By  on June 21, 1994

NEW YORK -- As the key fall selling season approaches for outerwear, the battle for consumer dollars between traditional department stores and off-price retailers is heating up.

Selling to off-price stores remains a touchy issue for many manufacturers, but most admit that off-price business has become a big part of their plans. Others say they use their own outlet stores as a means of disposing of leftover merchandise.

With off-price retailers such as Burlington Coat Factory, Filene's Basement and Loehmann's bolstering their outerwear offerings, manufacturers are torn between holding price points and not losing volume and market share, but most feel they have struck a delicate balance.

Many department and specialty stores have been selling closeouts to discounters for years, but not all of them call attention to it. Meanwhile, off-pricers contend they have an increasing number of designer coats in stock early every season.

The consensus among retailers and manufacturers is that Burlington Coat is the prodigy of the outerwear market. Founded in 1924 as an outerwear wholesaler, Burlington's success, according to Monroe Milstein, president and chief executive officer, may be attributed to its understanding of the industry, "We're not like department stores," Milstein said. "Coats aren't a stepchild with us. We really understand the business."

Milstein said his stores, on the average, designate 15,000 square feet -- or about 25 percent of their total floor space -- for women's outerwear.

While he declined to specify figures, he said, "Business now is tremendous. I never thought we'd be selling coats in Las Vegas and other warm places, but we are. There are no limits to how much we can grow."

Burlington offers at least 200 women's outerwear labels, with products ranging from $5 for a rain slicker to $3,500 for a mink coat, according to Ellen Rosenthal, senior coat buyer. With more than 200 stores in operation and 24 more scheduled to open this year, the company bids competitively with manufacturers and retailers, she said.

"We offer everyday low prices rather than sales," she said. "We don't want to train our customers to shop on sale."

Off-price retailers have acquired a substantial portion of the market because their prices are lower than mainstream stores', according to the president of one off-price franchise who asked not to be named. He said most manufacturers are willing to sell all goods, including fashion items, to off-price stores throughout the year."Most manufacturers sell everyone," he said. "There are some manufacturers who have strict selling guidelines, but most have looser guidelines."

Increased competition in the outerwear market has forced department stores to reevaluate their pricing strategies, according to Richard Leto, president of merchandising at Macy's East. Now there is even more pressure on pricing, he indicated, as low-priced sourcing has developed in Eastern Europe -- particularly in Russia.

"Everyone is selling you price today," Leto said. "But our business is fashion-driven first and then price-driven."

Aiming to be more selective about fabrics and to eliminate duplicate styles, Macy's East carries only half as many vendors as it did in 1991, Leto said. The company uses six Northern stores to test new styles of outerwear before completing winter orders, Leto said.

"A lot of people can put a lot of coats on the floor, but we give customers a more focused assortment of what they've indicated they want to buy in terms of style, quality and price," he said. "We do the editing for them."

At Bloomingdale's, anyone who sells coats -- not just off-price stores -- is considered competition, according to David Fisher, merchandise vice president for ready-to-wear. Given that, he said, anywhere from 20 to 50 percent of its outerwear is designed exclusively for Bloomingdale's. Outerwear sales have grown by at least 25 percent since 1989, Fisher said.

With 30 to 40 vendors, Fisher said Bloomingdale's never sells to off-price stores.

"We carry exclusive fabrics and precious fibers of the finest assortments," said Fisher, adding that large closeouts are "not something we have to deal with often."

Department and specialty stores will always be first with fashion, according to Michael Fine, senior buyer for women's coats at Dayton's, Hudson's & Marshall Field's. This year, the stores increased their inventories by at least 5 percent and Fine feels the stores' prices are competitive with off-price and other department stores.

Fine said DH and Fields prefer to clear out merchandise by marking down goods in their own stores. However, he said, they watch off-price stores' strategies as well as specialty stores'."The whole industry has become more competitive; it's not just the discounters," he said. "Our opening price points are as sharp as possible."

Some manufacturers were very forthcoming about their business strategies.

"Ninety-five percent of all coats sold are sold on sale. Anyone who says they aren't selling their coats off-price is lying because 'on sale' means off-price," said Benard Holtzman, chief designer and president of HarvÄ Benard.

"Those who hold the line on prices will lose market share. Department stores try to hold prices. But as soon as the first store breaks price, everyone follows immediately because they're afraid to lose market share. Most women won't buy a coat early on in the season unless it's real fashion. They know they can wait and get the color, style and brand they want on sale."

Holtzman said 10 percent of the company's 65 styles are sold to off-price stores. Last year, outerwear sales accounted for 20 percent of HarvÄ Benard's $100 million business, and early bookings indicate an increase this year, Holtzman said. He said HarvÄ Benard coats are rarely sold in the company's outlet stores, since space is limited. The company has three outlet stores -- two for women, one for men.

Russell Brooks, president of Oleg Cassini Outerwear, said 20 percent of the company's merchandise is sold to off-price stores. He said the company recognized the growth among mass merchants and wasn't afraid to target them with a designer label.

However, he said items that are unlikely to sell in specialty stores -- ones that have "the same quality, but not the same styling" -- are sold to Syms, Burlington Coat Factory and other off-price stores.

Oleg Cassini outerwear retails in 90 department and specialty stores at $250 and $500, but off-price stores offer 30 percent markdowns, Brooks said. Outerwear is sold to off-pricers beginning in January and ending in March, he added, noting shipping and handling charges, markdown allowances and other expenses demanded by department stores have made it tempting to sell to discounters.

"In the past 10 years, discount stores, price clubs and mass merchants have taken a lot of the traffic away from department stores. That's the way the retail market is headed," Brooks said. "As a vendor, you've got to be able to sell to both retailers and discounters."Neil Haimm, president of Donnybrook, a division of Lou Levy & Sons, said he sells 25 percent of his goods to Burlington Coat Factory and other off-price chains throughout the year, noting that some off-price chains have a lot of buying power.

"They enhance our business, but they certainly take millions of dollars from average department stores and small retailers," he said.

There are only one or two manufacturers that don't have to sell to off-price stores, according to one bridge-priced resource who asked not to be named. His company sells 10 to 20 percent of its outerwear to discounters, he said.

"Burlington is the number one account for certain manufacturers. Off-price stores are doing a better job in the coat area by taking an aggressive stance," he said. "They're chasing the business while some department stores are sleeping."

Filene's Basement and a few other off-price stores can purchase outerwear at manufacturers' opening prices, which intensifies the competition, he said.

"If they buy our coats for what we're asking, that's not off-price to us," he said. Searle does not sell any of its three lines -- Searle, Studio and Steve -- to discounters, said Steve Blatt, president. With 500 accounts nationwide and five Searle stores here, the company hasn't had much leftover merchandise in the last 10 years, he said.

Last year's volume was $27 million, and Blatt projects $30 million in sales this year. Some of his company's success is attributed to controlled distribution, he said. By not accepting returns from specialty stores, the company limits excessive buying, he said, while buyers are also discouraged from placing orders at the end of the season.

"We try to undersell," he said. "We cut mostly to order. We're very careful about who we pick up at this point. It helps not to be able to find the coats on sale in 40 or 50 stores. It's bad enough that some of our accounts mark down our lowest-priced line [called Steve]."

None of the four divisions of Andrew & Suzanne Corp. -- Andrew Marc, Andrew Marc Additions, Marc New York and AM2 -- sell to discount or off-price stores, according to Suzanne Schwartz, the company's executive vice president. The lines are available in more than 1,000 specialty and department stores, and Schwartz said the company tries to sell the majority of its merchandise to retailers who are not known for markdowns or promotions.Schwartz said AM2, the lowest-price line, which retails for $200 to $300, is sold to stores that offer promotions and sales.

"But if the customer wants to buy our products, they won't find it in a discount store," Schwartz said.

Instead, an annual warehouse sale is held at the end of the season at the company's 45,000-square-foot facility in Secaucus, N.J. The company's outlet store adjacent to the warehouse offers marked-down merchandise all year long. Schwartz said both locations sell closeouts.

Bebe Habib, fashion director for Herman Kay Coat Co., which makes the Herman Kay, Leslie Fay and Furrina coat lines, said its closeouts are sold at the Herman Kay Outerwear Store, a 5,500-square-foot facility in the Riverdale section of the Bronx.

Habib said those goods are offered after they have been available at retail for at least one year. Herman Kay products comprise 20 percent of the store's merchandise, she said.

Peter Culbertson, group president of Amerex USA Inc., which owns the Mulberry Street label and is the licensee for Jones New York and Misty Harbor, said he does not sell to discount stores except for a minimal amount of closeouts.

He said consumers who shop in department stores will continue to do so, despite the growing mass market.

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