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Contemporary Firms Buckle Up for a Rough Ride

Contemporary brands are taking several steps to at least maintain their sales levels, if not exactly grow them.

Contemporary designers are bracing themselves for the upcoming tough run at retail.

This story first appeared in the October 16, 2008 issue of WWD.  Subscribe Today.

According to The NPD Group, women between the ages of 18 and 34 spent $31.31 billion on apparel between August 2007 and July 2008. During that same period last year, sales in the sector stood at $33.22 billion — almost a 6 percent decrease in spending.

As a result, contemporary brands are taking several steps to at least maintain their sales levels, if not exactly grow them. The moves include offering more of a range in price points, cutting and fine-tuning the number of styles on their lines and bulking up customer service.

“I would say generally department stores are planning their business down,” said Andrew Oshrin, president and chief executive officer of Milly, the eight-year-old contemporary brand started by Oshrin and his wife, designer Michelle Smith. “Neiman Marcus is our biggest customer and I would say they are being conservative, and that is probably a good thing.”

While it may be good for retailers to closely watch their spending on spring merchandise, designers are starting to get nervous. Oshrin said his business is still OK overall, but he will close 2008 with sales down by 5 percent, when he had planned to increase them by 15 percent to 20 percent this year.

“It will be like a lost year, but we will really only know the extent when we see what pans out over the next few months,” he said. “Given the general economic outlook, we made a concerted effort to maintain our prices comparable to spring ’08 despite the weak purchasing power of the U.S. dollar. When pricing, we looked very carefully at every single piece to ensure that the value is strong.”

Stacey Pecor, owner of the four Olive & Bette’s boutiques in Manhattan, said that while her business was up 10 percent this August over last, she is keeping a close eye on her buying for spring.

“I’m nervous about spring, but I’m also glad that all my stores are in New York and not scattered everywhere since that alone makes us special,” she said. “It was really hard to go into the trade shows and the runway shows when the financial news has been so negative, but at the same time, I’m not finding much price resistance now, I’m turning fast at full price.”

For spring, Pecor said she is planning to beef up her accessories assortment, especially by offering more scarves so customers can still purchase something new and less expensive to spruce up their wardrobes.

“Rebecca Taylor looks amazing for spring, better than I have ever seen it,” she said. “Tibi was also good, she took some risks, which I love to see. But overall, I was hoping for more from my vendors — there is no way I’m going to sell those jumpsuits I saw all over the place and I was hoping there would be more highlighter colors, which tend to sell well in a tough economy.”

Josh Sparks, chief executive officer at Rockwood Management Group, a New York-based firm specializing in consulting for the contemporary apparel market, predicts a great deal of fallout in the coming months.

“It’s just evidence that the old business model doesn’t work anymore,” Sparks said. “Emerging designers who only do a couple million dollars in business every year will not be able to sustain their businesses in this economy.”

Sparks said many contemporary companies may find that they have to sell a stake in their businesses in order to sustain a healthy volume. While many designers don’t want to go that route, Sparks said that what he has managed to do with Rockwood has worked quite well for young designer clients such as Trovata, Form, Geren Ford and Imitation (a brand which Sparks also owns).

“We have grouped these brands together on the business end, so that we can keep costs down on the back end in areas like production and manufacturing,” he said. “It’s been a great way to structure these businesses in this economy.”

Rebecca Taylor’s business partner, Beth Bugdaycay, said she has switched her thinking entirely when critiquing their collections largely because stores carrying the brand have cut back on their open-to-buy dollars.

“We are thinking in terms of retail sales these days, we are looking at our line and thinking like a retailer, putting ourselves in the shoes of the end customer,” she said. “We have become much more critical of our line.”

As a result, as retailers have become more conservative in their ordering, Bugdaycay said Rebecca Taylor has cut its offerings down.

“Instead of offering 20 styles, we are offering 15 styles all with very strong messages,” she said. “Stores have said they don’t want safe items from us, they want extremely special pieces that can’t be resisted.”

Bugdaycay said her retailers have also suggested the designer offer a wide range of prices — bringing the lowest price down even further and the highest price higher. For spring, that means having a knit leopard tank top with an opening retail price point of $125 and a metallic chiffon maxidress that will retail for $595.

“We do still have those emotional buys happening. It seems that if the customer is going to spend, it really has to be something extremely special,” she said.

To keep items on the lower end of the price scale, Bugdaycay said the firm is taking its best-selling items and reinterpreting them in a jersey fabric, wholesaling items in the category between $52 and $265.

“So far, fall is retailing pretty well,” she said. “It’s not moving as fast as we would like, but it’s still doing well.”

Nanette Lepore said she is heavily focused on the end consumer — working to make sure she is purchasing even in these tough times. The company just launched an ad campaign for the first time and will also be providing new selling tools, such as look books at the retail level.

“We’ve been taking a lower markup on our tops so we can bring the prices down and have a full, well-rounded collection,” she said. “I want people to be able to come in and buy an entire outfit for under $1,000. That’s the goal.”

Lepore said she is also not replenishing items as much as she has in the past, only recutting a small amount for reorders.

“I think I do my best work when I’m in fear of what’s going on,” she said. “We had our best Coterie in three seasons, so that says something about the strength of the collection. I’m feeling good about our prices, we just will have to sit tight and see what happens.”

Om Batheja, vice president at Tracy Reese, believes customer service is key. “Our focus is on customer service,” he said. “In addition, we are differentiating our brands more clearly — Tracy Reese, with [the higher end line,] Black Label; Plenty by Tracy Reese and Frock by Tracy Reese — and focusing better on their respective market segments.”

Shoshanna Lonstein Gruss, owner of Shoshanna, said she had her best-selling Coterie ever after adjusting her price points to fit the times.

“At the last Intermezzo show we had some expensive dresses, about $575, which was just too high for us and stores just said ‘no way,” she said. “But now we have a very tight, well-edited line so our stores went even deeper into their buying at Coterie.”

With average wholesale prices now ranging between $130 and $160, buyers could easily manage that, she said. But, overall, she said, going into spring selling, stores were being conservative in their buys.

“It just pushes us to make sure every piece is important,” she said. “And that isn’t a bad thing, it just makes us stronger.”