Department Store Woes: Part II

Department stores experienced a brutal reality check during the 2016 holiday season, and 2017 hasn’t brought much relief. We continue to hear about store closures, missed sales estimates, and declining traffic – in sum, the general consensus being that something is off, but no one knows how to fix it. The rise of e-commerce crept up behind department stores while they were still basking in the thrill of expansion mode, and now the internet has lunged ahead, changing the very nature of the retail game. Department stores have invested heavily in order to keep up, but adapting old systems to this new retail has proven to be a challenging task. And yet, according to Macy’s CFO Karen Hoguet, e-commerce isn’t even their biggest competitive threat. The real culprit? Off-price retailers.

As brands and retailers pivot to follow the growth in our industry, they’re shifting more and more resources into the off-price business. Product in this channel falls into one of two categories: closeouts or make-up product. Closeouts are extra inventory in styles that were originally shipped to mainline department stores. At the end of the season, this inventory is sold to off-price retailers at a discount. Make-up product, on the other hand, is produced specifically for off-price accounts. It’s manufactured to meet their pricing requirements, meaning the product is usually a stripped-down version of what department stores sell – cheaper materials and construction, fewer hardware accents, etc. This product was never sold in department stores – in fact, that was never the intention. Continue reading

Price Matters

In my mind, it is very clear that we as consumers are demanding impossible prices for the clothing we buy. Since we hold the purse strings, our wish actually does become the industry’s command – it may seem like the retailers and brands have all the power, but if we aren’t buying? They’re SOL. Just take a look at the record number of retail bankruptcies this year.

Circling back to my original point: we want cheap prices. As the industry bends to accommodate this perceived need of ours, pressure begins to build. Everyone has margin goals they’re trying to achieve, from the retailer to the vendor and the factory – no one wants to budge in this arena. So, as the customer asks for cheaper prices, the retailer presses the brand for lower costs and for goods with higher markups. The brand then turns around and presses their factory for better pricing – sometimes the factory will be able to negotiate higher order quantities in exchange for bulk volume discounts, sometimes they just have to make it work for fear of losing the brand’s business entirely. And where does the factory turn to release this pressure, you ask? Well, there’s always their employees…

A perfect example of this process recently surfaced in the news. In February, Walmart held a conference with its major brands to make a proposal: in order to maintain its reputation with consumers as the retailer with the lowest prices, Walmart called on these brands to slash prices by 15%. If you’re a vendor at this meeting, you just felt the crushing weight of dread descend on your shoulders. There is no room to negotiate here: either (A) you make the necessary changes, or (B) you lose what is probably your largest account – you can bet your competitors will be more than happy to fill in for you if you choose Option B.

At every point in this scenario, the players are maxed out: they are giving as much ground as they can in hopes that the orders will keep coming (and ideally increase in volume). There is no flexibility – any small fluctuation could upset the entire chain. Does it seem likely that anyone in this situation would be thinking about the environmental consequences of production, the life cycle of their product, or the well-being of the employees and communities they impact? Not exactly. To be fair, that might not be because they don’t care about these things. Intentions aside, they just don’t have the bandwidth – they lack the capacity to act. The problem is that choosing blindness and ignorance in this area ultimately reaps the same harvest as truly corrupt intentions: both avenues contribute to the perpetuation of a broken industry.
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Department Store Woes: Part I

The selling period between Thanksgiving and Christmas is critical for retail – and 2016 holiday sales did not disappoint. According to the National Retail Federation (NRF), spending between November and December rose 4% to $658.3 billion, beating the projected 3.6% increase. Nonstore sales (e-commerce) rose an impressive 13%. Unsurprisingly, Amazon accounted for the lion’s share of this growth at 38% of total online revenue (next in line was Best Buy with a 4% share).

And yet, retail news has been pretty bleak lately – filled with grumblings from some prominent players. In the past couple weeks, major retailers have reported holiday performance figures that drastically swerved from the overall retail trend, causing significant drops in share prices: Nordstrom -9%, Macy’s -14%, and Kohls -19%. Macy’s reported a 2.1% decline in holiday sales, coupled with the announcement of 68 store closures and the elimination of 10,000 jobs. Sears experienced a more precipitous sales drop of 12-13%. They’ll be closing 150 unprofitable stores this year. JC Penney also reported a decrease in holiday same store sales (-0.8%). Nordstrom, which has historically been the strongest of the bunch, has repeatedly missed sales targets and even reported that traffic levels in stores are at their worst levels since 1972.

So, while overall retail sales grew, it appears that not a single department store shared these results. Continue reading

Fashion Police

Only organic natural fibers.

Or what about just natural fibers?

Scratch that. But no polyester. Oh wait…

Okay I guess recycled polyester is alright.

Only brands that list their factories.

Only brands that list the countries where their factories are.

Only brands that address factory conditions in their code of conduct.

Only brands that have a code of conduct?

Over the past year I’ve tried to abide by a number of guidelines when it comes to purchasing clothing. I curbed the total number of pieces I added to my wardrobe and I thought long and hard about each addition. Before each purchase, however, there was research. Lots and lots of research. If I wanted to fill a hole in my wardrobe, I went through a list of questions:

Which brands/retailers do I trust? Believe in? Support their mission? Bottom line: can I shop here with a clear conscience?

Which of those companies offers the type of garment I’m looking for (work-appropriate, basics, swimwear, etc.)?

At my price point?

Are they using responsible materials?

In my style? Size?

As you can imagine, the list becomes pretty short after asking the first question – trying to apply the last few filters often leaves me with a very limited set of options. If, as is often the case, I am left without any contenders, I move back through the list, deciding where I can budge. Slowly but surely, my list of non-negotiables becomes very negotiable, the lines I drew in the sand so blurry I start to second-guess their value. I inevitably find myself asking “What’s the point?” and wishing I could blindly trust that no brand or retailer would still be in business if they were doing something truly horrid. Right? Continue reading

Retail Woes: A Formula for Coping

If you’ve been paying any attention to the retail environment, you know it isn’t pretty out there. The retailers that were once cornerstones of our beloved shopping malls back in their heyday are reporting dismal results, day after day. In April, Macy’s reported their profit was down 40%. In May, Nordstrom posted a profit of $46 million, down from $128 million a year earlier. Due to sales declines, Gap shares have tumbled 45% over the last year. Even fast fashion hasn’t escaped: Uniqlo advised that operating profit was down 46.4% for the 9-month period ending in May, Forever 21 is closing some of its larger locations, and H&M reported growth of just 5% despite having opened an additional 438 stores within the past year.

Ouch. Continue reading

A Look Inside the System

The fashion industry is built on an intricate web of relationships between brands, retailers, suppliers, producers, and consumers. There are many ways to connect consumers with product, and each method has its advantages and disadvantages. The practices of buying and selling merchandise have evolved over time – how did we arrive at the current landscape of the fashion industry? Why do some brands sell direct (via their own stores or ecommerce sites) and others rely on wholesale partnerships (with large retailers like Nordstrom or Macy’s)? What makes fast fashion so different, and why has this model created such turmoil for traditional brands and retailers?

“Wholesale is a dream for design-driven brands, since it allows them to focus on the design and product, while offloading the selling to an often influential third party. Brands that really want to own the relationship with the customer…often won’t be as design-driven since they have many other skills to master, from customer acquisition to ecommerce to customer service.” –Loose Threads

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Designing for the Bottom Line

“Fashion is made to become unfashionable.” -Coco Chanel

And yet for some reason we’re still surprised when a once trustworthy market dries up and disappears completely. My hunch is that this surprise is due to the way many outside the fashion industry have come to treat brands: as any other kind of business, one that doesn’t have to bow to the fickle nature of fashion trends.

I become uneasy when I hear of a fashion brand going public. This was extremely popular in the 1990s as brands first discovered that the additional funding from an IPO could assist them on the road toward global expansion. We saw the creation of luxury conglomerates run by outsiders to the fashion industry (i.e. Bernard Arnault at LVMH Moët Hennessy) bring an entirely new mindset to the practice of selling clothes. Instead of hemlines and silhouettes, the conversations turned to growth and margins – to making creativity as profitable as possible. Continue reading

Decisions, Decisions

In a recent bout of online shopping, I found a blouse I really liked. Two weeks later…it’s still sitting in my shopping cart.

Background: this particular brand passed initial inspection so I decided to look around at their clothing. One top in particular caught my eye and I was 95% of the way toward making a purchase when a little voice in my head stopped me. “What is the fiber content?” it said. A sigh of annoyance escaped me – have I mentioned how I adore this pesky thing called awareness? To appease my conscience I headed back to the detail page and that’s when I discovered the top was 100% rayon. Ugh. Why did I have to see that? Continue reading

Knock It Off

Mary Katrantzou’s Spring/Summer 2014 collection is one I won’t soon forget. Never before had a collection so captivated my attention: the details were impeccable, the designs like nothing I had ever seen before – a rarity in today’s fashion world. I was completely in awe of her work. Chalk it up to my age or to a lack of exposure in the world of fashion, but I had never experienced this level of appreciation for a designer. Maybe for the icons that are no longer with us, but not for anyone from the modern fashion world.

It wasn’t long before her work was being replicated at every level of fashion retail. Her digital prints enabled copyists to take her designs straight from the runway and churn them out in a matter of weeks, beating Katrantzou’s own designs to market. Last year, she commented on how commonplace such imitations had become, saying “It became something you saw everywhere…I felt the need to move away.” Continue reading