WWD.com/fashion-news/fashion-features/vendors-venture-into-retailing-578136/
government-trade
government-trade

Vendors Venture Into Retailing

Tough competition and retail consolidation have prompted many vendors to at least contemplate opening their own stores.

View Slideshow

NEW YORK — Apparel vendors taking stock of their businesses are finding that it’s not enough to just make great clothes anymore.

Tough competition and consolidation at retail have prompted many vendors to at least contemplate opening their own stores, an expensive path that has nonetheless helped the likes of brands such as Nicole Miller and Sigrid Olsen, among others, expand while maintaining more independence than simply as manufacturers.

Successfully operating stores can be a harrowing experience and forces vendors to learn some new tricks, though the potential benefits are significant.

ECI, for instance, is actively looking to open two to three stores in the New York metropolitan area to broaden the better-priced sportswear line’s exposure. Steven Feinstein, president of M.M.&R. Inc., which owns the brand and has about $60 million in sales, hopes to find at least one location by fall for ECI.

“We’ve wanted to do this because we’re designing a line that doesn’t necessarily have a perfect fit in a lot of the stores that we sell to,” he said. “The merchandise is a little bit fast, it’s trend-right, but it’s not a contemporary fit. In our own arena, in our own store, that merchandise would be displayed better.”

Feinstein wants the retail stores to ultimately be profitable, enhance the brand in the eyes of the consumer and act as a laboratory where the company can test new styles and get feedback directly from the consumer. 

ECI isn’t the only brand longingly looking at storefronts.

Andrew Jassin, managing director of Jassin-O’Rourke Group, a fashion consultancy, said his clients have grown more interested in developing their own store concepts.

“I think it’s a great idea,” he said. “Owning your own retail stores, if you’re a fashion company, is an incredibly opportune vehicle to present your story the way you’d like to tell it.”

There are pitfalls, though, he said. “It’s not an inexpensive approach to doing business.”

Vendors have to become accustomed to holding onto inventory for long periods of time when they open their own stores, and have to learn the ins and outs of buying or leasing store space, he said.

“It requires the right side and the left side of the brain getting together and agreeing that this is a business opportunity,” he said. “Failure is unacceptable because that might hurt the brand in the mind of the consumer.”

Stores that have popped up recently, or are scheduled to, are relentlessly focused on the brand.

For instance, high-end denim maker Earnest Sewn is set to open a 2,600-square-foot store in the Meatpacking District here this month that will be characterized by a raw look that mirrors the firm’s jeans. The firm, with estimated sales of $20 million, will open stores in London and Japan if the New York location is a hit.

The jeans brand is following in the footsteps of other denim brands with wholesale and retail presences, such as Diesel and Guess.

Laura Pomerantz, principal of PBS Reality Advisors LLC, is picking up business from fashion brands looking to open their own stores.

“Most of the people that we’re working with are coming into New York for the first time,” she said, declining to be more specific than referring to some European brands that don’t have any stores in the U.S. yet. The good news is there’s still space for them in the city.

“SoHo has some space for sure,” she said. “There’s actually a fair amount of availability in SoHo other than on Broadway.”

Some brands are finding that exposure from a retail presence helps pump up department store business, she said.

“As people become more possessive of their brand image and the building of the brand as a total picture, they want to be masters of their own fate,” said Pomerantz. “While they want to continue retailing at the good department stores, they also want to present the collection in its totality and as it was designed, and the best way to do that is to open your own store.”

At least part of the interest in stores has been driven by seismic changes in the fashion world, said executives.

Producing fashions that have a clear brand image, are delivered to stores inexpensively and on time and can keep up with the capricious consumer has turned into the price of mere survival for vendors.

Already, manufacturing private label goods for stores has diminished as a profit stream for vendors as stores such as Federated Department Stores, with its Macy’s and Bloomingdale’s chains, focus on cutting out the middleman and making their own store fashions. This pressure will only increase as Federated merges with May later this year, producing a retailer with $30 billion in sales.

“There will be an increase in vertical operations as a result of all the acquisitions that have taken place and the ones that will continue to happen as well,” said Robert Rosen, chief executive officer of La Rose Inc., maker of the Bob Mackie Studio sportswear collection.

In addition to the pending May-Federated deal, Sears and Kmart recently joined forces and several other properties are or might be acquisition candidates, including everything from Neiman Marcus, Saks Inc.’s flagship Saks Fifth Avenue chain and its department stores to J.C. Penney.

For now, Rosen, who has considered opening his own stores, is going to hold off and continue to focus on his core business.

“[Retail] is a whole different business, you need the personnel,” he said. “I think you have to be incredibly focused on what you do and you need to make the retailers that you’re currently doing business with more satisfied and anxious to do business with you.”

The larger a company gets, though, the less it can depend on a single area of its business.

The megavendors, such as Liz Claiborne Inc. and Jones Apparel Group, which enjoy access to piles of cash compared with their smaller counterparts, began to diversify into retail years ago. At the end of 2004, Jones operated 402 specialty stores, and in December snatched up Barneys New York for almost $400 million.

Claiborne also has a significant retail presence of its own with sales from its retail stores of $1.07 billion last year from names such as Lucky Brand and Ellen Tracy. After launching in 2003, the firm added 19 Sigrid Olsen stores last year and has plans for 20 more this year. Juicy Couture opened its first store in Las Vegas and has more in the works.

Companies like Jones or Claiborne, though, are able to approach retail with broad strokes and can afford to try multiple concepts before getting it right. This is a luxury that smaller firms lack.

Some have been down the retail path before, only to turn back.

“We tried off-price and were a failure,” said Bernard Holtzman, chief executive officer at designer Harvé Benard. “It seemed like a good idea. This was 15 years ago when most of the department stores were broke.”

Holtzman said vendors getting into retail need to make sure the product warrants such a presentation.

“The retail field is quite crowded and unless you have a product that is not one-dimensional, you’re going to fail,” he said. “You can’t open a tops store and you can’t open a bottoms store because you have to have fresh product come in every minute. You have to really look very honestly at your product and say, ‘Does this have legs to go on its own special way into its own stores?’”

Regardless, manufacturers need to do something, said Holtzman.

“They’re losing their account base,” he said. “You’re going to see the demise of a lot of manufacturers going forward. It’s a very tough nut, just as department stores are having a hard time, these $50 million to $100 million [manufacturers], they’ll be hitting a crisis soon.”

View Slideshow