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Hello, Customers. Are You Out There?
A fashion director from a top New York specialty store, shopping the Paris collections this month, questioned the wisdom of stocking up on Balmain after visiting the company’s showroom, where the price range of fanciest dresses is $12,000 to $22,000, and jackets are priced at about $5,000. Like pretty much every other retailer, she wanted to carry one of the hottest labels in town, but really now, an entire outfit would cost modest 401(k) holders the equivalent of their losses during last week’s market chaos.
With the spring Fashion Weeks coinciding with the fall financial meltdown, retailers are faced with a dilemma that is partly economic and partly psychographic: How do they convince consumers of luxury goods to loosen their wallets when even the wealthy are showing signs of cutting back? And how do they plan for spring when the fall collections, now in stores, seem to be toxic? Sales were off last month by 15.8 percent at the specialty retail segment of Neiman Marcus, which includes Neiman Marcus stores and Bergdorf Goodman; 10.9 percent at Saks Fifth Avenue and 9.6 percent at Nordstrom, declines that surprised even seasoned retail executives. Luxury goods have seemed all but impervious to economic downturns over the last decade.
In Paris, as retail executives received sales reports from their stores back home — in some cases hourly and in most cases dire — the mood turned cautious. Some stores told designers they would delay the orders for spring.
“You’ve got to put yourself in the minds of customers,” said Pete Nordstrom, a president of Nordstrom. “We just have to be a lot better to try to earn their business.”
Down the front row was Burt Tansky, the chief executive of Neiman Marcus, who had noted as early as March that aspirational customers had begun to pull back in response to economic concerns. Mr. Tansky has projected that the fall season will end up with lower margins and higher leftover inventory than normal. (This did not dissuade Neiman from mailing its Christmas Book last week, an annual exercise in excessiveness that includes a $10 million thoroughbred racing stable in Kentucky alongside a $1,995 Prada lace bag.) “Like all of us, we’ll have to wait to see what happens,” Mr. Tansky said.
Several retailers said sales of expensive fashion, especially clothes, had come to a standstill at the end of September. At the shows in Paris, some executives said spring orders would be cut by as much as 10 percent overall, which had a chilling effect on the magazine editors in the audience, because designers will most likely reduce their advertising next year.
By most accounts, neither designers nor retailers are expecting improvement this year. The critical holiday shopping season is projected to be one of the worst since the last deep recession in the 1980s, before the luxury boom that inspired millions of customers to dream of receiving a Louis Vuitton or Coach handbag rather than a kitchen appliance. The effect of last week’s market swings was not as apparent in New York as it may have been in other parts of the country; Barneys New York and Bergdorf Goodman, for example, were fairly buzzing on Friday with foreign shoppers taking advantage of still favorable exchange rates. But at other times last week, and again on Monday, the stores appeared to be almost empty.
One woman, stopped outside Barneys on Friday, was carrying two shopping bags from the store. Asked what she had bought, she said, “Nothing. I’m just returning everything.”
Yes, Louis Vuitton’s numbers still look good, up 12 percent last week, Jean-Jacques Guiony, the LVMH Moët Hennessy Louis Vuitton finance director, assured skeptical analysts on a conference call. But with Wall Street shedding tens of thousands of jobs and financial industry bonuses expected to be meager, one wonders if there are enough members of the Saudi royal family to sustain the designer stores on Fifth Avenue and Madison Avenue.
“There is a sense that the air has been taken out of the room,” said Andrew Jassin, the managing director of Jassin-O’Rourke Group, a fashion consulting firm. Monday’s news of a government intervention in ailing banks briefly lifted the spirits of some retailers, who are hoping that new accessories and handbags will continue to sell, even if customers plan to wear them with last year’s little black dress.
“Before today, it almost looked un-American to shop,” Mr. Jassin said. “Saks, Neiman and Nordstrom certainly looked like they were in a lot of pain. And in the immediate and near-term future, there’s going to be a downturn in the frequency of trips made to luxury stores.”
Fashion, to a greater degree than many industries, relies heavily on credit so that designers can buy fabrics to produce expensive clothes for which they will not be paid for at least six months. Should the banks that lend money for that production become even more cautious, or should retailers be unable to pay for the clothes that are in stores now, many designers could face increasingly difficult odds of survival.
On a positive note, the situation has inspired retailers to more aggressively pursue and promote new labels as a means of differentiating themselves and bringing excitement to their stores. This creates opportunities for smaller, independent designers, as well as some established names who include accessibly priced fashion in their collections. Phillip Lim, Tory Burch, Zac Posen and Nanette Lepore, all of whom have a strong following among younger customers, are potential beneficiaries should stores concentrate their orders on designers with contemporary appeal.
Stephanie Solomon, the fashion director of Bloomingdale’s, said that she was excited about Aquilano.Rimondi, a new label from the Gianfranco Ferré designers, Tommaso Aquilano and Roberto Rimondi. Ann Watson, the fashion director of Henri Bendel, cited Sharon Wauchob, an Irish designer working in Paris, as one of the most promising collections of the season.
“We’re looking for special things, but we are being prudent as to how we invest,” said Stephen I. Sadove, the chief executive of Saks, which has also forecast weak sales through the end of the year.
Tatsugo Yoda, the president of Aloha Rag, with a new fashion-forward boutique in New York, bought more items that he felt were reasonably priced but that also offered surprise. He ordered all-in-one looks from M/Marani, which cost about $400, Giuseppe Zanotti sandals and new 1980s-inspired shoe styles from the Venetian cult brand Golden Goose.
“Really high-end clothing is a little bit slow, but people still want to play around,” Mr. Yoda said. “They’re looking for something with different details than what everybody else has.”
While retailers acknowledged that they were likely to place smaller orders this season, several said they were at the same time looking for directional fashion — something that will appeal to customers’ emotions — rather than making safe choices that may not even inspire them to walk into a store.
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