ON THE DENIM TRAIL
The Columbian September 11, 1997
By Jesse A. Hamilton
We buy used Levi's. The signs aren't as common as they used to be, but they're still out there. Vans sit in Clark County parking lots with buyers who offer cash for the cast-off Levi's of passing motorists. But what do they want with other people's used jeans? Where do all these retired pants go?
For reasons that baffle even those in the business, people in several other countries love America's old Levi's.
"The Japanese have a love affair with Americana," said Dean Officer, who operates a buying trailer on Sundays in a Mill Plain Boulevard parking lot. He lifts a faded pair of blue 501s out of a stack of 60 he purchased that day.
"That is John Wayne, walking down the street," he said, rocking the jeans through the air.
The French are also major buyers on today's ever-changing market.
"They love our cigarettes, Jerry Lewis and Levi's," Officer said.
He finds it strange that people in other countries pay a lot of money to wear Americans' old clothes, but he doesn't mind making a profit off it. Officer is one of two people still purchasing Levi 501s in Clark County. They are the first link in a chain that ends with foreign clothing retailers.
The second link is Roger Beale. Beale, who owns and operates Beale International in Novato CA, buys 501s from dozens of smaller buyers.
"Levi's been making 501s for the last 135 years," Beale said. "There's a real mystique about the 501s. There's just a huge demand for it."
Beale, who started with a small van in Santa Rosa, ships from 2,000 to 3,000 501s a month, selling about 3,200 in his best month.
He collects the pants in a warehouse before shipping them to another domestic buyer in Utah. That warehouse then sells them to a foreign broker who, in turn, sells them to a foreign retailer. That's where it gets into the hands of the old jeans' new wearers.
Recent trends in the market, however, mean trouble for the business. Foreign sales are down after several buyers shut their doors on what had been a flood of jeans. Germany, one of the biggest markets, stopped buying because of new trade restrictions.
"They were probably 15 to 20 percent of the demand," Beale said. Buyers in places such as Italy, Thailand and South Korea stopped in reaction to the rising value of the U.S. dollar. Retailers there couldn't survive with the narrowing profit margin.
This is certainly a business that complains about the growing strength of the dollar in foreign markets.
"It's like playing the stock market," said Beale, whose business is the last major Levi's warehouse in the San Francisco Bay area after competitors dropped out. "I'm just willing to see what happens. The business will never go away -- it's just going to change."
The remaining buying vans are still open for business, though they offer less cash for the jeans. But the buyers are looking for very particular pants.
First, they must be 501s. The market for other types has died.
Second, they evaluate the jeans on size, color, fade, wear, damage and age. Contrary to what many think, jeans with holes and excessive wear are not popular any more. Also, depending on international trends, desired sizes change often.
"For a while, Japan was buying up to size 46," Beale said. Third, jeans from before 1984 are judged on a different level -- the older the better. Vintage jeans have different characteristics easily visible to the trained eye. A very old pair in good condition can be sold for several hundred dollars.
Before planning future income in jeans sales, a visit to the local buyer might net less than expected. A pile of several good used pairs might get a price less than half the cost of one new pair.
Beale buys from seven vans and 25 small businesses that buy jeans for extra income, all in California and Oregon.
"A hundred bucks and a sign, and you're in the Levi's business," he said. "Those vans probably put back into the community in one year probably $ 8,000 to $ 10,000. It's money that people can spend in other businesses."
Oregon has two vans, one on 78th Street just off Interstate 5 and one on East Mill Plain Boulevard across from the Evergreen Airport. The former is open 10 a.m. to 3 p.m. on Saturday. The latter is open the same hours on Sunday.
"We're pretty much the last guys out there," Officer said. "Hopefully, we'll be able to capitalize on that."
Officer, who works on Mill Plain, likes to think of his job as being earth friendly.
"I like the idea it's recycling clothes," he said. "I'd like to expand that a bit more." His past expansion efforts have included buying and selling used Nikes, but every product other than Levi's is less stable.
Beale believes Levi's will sell much longer than the 135 years it already has under its belt.
"It's the only jean I know of that gets better as it gets older," he said.
Characteristics of Vintage 501s
A red line on the inseams
Single-stitching on the top, inside edge of the back pocket
A capital E on the small red tag on the back pocket
A strap with buckle on the back of the waist
SURVIVING ON THE FLY
The Oregonian July 21, 2000
By Boaz Herzog
Ignorance is bliss. Mike Beale had no qualms applying the old saying to his fledgling international denim recycling company four years ago.
And why not? By mid-1997, more than 3,000 Levi's 501 button-fly jeans a month were passing through the doors of Beale International, situated in a small warehouse near the eastern end of Novato's Morrison Bridge. The jeans -- after some hole mending, a few touches of bleach or paint remover and a run through the washer -- were bound for foreign markets.
Overseas demand for used 501s, precious Americana in several Asian and European countries, seemed limitless. Just get the jeans, and everything else will fall into place, Beale's buyer in Utah told him.
"And that's what I did," says Beale, 40. "I went out and got a whole lot of pants."
He didn't need to bother studying the industry by talking with final customers, watching foreign currency markets or keeping up on fashion trends.
Or so he thought.
When Southeast Asian stocks and currencies began tanking in the summer of 1997, jean prices plummeted, Beale's inventory swelled and the profit margins he had enjoyed earlier disappeared. He found himself wondering how he had failed to see his troubles coming -- and how he could avoid being blindsided again.
His story shows entrepreneurs the importance of following the news and trends of a particular industry. Research, as Beale soon discovered, helped him stave off bankruptcy, rebuild revenue growth and find new buyers for his jeans.
"You really need to stay in touch with your market," says Inge McNeese, an export finance manager in San Francisco's U.S. Export Assistance Center. "It keeps you from having some very expensive problems."
American symbol The jean recycling and exporting industry has survived for more than a decade, based almost solely on the lingering popularity of Levi's 501s. The industry's roots date back to the 1950s, when actors James Dean and Marlon Brando were spotted sporting the familiar red Levi's tags. The jeans' popularity spread worldwide as Levi's 501s, like Coca-Cola or McDonald's, became known as a symbol of American style. Entrepreneurs soon figured out that money could be made by exporting the jeans.
Beale caught on to the craze in early 1996, when he bought a jean-collection van at Northeast 57th Avenue and Fremont Street for $500. He started by working part time, paying between $1 and $10 for used jeans that were gathering dust in people's closets.
Five months later, he bought the company to which he was supplying jeans, Beale International, for $15,000. The outgoing owner showed him how to find more jean-collection sites, such as pawn shops and thrift stores. Beale was left clueless, however, about how the business worked beyond his sale of jeans to the buyer in Utah.
"It was exciting," Beale says of those glory days.
But the excitement soon turned into frustration. In June 1997, he received the first hint of turmoil in the jeans' destination markets overseas, though the warning was lost on him at the time. His buyer in Utah called to say that he would be paying Beale 15 percent less, for every "Grade A" jean -- those without any holes or stains.
"If I had been researching more, I would've known things are slowing way down in Japan, and I would've dropped my prices to suppliers accordingly and saved myself quite a bit of money," he says.
Instead, he ate the losses, considering the setback a minor bump in the road to more profits.
But two months later, Beale got another phone call from Utah. Prices were coming down another $3 to $4 for Grade A 501s. Again, Beale was stuck with a huge inventory of faded jeans that instantly lost about one-sixth of their value. The buyer also suggested that Beale fly to Utah to meet a new manager for the buying outfit.
When Beale arrived a couple of weeks later, he discovered the real story. The huge warehouse where Beale expected to find the jeans he had shipped was empty. His buyer was shutting down.
"I was feeling lost, disappointed, sad, afraid," he says. "I thought, oh my God, what am I going to do now? I didn't have anyone to sell my inventory to."
That's what can happen when a business doesn't have any contact with the overseas retailers who ultimately purchase the product -- jeans, in Beale's case, says McNeese of the U.S. Export Assistance Center.
"You don't have information about where your best opportunities are, and you don't have any advance warning when things aren't going to work out," she says.
Fighting to stay in business When Beale finally found out that his buyer was shutting down, it was almost too late for him to cut his losses. He briefly considered closing Beale International and laying off his four employees before he lost any more money.
Then what? Go work for someone else again? No way, Beale thought.
He resolved to fight for his business and his dream of staying self-employed. He began by finding a larger dealer in San Diego who had bought jeans from Beale Internationals' previous owner. The buyer agreed to purchase some of Beale inventory for resale in France and England.
Beale then cajoled his group of suppliers, now selling to him at lower prices, to continue collecting jeans for him. He suggested they lower the prices they paid for each jean, to about one-third less in most cases.
"I appreciate all your business in the past," he told them. "Just hang in there. We'll still make money."
Meantime, Beale began to grasp the connection between his business and developments in Asia, where currencies continued to fall, bankruptcies and layoffs multiplied, and social unrest grew. He began to read about Asia, devouring the daily newspaper, books, and Fortune and Money magazines.
Beale also scoured the Internet, where he found other used-jean dealers like himself. He'd call them up cold.
"I'd say, this is who I am and how long we've been here. Let's work together."
Most often, the other jean dealers didn't disclose the names of their customers or suppliers. But the relationships that developed became invaluable, Beale says.
"How's it going? How do you see the market going? What's the outlook for fall? What countries are buying?" Beale would ask them.
Beale slowly built up a handful of other competitors he called from time to time. Over the past few years, many used-jean dealers have dropped out of the business. But Minsker chats with several survivors two to three times a week.
The informal discussions yield important information. During late 1997 and early 1998, his competitors suggested that he temporarily quit collecting jeans below Grade B because the lower grades, the ones with heavy wear and lots of holes, weren't selling well overseas.
During the same period, he also dropped the average prices he paid his suppliers by $1 to $2 four separate times, after tips from competitors revealed that foreign currencies were affecting the prices they were receiving from overseas buyers.
Efforts pay off No one knows how many millions of used 501s are shipped out of the country.
But Beale says Levi Strauss & Co.'s shuttering of 23 U.S. manufacturing plants since 1997 to shift toward overseas fabrication may undermine the jeans' U.S.-made mystique -- and demand -- overseas.
Beale figures he's safe for at least a few more years. Demand for used 501s in the Far East is showing signs of resurgence as the economies of many countries have slowly recovered, Beale says. In addition, USA Traders has begun selling to Israel, France and South Korea.
"It's all been worth it," he says. "It's tough to take lumps sometimes, but that's how you learn."
This fall, Beale plans to take his first trip to Japan to visit stores where his jeans end up. The trip might be the best example yet of hands-on market research.
BUSINESSMAN CAPITALIZES ON PANTS' POPULARITY OVERSEAS
Statesman Journal August 14, 2000
By Agela Yeager
Roger Beale's business is buying other people's jeans.
Levi's 501 jeans, to be exact. He buys the pants, then sells them from his Novato warehouse to places as far away as Japan and Israel. But Beale's business starts in a van.
Every Saturday, he sets up shop out of a van in the parking lot of the Pink Elephant Tavern on Lancaster Drive SE. There, he waits for people to bring in Levi's in various shapes, colors and conditions. "I'll buy them in absolutely any condition," he said. "Even if the crotch is ripped, I can give something for it."
The 40-year-old entrepreneur fell into the Levi's trade business in 1996 when he was working at a train station, where a friend was buying jeans on the street corner. Beale saw how successful it was and bought the business from his friend. Five months later, he bought Beale International, an established used Levi's business.
"I was real skeptical at first. I didn't see how you could make any money," he said.
The popularity of Levi's 501 jeans overseas stems from a love of everything American-particularly in Asian countries such as Japan.
For more than twelve years, used 501s carrying the Made in America stamp have sold for a pretty penny in other countries.
But several factors have slowed the used jean business. In 1997, the Asian financial crisis hit, leaving Beale with a pile of jeans he couldn't sell. In addition, Levi-Strauss & Co. has shifted much of its manufacturing out of the states, removing the appeal of the American-made label.
And as all used jeans dealers such as Beale will attest, there is a shortage of classic Levi's. Younger people who make up the bulk of the Jeans-wearing population have taken to brands such as the Gap and Tommy Hilfiger instead.
"(Levi's) missed a whole generation," Minsker said.
Levi's has paid the price for ignoring the younger generations. The company's 1999 sales were $5.1 billion, down 28 percent from $7.1 million in 1996.
While Levi's has planned a new marketing campaign intended to make its jeans hip again, businesses such as Beale International are trying to rebound.
Minsker said his sales were up in 1999. He said by buying in other areas such as Vancouver, Wash., and Salem, he is able to find more products. In addition, he has contracted with two stores in the Salem area: Designer Clothing & Consignment and Keizer Shoe Repair to buy jeans from him.
Before the Asian crisis, Beale sold all of his jeans to a wholesale dealer in Utah, who would then sell overseas. Now he does about 50 percent of his business directly with international buyers.
He also buys other Levi's products, although the classic button-fly jeans are the most coveted. Generally, Beale International collects about 2,300 pairs of jeans a month. But Beale misses the old days. "People used to line up to sell their pants," he said. However, Bealea said he doesn't expect the demand for used Levi's to drop much more. He said the brand always has gone in and out of fashion and he thinks it is ready for a renaissance. But just in case, he said his goal is to start another business by next fall.
"I'm not sure what kind of business I'll do," he said. "Five years ago, I had no idea I would be selling jeans, so you never know."
THIS TRADER IS FOREVER IN BLUE JEANS
PCC COMMUNI•TIES NEWSLETTER
By James Hill
"Money talks, but it don’t sing and dance, and it don’t walk. And as long as I have you here with me, I’d much rather be forever in blue jeans."–Neil Diamond, 1979
This opening line to Neil Diamond’s hit song, "Forever in Blue Jeans," seems to be a fitting way to describe Roger Beale. The Levi 501 blue jeans are what he buys and sells, profiting from a sometimes–lucrative business. Beale owns Beale International, which scours the Willamette Valley for used Levi Strauss 501 blue jeans to purchase. Minsker’s buyers get the jeans and bring them to warehouse where they are washed, mended and sold to stores specializing in worn Levis. Most of his business comes in the form of storeowners from countries like Japan, South Korea and Israel, which make big money feeding a used blue jean craze.
To remain forever in his blue jean business, Beale has enlisted the help of Novato Community College’s Small Business Development Center to help him stitch any loose ends in his business savvy. Beale has completed the first– and second–year Small Business Management courses and even took the second–year class again last year.
"Taking the PCC classes has taught me many things," Beale said. "I think I would say that most of all they have helped me be a better person by becoming more organized, from my inventory to my desk files. Being organized is a big part of being in business and it’s a big time saver."
Thanks to a friend, who had a good experience with the Small Business Management class, Beale enrolled with the Small Business Development Center in 1996. Beale International. employs two part–time employees and four independent contractors to purchase blue jeans, so Beale needed to know how to efficiently run his business. Currently, USA Traders Inc. sells jeans to 20 local businesses from Portland to Salem as well as Goodwill stores in Maine, and collectors from Ohio to Texas, in addition to its international trade.
"He is a hustler in the nicest way," said Marcia Pry, a part time instructor for PCC’s Small Business Development Center. "Those are qualities I admire. He believes he should make a profit. Frankly, not everyone in business gets that part. People like Roger are fun to work with because they catch on and want to learn more."
During the years between 1995 to 1997, the used Levi blue jean market saw its peek, which Beale, who has been featured in The Oregonian and Salem Statesman Journal newspapers, said helped him establish his business. He purchased a 1968 Dodge van for $500 to be a buyer/seller in early 1996. From that colorful van, Minsker rolled from location to location, buying people’s old and worn Levi Strauss 501 blue jeans and, "made really good money doing it." During that time, he was introduced to Doug Clark, owner of Beale International. Later that year Beale bought the company from Clark, who had become burned out from the business, and the rest is history for Beale.
"I thought at the time I bought the company, ‘how can one make money selling these brands?" Beale said. "But it seemed like there was no end to my success when I first got into it. In the first month I took over the business I tripled my sales. Now I’ve got this little niche market and I’m just able to make a nice living."
Beale said the business grew quickly after he bought it four years ago, allowing him to obtain a 12,000-square-foot warehouse at Second and Alder streets. When he looks back to those initial days as a buyer, what convinced him to purchase the business was the amount of money he was making every Saturday out of that old Dodge van, working between 10 a.m. and 3 p.m. along stretches of Fremont Street. It also didn’t hurt him when, before he bought the company, he visited Clark’s warehouse in Sandy, Utah (a suburb of Salt Lake City) where he had almost 40,000 pairs of Levi Strauss 501 blue jeans waiting to be shipped overseas.
"I was pretty convinced that I could make money doing this," he said. "The warehouse convinced me this was the real deal. Even though I knew I was quitting a good job at the train station in Novato, I knew this was a good opportunity to learn a new business."
The Small Business Development Center offers classes and counseling to current and prospective small business owners. PCC operates the center in conjunction with the Small Business Administration, which overseas a statewide network of small business development centers in Oregon.
For information about PCC’s SBDC, please call 503-977-5080.