Deluxe: How Luxury Lost Its Luster (26 page)

Shibani is a big block building within the barbed-wire-topped chain-link fences in Phoenix, an industrial area in the hills inland from Port Louis. As I pulled into the parking lot, I noticed a Max Mara factory across the street. Upstairs, in the clean, white retail offices of Shibani stood racks of its in-house label knitwear, T-shirts, and lingerie for the spring season one year away. If it weren’t for the view of the Indian Ocean out the windows, I would have thought I was in a showroom on Seventh Avenue in New York. In walked Sunil M. Hassamal, a large-set Mauritian-born man of Indian origin. He sat down, asked an assistant to bring two cups of tea, and told me about his company, one of the largest on the island.

Hassamal’s family, one of the more important textile manufacturers in Mauritius, decided in
1986
to produce sweaters for Europe and opened Shibani with a South African partner. “Unlike other Mauritian companies who had cheap labor, hand machines, handlooms—that was the traditional way of doing it—we used electronic machines from day one,” he explained. “And we have kept modernizing and expanding so today we at are at the forefront of technology.”

That’s evident from the moment you enter the factory downstairs. The knitting room is the size of a football field, the dozens of knitting machines roaring as loudly as newspaper presses; many of the workers wear protective earphones. Most of the machines are from Stoll of Frankfurt, Germany, and bear the company slogan—“The right way to knit!”—embossed on the side. There are also two three-gauge Shima Seiki machines from Japan. “Some people cut up fabric and sew it together,” explain Hassamal. “Here, the whole thing is knitted on a machine.”

Among the labels Shibani produces in Phoenix and at its two other sweater and one intimate apparel factories on the island are the French catalog company La Redoute, the Paris department store Le Bon Marché, the high-fashion label Zadig & Voltaire, the French couture house Carven, Armani Jeans, Nordstrom, and Ralph Lauren. “We used to do Calvin Klein Europe,” Hassamal said. “And we do all the cashmere blankets for Ralph Lauren.” All of Shibani’s cashmere comes from Mongolia and is then dyed and spun in China, Italy, and Scotland. Chinese cashmere is the cheapest; Scottish the finest and most expensive. “The quality used in a sweater depends on what the client wants to pay,” Hassamal said. Generally, clients bring their own sketches and some supply one-off samples as patterns to follow. The sweater is drawn on a computer following specs for colors, type of yarn (cashmere, lamb’s wool, Merino wool, or cotton), kind of stitch, and size or gauge of the knitting. When the test swatch is approved, the whole production is run. Then the sweaters are sent to the finishing room to have trims, collars, buttons, and labels added.

It was break time when we walked into the finishing room. The Mauritian women were chatting and drinking tea, as the Chinese girls slept on folded arms on their knitting machines. In the mid-
1990
s, Mauritius was at full employment and needed more textile laborers to keep the factories running. The government devised a system that grants foreign—or expatriate (expat)—workers three-year contracts. Expats—who come from China, Bangladesh, Sri Lanka, and India—are an essential part of the Mauritian textile labor force; in
2004
, there were twenty thousand expats working in manufacturing on the island, most twenty to thirty years old. Up to
25
percent of a factory’s workforce can be expats. The factory owners are obliged to provide housing and board as well as pay wages. Generally, expats are limited to one three-year posting. “But they take another passport and come again two or three years later,” says Michel Mayer, marketing director for World Knits, a T-shirt manufacturer in Coromandel, Mauritius, that produces for JCPenney, Guess, and Armani Jeans, among others.

Shibani has eighteen hundred workers on sweaters and four hundred on intimate wear; expat workers predominantly from China and India make up about
10
percent of the workforce in the sweater factories. Shibani’s four factories run twenty-four hours, seven days a week, with four shifts each day. The legal Mauritian workweek is forty-five hours. “I’d rather give preference to Mauritius workers than deal with lodging, food, passage tickets,” Hassamal admitted, but “imports are better skilled as machine operators and there is less absenteeism because of family duties. Plus they don’t mind working nights and Mauritians do.” When the break was over, the Chinese girls snapped up and went right back to work. Their faces were blank, their eyes empty. No one spoke. All you could hear was the deafening
sidth-sidth-sidth
of the knitting machines.

By
2003
, Mauritius textile and clothing manufacturing export sales amounted to roughly $
1
.
5
billion. The sector employed about
40
percent of the country’s workforce and contributed
12
percent to the gross domestic product. As a result, Mauritius had the highest per-capita gross domestic product in sub-Saharan Africa. There’s evidence of the prosperity in Mauritius everywhere you turn: new European cars, restaurants, shopping centers, and housing construction. “Textile manufacturing is a main pillar of our economy,” trade chairman Gopal told me.

But that may be headed the way of the dodo. On January
1
,
2005
, the World Trade Organization eliminated the thirty-year-old textile quotas that gave birth to thriving manufacturing centers in developing nations such as Mauritius, Bangladesh, Madagascar, and Sri Lanka. Mauritius was perhaps the worst hit, according to apparel industry consultant David Birnbaum of Third Horizon Ltd. in “Winners and Losers
2005
,” a study of the economic impact of the phase-out of twenty-eight key garment-producing countries. In
2003
and
2004
, Mauritius lost thirty companies employing fifteen thousand apparel and textile workers. And Birnbaum reports that textile shipments from Mauritius to the United State in
2004
were down
17
.
5
percent from
2003
. Not surprisingly, the majority of producers have moved their manufacturing to China. “The Chinese work seven days a week, twenty-four hours a day, they live in the factory and are paid pennies an hour,” Michel Mayer told me. “How can we compete with that?”

I
N THE NORTHERN AREA
of Hong Kong called the New Territories—far from the banking towers, the grand hotels, and the luxury shopping malls—is an old industrial area of tired warehouses and rundown factories that until a decade ago was the pulsating heart of the region. For thirty years, this section of town turned out everything from plastic dolls to cashmere sweaters with the “Made in Hong Kong” label. In the fall of
2005
, I walked into the parking garage of an old factory on a crummy street, stepped into a beat-up elevator, and went up to the modern, well-appointed offices of Fang Bros., a forty-year-old manufacturing company that today specializes in knitwear. Kenneth Fang, the company’s chairman, is a distinguished Chinese gentleman who speaks the Queen’s English and displays impeccable manners. When we met, he was in a tailored hay-colored suit and cheerful cashmere vest in a pastel argyle pattern, his silver hair neatly combed back, his hands perfectly manicured. His card boasts that he is a commander of the British Empire (CBE), an honor just below knight bestowed by the queen. Fang’s main business is knitwear manufacturing. He also owns Pringle, the luxury Scottish cashmere knitwear company, which he bought in
2000
and is trying to revitalize.

In
1949
, when Mao Tse-tung established the People’s Republic of China, Fang’s family fled Shanghai to British-ruled Hong Kong. “Hong Kong back then was a small fishing port,” Fang remembers fondly. His father set up a business to continue what the family had done in China: spinning cotton yarn. In the
1960
s, the company started weaving cotton fabric, which was exported to the United States and Great Britain to be made into clothes. In
1956
, Kenneth was sent to North America to study. He took a bachelor of science in chemical engineering at the University of Michigan in Ann Arbor and a master’s at the Massachusetts Institute of Technology, and in
1966
returned to Hong Kong to join and expand the family business. One of his first initiatives was to move the company into knitwear.

Back then, Hong Kong was a manufacturing center of lightweight goods such as toys, plastics, wigs, and inexpensive clothing. One-fourth of Hong Kong’s economy was manufacturing, and
40
percent of Hong Kong residents worked in factories. From the late
1970
s to the mid-
1980
s, Hong Kong’s manufacturing quality had improved enough to lure high-end brands such as Ralph Lauren, Calvin Klein, and Max Mara. Fang Bros. became one of Ralph Lauren’s biggest Polo shirt manufacturers.

In
1978
, China opened its doors, “inviting investment with cheap land and cheap labor,” Fang explained. Many Chinese refugees in Hong Kong, like Fang Bros., returned to the mainland to open factories, primarily in the Pearl River Delta of Guangdong, the southeastern province that abuts Hong Kong. Most were in and around Shenzhen, a border town about an hour north of the Hong Kong port by car or train. By the mid-
1990
s in the Shenzhen region, more than six million workers were employed in thirty thousand factories owned and run by Hong Kong manufacturers—as many as the entire population of Hong Kong. Like Hong Kong two decades earlier, the product manufactured in Guangdong was cheap in quality and price.

As China’s manufacturing base grew, Hong Kong’s shrank. Chinese workers’ skills improved and production quality increased, yet costs remained low. Soon high-end and luxury brands began to relocate their clothing manufacturing from Europe, the United States, Hong Kong, Mauritius, and elsewhere to China. As with accessories production, few brands admit to it. In a matter of days in the fall of
2005
, I heard from manufacturing and industry sources in China that several prestigious Italian brands manufactured ready-to-wear and knitwear there in pieces and had the items assembled in Italy to carry the “Made in Italy” label, and Christian Lacroix had knitwear made there. Fang said, “We do a lot for Ralph Lauren and a small amount for Donna Karan,” which, since
2001
, has been an LVMH brand.

Burberry’s chief financial officer, Stacey Cartwright, told me at a luxury conference in Hong Kong in December
2004
that the British-based company produced “a small bit of luggage in China. It’s experimental, tiny, tiny.” A day later, a source who worked with Burberry at the time told me, “Burberry’s production in China is more than experimental. It is big quantities,” and said it was primarily leather goods and accessories. Some of the lower-priced Burberry Blue Label, a licensed line that is produced by the Japanese firm Sanyo Shokai Ltd. for the Japanese market, is manufactured in China as well. I remembered the Burberry trench my husband tried on in Xi’an and thought to myself, “Maybe it
was
real.” In September
2006
, Burberry announced it was shuttering a factory in South Wales that had been in operation since
1939
and produced polo shirts, leaving three hundred out of work, and moving the production to China. In November, Welsh actor Ioan Gruffudd, who had modeled in a Burberry ad campaign, protested the closure, and the
Times
of London reported that Prince Charles contacted Welsh government ministers to “ask if there was anything he could do” to stop the move. Peter Hain, Britain’s secretary of state for Northern Ireland and Wales, asked Burberry CEO Angela Ahrendts to rethink the move and the Church of England, which has a $
4
.
9
million stake in the company, requested a formal explanation. “We found the costs of producing the polo shirts offshore were substantially lower than the coasts in Wales,” Michael Mahony, Burberry’s director of commercial affairs, said at the time. “In fact, they were less than half.”

The only luxury designer I heard openly embrace manufacturing clothing in China was Giorgio Armani. “The ‘Made in Italy’ label is very important for the top line because it suggests a certain specialization,” he said during his visit to China in
2004
. “But to manufacture some of our other lines in China…as long as we control the quality, then why not?”

Today, there are more than thirty thousand apparel and textile companies in Guangdong Province, employing more than five million people. China’s textiles and apparel industry is worth more than $
100
billion a year; meanwhile, Hong Kong’s is nearly extinct. By
2002
, manufacturing made up only
5
percent of Hong Kong’s economy and only one in ten Hong Kong residents worked in factories. Instead, banking, trade, tourism, and real estate were the primary businesses. “Most manufacturers have their headquarters, and some design and marketing in Hong Kong,” Fang said, “but assembly has moved to China.” Fang Bros. continues to produce a small amount of knitwear in its Hong Kong factory, but most of its manufacturing is done in China, where the company has four knitwear factories and ten thousand employees at one-third the cost of Hong Kong. Average garment and textile factory wages in Guangdong Province are $
50
to $
100
a month. (Pringle’s cashmere sweaters are still made in Hawick, Scotland, but some of the ready-to-wear is now produced in Fang’s factories in China.) The living standard in Hong Kong has increased so much in the last forty years, making it one of the most expensive and cosmopolitan cities in the world, that “most young people do not want blue-collar jobs.”

Fang sees manufacturing in China quickly evolving into a more sophisticated and costly market, like Japan and Taiwan before it. “Everybody goes through the same track,” he said. At the moment, he explained, “the Chinese are brand-contracting.” But soon, he believes, “manufacturers will start to promote brands. I expect more oriental brands to emerge in the next decade, especially for the Chinese market. The Chinese government has been supporting this: there are now fashion shows in Beijing, Shanghai, and Guangzhou. And manufacturers will pay more attention to quality and consistency. You have high-quality, well-built factories. China has well-skilled labor. In ten years it will be a different market.” However, Fang doesn’t believe that luxury brands will ever open their own factories in China. “Why should they,” he asked, “if they can have someone produce for them and guarantee the quality?”