THE CEO TALKS OFF-PRICE, EXCESS INVENTORY AND MAKING MILLIONS OF MASKS TO FIGHT COVID-19.
MadaLuxe Group, a family-run company that distributes luxury goods to off-pricers, luxury timepieces to regular-priced retailers and operates its own high-end off-price stores and web sites, has added PPE to its unorthodox business model.
The 10-year-old Los Angeles- and New York-based firm is tapping its network of factories to source and produce face masks, gowns and hand sanitizer for doctors, hospitals and health organizations around the U.S. “There are medical components, specifications and certifications required. A great amount of diligence and verification goes into this,” Adam Freede, cofounder, co-owner and chief executive officer of MadaLuxe Group, said in an interview.
He said MadaLuxe is sourcing from multiple factories in China for masks and gowns, and in the U.S. for the sanitizer, and working with a major manufacturing conglomerate in Hong Kong producing anything from food, to jeans to Black & Decker equipment to vet the product and insure proper specifications of the PPE. The conglomerate provides “support on the ground,” said Freede, who cofounded MadaLuxe with his mother, Sandy Sholl, cofounder and co-owner.
For the project, MadaLuxe has created a new division called MLG Health, which Freede said he’s overseeing. The division is composed of existing staff from buying, logistics, planning and operations.
MadaLuxe has delivered more than 2 million masks to health-care groups across the U.S., among them OSF HealthCare, which operates 145 locations including 14 hospitals; Franciscan Health, a health-care group with 12 hospitals and many practices in the midwest, and Northwestern Medicine, which has hundreds of locations in and around Chicago. The company said “millions more” will be delivered in the next 30 days. “We’re not looking for small orders, but we are saying yes to everything,” Freede said. “We have a long list of those we are supplying and trying to help. We are not asking for deposits or payment for before delivery. We are taking care of that part of the process to de-risk it for health organizations.”
The company is supplying only FDA-approved respirator masks and surgical masks to several municipalities as well as the health-care organizations. Large quantities of PPE are received weekly, and production time varies. Masks require three to seven days; gowns, 20 days; hand sanitizers take one to five days. Some of the production is based on orders; others are to build up a supply, much of which gets donated.
“This is not a profit center,” Freede said.
Hundreds of thousands of masks are being donated to UCLA, Mount Sinai, Cedars Sinai and OSF, and elsewhere.
With stores closed and people not shopping, “There will be more inventory than usual in the coming seasons, but there won’t be panic in the luxury sector,” observed Freede. “You won’t see any fire sales in the mono-brand boutiques. These brands are meticulous in their planning and their strategies, and will be really shrewd and intelligent with how they pivot their inventory. Many of these luxury brands are family controlled where cash is not an issue. They make decisions for the longer term. They don’t make short-term decisions for cash or sales gains.”
He said there will be greater pressure on contemporary fashion firms to move inventory since they typically deliver 11 times a year. “The pressure for them to move inventory and get rid of it is significant. In the non-luxury sector, it will be nothing short of a bloodbath.
“For the off-pricers that come out of the COVID-19 crisis strong enough, it will be a banner year. Bankruptcies, liquidations and store closings will pour a lot of merchandise into the off-price market.”
The three MadaLuxe Vault off-price stores, located in Citadel in Commerce and San Clemente, Calif., and in Anthem, Ariz., are temporarily closed, though some, not all, of the shortfall is being made up online, through the company’s two websites, MadaluxeVault.com, which sells off-price and MadaLuxeTime.com, which sells full price.
“Our e-commerce has been stronger than ever since the last two and a half to three weeks, almost comparable during holiday time,” Freede said. “We are selling a lot of timepieces, sunglasses, expensive footwear and handbags. A lot of everything really, more than what I was expecting. A big part of consumers’ wallet share has been going to experiences like travel and restaurants. But people can’t do any of that now. So for many who still have jobs, still making money and stuck at home, there’s a fervor to live their lives and buy fashion that makes you feel good. The online business is not enough to make up for our store closures, but there are some bright spots.”