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Independent specialty stores are trying to fight back. Faced with daunting recession-era challenges such as frugal consumers, department store discounting and the luxury backlash, the merchants are moderating price points, tightening inventories, negotiating harder with vendors and working to cultivate relationships with their customers. For some, the hard work is paying off. Several have managed to post higher sales and profits this summer as the game plan kicked into gear. But no one is minimizing the struggle. Specialty store retailers are arriving this week to attend the biannual New York market. They will hit The Collective, Blue, Project, MRket and the Designer Forum, as well as showrooms in search of new vendors and merchandise pieces to lure customers to their stores. “The luxury business as we know it, well, you can throw that out the window,” said Wally Naymon, owner of Kilgore Trout in Cleveland. “The model that we used for many years is gone and it’s a new day.” Although the rules have changed, Naymon believes there are opportunities. “We’re promoting ‘buy local’ and stay out of the big chains,” he said. “We’re working to be as fluid as we can be. And we’re working closely with our vendors because we’ve got to make money.
This story first appeared in the July 16, 2009 issue of WWD. Subscribe Today.
We can’t do again what our friends on Fifth Avenue made us do in November,” he said referring to the 75 percent off holiday sales at Saks Fifth Avenue and other major stores. Like many specialty stores, Kilgore Trout has not traditionally broken price until after Christmas and post-Father’s Day, but the economic situation since last fall meant that all the rules were broken. Naymon said for the most part his vendor mix has remained the same, but the price points are different because the consumer mind-set has shifted away from conspicuous consumption. “We’re not selling $1,500 Cucinelli sweaters anymore, they’re $500 now,” he said. “We have to work with our vendor partners to provide us with specific merchandise at a specific markup. You have to make your customer think he’s getting good value. And we have to hit our numbers.” And Kilgore is not branching out into too many new brands. “Our list has tightened up,” Naymon said. “We want to be significant with our key vendors and we can’t be spread too thin.” In New York, Naymon said he will be “shopping differently. I’m going to be as aggressive as I can on a limited budget. My inventories are down 20 percent from last year and will go down even further. I want to be open to jump on any hot items. I can’t afford to make any mistakes; I have to be fluid and opportunistic.”
He plans to shop mostly for sportswear and items that will resonate with a younger customer. “The more modern business is what’s percolating,” Naymon said. Although there is “no consistency” to the business, Naymon said the store has seen growth in certain classifications, which he didn’t specify, and even exceeded
plan in June. Bob Mitchell, co-president of Mitchells/Richards/Marshs in Connecticut and Long Island, N.Y., has noticed “a more positive attitude” among his customers. “The panic has dissipated and we’re seeing a light at the end of the tunnel.” Nevertheless, he cautioned, “It’s not yet translating into positive numbers. The big test will be in October when the decreases started. So by then, we’ll be looking for stabilization or even growth.” Customers are still seeking the well-known brands the company has built its reputation upon. “But we’re looking at price points in a different way,” Mitchell said. Vendors recognize the shift and are addressing it as they seek to stabilize their businesses, as well. “People who are not evolving will see a significant part of their customer base shift,” Mitchell said. He pointed to Cucinelli, whose growth has been “explosive” for the company over the years, as one vendor answering the call. “Prices are down 15 to 20 percent for fall.”
The same applies to Zegna, whose opening price suits are now $1,995, down from $2,495, and Canali, whose prices dipped to $1,495 from $1,895. “This is significant,” Mitchell said. “The luxury customer won’t go from there to opening price, but they’re looking for a less-expensive option. This also helps us establish credibility since we can show them that we’re changing and we’re not living in a bubble.” By realigning inventory, Mitchell believes he can “reset the business and get back to selling more goods at regular price.” The biggest danger, he said, are promotions at the department stores. If they persist, “customers over time will not see the value of regular price,” he said. To help cope, Mitchell has added Façonnable for fall. “This is a brand that has not been heavily promoted, it’s not widely distributed and it sells at a commercial price point. For the customer who has been buying superluxe, this may be a brand they haven’t experienced.” Coppley is also being expanded, he said.
At the New York market, Mitchell will be looking for impulse items in the casual, contemporary and denim realms. “We need to take a stronger position with key items and avoid duplication,” he said. “It’s better to have a great casual pant at two price points and have it in depth.” Dressy polos to wear under softly constructed sport coats also are on his list. Butch Blum, operator of his namesake specialty store in Seattle, has jumped on the company’s 35th anniversary as his primary opportunity this year. “We brought
in more sale merchandise than usual and started with 35 percent off,” he said. “Everything we’re doing is keyed into our anniversary.” Blum said he also “stole a page out of Wal-Mart’s playbook” and ran a promotionoffering a price rollback to 1974 levels. “We offered real down and dirty pricing and had a nice June.” Because the promotions were planned, Blum said the well as its sales. “Our margins are better and our inventory is leaner.”
And, like many other high-end stores, Blum has started to bring in more moderate-priced goods. “We’re still doing Armani Black Label but we’re moderating. I hate the expression ‘trade down,’ but we’re balancing our inventories better and being real.” The lower-priced merchandise includes suits with a slimmer silhouette and unconstructed sport coats, which appeal to a younger shopper. “I don’t want to give away the next generation of shoppers to another store,” Blum said. “Plus, the younger customers come in more often and if I give them a cool pair of jeans for $200 and a shirt for $125, they’ll come back.” Although prices are lower, “the really important thing is not to compromise on taste or quality — that’s what we built our reputation on.” Blum said the difficult business climate also is “kind of fun. It’s energized me. We’re not on auto pilot anymore.” And so, he will attend the shows in New York searching mainly for sportswear and cool items from a variety of vendors.
“We’ve got to really pound the pavement this time,” he said. Tim Ryan, owner of Harley’s in Milwaukee, said he started cutting inventories early last year. Those cutbacks will continue for spring. “We can see the light at the end of the tunnel but we’re not at the end of the tunnel yet,” he said. In addition, he brought in some lowerpriced clothing lines for fall. “Higher-end goods are not where we should be right now,” he said. Ryan expanded the offerings from Jack Victor and is bringing in Hugo Boss to address the “under $1,000 retail price point and bring in a younger consumer.” In an aggressive move to reduce costs, Ryan said the store will move from its home of the last 60 years to a smaller site about five blocks south in September. Although the new location is about one-third smaller, it’s “more efficient” and “contemporary.” The move will result in a 50 percent saving in occupancy costs, and will provide Harley’s with another reason to “get the customer in the door” with its moving sale and new grand-opening celebration,” Ryan said. “We’re making positive moves in a negative time period.” Ryan said his business “hasn’t been terrible,” and was up by double digits in June without promotions until after Father’s Day.
In New York, he will shop new and existing vendors “to give our customer something exciting. In tough times, men tend to stay in their comfort zone and it’s our job to try and stretch that comfort zone.” David Rubenstein of Rubenstein’s in New Orleans said his strategy has involved working with existing vendors “who have in-stock positions. We’re paying higher freight bills but we’re turning it faster,” he said. “We’re working with our vendors to stage our merchandise, which also allows us to manage our cash flow better.” The most “flexible” firms include Jack Victor and Coppley, he said, noting his inventory levels are down about 30 percent from this time last year, “and we will keep it there.” Like his competitors, Rubenstein is reducing his dependence on the highestpriced luxury goods. “We’re not buying as deep or as far in advance,” he said, noting the store is adding more moderate-price merchandise. Because of his low inventory position, Rubenstein said he’ll have “a lot of money to spend” in New York. “People are going to like seeing me.” He’ll be searching for sportswear, denim and sport shirts and is hoping to find some new vendors. Rubenstein also will search for clothing in the $500 retail range.
“We have Hugo Boss at $750, but we’re looking for the $500 to $600 suit to bring in a younger customer.” Van Weinberg, owner of James Davis in Memphis, said what’s helped him the most since last fall has been a new focus on expenses, along with trimming inventory. “We took our last three good years and looked at our expenses and we’re making sure to keep them there,” he said. “That’s been our key to managing through this.” On the merchandising end, Weinberg said the store is “investing less” in high-end lines such as Barbera, Zegna, Armani and Etro and increasing its percentage of goods from Peter Millar and Forsyth. “Even guys that still make a lot of money don’t want to buy a $2,000 suit,” he said. In New York, Weinberg will “take notes” on categories ranging from suits to socks and will shop a range of resources, including Armani, Brioni, Tommy Bahama, Peter Millar “and everybody in between.” Mike Zack, owner of Circa 2000 in Plano, Tex., said is looking ahead — but not too far.
“We can’t worry about what we did last year. We have to worry about next week.” He estimated inventories were down about 20 percent from last year and price points have dropped, as well. Sport coats that would have retailed for $595 last year are now $395 and shirts are $100 instead of $300. Zack said he’s able to offer these cuts because vendors are reducing their prices to maintain sales. Business has been inconsistent. “When customers do shop, they’re shopping differently,” he said. As a result, Zach will shop the New York market “to search for answers. We can’t give our customers what we gave them before, just in a different color. We have to keep changing. “There are no clear indicators,” he added. “Business is up and down and it’s hard to get a good barometer on sales. So we have to be prepared to make changes on the fly.” Dick Hite, owner of Norton Ditto in Houston, said a recession forces merchants to “think outside the box in every way possible. We have to come up with creative ways to do business without giving away the ship.
We won’t survive if we buy the customer with sales.” Hite said his store is holding its own on basic clothing. Hickey Freeman, for example, is running about even with last year and is selling mainly blues, grays and classic pinstripes. Suits in more fashion patterns and colors are “off,” he said, as are sport coats. But with Hickey retailing for about $1,500, some customers are not shying away from high prices. Dolcepunta ties that retail for $150 to $180 also are doing well. As a result, Hite has resisted lowering his price points. “We can’t run scared of the Jos. A. Banks of the world. They’re misleading the public and hurting the business by making suits in Asia for nothing. We have to work better, make more calls and have better displays.” His inventory levels are down about 20 percent, however, and that will continue for spring. “We’re putting our money into the things that are selling. We feel we have to do that for our customer — we can’t afford not to.”
In New York, Hite’s buyers will be hunting for opportunistic purchases and eyecatching items to create buzz on the sales floor. “I expect business will continue to be tough, but maybe by mid- to late-fall, there will be some pent-up demand,” he said. “This is the worst economy in 70 years, so you can either let it get you down or keep plugging away.” Kilgore Trout is focusing on key vendors. Mitchells is bringing in some lower-priced goods to address the new economic climate.