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As Wall Street’s financial tremors keep rumbling, several Madison Avenue retailers are bracing themselves for what could be a long stretch of even more uncertain times while already struggling to woo shoppers this fall.
This story first appeared in the September 30, 2008 issue of WWD. Subscribe Today.
Last week, sales associates at 25 stores surveyed were suddenly having to face the fallout, which could be seen in the cautiousness of price-sensitive and indecisive clients, a rash of returns and moratoriums on shopping. Compounding the problem is a slight slowdown in European visitors, who are now thinking twice about visiting the U.S. due to the weakening euro against the dollar. When the currency was stronger this summer, European shoppers made the most of the exchange rate in what one saleswoman described as “abusing the dollar,” and substantially boosted sales.
An increasing number of loyal, freewheeling shoppers are now acting as though they are on a tight budget — whether they actually are or not. Sonia Rykiel sales associate Caroline Trevelo-O’Neil said, “It’s not like these people don’t have money anymore, but some are going to behave that way. They will say they don’t want to try something on even though they have diamonds all over. A lot of this [fear] is perception. People are kind of frozen now.”
A salesman at an American designer’s boutique, who requested anonymity, has been “shocked” by the number of Madison Avenue salespeople he has seen standing near their front doors staring blankly out the window, half expecting shoppers just to waltz in. “When the Great Depression happened, that’s when some of the people made most of their money. A lot of people are being complacent. It doesn’t matter how good your windows look or how good your merchandise is. You have to show the customer how to wear it and when to wear it to make it valuable to them,” he said. “The store might be dead but I spend all day on the phone with [international] clients, e-mailing them or sending them pieces on consignment.”
At Mulberry’s Madison Avenue store, more shoppers are consulting with their husbands on their cellphones before buying anything. “We’ve actually had clients on the phone describing what they are looking at, and their husbands will tell them, ‘Not now. Let’s talk about it when you get home,’” said Lawrence Coote, loss prevention specialist at Mulberry.
Shoppers are now thinking twice about buying anything $1,000 or higher, he said. The number of American shoppers in the store has trailed off, and the European customer base, which accounts for 70 percent of all shoppers in the Midtown store, has decreased slightly due to the weakening euro, Coote said. Mulberry is trying to offset the slowdown with some belt tightening of its own in terms of overhead expenses, corporate layoffs and negotiating lower salaries with new hires, he added.
Sonia Rykiel’s Trevelo-O’Neil, who is studying psychotherapy, said, “Fashion is very much for people to please themselves and to look good. When there is a time of austerity, people think, ‘Let’s go back to serious things.’ Even if they have the money, they are going to act as though they aren’t the kind of person who spends money on those kinds of things.”
Some shoppers are going through the motions, but then they come up with a reason as to why they can’t buy something on a particular day. Many women, including longtime clients, are asking why a garment has the price it does and some will flat out ask, “Don’t you have anything under $500?” Trevelo-O’Neil said, adding the store does. Last fall 15 people might make purchases at the store a day, whereas recently 10 people each day on average, including browsers, visit the store. These times just call for more personal service and phone orders, she said, adding that one client recently spent $10,000 in the store.
Despite consumers’ skittishness, Matthew Bauer, president of the Madison Avenue Business Improvement District, does not expect the neighborhood’s 272 fashion-related stores to be hard hit by the economic shift underfoot. “So much of the client base is very local within a couple of blocks. They generally view Madison Avenue as their Main Street. We continue to be very attractive to the visitor market. This is a mile and a half of great international luxury boutiques, galleries, salons, hotels and restaurants.”
At Etro’s Madison Avenue store, Jana Olson, who runs women’s wear, said this summer’s sales were up 25 percent compared with last year due to the bevy of European shoppers. But this month’s sales would “definitely be different,” she said. “There is definitely more talk about price. They will say, ‘Oh, this jacket is $2,000? I don’t necessarily need that.’ It is usually not that way.”
“We’re OK here because of our European clientele. As long as we have people coming over here to, as we like to say, abuse the dollar, to get their retail fix, we’ll be alright. People who do live here can’t be as liberal,” Olson said.
En route to make a return at Barneys New York, one woman, who requested anonymity, said Wall Street’s fallout and the uncertainty that has ensued is similar to the post 9/11 retail scene. “We need people to keep shopping to support our economy,” she said. “Don’t be negative — please.”
Upstairs, a salesman said: “It depends on the person. Some may say, ‘Oh, my husband has me on lockdown.’ and others will be spending like crazy.”
However, a saleswoman at the store noted how the demise of Lehman Brothers triggered loads of returns. “It was huge but it was just for one day. I don’t think it will affect Barneys as much as some of the other stores because we have more elite shoppers,” she said.
On the store’s main floor, British tourists Katherine Goodwin and Trudy Jackson said they had spent $3,000 and $3,500, respectively, at Barneys and other stores, and planned to spend $5,000 each. Prices are 30 to 40 percent lower than what they would be in the U.K., due to the weak dollar, they said. “It’s always worth flying all the way over here to buy it. But the savings are not as good as they were a year ago,” Jackson said.
Killing time in the Co-op before meeting a friend for lunch, a self-described New York housewife, who declined to give her name, said she is being more discriminating about what she buys and is walking away from overpriced European goods. “Everybody is so tired of the [rising] prices [due to the euro]. My friends and I are having a quiet little strike,” she said. “Nobody needs anything. I know a lot of people with money aren’t running out to buy a ton of stuff.”
At Searle, store manager Normia Perry believes that having a wide range of price points, especially items in the $200 to $500 range, which are not always easy to find on Madison Avenue, is helping business.
The economic fallout has slowed down foot traffic on Madison Avenue, especially in the beginning of the work week. “You do have your days where you say, ‘Where are the people?’” she said.
At Chloé, saleswoman Gisela Jimenez said, “People are definitely more cautious, and they definitely want quality versus quantity. They feel a little guilty too. We do hear that from clients. But people are coming in and buying,” with Europeans still driving sales.
Zara’s Midtown store was buzzing with shoppers lining up to make multiple purchases one afternoon last week. Sales associate Jannelly Espinal said, “If anything, it’s busier than usual. But it’s mostly tourists.” Saks Fifth Avenue also had its share of customers beyond the bustling main floor.
A sales associate at a Madison Avenue European designer store said the weakening euro was affecting store traffic but not dramatically.
“The middle class is usually affected first. I have friends who work at department stores who are really worried about business,” she said. “Every day I’ve been getting e-mails from Saks and Neiman Marcus about sales. What exactly is on sale? Fall just started.”
Asprey’s international public relations director Ellen Niven said if people are going to spend money, they are more inclined to buy items that will last a long time “more so than a trendy trenchcoat.” That bodes well for Asprey, which specializes in milestone gifts like christening items, watches and engagement rings.