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Power Up

The Blackout of 2003 left retailers assessing the business lost, but most agreed the lazy days of summer helped limit the damage.

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NEW YORK — One monumental inconvenience, but no big business loss. That’s how retailers and garment officials here assessed the largest blackout ever to hit North America.

By Saturday, roughly 30 hours after the blackout hit the Northeast and Midwest, just about every retailer in the Northeast was out of the dark and operational. On Sunday, merchants told WWD that, despite the loss of power, they still expect August to be good, since back-to-school doesn’t peak until the final two weekends of the month and business has been tracking better than expected since July.

More expensive fashion retailers less focused on b-t-s weren’t looking for huge business anyway, since they hold fall events earlier in the summer, and many of their customers are on vacation now. Also, big retailers have business interruption insurance covering lost profits and backup systems to retain sales and customer data.

Amid the darkness, there was some light — a rush on such items as underwear, socks, sneakers and other casual footwear, candles, pocket radios, batteries, flashlights, water, pizza and “I Love New York” T-shirts (proving that even in the midst of a crisis many people still maintain a sense of humor — or irony).

In the garment district around Seventh Avenue, summer hours are popular, so the blackout didn’t add that much to companies’ downtime. Workers tend to escape to the Hamptons, Fire Island or the Jersey shore on Thursday evening or early Friday, meaning their trek was either delayed by the loss of power or advanced. Still, the streets around the area were almost deserted on Friday afternoon, a rare sight on any workday.

For the intrepid who made it to work Friday, there wasn’t much to do. Many congregated in the streets unable to enter their buildings, like an impromptu block party, with cafes and restaurants setting up tables outside to sell coffee, water and food.

Some businesses, however, were bound to be effected. J.C. Penney, which had around 175 stores knocked out, including many through Saturday, advertised its “hottest sale of them all” for Friday and Saturday. It included 7 a.m. openings, door busters, a buy-one-item-get-a-second for 88 cents on selected products sale, and storewide savings.

This story first appeared in the August 18, 2003 issue of WWD.  Subscribe Today.

Wal-Mart, which also had a couple of hundred stores knocked out, took steps to ease the power load in its Eastern region. Supercenters and discount units in six states turned off one-third of their lighting and raised thermostats.

In New York City alone, the estimated loss to business was $750 million in the first day and the estimated loss to the city was $50 million in tax revenues, according to government officials.

It is still unclear what the total economic damage was to the entire region affected by the blackout, which spanned from Ottawa and Toronto to New York, Detroit and Cleveland.

The Saks Fifth Avenue flagship, which was closed Friday, reopened at 10 a.m. on Saturday and saw “pretty brisk traffic” on the day, said a spokesman. “There were no major problems and nothing special going on. It was like a snow day. If you look at the big picture, it would have been worse if it happened on another day.”

Bloomingdale’s had six stores knocked out, but all reopened by Friday morning except the 59th Street flagship and the Huntington store on Long Island. The store held a two-day promotion where if you spent $100, you got a $15 gift card. Wednesday was strong, but Thursday was not, since the blackout hit around 4 p.m.

“You never are going to get back what you lost,” said Bloomingdale’s chairman and chief executive Michael Gould. “Our business was very, very strong” just preceding the blackout. “Even with the loss, we still will be substantially ahead of plan for the month, and ahead of last year.” Gould said the chain lost a couple of million dollars in sales. “We are not going to add promotions to make the business back.”

At the Tourneau Time Machine flagship on 57th Street, where some watches cost upwards of $200,000, everything was protected. “We have a lot of back-up systems and we are prepared for something like this,” store manager Andrew Turrin said. “The blackout is inconvenient and it’s hard for any business when you can’t open, but it wasn’t devastating.”

Other stores, such as Saks, post guards inside, round the clock.

“Most retailers will take this in stride,” said Tracy Mullin, president and ceo of the National Retail Federation, on Sunday. “It will have the same effect as a bad snow storm, but it won’t even come close to the impact of the [winter] storm on President’s Day weekend in February that knocked out the East Coast for days.”

The NRF has projected sales of b-t-s merchandise will be $14.1 billion this fall and Mullin said retailers should hit that target despite the outage.

“The good news about the back-to-school season is most people have to buy bags, books, pencils and sweaters at some time,” said Mullin. “It is a return shopping experience that will not be lost to retailers.”

Other observers agreed. “Retail had to be hurt somewhat. Even people that were not directly affected stayed home listening to the news about the blackout, just like they did during the [Iraq] war,” said William Smith, president of Financo. “People get glued to their TVs. I have family in North Carolina and Florida and I know they were glued to it. But this is a one-shot event. I don’t think it’s a huge deal.”

Carl Steidtmann, chief economist of Deloitte Research, concurred. “I see this having very little impact. It didn’t last that long. Supply chains are built with a certain amount of redundancy. There might be a little affect in the food chain, with spoilage and a rush to buy stuff, such as flashlights, water and batteries. But this won’t even show up in retail sales numbers. I would be very surprised if August turned out to be a bad month. There is a lot of momentum in the economy. Consumers got their rebate checks, a total of $15 billion in cash.”

Some believe the outage may be a boon for systems suppliers, though, as retailers take a renewed look at their supply chain and backup systems. “Retailers have backups for the money they lose and for retaining data, but I believe many retailers may now put in backup systems for power so they can operate their stores when there is a blackout. There’s a lot of uncertainty that this can happen again because the grid system is so old,” said Walter Loeb, retail analyst.

And, in the midst of the blackout on Friday, some stores were actually able to capitalize on the situation.

At City Jeans, on 42nd Street and Sixth Avenue, a manager said that business was up 20 percent as tourists and businessmen shopped for sandals and sneakers. At Midtown Bicycles on 47th and Ninth Avenue, rentals were gone by closing time Thursday and all the cheapest bicycles were sold, leaving those priced north of $250 still available. In Times Square, Sephora was bustling with tourists testing out compacts and foundations. “We knew that all we had to do was get the doors open,” said Janet Harkins, regional director for marketing. “People are not working today. We literally had people waiting outside when we opened. People need something to do. I would guess that business today is up 20 percent and tonight we’ll really be cranking.”

However, with power outages running well into Friday afternoon and continued problems processing credit card purchases and consumers accessing ATMs, most large retailers — and fashion-retail staples in particular — opted to stay closed for the day. From Jeffrey New York to Stella McCartney, Prada to D&G, high-priced stores throughout the Meatpacking District all the way down to SoHo kept their rollgates down and their doors locked.

The sign in the window of H&M on 34th between Sixth and Fifth Avenues read: “All H&M locations in New York City are closed. Normal hours will resume Saturday from 10 a.m. to 9 p.m.”

Elsewhere on 34th Street, Banana Republic, Nine West, Ann Taylor Loft, Bakers, Champs and Shoe Mania were among the stores shut down.

After a five-hour, five-bus commute from White Plains, Peter Vargas, a makeup artist at the Victoria’s Secret 34th Street store, was disappointed to find the only person working at his store Friday morning was a burly security guard.

He said, “In Puerto Rico, where I’m from, power outages happen often, but only for five or 10 minutes. But in a city this size — for 12 hours.” extending his arms dumfounded.

On Friday, with the store closed, Lord & Taylor’s doorman Mike Zopulla, known as “the Whistler,” put himself to work smack in the middle of Fifth Avenue, directing traffic. Armed with sunglasses, a red and white umbrella to shield the sun, white gloves, a fanny pack and bottled water, he commandeered cars with an ear-piercing whistle. Zapulla shouted from the middle of the street, “Customers have been so good to me. I have to be good back to them. There are so many great people out here helping each other that I had to be part of it.”

On Friday morning, the fashion district felt eerie. Some employees arrived at their offices only to be told that they couldn’t get inside. Buildings such as 1384 Broadway and 1372 Broadway, where companies such as Ann Taylor, Aeropostale, Dress for Less and Ross Stores are based, were shut.

The sign outside the headquarters of Kasper read, “Kasper is closed. Have a good day.” One building maintenance executive was sleeping on a chair outside 1430 Broadway. Over at 285 Madison Avenue, people camped outside the headquarters of Young & Rubicam Friday afternoon. “We’re part of the I.T. team, and we’re waiting for the power to go on. We can’t get upstairs,” said one employee.

At 550 Seventh Avenue, a building occupied by such fashion firms as Donna Karan, Polo/Ralph Lauren, Michael Kors and Cynthia Rowley, superintendent Joe Irato said, “Some people showed up, but we sent them away. We have no power and there’s a liability issue to have people walking up and down the stairs,” Irato added from his perch on the sidewalk, where he and many other Fashion District building mangers had stationed themselves in desk chairs Friday morning.

The story was a similar one at other buildings in the district, including 1414 Broadway, which houses such companies as Kellwood, Jones, Levi Strauss and Rocawear, and at 501 Seventh Avenue. The latter building was closed for the day and at 1414, property manager Tom Bloomfield said, “Basically, the businesses here are not operating, although a few people came in to work.”

It was a different scene Friday at 525 Seventh Avenue, where building manager Walter Muller said there were “skeleton crews” working at some companies — mostly consisting of people who had spent the night in their offices. “Very few people have come in today.” Nicole Miller, Badgely Mischka, and Sean John are among the fashion players with offices there.

In the diamond center in Midtown, power went on early enough for most stores to open, though business was virtually nonexistent.

There were only a few reports of looting, and nothing major. Police and firemen were very prepared. Just after 5 p.m., a group of teenage boys in SoHo tossed a lit firecracker into a dumpster on Wooster Street and Prince, setting it ablaze. The flames quickly grew, as did the crowd, which grew to 50 gawkers. Firemen arrived fast, and soon the only sign of the incident was a bit of ash covering the American flag outside Russell Simmons’ Phat Farm store and a small pool of water.

Alexander McQueen on 14th Street between Ninth and 10th Avenues opened briefly after the power returned only to find a new set of challenges. “We closed the store because it wasn’t working out,” said a store manager at McQueen. “The refrigerator is leaking, it’s wet, there’s no cleaning lady and there was no security. It just wasn’t really safe.”

At Beau Brummel, a men’s store on West Broadway, owner Steve Krampf showed up to check on his computer system and windows, but stayed closed even after the power came back at 2:30 p.m. “French Connection and Crate & Barrel are open. I don’t know why. The mayor advised people not to go to work and to stay home. What would make people come to trendy SoHo today?”

Robert Goughary, the manager of At Design Within Reach on Wooster Street, took it all in stride. “For us, we just lose a day of sales here and we have stores all around the country that are open. Imagine owning a restaurant. Imagine owning a sushi bar!”

While the regular farmer’s market in Union Square attracted large crowds in search of fresh produce and cold juice, the stores nearby on lower Fifth Avenue stayed dark for most of the day. At Agnes B. on 16th Street, store manager Elisabeth Hughes sat in the window, for whatever light she could get, wearing white linens and writing in long hand on a memo pad. She and her staff had closed the store at the normal time, 7 p.m., the night before, and periodically checked on it throughout the night. “But the people at the [grocery] store across the street were very afraid there might be looting and stayed the entire time.”

The East Village was one of the last neighborhoods to regain power on Friday, and besides the few restaurants with unspoiled food, little was open by late Friday afternoon. At the boutique Peacock NYC on Ninth Street and Avenue A, owner Orly Hazan and her two younger sisters sat on the stoop, killing time. “We just came here because the phone at home isn’t working,” Hazan said. She had been on the subway when the blackout hit and had to walk on the tracks in darkness for 45 minutes before emerging at Grand Central Station. “Staying in the car with no air was the scary part,” she said.

Mark Hasan, the manager of the men’s store Britches of New York on Wall Street, said he opened his doors at 11 a.m., three hours after the regular time. “A lot of people are coming in for underwear, shoes and shirts,” he said of business on Friday. Typically, though, he said mid-August business is a slow time.

The blackout ended early in the Cobble Hill and Carroll Gardens neighborhoods of Brooklyn. Power was restored by 11 a.m., and though residents were out in force on the streets — having been left to their own devices because of a lack of subway service — boutique owners said it was business as usual. “There are more people outside, but everyone is busy telling their blackout stories,” said Diane Tkacz, owner of Diane T. on Court St. “Yesterday, everyone was buying flip-flops.”

Faced with a skeletal staff, senior executives from the Grand Central Partnership donned work gloves to pick up trash and sweep midtown streets. “We couldn’t get into the office so we thought this was the most productive way to spend the day,” said general counsel Marc Wurzel.

The GCP receives $12 million in annual funding and services 20,000 businesses including 800 ground-floor retailers in a 70-square-foot radius. Wheeling a trash barrel near Lord & Taylor, Alfred Cerullo 3rd, the group’s president and ceo, said the experience brought some lighter moments. A stranger approached him and said, “I had to do that once.” When Cerullo asked “What was that?” the stranger replied, “Community service.”

“I think he thought I was on probation,” Cerullo laughed.

On Madison Avenue, Bruno Magli threw open its doors Friday and welcomed passersbys. At Luca Luca, staffer Françoise Rideau, said, “We were the first one open and, voilá, we sold three suits. Hah!”

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