SAKS SCRAMBLES TO OPEN MANHATTAN CLEARINGHOUSE

Byline: Sharon Edelson

NEW YORK--Attention Loehmann's shoppers: Saks Fifth Avenue knows bargains, too, and is rushing to open a Saks Clearinghouse unit in Manhattan this year.
It's an attempt by the high-end retailer to battle the growing presence of off-price chains such as Loehmann's and Filene's Basement in the city. Both chains carry many of the same resources as Saks but at bargain prices. It's also an attempt to further one of Saks' more successful new concepts. According to Brian Kendricks, vice chairman of Saks Fifth Avenue, the Clearinghouse stores "are very profitable." He said, "They produce well over $500 a square foot."
Kendricks said Saks views the Clearinghouse concept as a growth vehicle and is planning to open eight to 10 more units this year and six to eight on an annual basis thereafter. There are currently nine Clearinghouse stores in the U.S.
"We think we're one of the more successful retailers with this format," Kendrick said. "We don't think it detracts at all from our [regular-priced] business.
"We think it makes a lot of sense to be looking for a spot in the largest retail area," he said, referring to Manhattan. "We've done studies that found there is not a lot of crossover shopping. We're accessing a different segment of the population, one that defines value differently than the customer of our Saks Fifth Avenue stores."
Kendrick said Saks has been looking all over Manhattan, "primarily in the downtown or lower Midtown area, in the 20s, where you've seen a lot of the discounters looking." He added: "But we're also looking at other spots."
Most outlets are in suburban areas, usually at least 20 miles from a major shopping area. But Nordstrom's has a Nordstom Rack outlet store in Seattle, where its flagship is located.
"Sooner or later the critical mass of outlet and off-price stores carrying branded merchandise will affect conventional stores," said Walter K. Levy, partner in Levy, Kerson, Aronson Associates. "The long term problem is that it will bring about a price restructuring. Sooner or later the customer is going to say, "Why am I paying these higher prices?"
Some Saks vendors had mixed feelings about a Clearinghouse in Manhattan.
"If you have a high-level image, a lot of what you do is based on the customer's perception of your status and credibility," said Bud Konheim, chairman and chief executive officer of Nicole Miller. "But what do you do with unsold inventory so you can recover some money? It's a balancing act.
"The minute a customer can buy something for less at a secondary channel of distribution, the customer has a hard time going back to the original source."
Allen Schwartz, ceo of ABS, said, "In a lot of ways it may be a good thing if they maintain first-run goods in their flagship store. But it depends on where they open the Clearinghouse."
Schwartz added, "At the end of season, if you always keep your merchandise fresh and new, you could condition the customer to buy at full price. It makes sense to put the sale merchandise into Clearinghouse stores and give the specialty store a chance to keep the new and forward merchandise alive."
Konheim said, "I'd like to say styles change very much from year to year, but the truth is they don't. "I understand the problem of disposing of inventory that nobody's buying, but rather than look for a place in Manhattan, I'd like Saks to look for a place in Iceland."

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