NEW YORK — Offering trend-right apparel with superior customer service while understanding — and accepting — that a retailer’s core customer base also frequently shops at Wal-Mart, was some of the advice offered by a roundtable...
NEW YORK — Offering trend-right apparel with superior customer service while understanding — and accepting — that a retailer’s core customer base also frequently shops at Wal-Mart, was some of the advice offered by a roundtable of industry experts, held here, at WWD.
The panelists also discussed the importance of more independent boards of public companies. The participants were: Peter Solomon, chairman of investment banking firm Peter J. Solomon Co.; Peter Thorner, operating partner of merchant bank Tri-Artisan Partners; Ken Wasik, an investment banker and director of the consumer products group at Houlihan Lokey Howard & Zukin; Walter Loeb, a retail consultant of the firm that bears his name; Deborah Weinswig, a retail analyst at Smith Barney, and Adam Rogoff, bankruptcy law partner at Cadwalader, Wickersham & Taft.
As government regulatory agencies and shareholders pressure public companies toward greater transparency and accountability, board members are taking their responsibilities more seriously, while also spending more time on their duties. In addition, public companies are filling the ranks of their boards with more independent members.
According to Solomon, “What we’ve seen happening at Disney [and the shareholder discontent with chairman Michael Eisner, for example] affects retail as well. You’ll see obligations go up, and a gradual change toward retired generals and professionals, as well as the ages of the board members increasing.”
Thorner, the former head of the now-defunct Bradlees, who is credited with turning around the chain before it was liquidated in 2001, said he believes in making information readily available to board members, and noted that he doesn’t view independent boards as a threat to management.
“I believe that board members are partners, and if you are resourceful as a chief executive officer, you will utilize their individual expertise for the benefit of the company and its shareholders,” he said.
Thorner deplored situations where it was obvious that directors had not familiarized themselves with company-related materials sent to them before board meetings.
Loeb said this is starting to change. “I can think of three examples where the company’s directors meet the night before for dinner to discuss some of the things on the agenda, and more importantly, to establish a greater working relationship,” he said.The consultant said audit committees now have a much greater time commitment than before, spending more time each month to ensure compliance of the required regulations. He concluded, “The boards of companies today are no longer a chairman’s club. They are much more aggressive in how they handle things.”
Rogoff said how boards perceive their role is also changing, especially when dealing with restructuring issues — a process that is overseen by a bankruptcy court.
“I have seen independent directors who, five years ago, might have shown up at a board meeting, gotten a Danish and then a package that they didn’t read until the meeting started. Now you have them really coordinating in advance,” he said.
The attorney noted that the boards involved in a Chapter 11 scenario are becoming far more active. “What you’re now seeing is what historically was a two-hour board meeting now take place over a week’s worth of concentrated time,” Rogoff said. “Documents are being drafted because everyone on the board wants to be fully informed. In some respects it is litigation in the making. Boards are looking to do the right thing and build the right record. It’s not a bad consequence, but it does take a significant amount of time.”
Aside from corporate governance issues, retailers are struggling with other factors, such as finding relevance in a fiercely competitive and rapidly consolidating marketplace. Moreover, the evolution of mass and specialty retailing is increasingly pressuring department stores.
According to Solomon, “department stores have been in a decline since 1953.”
Loeb believes retailers will be successful if they focus on their core customers. But they must provide a more meaningful shopping experience coupled with a value proposition that is delivered with top-notch customer service.
“Department stores have a function in retail in that they are able to promote fashion, provide a head-to-toe wardrobe and give a pleasant one-stop shopping experience. The problem is that the middle-fashion market is totally lost today. Upscale fashion at Lord & Taylor’s and Bloomingdale’s are doing well. The lower-priced merchandise is doing well. However, the middle-priced lines that used to serve the core of the consumer are lost, and many stores are trying to make an effort to identify that customer. That is the area where some department stores have not made a play after,” Loeb observed.Weinswig said there are department store retailers who are not zeroing in on the right demographic. She said there are retailers “going after the teen market even though the biggest part of the population is the Baby Boomer.”
“This customer is now the 40-year-old of yesterday,” Weinswig explained. “They are still interested in fashion and apparel. These are the consumers that the department stores have really moved away from, and they’re the ones who want to enjoy shopping in that channel.”
Another looming problem for department stores, Loeb pointed out, is the “800-pound Gorilla” lurking in the background: Wal-Mart.
“The industry faces a real dilemma,” he said. “We have a giant in the discount industry. Wal-Mart has a great influence on the rest of the industry, with its value-price orientation, multiple locations and merchandise assortment. But it has not always made an effort to be fashionable. Because it is not a fashion leader, it is really just a place for basics.”
Solomon agreed, and said the deepest woes in retail stem from Wal-Mart’s omnipresence.
“Imagination is definitely lacking these days,” Solomon said. “Money is readily available. Just take a look at the availability of venture capital. So now these retailing firms have money, real estate and resources. But they all suffer from one condition. They have no imagination. You know why? They are all intimidated by Wal-Mart.”
Wasik said department stores have to contend with a very real pricing challenge, that Wal-Mart created, but retailers have yet to figure out how to compete against the discounter.
According to Wasik, “More than anything else, what Wal-Mart has done is educate an entire consumer class. While a little bit of that is due to increased media access making people more aware of pricing, a lot has to do with consumers having better knowledge of what quality is and how to seek it out. Department stores aren’t even on the same scale. The smart consumers will head into their stores, see something and then say that they can get it somewhere else either at a better price or shopping experience. That’s the attitude that the department stores are grappling with. Right now the department stores need a better grasp of that value-quality pricing relationship.”Wal-Mart, to be sure, appears to have a lock on that, based on its huge and ongoing investment in logistics.
“I hate to say that Wal-Mart is unstoppable at this point, but it enjoyed similar benefits to the Japanese auto industry following World War II,” Thorner said. “Both started with clean slates. Wal-Mart began in the 1970s and was farsighted enough to invest heavily in systems and logistics that allowed it to efficiently re-supply its stores and remain substantially in-stock. In retailing, most of a discounter’s success is directly attributable to its ability to maintain in-stock inventory of seasonally appropriate merchandise. I have been on the inside of four substantial retailers. They all deferred investments in systems and logistics to improve cash flows and earnings. This is a short-term tactic with long-term negative consequences to the supply chain.”
Thorner said Wal-Mart also has an edge against some of its competitors with its everyday low-price strategy.
Weinswig noted that the negative stigma of shopping at Wal-Mart is gone. It’s in vogue to shop at the store.
“Burt Tansky at Neiman Marcus will tell you that his core customer is shopping at Wal-Mart,” Weinswig said. “Lee Scott at Wal-Mart will tell you that his core customer is shopping at Neiman’s. The consumer is smart and a lot of retailers don’t pick up on that. For example, I am very happy going to Wal-Mart and buying a plain shirt, and then heading over to Neiman’s to buy a suit. That is cool these days.”
For Loeb, it would be even cooler if the department stores went back to being a fashion destination.
“I do not think that fashion can be promoted at any of the low-margin operations because fashion has to be enhanced with a little flair to make it a fashion statement. Fashion has to be promoted. There has to be a show and this is where department stores can make their mark,” he said.
Loeb said fashion still drives retail, but noted many retailers seem to have forgotten that mantra.
“You used to be able to walk into a department store and see a look. It was a statement about fashion. Today, the buyers are young and don’t have as much experience so they buy a little of this and a little of that. They play it safe, but then end up buying too much and nothing that is specific enough to make a statement,” he observed.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast