The trade publication “Luggage & Leather Goods” December 1935 provides a glimpse of the recovery of the handbag industry after the devastation following the Stock Market Crash and the onset of the Depression. Mention is made of cutthroat competition systems in place during 1931 and '32 that threw the industry into a turmoil. With this tantalizing clue in hand and armed with industry journals from the 1929-1935 period, examples of this turmoil became clear.
Before 1930, Morris White Inc. was the largest manufacturer of ladies handbags in the world. It was a very profitable business. When the Stock Market Crash sent shock waves through the economy in October, 1929, Morris White Inc. was hit hard. Quoting from the bankruptcy reorganization case that eventually made its way to the US Supreme Court in 1933, "the company became financially embarrassed, partly through cancellation of orders due to the general depression, partly through withdrawals of large sums by Morris White for investments in stocks and real estate. White's creditors refused to accept a the court's solution, offering 20% cash and 80% in new stock in the company, reorganized under the leadership of, Lily, Morris White's wife. MorrisWhiteMfgCo They pursued the case all the way to the Supreme Court, where, in the end, the company assets were liquidated and split among the creditors. (See the full text of the Supreme Court Decision). As the largest handbag producer in the country, this lawsuit and eventual bankruptcy brought the Depression to the industry in no uncertain terms.
Suppliers were not paid, wages were cut, workers were laid off or lost their jobs entirely. And who will buy handbags when their out of work? Manufacturers were over a barrel and the department store buyers pressed their advantage. Take, for example, this situation described in this editorial from "Hand Bag Modes" of May 1930:
A BUYER for a chain of 18 stores recently approached a manufacturer with an order for $9,500 worth of merchandise—on consignment. This manufacturer doesn't get many orders of that size in the course of a day. The mention of $9,500 probably caused his heart to skip a beat or two. But he turned the "order" down.
"You are just talking figures to me, not dollars," he told the buyer. "I could ship you the bags, and kid myself into believing that I had sold you $9,500 worth at my regular price, which allows me a margin of profit. But in reality I would be turning over $9,500 to you to play with. Later you would return a large part of the bags, and I would have to dispose of them at a price that wiped out the profit, and perhaps part of the cost, on the entire lot. I can't afford to ship on memo. Now, can I sell you anything?"
The manufacturer didn't use those exact words, because a seller must speak softly to a buyer. But they convey the idea.
Unfortunately this buyer probably got his consignment merchandise next door. For there is a good deal of business done on memo in the handbag industry, as it is done in some other industries. And always it is an indication of unsoundness in the distribution plan of an industry.
Consignment buying operates like a monkey wrench thrown into the machinery. The rare instances where it is perhaps permissible do not justify its present widespread use. It encourages careless manufacturing programs and develops irresponsible retailing.
The bad effects of consignment selling on the manufacturer are apparent. But it also hurts the retailer and the public. The retailer who buys on consignment is not so likely to be alert in his buying and selling operations. Whatever he doesn't sell he can return. And so he may become careless. He hurts his competitors, too. For while they have to keep on selling the stock they have paid for, the consignment buyer can throw his stock back on the manufacturer and shortly offer the public new merchandise—probably "bought" on memo, too.
And where the public gets stung is in the extra charge that is generally placed on consignment merchandise by the manufacturer. The public pays for that extra charge in the form of higher prices.
The retailer who is worth his salt is acting as the purchasing agent of his community. When he operates his business in such a manner that he must sell merchandise for more than it is worth he is betraying that trust."
Labor relations began to deteriorate along with the business climate. The contract of July 21, 1926 the forty-one members of the manufacturers association 1926NewYorkHandbagManufacturersAssociation with the Pocketbook Workers Union International Ladies Handbag, Pocketbook and Novelty Workers had been extended to May 1, 1931 before the crash. Factories and workshops closed, along with some banks. Credit dried up. Deflation overtook the United States. To fight the unions, many manufacturers packed up their factories and moved them in search of cheaper labor, rents, and utilities outside on New York City. When the contract expired, the manufacturers association believed the union was powerless and dared them to strike. "The association let it be known that it would counsel its members to remove their factories from the city in the event of a strike." (Moving Days of Factories by Ossip Wasinsky). Contracts were renewed in 1931 and 1932. The work week was reduced from 44 to 40 hours, in an effort to employ more worker. But conditions grew progressively worse.
This situation was cataclysmic for manufacturers and many did not survive. By the beginning of the 1932 Presidential Campaign, it was obvious President Herbert Hoover was not contending with the challenges presented by the Depression. Franklin Delano Roosevelt's election and the rapid adoption of the National Industrial Recovery Act in the first 100 days of the New Deal resulted in the establishment of NRA standards and practices for the industry that began to resolve some of these problems. This was no simple task.
"The manufacturers and union alike worked for a decent N.R.A. code, under which cutthroat competition among manufacturers in town and out of town would be curbed and decent labor standards and conditions established, but the proposed codes of the manufacturers and the Union were miles apart. The manufacturers shouted from the roof tops for a decent N.R.A. code for the industry. But the code the manufacturers termed decent, the union called legalized slavery." (Moving Days of Factories by Ossip Wasinsky)
For example, the association proposed skilled workers in New York City receive $14 for a 40 hour week, out of town $12. They proposed 15% of the employees be "learners", paid at 80% and a minimum wage of $11.20 in city and $9.60 outside....per week. (At an inflation adjusted 1184%, that's $132.61 and $113.66 a week.)
The union countered with a 30 hour week, no Saturdays or Sundays, but would be willing to give a 35 hour week a trial. Skilled cutter, framers and pocketbook makers would earn $45, less skilled workers between $31.50 and $17.50 with minimum wage at $15 a week or $.50 an hour. The union lost the battle and its membership was in open rebellion. Ossip Walinsky came back from retirement to save the situation. "One thing the union leadership and membership did not realize, however, was that times and conditions were against them..." (Moving Days of Factories by Ossip Wasinsky) The union called a general strike over the 35-hour work week. In response, the largest and most viable manufacturers moved their shops out of New York City. Of the 4000 workers employed in 1934, 1500 lost their jobs and the remaining workers accepted lower standards and conditions and lower pay.
On March 26, 1934 the Code of Fair Competition for the Handbag Industry, as approved and signed by General Hugh S. Johnson became effective. (July 1935 Luggage & Leather Goods, pg 41)
In January of 1935, The US Supreme Court struck down one section of the National Recovery Act and by May of that year they had unanimously overturned the entire National Industrial Recovery Act as unconstitutional. The Industry could see the writing on the wall and began to formulate their own, locally administered "Articles of Agreement," removing the Federal control over industry standards that the Supreme Court found most objectionable.
The final death knell of the National Recovery Administration was sounded by the Supreme Court later that year. "On May 27th a Decision of the Supreme Court threatened to stop the great good which this Code was bringing to an industry which needed, above all, organization, analytical study and control." (July 1935 Luggage & Leather Goods, pg 41)
An air of desperation descended on the industry, reflected in this July 1935 editorial, pg 9 of Luggage and Leather Goods.
The same month this article was published, the National Authority for the Ladies Handbag Industry was launched on July 1, 1935 at the Hotel Pennsylvania in New York City. One hundred twenty-five industry representatives from 70 firms voted unanimously to accept the Articles of Agreement, eliminating child labor, permitting limited use of "learners", paid at 75% of the 35 cent/hour minimum wage and establishing a 40 hour work week.
A VOLUNTARY CODE FOR THE HANDBAG INDUSTRY
On July 1 the Industry met and decided to adopt its own "Articles of Agreement" and to recognize its own National Authority. In the Articles of Agreement the trade practice regulations which will affect the retailer include the continued use of Labels, which will symbolize fair hour and wage regulations to the public, no cash discounts in excess of 3/10 EOM, no share of customers' advertising to be paid by manufacturer, no returns after 7 days and no misrepresentation of goods in advertising. These are a few of the points on which retailers will be expected to cooperate with the handbag manufacturers so that they maintain a control in this industry which will be as beneficial as was the control of the NRA Code. This action on the part of the handbag manufacturers puts them in the front ranks of the more enterprising business men in America, and proves that as an industry, here is a progressive group. Under the leadership of such men as Abraham Mittenthal, Max Berkowitz and Maurice Mosesson, the handbag manufacturers are going to present a strong front, and a strongly cooperative group with retailers who also want to carry on the Code practices started by the New Deal.
Details of the Authority and the Agreement are found on page 43 of the July 1935 issue of Luggage & Leather Goods.
Handbag Industry Agrees on National Authority
The National Authority for the Ladies' Handbag Industry was officially launched on the night of July 1 following a unanimous vote of approval of its Articles of Agreement. Some 125 key leaders of the industry representing 70 firms turned out to consider and later accept the Agreement at a called meeting at Hotel Pennsylvania. Harry Schoenfeld, former code authority chairman, presided.
The temporary committee in charge of plan drafting included Maurice Aarenau AarenauWolf, Hyman Burstein, Samuel R. Goldsmith, Abraham Gieenbaum, Morris Immerman, David A. Ingber IngberCo, William Kadin, Richard Koret, Milton Lefcort, Maurice Magid AIMagidCoInc, George Myers, Irving Meyers, Julius Michel MichelMaksikFeldman, Sol Mutterperl StylemarkbyMutterperl?, Lawrence Moss, Samuel A. J. Rosenthal Rout-RosenthalCo, Ira Rosenzweig, Harry Schoenfeld SchoenfeldWolf, Irving Schoenholz, Max Weinman and Morris White MorrisWhiteMfgCo.
Among those speaking from the floor were Morris White MorrisWhiteMfgCo, Rubin Dobular, Geo. Meyers, A. Wirklich, Jacob Kaplan, Simon Rubin and Julius Michel MichelMaksikFeldman. The motion to adopt Agreement made by Lawrence Moss with second by Sylvan Strauss. Amendment was offered by Julius Michel MichelMaksikFeldman.
Provisions of Agreement
With new Agreement calling for continuance of same discount terms and sponsorship of labels, which obtained during NRA days, an important change appears in provisions as to employment of learners. As stated in Agreement, these are to be paid 75% of minimum wage for a 3-month period and thereafter at not less than minimum 35c per hour. At no time may learners exceed 10% of total workers in any factory. Also it is contained in Agreement that hours shall not exceed 40 in any one week, nor be in excess of 8 in any 24-hour period. Persons under 16 may not be employed by members entering into Agreement. Minimum wages are to be not less than 35c per hour with the usual exceptions provided for otherwise.
As to Authority's administration this is to be empowered in an Advisory Board of 16. Of this number 12 are to be manufacturer members and 4 associates without vote. Associates will represent consumer, labor, retailer and salesman.
The Advisory Board is to be empowered to establish rules governing design protection through registration with National Authority. Also the Board will assemble and maintain statistical information on all branches of industry; this, of course, to be available to all members as also will be information and instruction as to methods and systems for costs calculating. The Agreement also fully covers payment of damages for violations.
Maurice S. Mosesson, executive secretary of former Handbag Code Authority, in a statement to LUGGAGE AND LEATHER GOODS, stated that the new National Authority will make every effort to keep industry in shape and prevent its return to the cutthroat competition systems of 1931 and '32.
The Agreement also provides that all merchandise manufactured by members shall bear the official label to symbolize to purchasers that such members are maintaining hour and wage provisions and trade practice rules established by National Authority. Such labels will be issued exclusively by National Authority subject to rules adopted by Advisory Board. The widest publicity will be given to the label so that not only a retailer demand but eventually a consumer demand will be developed, said Mr. Mosesson.
"The industry by its whole-hearted support of this plan has indicated that it has no intention of departing from the fair standards of labor and trade practices which have obtained during the past year," Mr. Mosesson further stated. "The industry also feels that under the leadership of the executives of the former Code Authority—Abe Mittenthal, Max Berkowitz and myself—strides will be taken in the right direction."
Federal Trade Commission and American Arbitration Ass'n may be designated by the Advisory Board as agencies for the enforcement of trade practice rules. Burton A. Zorn is to be in charge of compliance.
National Authority Holds Forum
On Thursday afternoon, May 14, 1942, the National Authority for the Ladies' Handbag Industry, held a cocktail party and meeting for members- to discuss problems facing- the handbag industry. About ISO manufacturers and suppliers were present.
May 1955 Handbags & Accessories posted the announcement by the Authority of the Fall Handbag Show. At least partly to avoid design theft, the Authority set the date of release for the new line by all manufacturers since 1947.
This full page ad in the May 1955 issue of Handbags & Accessories points buyers to the Members Showroom at the June 13, 1955 Fall Handbag Show.
The outlook for 1956 was assessed by Max Berkowitx, Director of the National Authority in the December 1955 Handbags & Accessories, page 14.
Good year ahead for handbag manufacturers
By Max Berkowitz Director, National Authority for the Ladies' Handbag Industry
"The past year, in spite of an inauspicious beginning, bids fair to roll up a bigger sales volume than for the last three years. An unusually hot summer combined with two disastrous hurricanes and the attendant flood damage failed to more than temporarily retard the industry's progress, and the fall season has indicated a healthy and vigorous response."
Sales volume at the wholesale level for 1955 appears to be a little better than the unit sales and dollar volume for 1954. Sales volume in 1954 was estimated at 146 million dollars and the number of units sold was 63 million. We believe 1955 will show increases of about 5% over these figures.
The industry is still burdened with the wartime excise tax 20PercentFederalLuxuryTax and it is the aim of the National Authority in 1956 to work assiduously for the elimination of this unfair and unnecessary levy. In view of the thinking in Washington, the coming year should present a wonderful opportunity to rid ourselves of the tax."
News of the handbag industry
National Authority fights import competition
The United States leather handbag industry, by the filing of an application with the United States Tariff Commission, has started the machinery necessary to invoke the "escape clause" features of the Trade Agreements Extension Act. The formal application filed by the National Authority for the Ladies Handbag Industry is one step in a campaign to combat the unfair competition of French, Italian and Cuban leather handbag imports, the Authority reports.
Since the application is being made solely for the leather handbag manufacturers, as distinguished from the entire industry which manufactures handbags from many other materials such as plastic, fabrics, straw and other materials, it is believed to be the first application for relief for a segment of an industry under the changes in the tariff laws as amended by Congress last year.
Max Berkowitz, director of the trade association of handbag manufacturers, in the brief filed with the Tariff Commission points out that in 1954, 974,-084 leather handbags were imported. This is the largest number ever imported into the United States. For the eight-month period of January through August, 1955, the United States imported 809,310 units, which clearly indicates that well over a million leather handbags will be imported in 1955.
In 1949, foreign dollar value of the 114,342 leather handbags imported was $749,148. The figure rose in 1954 to 53,507,484—an increase in units of 750% and in dollar value of 305%. Value of imports in the period January through August 1955 was $2,608 -861, compared with $2,016,521 for the 533,865 units the year before.
The principal countries from which leather handbags are imported are France, Italy and the United Kingdom. Reptile handbag imports come primarily from Cuba. The imports from France and Italy, the brief points out, "are of a kind and character that are directly in competition with the type manufactured by the domestic producers of leather handbags" So far as Cuba is concerned, a preferentially low rate of duty of 14% leads to the "natural and reasonable expectation that the imports would increase and today reach alarming proportions."
On the relation of imports to domestic production, the brief points out that "The 1947 Censue of Manufactures showed that there were 16,466,-000 leather units produced at a wholesale value of $74,306,000. Since 1947 the volume of the industry has been reduced and in 1954, the National Authority for the Ladies' Handbag Industry estimates the number of handbags produced at 13,600,000 at a wholesale value of $61,500,000."
Mr. Berkowitz stated, "Another factor of great impact and concern is the steadily decreasing unit value of the imported handbags. In 1949 the average unit value of the imported leather handbag was $6.55. Today, the average unit value is down to $3.22.
"All of these insidious factors have wreaked their havoc on a small American industry that is substantially located in the City of New York. This is a geographical concentration that results in aggravating and compounding the injury to the domestic manufacturers and their employees.
"It is our contention that trade concessions hitherto granted have resulted in a marked increase in imports, to such an extent as to cause serious injury to the domestic handbag manufacturing industry generally, and very serious injury and crippling effect on the domestic handbag manufacturers of leather handbags." (Handbags & Accessories December 1955, page 20)
Imports of Cuban Handbag
"The National Authority for the Ladies' Handbag Industry is opposed to a continuation of a preferential rate of duty on reptile handbags imported from Cuba. The Association is urging the President and the Secretary of State to formulate policy now to put imports of these commodities from Cuba on an equal basis with imports from other countries, in anticipation of GATT tariff conferences to be held in Geneva in September 1960.
In letters to the President and the Secretary of State, the Association said: "The present rate of duty on Cuban handbags made from reptile leather is 14 per cent and from other countries it is 171/2 per cent. This rate resulted from a reduction in the general rate in a trade agreement with Cuba put into effect in September 1934, under which the Cuban products were entitled to a 20 per cent preferential rate.
"Whatever the reasons for the original preferential treatment granted Cuba in 1934 were, as concerns handbags, they no longer exist today. The Cuban handbag industry after 25 years cannot any longer be considered an infant industry and worthy of preferential treatment. In view of the unfair competitive conditions, continuation of this preferential tariff treatment is a disservice to the domestic handbag manufacturing industry.
"This proposal is not motivated by the political climate that exists in Cuba today, but rather is a matter of fairness and consideration of the well-being of the domestic industry. The Association urged the increase in the rate of duty on Cuban imports in 1954 and renews this request because less reason exists today than anytime in the past for the Deferential treatment to Cuba." (Handbags & Accessories December 1955, page 68)
June 1961 issue of "Handbags & Accessories," page 76.
"MARKET WEEK exposition of handbag resource's best is scheduled this month for the windows of the Empire City Savings Bask, Park Avenue at 33 Street, New York. Shown at pre-opening preview of this new industry "first" are, left: Alfred Malesardi, assistant bank secretary; Max Berkowitz, National Authority for the Ladies' Handbag Industry; W. Emerson Gentzler, president Empire City Savings; Maurice Mosesson and Sol Siegel of Authority."