Meet Me in the Parking Lot

In the wealthy and normally well-mannered Washington suburb of Bethesda, Maryland, the competition is heating up.¹ ² It is Saturday morning, and soccer moms are in a race to throw things away. First in line is a Lexus SUV, followed by a Town and Country minivan, and then a Lincoln Navigator. The first three vehicles alone cost well over $100,000, which would buy about one-tenth of a house in much of the surrounding neighborhood. The Salvation Army truck sits outside the Sumner Place Shopping Center, but the truck has only so much room, so it pays to be early and to be tough. The wait to dispose of last year’s stuff is longer than the wait to buy more stuff inside the shopping center, and often, by 10:00 A.M., the van is full and the weaker competitors are turned away until the next week. Mostly, the moms are giving away clothing—large Hefty bags stuffed to bursting with perfectly fine clothing that someone is tired of. Some of the moms admit that later in the afternoon they would be headed to the mall to buy more stuff, and that next year they would likely be unloading that as well. A few of the moms express an altruistic motive for lining up behind the van, and all say that they will use the tax deduction. More than anything, though, the moms are here because they need to clean out their closets to make room for new stuff.

T-shirts? Yes, they agree, lots of T-shirts. They shake their heads, not sure how they ended up with so many T-shirts. It is easy to see the simple market dynamic of secondhand T-shirts in a wealthy U.S. suburb: all supply and no demand.

The high wages that have caused the demise of U.S. textile and apparel manufacturing have a flip side. The very wages that have stripped America’s manufacturing might have at the same time led to a new comparative advantage: Rich Americans—or even middle-class Americans—excel at throwing things away, and the richer we become, the bigger the mounds of cast-off clothing swell. The Salvation Army at one time tried to sell all of the clothing in its stores or to give it away, but the supply now so far outstrips domestic demand that only a fraction of the clothing collected by the Salvation Army stays in the United States. There are nowhere near enough poor people in America to absorb the mountains of castoffs, even if they were given away.

America’s castoffs, however, have customers the world over, and clothing thrown away by Americans forms the backbone of a dynamic global industry. While the United States has experienced an unbroken string of merchandise trade deficits for more than 30 years, recycled clothing has been a consistently successful export industry. Between 1995 and 2007, the United States exported nearly nine billion pounds of used clothing and other worn textile products to the rest of the world (see Figure 13.1), and the industry now has customers in more than 100 countries. During the past decade, the United States has in most years been the world’s largest exporter of used clothing.³

Observers have sharply conflicting views about the global trade in cast-off T-shirts. Is the recycled clothing business a villainous industry—a shadowy network that exploits the goodwill of charities and their donors, and suffocates the apparel industries in developing countries under mountains of castoffs? Or is it a great industry, a model of nimble, free-market dynamism that channels charitable impulses into clothing for the poor? People who hold opinions about this business hold them strongly, but most people, of course, do not think about the industry at all, and while tossing T-shirts into the collection bins have only a vague and usually wrong idea of where the T-shirts might be headed and what will happen to them next.

Figure 13.1 U.S. Exports of Used Clothing (by Weight)

Source: USITC Dataweb.

The industry is all but invisible except to insiders: It has no household names and no big global players. Firms go in and out of the business almost daily, and though there are some factories, there are mostly networks of small family businesses scattered around the globe. The networks are often linked by ethnicity or family ties, and most of the businesses have only fleeting advantages in demand or supply. It may look easy, a simple matter of funneling the mountains of clothing that rich people no longer want to the poor who never have enough. But there are multiple complications and many challenges with an industry that links the moms in the Bethesda parking lot with the moms in African villages. Each leg of the journey has another set of competitors, and it is impossible to know ahead of time what will get thrown away in Bethesda and who in Africa might want it. Both suppliers and customers are astoundingly fickle.

For now, I’ve decided to keep my T-shirt. But one day I will toss it into a Salvation Army bin, and it will encounter myriad new experiences. Most important, it is only in this final stage of life that the T-shirt will meet a real market. Unlike the U.S. cotton producers, the North Carolina textile mills, or the Chinese sewing factories, the clothing recyclers are on their own, without help, or even notice, from governments or lobbyists. There are no walls to keep out the lions, so successful players in the used clothing trade have no choice but to compete by punching rather than ducking, and each survives only by excelling in an exhausting race of faster-better-cheaper with hundreds of competitors, a race that leaves little time for politics. It is only in this final chapter of the T-shirt’s life that world trade patterns are fashioned by economics rather than politics. While subsidies likely explain much world trade in cotton, and tariffs, quotas, and trade agreements explain much world trade in finished T-shirts, once the T-shirt is tossed into the bin its remaining life story is a story about markets and little else.

The global used clothing industry is also a fascinating study in the market for “snowflakes,” as almost every item of clothing that enters the trade is unique. At the raw cotton stage, any bale of similarly graded cotton is interchangeable with any other, and once certain characteristics are specified, plain-white T-shirts, too, are interchangeable. But if the moms lined up in Bethesda toss away 100 T-shirts, each will be different, and this snowflake factor has important implications for how the industry is structured and what it takes to win. In brief, the snowflake factor means that the most successful firms in the industry are those with highly developed expertise in picking out special snowflakes, and with worldwide but personal relationships that allow them to match snowflakes with customers. It is hard to see how a big multinational could pull it off. Here, finally, is a global industry for the little guy.

Panning for Gold in New Jersey

The Stubin family of New York has been a player in the industry for more than 60 years. For most of that time, Trans-Americas Trading Company, the family firm, occupied a five-story warehouse and factory in the Greenpoint neighborhood of Brooklyn. For generations, Greenpoint was a first stop for generations of immigrants, especially from Europe. Morton Stubin, who arrived from Poland in 1939, was one of them. Family lore is a bit hazy on how Morton started in the used clothing business, but somehow he found buyers and sellers of used clothing and built a business bringing them together.

Ed Stubin, Morton’s son, hadn’t planned to join the business. His plan was to become an academic, and he went so far as to obtain his Ph.D. in psychology. But Ed found himself facing a weak academic job market and the demands of a growing family, so he joined his father in the business in the 1970s. Today, though Ed is completely committed to the business, and is considered by many to be the industry’s leader and voice, he doesn’t really believe he is a natural businessman, and he still thinks about what he might be able to do with his psychology training once he retires. Eric Stubin, Ed’s son, also did not plan to join the business, but after college and a few years climbing the corporate ladder, he came back to Brooklyn and joined his father. Sunny Stubin, Ed’s wife, also works at Trans-Americas. In 2006, with gentrification closing in, the Stubins sold their Brooklyn factory to a condo developer and moved their firm about 20 miles away to Clifton, New Jersey.

The U.S. textile recycling industry consists of thousands of small family businesses, many now in their third or fourth generation of family ownership, and Trans-Americas is both the rule and exception in the industry. Like its nearly 3,000 competitors, Trans-Americas is a family-run firm involving multiple generations in the day-to-day operations of the business.⁴ Every year, the Stubins watch many of their competitors go belly-up, and every year the failures are quickly replaced by new and nimble players. In this fluid network of start-ups and failures, however, the Stubins stand out for their longevity. Ed Stubin repeats this often, usually with a tone of amazement: “We’re still here,” he keeps telling me, as if he can’t quite believe it.

By 2008, the competitive landscape was far more intense than it had been just a few years earlier. “We have to run even faster to stay in the same place,” Stubin told me. The Stubins buy clothing from charities within a 1,000-mile radius of New York, and on an average day their 85 employees will process about 70,000 pounds of clothing. The charities charge what the market will bear. Prices tend toward the higher end of the range when the castoffs come from wealthier neighborhoods, and toward the lower end in seasons that generate less desirable castoffs. In general, winter clothing has a more limited market than summer clothing, so prices trend down during periods when suburbanites are disposing of cold-weather clothing, and per-pound prices are higher in warmer climates. When I first visited Trans-Americas in 2004, the Stubins were buying unsorted truckloads of clothing from the charities for about 5 to 7 cents per pound. By the summer of 2008, this price had approximately doubled, thanks to competition from the increasing number of buyers. Interestingly, during this same period the price of new T-shirts from China fell by approximately

Used clothing buyers can’t be choosy or averse to risk. They have no choice but to buy what has been thrown away and deemed worthless by somebody, and they never know exactly what will be buried in the truckloads from the charities. The most successful buyers are like successful stock traders, buying at low points, seizing timing opportunities, and hoping competitors are looking the other way.

Unfortunately, the best stuff has been picked off by the time the clothing reaches Trans-Americas. The larger charities—Goodwill and the Salvation Army—sort through donations for the goods that are saleable in their stores, so by the time the donations reach the Stubins, they have already been cast off twice, by the original owner and by the charity. But astute buyers not only know what types of goods get tossed to which charities and when, they also know which charities tend to skim off what.

Ed Stubin has seen a shift in the very nature of the business during the past generation. For many years, the business was essentially a sorting business. The tons of clothing pouring through the loading dock were sorted into three basic categories: for sale as clothing, wiping rags, and fiber. Each category had ready buyers, and, more important, each category was profitable. Whether the clothing coming into the warehouse was to be shredded into fiber, cut into rags, or worn as clothing, most of the prices paid for the raw material were sufficiently below the selling prices that the Stubins could make a profit. The business was simpler and easier then, and it was this appearance of easy profits that began to attract competitors.

Increasing competition in the 1970s led to a downward trend in selling prices that lasted more than 30 years. With selling prices falling and buying prices rising, it was no longer enough to sort and sell in the three categories, as most of the selling prices were below the Stubins’ cost. The business changed from a sorting operation to a mining operation. Mining usually requires more skill than sorting, and also entails significantly more risk. While some firms in the industry simply “sort and sell,” others, like Trans-Americas, have developed significant expertise in mining.

The clothing enters the Trans-Americas warehouse on a conveyor belt that moves quickly past the workers, who stand on either side of the belt.⁵ Like an I Love Lucy rerun, the workers grab the clothing whizzing by and toss it into or onto one of a number of bins or conveyor belts. At this stage, little skill is required; the “rough sort” entails simply identifying the product and tossing to the appropriate place. The choices include, for example, skirts, men’s pants, household materials, and jeans. T-shirt material has its own category, but includes not just T-shirts but also other articles made of cotton-T-shirt-like fabric.

Clothing in the T-shirt category slides onto another conveyor belt where it is again surrounded by a team of workers. The workers quickly examine each snowflake and decide its fate. The shift is subtle but distinct: The workers are now miners and graders, rather than sorters, and the job requires more skill and more attention, and is rewarded with more money. The workers also categorize the clothing by amount of wear, ranging from like new to slightly worn to unsaleable as clothing. As the workers grade and categorize, they are also panning for gold, because certain types of clothing, even that in poor condition, have an upscale and eager market. So-called vintage clothing has the highest value of all, though it is not easy to explain what exactly “vintage” is. If a worker identifies an article of clothing as vintage, the clothing is singled out for special treatment in a separate section of the factory, where Sunny Stubin matches special clothing with special customers. While it may not be clear what vintage means, what is clear is that the business depends on the workers’ ability to spot it, because to let it whiz by with the flotsam is like flushing gold down the river along with the firm’s profits. Spotting the snowflakes that have special value is a skill that management experts call “tacit knowledge.” In other words, it’s hard to explain. A skilled grader can decide a T-shirt’s fate in approximately one second.

Some aspects of the panning business are easier than others. Everyone knows to watch for Levis and Nikes, because hip young Japanese have a penchant for these brands, and just the right pair of used jeans or sneakers can sell for thousands of dollars in Tokyo.⁶ The Japanese also love Disney, and a perfect-condition Mickey Mouse T-shirt can be easily sold for 10 times the price of a less-well-adorned T-shirt. (Indeed, when I visited Tokyo in 2007 after this book was published in Japanese, I strolled in the Takeshita Dori neighborhood, where there were literally hundreds of $100 old American T-shirts for sale.) Because of its insatiable demand for trendy Americana, Japan is usually the largest customer for American used clothing.⁷ However, Japan’s demand is limited to high-end and quirky items; so while Japan is the largest-dollar-volume customer, the country absorbs only a tiny volume of America’s castoffs. Most of the truckloads that are dumped into the Stubin factory have little of interest to the Japanese.

Once the likes of Mickey Mouse have been picked off, panning for gold in the T-shirt river becomes more inexplicable. The value equation might be flipped upside down, with worn items sometimes having greater value than new, and sometimes not. Old tie-dye, for example, is gold, new tie-dye is not, but the equation is reversed for sports team shirts. Somehow, Sunny Stubin just knows when she sees a T-shirt, whether it will appeal to one of her upscale customers, and somehow, the higher-paid workers are expected to know, too. How to explain to a worker from another culture that a ratty Led Zeppelin T-shirt (what is Led Zeppelin, anyway?) should be skimmed off while a newish JCPenney T-shirt should be sent down the chute? How to explain why some “event” T-shirts (David Faulkner Memorial 2001 Motorcycle Ride) have high value and others (Kidz in the Zoo Fun Day 2002) do not? Sunny Stubin shrugs repeatedly: You just have to know your customers, she says over and over again.

Certain T-shirts are hot right now, especially in Europe, New York, and Los Angeles. Sunny has customers willing to pay top-dollar for 1970s rock bands, for example, so the viability of the business depends on the workers’ ability to spot such gold and send it onto the vintage belt for special handling. Sending an old Rolling Stones T-shirt to Africa is a lose- lose, as African consumers couldn’t care less about the Rolling Stones and also do not like visible wear and tear. Just the right Rolling Stones T-shirt—from the band’s 1972 tour, for example—can fetch about $300 at a hip vintage store.⁸ If such a shirt ends up in an Africa-bound bale, then the Stubins have not only forgone profit from their vintage customers, but they have created an unhappy customer in Africa.

The T-shirts singled out for special treatment as vintage are matched with certain customers and are often sold by the piece, though sometimes by the pound. A nice Mickey Mouse can go for $3, and a rare rock band can bring much more. The vast majority of the T-shirts flowing onto the conveyor belts are not gold, however, and not bound for London, Los Angeles, or Tokyo. Like the leftovers from Nelson Reinsch’s cotton production, old American T-shirts end up in surprising places.

T-Shirts in the Afterlife

Approximately half of the clothing arriving at Trans-Americas has another life to live as clothing. Where rich Americans see garbage, much of the rest of the world sees perfectly fine clothing that can be worn to work or even to weddings, and can clothe another child or two. Since the fall of Communism, American used clothing has found an eager market in the so-called “second world,” and U.S. processors now ship large volumes of used clothing to the former Soviet bloc. According to the Department of Commerce, the United States ships used clothing to Poland, the Ukraine, and Russia, and used clothing Internet message boards often contain expressions of interest from the poorer side of Europe. One advantage of the Eastern European market is its climatic similarity to the United States, as well as its similar fashion sensibilities. Interestingly, Ed Stubin told me that the wealthy countries of Western Europe have recently lost their used clothing industries to the poorer countries of Eastern Europe. Rather than sort clothing in Western Europe and then sell winter coats to the Ukraine, the sorting and grading activities have shifted to the poorer countries in order to take advantage of the lower labor costs. Other common destinations for American used clothing include the Philippines, Chile, and Guatemala. Virtually all of the clothing shipped to these markets is in fine condition; the only thing wrong with most of it is that an American got tired of it.

But most of the clothing whizzing by on Trans-Americas’ conveyor belts is headed to Africa, on a journey from the richest to the poorest place on earth. For many countries in Sub-Saharan Africa, used clothing represents one of America’s leading exports (see Figure 13.2), and for several, it is often America’s largest export.

The countries appear to have come from a list of World Bank basket cases, places where women still carry water and babies are born in mud houses. The basket-case imagery is often used by critics of the used clothing trade, where observers like to describe how insult is added to injury when the poorest countries of the world serve as a dumping ground for America’s rags.

Figure 13.2 Countries for which Used Clothing Was Among the Top 10 Imports from the United States, 2007

Source: UNComtrade.

Ed Stubin has traveled to many of these countries, traipsing through Niger, Mozambique, Angola, and Benin to meet with customers and drum up business. He is still haunted by images of swollen bellies and especially of land-mine amputees. But to Ed Stubin, Africa is not a dumping ground or a basket case but a customer, or rather hundreds of different customers, each with exacting demands for quality, service, and price. Stubin is mildly offended but mostly amused by the notion that he dumps castoffs into Africa. Such a business model would never allow him to survive, not when his competitors are eagerly trying to meet the demands of the African consumers.

As Americans continuously clean out our bigger and bigger but still-too-small closets so that we can head back to the mall to buy more, we create an exploding supply of used clothing that shifts the balance of market power to the African customer. Whether the African customer is seeking khakis, baby clothing, or T-shirts, he or she has hundreds of potential suppliers from the networks of exporters in the West, and Stubin survives only by figuring out what his customers want and delivering it in good time at a competitive price. The underlying principle is not original, but it is critical: The customer is king, and Stubin is in a faster-better-cheaper race to make the customers happy. Dumping ground, indeed.

Like clothing customers anywhere, Trans-Americas’ customers in Africa want their clothing free of stains and tears. In addition, the hot climate means a preference for light cottons. But modesty is an important value in most of Africa, and so shorts have little appeal except for children. Miniskirts, too, are out, as is anything sexually suggestive. Most of Ed’s African customers prefer darker colors, because they do not show dirt so easily. The Africans are every bit as fashion-conscious as the Americans, and know whether lapels are wide or pants have cuffs this year, and make their demands accordingly. T-shirts are perfect for the African weather, though the market is particular about the pictures or script on the shirt.

Most of Trans-Americas’ clothing is baled according to customer specification and sold by the pound. Typically, the bale size is 500 pounds, though it can be smaller or up to 1,000 pounds. The bale’s size and contents, as Stubin keeps telling me, are “whatever the customer wants.” Stacked in the warehouse ready to leave the loading dock are literally hundreds of bales marked “women’s cotton blouses,” “baby clothing,” “men’s khaki pants,” “cotton polo shirts,” or just “socks.” In their incessant quest to meet the exacting customer specifications, Trans-Americas today sorts clothing into more than 400 different categories.

T-shirts are their own mini-industry. In all, the Stubins sort T-shirts into approximately 20 different categories, for example, pocket tees, ringer collar tees, four-color pictures, script, two-color pictures, and sports teams. While some customers will order bales of mixed styles of T-shirts, others will specify in detail their T-shirt style preference. In 2008, the selling price of used T-shirts in good condition was about 80 cents per pound. Because T-shirts average three to a pound, this means that the Stubins sell T-shirts to their African customers for about 25 cents apiece. Ed Stubin likes to stress that he can send a nice T-shirt to Africa for less than the cost of mailing a letter. The cost is also approximately half of the value of the raw cotton in the shirt.

My T-shirt from the Florida beachfront shop is well-suited to the African market. African customers do not like in-your-face logos (e.g., “Ya got a problem with that?”) or suggestive messages (e.g., “Hot Chick”). But my T-shirt’s colorful picture of the parrot and palm tree is cheerful and inoffensive, and the shirt could be worn by a man or a woman. The T-shirt is still in good shape, with no holes or stains. It has been washed a few times, but the print is still bright.

My T-shirt is among the lucky ones, however, because about half of the shirts that enter the Trans-Americas factory do not have another life as clothing, as there is virtually no demand from the world market for clothing that is torn, excessively worn, or stained. Of the clothing that is no longer wearable, T-shirts are among the most valuable: Most of them will end up as wiping rags in the world’s factories. There are few better wiping rags than an old T-shirt, according to Ed Stubin. Suppose, he asks, you have a pile of old clothing at home and you spill your coffee: What would you wipe it up with—the jeans, the sweater, or the T-shirt?

Approximately 30 percent of the clothing entering the Trans-Americas factory is destined to become wiping rags. Trans-Americas provides bales of worn T-shirts for sale to rag cutters, who pay the firm about eight cents per pound. Many industrial processes require white rags, so white T-shirts are baled separately and sold for a higher price. At this stage, the value proposition reverses again, as a T-shirt with an elaborate four-color picture will sell for a lower price than a plain-white T-shirt, because the material used to make the print impairs the cloth’s absorbency. Very dark T-shirts (whose dyes can react with some chemicals) and those containing some polyester (which impairs absorbency) can also sell for lower prices.

In order for an old cotton T-shirt to be saleable to a rag cutter, there must be enough left of the T-shirt so that the cutter can cut a rag of about 150 square inches. Some T-shirts are too ratty, or too covered with paint or prints, to be sold to the wiping-rag manufacturers. There is a gasp of breath left in such a T-shirt, however, as it enters yet another market to become shoddy.

A T-shirt becomes shoddy once it is shredded into bits by a machine called (aptly) a mutilator, in a process that is a bit like turning tree trunks into mulch. Shoddy has a market value of 2 to 4 cents per pound, and it also has customers across the industrial landscape. Bernie Brill, former executive director of the Secondary Materials and Recycling Textiles (SMART) Association, told me that used T-shirts are contained in, for example, automobile doors and roofs, carpet pads, mattresses, cushions, insulation, and caskets. Recently, shoddy has found a market in eco-friendly construction, where it is used as insulation.⁹ And finally, in a fascinating full-circle story, high-quality cotton shoddy can be spun back into low-grade yarn and turned into cheap clothing again.¹⁰

Ed Stubin finds a use and a market for almost all of the textile articles thrown away by Americans. The high-end items with quirky appeal will be sold to vintage shops all over Europe and North America, and the Japanese will get most of the Levi’s. Winter coats will go to Eastern Europe, and old cotton sweaters will go to Pakistan to be turned into new sweaters. Shoddy will go to factories everywhere and also to India, where it is transformed into cheap blankets that are passed out to refugees. Italy is a customer for old wool, where an industry is built on recycling fine cashmere.

The heart of the business, though, is the trade with Africa, where the exploding supply of castoffs from the rich meets the incessant demand for clothing from the poor.