SMALL SPECIALTY STORES BATTLE WITH THE BIG GUNS

Byline: Sharon Edelson / With contributions from Jennifer Owens, Washington, D.C., / Teena Hammond, Los Angeles

NEW YORK — Chargebacks. Demands for co-op dollars. Markdown money. Increasingly complicated shipping instructions. Mega-niche brands dominating real estate and squeezing out less-prominent labels from the selling floor.
It’s enough to make a small vendor lose interest in department stores and turn to small specialty stores for a more personalized approach to business.
“Most of our vendors are smaller, and the department stores are too complicated for them,” said Noel Davidson, president of two Bodytalk stores in Connecticut. “They want better terms. They’d much rather ship to small specialty stores because they’re small vendors.”
But they don’t stay small forever.
“When they get larger they start to open their own retail outlets,” said Davidson, noting that Blue Fish and CP Shades, which supply his stores, have already done so. “I like that. I think it helps us if they open a retail outlet near our stores. Their consumer travels further to get to their store and then comes to mine.
Nancy Pearlstein, owner of Relish, a designer boutique in Chevy Chase, Md., said that now more than ever, smaller vendors are reaching out to her.
“In my 20 years of being in business, this has never happened,” she said. “I’ve been getting faxes from overseas from young upstarts who have maybe made a name for themselves in their own country, but are looking for help here.”
Pearlstein said she certainly understands why these vendors, primarily French and English, are faxing her directly these days.
“They can’t get in touch with the big stores,” she said. “If they send a fax to a large store, they can get lost in the shuffle.”
On the other hand, the designers always get Pearlstein’s attention.
“Of course, I always look,” she said. “I have to look.”
Harriet Kassman, whose eponymous designer boutique at the upscale Mazza Galleria mall on Washington’s northernmost border, said designers have long enjoyed the exclusive attention of her shop.
“When we see a good line and no one else has it, we grab it,” she said.
And yet, some Washington shop owners said they still find that when good lines turn great, their boutiques can be left behind for the bigger orders of department stores.
“They can forget where they started from, so it’s a gamble,” said Henri Peker, owner of MicMac Bis on Wisconsin Avenue. “Everybody is afraid to start with a young designer because you are always scared that the cut will not be proper, the quality will not be good. You’re always frightened for the first collection. Sometimes it works, but sometimes you loose your tie. I know the department stores don’t really want to risk it.”
Bodytalk’s Davidson points out that the sheer size of department store orders rarely suits the limited production capabilities of small vendors.
“Department stores are so big today,” Davidson said. “It’s not like before, where you had two or three doors in a chain. Now, you’ve got to be huge to supply them.
“The small guys aren’t even on the matrix,” he said, referring to the main vendor list used by chains like Federated Department Stores. “If they get on the matrix, they’re in big trouble. They go from making 5,000 units a month to making 200,000. The department stores get terms, 8-10-EOM at the beginning, and markdown allowance at the end of the year. The vendors eventually build that into their markup.”
Within the last year, “We’ve added many resources to Mitchells of Westport,” said Connie Finnel, vice president and general merchandise manager of the Westport, Conn., specialty store. She cited Ann Demeulemeester, Missoni, Cerruti, Jean Paul Gaultier, Barry Kieselstein- Cord, Judith Leiber, Sonia Rykiel and Loro Piana among the additions. “We try to shop as many designers as we can, whether they are new or established,” Finell said.
Among the reasons vendors may seek to sell Mitchells and smaller specialty operations: “We don’t go knocking on doors looking for markdown money,” Fennel said, though the company does request advertising money and sometimes requests merchandise exchanges.
“It’s a case of their wanting to be part of a growing fine specialty store,” and also “a problem is space, for everyone,” she said, referring to larger specialty and department stores, where there is generally a scramble to find space for new resources.
And resources are grateful for the effort.
“Big companies are pursuing the smaller stores because they realize there is absolutely no growth left in the department stores, where every conversation is about space and frontage and real estate, not about product,” Joseph Greco, president of the bridge company Gruppo Americano, said recently. “Specialty stores are about personality and merchandise. You might give up some exposure, but you achieve much more in credibility and integrity.”
“The younger designers appreciate very much being showcased and highlighted in a special environment,” said Linda Dresner, who owns designer stores here and in Birmingham, Mich. “As a person grows, the situation always changes.”
Peter Marx, vice president of Saks Jandel, which owns boutiques in Chevy Chase, Md., and at the Watergate Hotel in Washington, said better vendors see specialty and department stores as each having a place in their distribution strategy.
“They want the big customer department stores for the volume and consistency on a grand scale,” he said. “But they also want a specialty store to carry their line so it is displayed with more zest and interest.”
Marx said, however, that there can be exceptions: A specialty store might have the exclusive rights to a collection, while a department store usually gets the latest hot diffusion line.
Still, he said, a committed specialty store can usually offer more to a vendor.
“It’s better to have the heart of a specialty store that’s entrenched in a community, that can provide better service to the customer,” he said. “But there are fewer and fewer of those stores.”
Indeed, many of the most respected designer specialty stores have succumbed to bankruptcy and other financial woes since the beginning of the decade.
Lou Lattimore, a top fashion retailer in Dallas, closed its doors in 1991. Martha’s, the venerable Park Avenue institution, filed for Chapter 11 protection in 1992 and closed its last store in November 1994. Charles Sumner, an old Boston specialty retailer, and The Gazebo, a Dallas boutique, closed in 1996.
But the survivors now seem stronger than ever. Many operate in a niche at a lower price point because that’s where the demand seems to be. Bridge and contemporary stores, often with one or two units, have found a customer who wants a specialty store experience at a more affordable price.
The hip Tracey Ross boutique in West Hollywood, where celebrity sightings are as much a part of the atmosphere as racks filled with such names as Katayone Adeli, Anna Sui and Vivienne Tam, has no trouble attracting designers.
Within the next month, designs from Heather Witt and Margie Tsai will arrive at the shop, said Tracey Ross, who owns the store. Although it doesn’t lack top fashion names, newer designers seek out the boutique because it is easier to work with than a department store, Ross said.
“Most young designers can’t afford to go into the department stores,” she added. “They get paid later, and they need the money to put into inventory going forward.”
Other designers that have recently been added to the boutique are A. Crispen, Agatha, Josephine Loka and Milk Fed, Ross said.
Shauna Stein, a Los Angeles boutique, which recently opened a unit at the Forum Shops at Caesars in Las Vegas, has also picked up a few new lines in recent months, said owner Shauna Stein.
“I brought a cute new little collection into my Vegas store named Is,” Stein said. “It’s kind of a derivative of Voyage.”
Both stores also began carrying Roberto Cavalli, she said.
Stein seeks out designers who aren’t in department stores because, “I don’t want the same mix that they have. I’m looking for new talent.”
High-end specialty stores like Linda Dresner’s have struggled to maintain a mix that is both unusual and accessible, a feat that has become increasingly difficult as designer distribution expands through chains like Neiman Marcus and Saks Fifth Avenue, and as designers themselves open freestanding boutiques.
“Hopefully, specialty stores can give their own particular stamp to collections that exist in department stores,” Dresner said.
A new strategy for Dresner has been highlighting younger, lesser-known designers in a new 1,500-square-foot Loft area in the Michigan store.
“Basically, it’s all the young designers that are doing special, interesting things,” Dresner said. “And we’ve had a wonderful sell-through with these young people.
“Katayone Adeli, a lot of small designers from the Stephen Allen showroom and certain things from Darryl K. have been really interesting. Her pants have been a bestseller for us.”
Dresner said the future of specialty retailing lies in this “unusual type of designer merchandise instead of selling only designer clothes that are highlighted in so many places.”
“Today, it’s very usual that they’re overdistributed,” she said of some high-end labels. “They can’t resist selling to department stores. That’s their decision. But we pay a price for that. I think they will, too. It’s familiarity, it’s too much, overstored, overmerchandised. The customer wants to feel unique. She’ll buy less from those designers in the end.”
Service is a cornerstone of the specialty store format. Many specialty store buyers and salespeople know their customers by name, size and style preferences and call them when a new shipment of a favorite designer arrives.
They have the time and inclination to put together complete outfits, unlike department stores, where service is still a room-for-improvement issue.
“Our customer wants her hand held,” said Genny Feltus, owner with Marie Rexer of Rexer-Parks, a 2,500-square-foot Atlanta specialty store. “She wants something special, and she wants help in putting an outfit together, complete with lingerie and hose. And she doesn’t want the hassle of running all over the mall.”
Another attraction of specialty stores, experts said, is that they offer a point of differentiation in a market that many agree is becoming increasingly homogeneous.
“There is a sameness that many consumers describe as boring,” said R. Fulton MacDonald, president of International Business Development, a consulting firm specializing in the retail industry. “There are many designers today, just not enough outlets for their creativity.”
Department stores and even high-end specialty chains like Neiman’s and Saks are heavily focused on private label merchandise, which fattens their margins. It is an area that adds to the perception of sameness, because private label centers on basics, from cashmere and merino sweaters to innocuous separates in seasonally appropriate colors.
Kay Furakawa, a buyer for Maxfield in Los Angeles, said an attraction of specialty stores is that they don’t play it safe.
“We’ve only dealt with people that have always wanted to sell to specialty stores,” she said, ticking off names like Prada, Gucci, Jil Sander, Dolce & Gabbana, Jean Paul Gaultier, Issey Miyake and Comme des Garcons.
“[Owner] Tommy Perse was the first to bring the Japanese designers to the U.S.,” she said. “His was not a department store viewpoint.”
The chain now carries Dries Van Noten, Ann Demeulemeester, Helmut Lang, John Galliano and Givenchy.
“Givenchy is carried in one other department store in our city — Saks Fifth Avenue,” Furakawa said. “We buy it totally differently. We buy a much more specific range. A department store tends to be safer.”

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