NOR T H A ME RIC A N F UR AUC T IONS
NAFA NEWS
- PRESIDENT’S MESSAGE - 2014 AUCTION RE-CAP - MARKET UPDATE
SEPTEMBER 2014
- GALA SHOW IN KAZAKHSTAN - 2015 AUCTION DATES
65 SKYWAY AVE. TORONTO, ON M9W 6C7 CANADA | TEL: +1.416.675.9320 | FAX: +1.416.675.6865 | WWW.NAFA.CA
P R E S IDENT’ S M ES S AGE
Dear Rancher, With the conclusion of our September auction, it was a heartening to see that over the course of our four day sale, market levels were improving. But as a whole, the overall calendar year was a challenging one because of see-sawing prices and volatility within the market. NAFA’s September auction however provided everyone with some cautious optimism to close out the year. Despite the trying season, NAFA was still able to meet key competitive objectives. First, at all three of our auctions, we attracted large crowds of international buyers. Second, we have delivered strong competitive results to our producers. Third, we increased our volume to nearly 10 million pelts and as a result, have been able to produce an operating profit for your company despite the unprecedented drop in prices. Additionally, we were able to pay out our 5% profit rebate to all our North American consignors in 2013/14. Given all the political difficulties around the world and the warm selling season this past season in all fur markets, our successes are noteworthy. The year’s challenges for the industry also included the release of a video alleging mistreatment of animals at a Canadian farm. The video release then led to calls for new government regulations and the closure of the farm from the usual animal rights extremists. Please be cautious about the on-going animal rights campaigns and stay in contact with your associations about how to protect yourself and your ranch. Moving forward, we are gearing up for next year’s season with a big push on buyer solicitation as our new Senior Vice President of Marketing, Rob Cahill, begins work with our team of international agents. A renewed focus on a robust and strategic approach to buyer solicitation is being planned. As the cooler temperatures arrive and our plan is put in place, NAFA will be gathering important intelligence on the upcoming year and will keep you posted as the season approaches. News from the major fur markets is included on page 4 of this newsletter. NAFA is also looking forward to the coming season because of its work on bonded warehousing services in China. This is a priority project for us which will help us better service our Chinese buyers, who play such a pivotal role in the international fur business. We wish you the very best this fall and look forward to the coming season working with you. Sincerely,
Michael D. Mengar, President & CEO
2 01 4 AUC TION R E-C A P
- Large Buyer Attendance - Strong Competitive Results - Increase in volume to 10 million pelts - NAFA Operating Profit - Five Percent Profit Rebate Paid to Loyal Consignors 2013/2014
MARKET UPDATE KOREA A MARKET THAT COVETS QUALITY With its thirst for high quality products and its commanding presence in the auction room when Black NAFA females are on sale, the significance of the Korean market on the overall fur trade remains substantial. After the tragic ferry accident in the spring, Koreans were reluctant to do things that seemed celebratory in nature, including shopping. As a result, retail sales slumped during the aftermath of the ferry disaster which had a ripple effect on the economy and negatively impacted industrial output in April and May. Industrial production has slowly come around, with Statistics Korea now reporting that industrial output grew 0.2 percent in August – the second month of gradual growth.
TREND TRANSFORMATION – ONLINE ORDERING It’s a widespread assumption that more young consumers enjoy surfing the web and purchasing products on their computer screens, while middle-aged consumers remain committed to the traditional brick-and-mortar shops. However, that trend is being transformed. There’s new research in Korea that shows people in their 40's and 50's have switched to online shopping. In fact, the shift is sizeable - online transactions by women in their 40's and 50's, for example, have increased more than threefold in the past four years.
WHO’S SOCIAL? Social networking is the latest and newest way to market coveted and sought after items – including luxury goods. Those who infiltrate the ‘virtual’ social scene are more likely to grow their brands organically. Some Korean brands are now integrating social marketing into their strategies and are no longer relying solely on print advertising. Promotional events, for example, are being posted to popular networking sites rather than promoted through print ads.
TRADITIONAL ELECTRONIC MEDIUMS In Korea, the TV home shopping channel is considered a powerful tool for furriers – garments and accessories do sell briskly through this medium. In particular, Jindo has had a lucrative run at selling some of its lower quality coats and vests on the shopping channel.
KOREAN UPCOMING EVENTS NAFA has been asked to provide the entertainment through a fashion show at the prestigious STV Music Awards in Seoul on November 3, 2014
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CHINA WARM WEATHER & ANTI-CORRUPTION IMPACTS SALES
The near perfect storm of a warm winter and the Chinese government’s corruption crackdown has damaged this most important fur market. The ongoing anti-corruption campaign and ensuing arrests for bribery and customs issues have occurred in many different sectors, creating a culture of concern among the fur buying community. Buyers remain reluctant to travel and, so far, there is no end in sight to the government crackdown. There are some estimates that upward of 75 percent of the fur trade’s products are sold in China which now has a backlog of inventory. The over- abundance of unsold goods has had a bottleneck effect throughout the trade, with manufacturers and producers having to suddenly cut back and reduce their operations.
RETAIL FUR CENTERS Summer sales and discounts in the northern areas of Heilongjiang and other provinces helped move some excess inventory but in the traditional fur retail centers of Haining and Tong’erpu, retail transactions decreased. Some of the larger Chinese manufacturers who make approximately 20,000 to 30,000 garments annually have reduced their production as a result of last winter’s slow season. Manufacturers are looking toward mid-November before making predictions for the year to come.
CONTINUED INVESTMENT On a positive note, several new fur malls have opened up in China with new, high end stores, showing significant investment and optimism for the trade. The lower priced garments – less than half of last year’s highs – is expected to spark interest and sales.
GREECE & TURKEY The Greek market is very closely intertwined with the Russian market as most Greek manufacturers export their goods into Russia or sell them in Russian tourist destination retail stores. As a result of the conflict between Russia and Ukraine and the subsequent devaluation of the Russian Ruble, this manufacturing market has struggled. Many manufacturers who opened large retail stores to cater to Russian tourists are thinking of returning to their wholesaling roots. The lower pelt prices are affording them the opportunity to manufacture less expensive garments, which in turn helps Russian retailers sell to their consumers. In Turkey, the trimming trade is king, with most pelts being used as trim in the leather industry. Similar to the Greek trade, this market is heavily dependent on Russian tourism which is in a serious slump as a result of the tensions with Ukraine. The Dubai market is experiencing similar issues as Russian tourism has declined significantly. 5
RUSSIA Instability in Russia, created by the conflict with Ukraine has resulted in general economic volatility. Inflation, along with dwindling purchasing power and high customs duties has had an adverse effect on Russian buyers. At the same time however, there is a small collection of consumers who are looking for ways to safely invest their money, especially with the depreciating currency. Fur garments are sometimes referred to as ‘soft gold’ in Russia and some consumers feel it is a relatively safe way to spend their money. The higher auction prices in the 2009 – 2013 seasons created some price resistance in the market. The desire to wear fur in Russia remains high but the higher priced garments forced a lot of consumers out of the market. The very wealthy and affluent consumer can afford the higher quality goods but the average quality goods are having difficulty selling. Most retailers have begun the season with discounts to lure consumers into their stores.
WHOLESALE MARKET In the Russian market, 90 percent of the production of fur is imported – the manufacturing sector is small and is only operating at approximately 35 to 40 percent capacity. Ready- made fur garments are more economically appealing for Russians who don’t find it profitable to develop their own production lines because the cost of tailoring is less expensive in other markets, like Greece or increasingly, China.
NORTH AMERICA The traditional fur market in North America, where fashion trends are set, there is renewed optimism in the retail community. Following on the heels of a bitterly cold winter, which boosted retail sales and the summer storage season, retailers are encouraged by long term weather forecasts which predict another cold winter season. The economic environment is also showing favorable signs as unemployment in the U.S. is down and disposable incomes are increasing. This coupled with the lower pelt prices, is giving retailers reason to look forward to the year with renewed confidence. Fur is still strongly supported by the top brands and internationally revered designers and leading fashion magazines are expected to again feature fur as stylish and in vogue this season.
NAFA HOSTS FIRST GALA FUR SHOW IN KAZAKHSTAN NAFA selected Almaty for its first gala event in Central Asia as the city holds the key to the region and a population that is experiencing continued economic growth. Added to this are the strong ethnic ties to the Russian culture and their love of fur. On the evening of September 17, 2014, over 250 VIP guests gathered at the Royal Tulip Luxury Hotel to attend the most talked about show of the season. The many celebrities included films stars, pop singers, sports figures and designers along with politicians and socialites. Following a champagne reception in the elegant hotel foyer, guests converged on the Grand Ballroom where they were welcomed by Bobby Poulios, Vice-President, NAFA Buyer Relations and Oksana Moroz, Marketing Director of Eastern Europe and Russia. A short ceremony ensued for the presentation of Top Lot awards. It was obvious as the gala show unfolded, that no one was disappointed. The theme of “Visions”, which promised a look into the world of fur, offered a wealth of excitement as the latest trends in fur fashion were presented in NAFA’s fine quality products. The finale of Black NAFA Mink was a perfect close to this grand evening. As he was departing, designer Sergey Efremov commented, “I am so happy that I chose to make the journey to Almaty. This was a world class event and no one but NAFA could have made this happen!”
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PRESS RELEASE NAFA ANNOUNCES 2015 AUCTION SCHEDULE
LRD DATES SALE DATES DECEMBER 13, 2014 – MUTATIONS DECEMBER 31, 2014 – DEMI & MAHOGANY JANUARY 2, 2015– BLACKS JANUARY 23 – MUTATIONS JANUARY 28 – DEMI & MAHOGANY FEBRUARY 3 – BLACKS FEBRUARY 13 – RANCH FOX APRIL 6 - MAHOGANIES, DEMIS & MUTATIONS APRIL 8 – BLACKS APRIL 20 – BREEDERS MAY 22 – RANCH FOX
JANUARY 27 TO FEBRUARY 2, 2015 (ON SHOW JANUARY 22)
MARCH 28 TO APRIL 3, 2015 (ON SHOW MARCH 23)
JUNE 28 TO JULY 3, 2015 (ON SHOW JUNE 23)
SEPTEMBER 1 TO 3, 2015 (ON SHOW AUGUST 29)
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