A New Era for Cuban Fashion

Michelle, wearing Narciso Rodriguez at the Presidential Election Victory Speech, Chicago, Nov 04, 2008. Everett Collection / Shutterstock.com

When Michelle Obama attended the 2009 Presidential Inauguration wearing an Isabel Toledo dress and coat, it was a proud moment for Cuban-Americans. Coupled with the fact that the first lady also favors Narciso Rodriguez designs, some could say the first lady was signalling a thawing of relations between the two countries well before politics caught up.  Finally, on December 17, 2014 the President announced the beginning of normalizing relations with the communist and isolated island nation just 90 miles off the coast of Florida. It was a beacon to Cuban diplomats and businesses alike and the fashion industry is no exception. It will not be a quick and easy entry to profit in the Cuban market, however, due to the current nature of fashion retail in Cuba, continued trade restrictions and the Cuban economy itself. But there are ways for brands to succeed in Cuba in the long term.

President of #CubaNow, Ric Herrero, lauded the December announcement in an op-ed for the Miami Herald and called on the Cuban-American community and Americans in general to “explore the wealth of new opportunities presented by this era of diplomatic relations and expanded travel, trade and telecommunications flows to help empower Cubans.” Though, this will not be as simple as hopping on a plane and setting up shop in Havana. Businesses will have to understand how Cuban customers view fashion.

Tomas Bilbao, Executive Director of Cuba Study Group explains that while the normalization of relations is a huge step, “limitations on foreign investors are still significant and of course U.S. law still continues to prohibit direct foreign investment with very few exceptions. So we’re still a while from dealing with a more normalized free market in Cuba.” He says that reform has already begun in small ways, like allowing approximately 500,000 people to date to be self-employed in the “non-state sector.”

This non-state sector is where fashion retailers began to take hold. Like any Caribbean country, Cuban style is dominated by Latin American and African influences. From the guayabera shirt to braided hair, beach dresses, and bright colors, clothes and accessories reflect the climate and energy of its people. Some, like Albert Goldson, executive director of Indo-Brazilian Associates LLC, says he “anticipates a burst of creativity [around the world]…with respect to Cuban fashion from the 1940s through 1950s, the decadent pre-Castro period” now that relations have begun to open the country. Goldson believes Americans are especially drawn by Cuban fashion’s elements of “Old Havana, Hemingway, Cuban cigars…and nostalgia for a bygone era.”

Of course, imports of goods emblazoned with everything from Nike and the Union Jack have made their way past embargoes to produce trends in the non-state sector clothing stores that at point provided stiff competition for the state-run stores.

The competition was so fierce that licenses to sell imported goods were being revoked towards the end of 2013.

The success of the private retailers, however short-lived,  was indicative of the state-run retailers inability to provide the kind of clothing and accessories demanded by customers.

The normalization of relations now will likely open operations more for those retailers as non-state sector employment rises, according to Bilbao and those retailers will turn to a familiar avenue for importing fashion items.

“When President Obama liberalized family travel in 2009, that had a big influence on the ability of Cuban-Americans to import from Miami or other places, their fashion trends and their preferences for clothes and accessories,” says Bilbao.

While Cuban-Americans have influenced fashion trends by donating clothes or sending remittances, Bilbao notes the Obama administration’s expansion to allow unlimited family remittances and up to $8,000 in non-family remittances. He explains that “this has helped fuel these half a million self-employed, many of whom are in the textile sector, and those that are actually making clothes.”

But Bilbao thinks that Cuba will likely not see the ability to become a hub of manufacturing because of the “declining margins for the past 30 years” of clothes. Instead, he says that there is a growing trend of bespoke designers that cater to Cubans, making tailored shirts, swimsuits, and the like to answer consumer demand. Along with growing remittances, Cubans are less likely to rely on what one youngster says are the state-run shops’ “uglier” clothes and limited supply.

Havana, Cuba. Kamira / Shutterstock.com

Havana, Cuba. Kamira / Shutterstock.com

 

There seem to be two options for these local fashion designers, producers, and retailers to grow their businesses within the non-state sector.

Despite last month’s easing of trade restrictions, there are still prohibitions on what Cubans can export. The U.S. Department of State assures citizens that most “goods produced by independent Cuban entrepreneurs” can be exported from Cuba and imported into the country, except for an extensive list of restricted items.  Denoted by their classification under the Harmonized Tariff Schedule, most finished and unfinished textile goods are on the list.  Bilbao points out that if Cuban designers, producers, and retailers “can’t have access to the most affluent market, it certainly stunts their ability to grow.”

What #CubaNow calls “antiquated embargo laws,” are more than likely a result of strong lobbying by the powerful cotton lobby in Congress to protect itself. Specifically the restriction would protect Texas, the country’s top producer of cotton.

Texas is a state that as late as 2009 was earning nearly $85 million by sending agricultural goods to Cuba. Under the same limited sanctions provisions, Louisiana earned $241 million in revenues doing business with Cuba that year.

Due to the climate and ease of production, cotton is likely an essential textile for most clothing and accessory makers in Cuba. Silk and wool are also included under that prohibited classification.

Not all hope is lost for the domestic industry, as Syama Meagher, CEO of Scaling Retail says.  “It starts with tourism first,” she says.  According to Meagher, the tourism industry will have to plant roots in Havana and Cuba’s beaches in order for other industries like fashion and retail to grow because where there are hotels, there are wealthier tourists who will want fashion and beauty items. It makes sense given that the Cuban customer base is small; the average state salary is only about $20-24 per month.

Normalizing relations with the U.S. would provide “opportunity to see more capitalism but it is up to the government,” says Meagher. As Bilbao notes, the government would have to be willing to strike up an equal or majority partnership with private companies in order for this to happen.

At first the fashion retail industry will likely follow the Japanese and Indian model. Meagher explains that in shopping malls in Tokyo and Chennai, American and European name brands from Ralph Lauren to Burberry have a strong presence. She says not to be fooled though because “the branding is there, but not necessarily the brand.” For instance in Japan, clothing store Barney’s is quite popular but Barney’s corporate buyers are not actually buying items for their Japanese stores because those are owned by the operator of the shopping center in which the store is located. That landlord is also a lessee of the Barney’s name, image, and brand reputation.

A Chennai shopping mall offers a similar experience. Meagher just returned from a business trip there and says she knew right away that the mall owner was ‘leasing’ all the branded stores and counters in the mall from the parent corporations. The giveaway was that there was a centralized point-of-sale for the whole mall, unlike in many other similar shopping malls where each point-of-sale is owned and controlled by individual retailers. She says this in essence makes the shopping mall owner a franchisee of these branding, but not the whole brand and all the brick and mortar, store support, and marketing itself. It offers Tommy Hilfiger and Benetton an easier way to enter a market without investing heavy capital. They are also able to tap in to the mall owner’s local knowledge of customers’ needs.

This model would like work in Cuba in the near-term because it would ease companies into entering a market rife with uncertainties because it would not require intensive labor or capital, especially if the target audience will be American and European tourists at first. It is also a way for the government to test the waters of capitalism as well without heavy investment, allowing them to slowly build up the nascent fashion industry should it choose to do so.

Once domestic fashion designers and retailers get experience catering to the tourist market, a microcosm of what awaits them internationally, there could be an opportunity for export should trade restrictions be eased further. More likely though is that brands and retailers will be able to carry Cuban-designed goods in stores to offer a local flavor. As Goldson predicts, “demand for vintage Cuban fashion will remain stronger and longer than most other fashion trends. [That] vintage Cuban wear will have a universal, non-European centric look thus it will have a broader based appeal to a highly ethnically diversified American consumer.”

Domestic retailers could then carry foreign brands to satisfy Cuban consumer needs. It could also eventually create a nascent brand capable of competing with imported labels, as Meagher says China did with its answer to Zara. Though the Spanish retail giant operates thousands of stores in the country, China has been able to create its Yishion brand to a relative amount of domestic success.

Needless to say, Cuban fashion will forever be changed as tourism and imports allow for more artistic influences and the crux of capitalism: choice. Growth will be slow at first because of continued prohibitions on trade, but groups are putting pressure on the U.S. government to ease the pain caused by Cold War-era regulations. The private sector as a whole is on the brink of a new exciting market should tourism take hold in Cuba, which will likely never lose the color and vibrance of Latin and African-infused fashion despite its dreary military-green government presence.