Of all the myriad challenges facing independent specialty retailers during these coronavirus-afflicted times — government-mandated temporary store closures; underdeveloped e-commerce businesses, or none at all; lack of available liquidity; payroll responsibilities, and swelling inventories that dwarf demand — one of the biggest concerns among smaller stores is rampant discounting by their larger department store brethren.
Independent retailers that may not have the luxury of a corporate backer’s deep pockets or the cash infusions of investors could be increasingly challenged as the COVID-19 pandemic wears on. Complicating matters is the fact that there’s no consensus on a possible end, which is wreaking havoc on stores’ buying and planning.
With the spring season — one of the best periods for business with proms, weddings and spring break — quickly vanishing, specialty stores are being forced to make a Sophie’s Choice: cancel the orders from young designers they pledged to support, or cut employees, or reduce their pay, or both.
Ken Giddon, president of Rothmans, a three-unit men’s specialty store chain in New York City and Westchester, N.Y, has a story that is more dramatic than most. Forced to lay off his entire staff when the stores closed last week, Giddon put all spring orders on hold and is waiting to make a decision about fall.
“We have seven figures worth of inventory in our stores that no one can buy,” he said, noting that e-commerce represents only 1 percent of total sales.
Independent merchants need to immediately enter survival mode, which includes reducing payroll to virtually nothing. “It is heartbreaking, but necessary,” he said. “If you try to hold on to jobs, you’re more likely to fail in the long run.”
Giddon is hoping for government intervention and also planning to keep employee healthcare benefits active for two months.
After 34 years of owning a small business and surviving 9/11, the 2008 Great Recession, and Superstorm Sandy, Giddon has the scars to show for it, and also some hard-earned wisdom, such as resilience, not raw intelligence or a great business idea, is the most important tool in the small business toolbox. Use this time to plan, assess, evaluate and innovate. Improve operating areas that weren’t functioning well. “This is a punch in the gut to all small businesses, but I most likely will survive and come out better on the other side,” he said.
“I feel like I’ve been in panic-survival mode,” said April Hughes, founder of Oroboro on Mott Street in Manhattan’s NoLIta, which sells Ulla Johnson, Christaseya, A-Company and Nomia, among other brands. “Not that working for people is better. But, if I had a stable job, I think I’d be enjoying being at home and cooking with my children. When you’re a small business, you’re in free fall.”
For Hughes and others, the timing of the COVID-19 outbreak couldn’t be worse. Whether it’s the bar and bat mitzvah circuit, the lead-in to summer weddings or spring break in Texas and Florida, independent retailers are losing out on some of their biggest shopping periods.
“When you go to Paris for fashion week in January and February, as a small retailer, you wonder if you’re going to survive,” Hughes said. “Then, the good months kick in. We were getting the majority of our spring deliveries and paying for them. The fall orders were starting to hit when New York was having to close its doors.
“Are we canceling orders, and are we canceling fall? Our store is 70 percent of our business,” Hughes said. “Our web site is only 30 percent to 35 percent of business when conditions are perfect. It’s the tactile, face-to-face experience that we sell. The web site is a branding tool, not a huge money-making tool.
“I want to stay alive and do everything I can to protect the people that work for me,” Hughes said. “Now, we’re at 70 percent of their pay. We kept the important people. We’ve been closed for 10 business days now. We held on until it was starting to be uncomfortable and not safe for staff to interact in that way.”
Hughes said she’s on her computer from the minute she wakes up to the moment she goes to bed, filling out grant forms. “It’s great that there’s an employee retention grant, but we [owners] have to put our house or our real estate up [as collateral],” she added. “If I take these loans, I’m personally liable and will have to pay for that.
“My staff — the ones that are left — have told me they’d like me to put everything on a site-wide sale,” Hughes said. “I said, ‘Let’s hold off on marking the whole site down.’ We’re Americans, we’re consumers. We hopefully will come back.”
“We’re trying to stay afloat,” said Merry Vose, who operates two stores in Dallas — Canary, for contemporary labels, and the designer-oriented Cabana. “We’ve had double-digit growth at both stores. We started 2020 in the same manner, and then, literally, the rug was pulled out from under us in 10 days.”
March and September are Canary and Cabana’s biggest months. The former, a time of school breaks, and when a change in the weather is palpable in Texas. Clients take inventory of their closets, purge and replenish. “It’s stopped…at the height of our inventory,” Vose said. “We’re putting our heads down and getting creative and using our stores as warehouses. I’ve been in my car all day delivering to clients.”
Whether or not to cancel orders is a dilemma without a clear precedent. “We’re not receiving another piece of merchandise until April 1,” Vose said. “On April 1, we’ll revisit that.”
Vose said her priority now is paying her 10 employees. “My biggest goal is not to let anyone go,” she said. “I have asked my girls to take a little temporary pay cut. I feel like if we stay afloat, then we’ll be able to survive anything. What’s freaking everyone out is the unknown.”
Founded in 1989 by Laura Vinroot Poole, Capitol, in Charlotte, N.C., features designers such as Valentino, Gucci and Rosie Assoulin, and Irene Neuwirth, while Poole Shop, on the second floor, sells contemporary brands. Capitol Brentwood bowed a year ago at Los Angeles’ Brentwood Country Mart. There’s also Tabor, a men’s store in Charlotte.
“California was shut down pretty quickly, but in Charlotte, we’re still doing deliveries,” Vinroot Poole said Monday. “We’re doing Tabor Takeout, where clients text their salesperson and have them put together a bag that they can pick up at the store or that we’ll drop off.
“We canceled all of the runway that we could,” Vinroot Poole added. “We certainly have been careful in placing our fall orders. I’m concerned about orders being fulfilled, so I don’t want to cancel orders. We’re a luxury store and most of our fabrics are from Italy. They’re really in the bunkers. My biggest lesson from the 2008 recession is that relationships are everything — with my team, my vendors, my clients.”
So far, Vinroot Poole said, she’s let part-time employees go. “We have 40 employees. We’ll do the best we can and then we’ll have to let people go one by one.”
Another big takeaway from 2008’s ordeal, said Vinroot Poole, is, “Nobody’s going to bail me out. I love what I do and I’m really committed to making it work. Certainly, there are things we’ll change. I don’t know yet what those will be. I’m in it and ready to fight for it.”
Bob Mitchell, co-chief executive officer of Mitchells Stores, said he fears that other merchants will immediately start deep discounting, which is what happened in 2008. “The credibility of luxury retailers” will be questioned, he said.
Mitchell noted that nearly all of the company’s stores are located in COVID-19 hot spots and have been shuttered since last week, including Mitchells and Richards, Greenwich and Westport, Conn., respectively, Wilkes Bashford, San Francisco, and Mario Bisio, Seattle.
“We’re doing our best to navigate through these uncharted waters of having zero revenue coming in for what could be eight to 12 weeks,” Mitchell said, noting that only about 5 percent of sales come from online purchases.
The company is communicating regularly with its vendors, many of whom are in hard-hit Italy, about the best way to handle both spring and fall orders as well as their production issues with factories there shut down. He said it could actually be a good thing to push deliveries back so that retailers can work through their existing inventory when the stores reopen.
Mitchells Stores paid all employees for two weeks and the co-ceo was hopeful the government stimulus plan will help bolster the paychecks of those workers in the future. “If there’s one thing I’ve learned, it’s that in a downturn, if you’re good to your people and partners, it’s better for everyone when it’s over,” he said.
“We’ve received so much merchandise,” said Karen Daskas, co-owner of Tender in Birmingham, Mich., which sells Marni, Rochas, Peter Pilotto, and Sies Marjan, among others. “Everyone’s shipping a ton. Vendors are very nervous about being paid. I’ve never not paid someone. Am I going to be late this season, oh yeah, because [there’s] no money coming in.
“I don’t want to cancel any orders because really they’re contracts with the vendors,” said Daskas. “Hellessy asked if I want to hold back on the pre-fall delivery and do I still want to move forward with fall product. They want to feel out the waters a little.”
Tender doesn’t sell online, but it doesn’t have to worry about rent as it owns the building that houses the store. Daskas said discounts won’t help since her clients can’t visit the store. For the first time, Tender offered 20 percent off gift cards, and clients bought them in value increments of $5,000, $1,000 or $500. “Did it bring in a lot of money right now?” she said, “No, but it brought in a great feeling that people aren’t taking us for granted.”
Ashley Vermillion Webb, founder of Vermillion in Raleigh, N.C., in April was set to celebrate the store’s 15th year in business and expansion to 2,600 square feet, a 60 percent increase, with a party and panel discussion featuring Wes Gordon of Carolina Herrera, Lela Rose, Tibi’s Amy Smilovic, and Maria Cornejo. “Our clients were so excited,” she said. “Now, I’m thinking September or October.”
While the store is closed, Vermillion Webb is dropping off items for clients to peruse, and meeting them at the store individually. “We’re taking precautions, cleaning the store before and after the meetings, and the clients wear gloves,” she said. “Our sales are obviously way down and we can’t count on traffic. We’re a relationship-type store.”
Vermillion’s owner sent a letter to vendors asking them not to ship anything without speaking to her first. “We got an order yesterday from a luxury handbag company that didn’t get my e-mail,” she said. “They said they’d be happy to net 60, typically they’re net 30. It’s a little easier dealing with smaller companies, but everyone is in a state of stress, and willing to work with us.“
Vermillion Webb told her employees she’ll pay them for the next two weeks, and then evaluate the situation. “If everybody takes a pay cut, I’ll take a pay cut,” she said, adding that she’ll apply for a loan if she has to. “It’s survival.”
Alicia Kossick, owner of Miami’s The Polished Coconut, which sells artisan-made products, has pivoted before. Originally located in Miami’s Coconut Grove, when chains such as Le Pain Quotidien and Mr. C. opened, Kossick decamped to the less-trammeled West Grove. “Ours is a destination,” she said. “You have to want to come here. We don’t have walk-in traffic.”
A Tory Burch Foundation fellowship finalist for sustainably sourced Native American fashion, Kossick said she recently asked herself, “Why am I not calling Tory Burch? We have to tap into our relationships. These are times when big businesses or well-established brands can collaborate with smaller brands.
“Instagram is a good tool for small businesses,” she added. “You can use it as a resource to access people you wouldn’t normally have access to. I have a sense that in these times of need, the larger and more famous or well-funded brands will help smaller brands.”
Christophe Desmaison, founder of CD Network, which represents brands such as Forte Forte, Mugler, Pringle of Scotland, Valextra and Vanessa Bruno, would be happy for any sign of leadership. The cacophony of competing sounds in the U.S. is diffuse and sometimes at cross-purposes, he added.
“Yesterday I was on a call with Gary Wassner [ceo of Hilldun], who is trying to band together all the factors. The industry lacks a common voice,” he said. “It’s made up of little voices. Even in Italy, where fashion is the second-largest industry in the country, they can’t make their voices heard. There’s no [organization] representing everybody.”
Desmaison said the orders some designers scrambled to ship just as New York Gov. Andrew Cuomo tightened restrictions on people’s movements, remains in customs. “You have to deal with spring season basically vanishing,” he said. “We’re postponing or redistributing or staggering the deliveries. There’s no point in forcing people to take on merchandise because they have no venue for selling it.”
Consumers aren’t interested in buying apparel, even at reduced prices, he said. “Discounting is the wrong answer. We never really recovered from Saks Fifth Avenue going crazy in 2008. People are not in a mind-set to spend today, even at a discount. Everybody’s in a cash crunch. We should discuss as an industry and take a position on how we work together [without discounting]. Everybody is going to have to take their own share of the pain.”
Desmaison said selling fashion now requires some magical thinking — and the fashion calendar, complete rethinking. “The word of the season was sustainable,” he said. “Let’s demonstrate if we can be sustainable. I remember 25 years ago, the bridge market collapsed because there was too much merchandise. Everybody was pushing merchandise and taking as much back. The same thing with the contemporary market. We just changed the name from bridge to contemporary.”
All of the arcane approaches that didn’t work, but that the fashion industry persisted to hold on to, will be reassessed. “The caravan of people like me going to 20 fashion weeks — that’s over,” Desmaison said, adding that consumers will not be at a loss for fashion. “I’m not worried about people going naked in the street.”
Read more from WWD:
WATCH: Tips and Tricks for Working From Home