THE REPS SPEAK OUT
New York — As showroom reps stake their claim in the market, they confront issues like delinquent payments and cash-flow problems, tricky business relationships, fast-moving fashion cycles and the threat of new forms of marketing and retailing.
A group of accessories showroom reps gathered at a WWD roundtable to discuss some of the challenges they face in a changeable market and an uncertain retail environment.
The participants were Karen Erickson of Showroom Seven; Lisa McLaughlin of Metropolitan Design Group; Roy Kean of Accessories That Matter; Susan Testaccio of Yvette Fry; Lisa Natt of Sola; Allyn Fried of Allyn & Co.; Brad Frey of D.P. Accessories, and Merri Keller of Meridian Accessories.
Here’s what they said:
WWD: What are some of the major problems you’ve had to face as an accessories showroom rep?
Erickson: The biggest problem I have in the accessories business is that we’re dealing with underfinanced, small people. We put less and less emphasis on the accessories business every year. We might have the same number of accessories designers as we do ready-to-wear — but the volume, it’s completely different.
McLaughlin: We do the same thing, but we’re doing more home. In the past 2 1/2 years, the home business has taken over the showroom and does more than accessories. I think that’s true in that there are problems with underfinanced designers.
When I started the business 15 years ago, we started to do the billing and collecting for those designers. One of the reasons I did that is so I would get paid. So, we’re able to circumvent the problem of designers not paying the rep, which I think is a big problem for a lot of people.
Kean: Most people have gone out of business not because they didn’t have a healthy business selling, but because of their cash flow.
We’re in a position of launching all these new, fabulous young designers with great product, but it doesn’t mean they have a company that stands behind them.
Keller: Well, I think the problem is that a lot of designers aren’t necessarily business-savvy and they might have the finances, but they don’t know how to control them and they don’t know how to go after the customer to get the money.
Testaccio: Absolutely. To some degree, you hold their lives in your hands. They depend on you for their livelihood, to pay their rent.
Erickson: Right, but you depend on them for your livelihood and to pay your rent. Chances are that you have sizable square footage and you’ve got a staff to pay every day.
Natt: I think that the end result of that is also when you do have a successful designer and you do build somebody up, they take a look at how much their business has grown and how much commission they are paying you, and think they can just take it in-house and open their own showroom.
So all the work you’ve done over the years eventually is lost because they decide, “I don’t need this person anymore. They’ve built me up, but I really don’t want to be paying that much commission any more.”
Keller: But don’t they still think that at this point they see the business you’re doing, and realize you really are getting such good business, and think, “Why would I want it to do that?”
McLaughlin: I think it depends on how big they are. It gets to a point where they have an established network themselves and they have business partners or financial partners.
If you end up having business partners and growing your business and having a whole network of production, the next thing to do is go out on your own and pull your own sales force and bring it all in-house.
Erickson: Well, look at it. I started out with two designers. One was ready-to-wear, Robert Molnar, and Eric Beamon with accessories. And that’s how we started making it. And we grew Showroom Seven around Erickson Beamon. For me, having been a single designer with a showroom, I found it completely boring. And it was a great way to cut costs by sharing the expenses.
McLaughlin: I’m sure — although none of us would want to admit it — that there are certain designers under our umbrellas that don’t get as much attention.
And there are designers that produce more business, and that end up taking up more time. And that becomes a problem for a lot of designers.
Erickson: But it’s just like in a department store. The nonperformers are in a drawer. McLaughlin: Right, it’s just a fact of life. So those designers who end up doing more business and producing more, and becoming more savvy will end up going out on their own or taking it in-house.
Fried: But isn’t that the nature of our business?
McLaughlin: Absolutely. It’s the nature of fashion, it’s the nature of any business.
Fried: That’s something we took into account before we went into this part of the business and certain people we would also tell to go on their own because they need more attention, because we are split in 92 places.
And as far as getting coverage on all lines — I don’t know of anyone else, but I do not put lines in drawers. They’re all out there. Some are a little lost, and they don’t get as much attention.
Erickson: No, we were talking about department stores. In any department store where anything, especially jewelry, isn’t performing, it goes in the drawer.
Keller: At the same time, while you’re developing one designer, if they’re hot, you’re developing your relationships, too. So as much as they might be taking advantage of your services, you are gaining. If you’re getting them into a door at Neiman’s or Bergdorf’s, you are now in that door.
Fried: And the relationship is yours, not theirs.
Keller: Exactly. If you can sustain that relationship with that designer, you have the relationship. You’re the salesperson. Our responsibility is to keep that relationship. WWD: Do you have to go after the designers to get paid?
McLaughlin: I don’t have any of my salespeople doing it. I have a separate group of people that handles accounts receivable.
Erickson: We have a bookkeeping department.
Fried: It’s just like any other business. And then you’re looking straight in the face of, “Well, I’m the one with the relationship,” and then get on the phone. Then what you said totally goes into effect.
Kean: This is something that I think you can ascertain from the first meeting. You know the designer’s strengths and weaknesses.
And I think our role in the marketplace has evolved. We’re not just smiling and dialing, and picking up the phone and saying, “Hi, come on in.”
We’re part of their whole business. When you’re having your first discussion, you should bring right to the table, “What’s your financial backing?” and “What can you do?”
We’ve had instances where we have lines that are more than doubling in sales every single year. We sit down, we have a meeting, we say, “OK, let’s cut this line in half. You have wonderful ideas here, but can you really afford to produce them?” And by planning that out and saying, “OK, we know your cash flow right now is really poor, so let’s cut this back.”
Now as a showroom, of course, that’s money out of my pocket. It’s knowing that that designer is going to have a healthy business, and we plan on growing. We sit with our designers constantly. The most important thing is keeping the communication flow, knowing where your strengths and your weaknesses are, and how you can help them and how they can help you.
Natt: I don’t think a lot of these designers do decide to go out on their own, because it’s a very daunting prospect. Because of the relationships we have with the buyers, they have often made it clear to the designers that the reason they’ve chosen to stay with that designer is because of the way their business is handled.
So as a backup to us, that relationship that you have with the buyer can be utilized in so many different ways, and it is a backup to you.
Obviously, they’re going to buy what’s best for them, but when it’s a kind of commodity product — like pashmina, which they can buy from so many different people — they need to be educated about the product.
I do think that the agent relationship with the store plays a big part of it, and I do think the designers realize that, and it’s another reason it prevents them from leaving. They would be too afraid to skirt their relationships that are already in place.
Keller: And I don’t think it’s always financially sound. I know what my costs are, my overhead. There’s no way they can afford the Fifth Avenue rent. Our costs are ridiculous.
Natt: From a buyer’s standpoint, if they’re coming into town for three days, they don’t want to take the time to go to one place where 2 percent of their entire business is this designer when they can go to a multiline showroom and buy 10 out of 20 collections, and have a relationship and know that things are going to be taken care of. We’ve both had designers who have gone out on their own and failed and then decided to come back because they see that people just don’t want to devote the time.
You’re a Neiman Marcus buyer, you’re not coming to the showroom unless there’s enough to see. And they know that you basically weeded out all of the lines that are out there.
Fried: They have no idea about commercial real estate tax, or all the different costs. They just think the rent is the rent and have no idea how it snowballs. That’s why a lot of them don’t make it.
Natt: You get most frustrated with the designers that complain about business and you’ve given them consistent feedback, and you’ve said, “Look, your product is fantastic, it’s on target, but you’re completely outpriced in the market. Or you’re completely off target.”
So those are the people you tend to take less seriously, because you’ve spent so much time and energy and research figuring out a way to fit them into the niche, but they don’t listen.
Testaccio: Sometimes there’s no chance for feedback. We normally ask for samples a full two weeks before market. I would say most of them, a full week before market, which gives you at least a chance to say, “This is fabulous, give us more of this,” or, “Let’s see if we can change the colors or give us what buyers are looking for.”
Keller: I just had a situation with a buyer where the designers wanted to present their collection like their designs. They forget the average consumer doesn’t necessarily want a design, they want the trend.
Until you’re a name that anyone will buy, whatever you design, you have to put out what consumers want. You explain it to designers and they come to the shows or to market and see the reaction.That’s why we do shows and they are at their shows.
Erickson: We encourage people to come. We encourage the designer to participate as much as possible. I wish they were involved more. We have so many people who aren’t local and the last thing they want to do is hang out for a Bergdorf’s appointment.
WWD: How do you feel about the Internet as an alternative form of retailing?
McLaughlin: I think we all have to get there. I don’t know any retail buyer I work with that actually shops the Internet for their profession. But I don’t think we’re there yet in our market, or in ready-to-wear, for that matter. But obviously that’s where it’s going.
People thought the same thing about the catalog mail-order business so many years ago, and now look. Plus, when you’re a multiline showroom, there’s a tremendous amount of work to be done to get each of the designers on all of the collections.
You need a few people working on that. That’s another division that needs to start to develop.
There is also something about the whole shopping experience to try on all that stuff. Erickson: We’re treating the Internet as we would a retail store coming to us. They’re buying outright, like a store. We ship them merchandise and we’re going to see what happens.
To me, it’s going to be like the future of fashion television; it’s supposed to be a big deal. We have a Ghost web site, where you can shop our store in London or our shop in Paris, and I think it’s really cute and it’s really nice. We’re selling some product, but not as much as we’re selling in the real world.
Kean: But we’re talking retail here, and how does this affect us wholesale? If we’re putting our lines out at the same time they come into our showroom, we’re opening ourselves up to being very vulnerable.
I know that my people are all about design, and by having those designs out on a web page, another line can go and have it within minutes. We need to stay unique and need a certain amount of lead time now.
Erickson: You can take Gaultier, you can take Galliano, you can take the most cutting-edge designers, and they’re being thrown up on the web the next day.
Kean: But with that, at least people have to go back and get the fabric and sew. With accessories, it’s a lot easier. I think we turn a lot faster.
I don’t think all the security issues are up to speed yet. I think as showrooms, we stand for something. I think the buyer’s reputation is really on the line because they’re buying something off line sheets, and they’re doing not a great job because they’re searching the web, and not holding the product, not opening it.
They’re being paid to be a buyer and to know that merchandise. If they’re getting it off a web site, they only know what the picture of that merchandise looks like.
McLaughlin: I think what you would use it for is not necessarily to make the trips to Manhattan null and void, or not to go into showrooms. I think you use it, like anything else, as a tool.
Kean: We do that a lot; we send photos over the Internet.
Keller: But I don’t think it will ever be as creative as a showroom can be, or a show can look. I don’t think every designer will be comfortable with the way their designs would be shown on a web site.
WWD: What do you think about the shows? The idea of the show?
Erickson: It’s a matter of servicing our clients. I mean, we have a huge showroom; there is no reason why we need to have [a show]. It’s a matter of being convenient to our stores. WWD: Is it profitable?
Frey: It’s becoming more and more profitable over the years. Our business has doubled from year to year, consecutively, since we’ve done the shows.
Kean: I have some lines that do very, very well in the shows. They’re perfect for certain shows. We’ve had people we always do more business with in the showroom and we have other people who do very well in the show. It’s about getting the buyer we see at the show to come to the showroom.
McLaughlin: I think Karen has a valid point that the reason to do the show is for service. Oddly enough, it’s the same reason I don’t do the show. It’s coming from another mind-set.
I started in the fashion business, and I started doing those shows because I was able to get people into the showroom.
In the fashion accessory business, we’ve been fortunate enough to not have to do shows and still have a healthy business. We provide a better service in our showroom.
That’s kind of the premise I opened the business with: to provide a service to the buyers and be able to talk to them about distribution, exclusivity and all those kinds of concerns. I think there’s a place for the shows, but for us, it works better for us not to.
Kean: It’s the same stores that complain that you’re in other stores in the neighborhood that don’t go to the showroom.
Why are they seeing the same merchandise as the store down the street? Because they both shop at the same two shows! They don’t get out there and pound the pavement and find all the little niche marketing products we all have.
Natt: The interesting thing about timing with the shows for me is that I find the ones that are most successful are the American designers because they’re on a completely different timetable.
WWD: What of your getting stiffed by designers or retailers?
McLaughlin: Well, definitely retailers.
Erickson: We’ve all lost; every single department that went Chapter 11, we all took a hit.
WWD: What about when the designer leaves?
Keller: We had one designer we had to go after with a collection agency. She was pretty much going out of business.
For the most part, I think we’re fortunate that we’re small. So we get a relationship with these people and work with them for a long time. Sometimes I feel it’s our fault that we’re a little bit lenient.
Natt: When you don’t have control over where the samples are, and things go out for trunk shows, you think you’re being smart about things, and you almost think, “Well, they wouldn’t…”
McLaughlin: That’s why when we collect the money, I’m in control of the finances. We collect the invoices and pay the designer. I pay them less my commission and any store chargeback.
I don’t have problems when I collect from the stores because I have a department that does that. I do have the problem with the few designers who do their own collecting because they have a cash-flow problem, and I’m the last person they want to pay.
Natt: My first year in business, they owed me $150,000. I was understaffed. I didn’t look in my books, and when I lifted up my head, they owed me $150,000.
They then proceeded+with my own money. I proceeded legally. The recession hit; I couldn’t proceed. My lawyer wouldn’t take it on contingency and I had to let it go. That’s how I learned to send the bottom of orders. And it works.
Keller: That’s true. You’re working with young, up-and-coming designers. Let’s say they finally make it big and they get a huge order+in May. They’re shipping Aug. 30, Sept. 15. Well, here they have this huge order; they have to put out all the money to make the supply. They’re lucky to be paid by Oct. 15, Oct. 30. That’s really where the bulk of the problem is.
Erickson: Once you have the volume, you have to work on a draw situation.
WWD: Maybe there’s a new model that could be created for reps?
Keller: Well, you can always get backing, but there’s someone else you’re going to owe, too. So that’s the thing about getting investors or backing: There’s someone else in the picture.
I’m sure you can form a partnership with your designer. But you have a whole different relationship, and you’re really liable as either a partner or an investor.
McLaughlin: Or basically letting the designer design, which is what they do best, and then you provide the management and financial side of the picture. That’s really the way to go. Our expertise is in selling, merchandising and collecting funds. They would be making more money owning 50 percent of the business than 100 percent of their company, which is always in the hole.
Erickson: And we make p.r. mandatory for all of our designers. Without a proper press effort, it’s not going to happen.
Frey: Our solution for the lack of profit in the repping business has been to diversify. We have a separate p.r. division and a clothing division.
WWD: Does anyone feel it’s a scary market?
Kean: It’s so hot right now, it is scary. How are people supposed to produce all these orders. Our orders are so good, our cash flow has slowed up! Why is this number so high and this number so low? That’s the scary part.
Erickson: We try to get our designers to think of us as their payroll.
Natt: It’s a challenge not to overextend yourself if you have capitalized on a trend in one year and don’t know what’s going to happen in the next and your business might be half of what it was.
Keller: Those challenges make it exciting. It’s going after the next account.
Frey: It’s about going after that next thing, and there’s a lot of money to be made if you do it right.