As stores begin to reopen around the U.S., inventory remains a perplexing problem in a shortened spring season. Vendors have spent the last two months scrambling to figure out solutions on what to do with their spring/summer and pre-fall merchandise that hadn’t shipped yet. While stores canceled many orders, some vendors were able to push back shipments, re-merchandise, or hold some of their collections for future deliveries.
WWD interviewed several vendors about how they were able to protect part of their inventories, and their strategies range from packing up their summer deliveries for next year to taking their pre-fall collections that would have been delivered in May and June and reclassifying them as “resort” for fourth-quarter delivery. Overall, there was a lot of shifting and moving pieces around, changing and scaling back color choices, refining collections and cutting styles, all in an effort to limit the brands’ liability.
Still, what worries vendors is the excessive markdowns they anticipate retailers might take on spring lines once stores reopen to make way for fall merchandise. Despite what vendors feel would be a good opportunity to shift the retail calendar to more seasonal deliveries, brands are afraid retailers might panic when their traffic isn’t robust, and clearances could be rampant to attract a hesitant customer and clear inventory.
“It is beyond their control,” said Marshal Cohen, chief industry advisor, retail at The NPD Group, Inc., when asked markdowns. “Stores will try to open at full price to protect what little margin they have left to make some profits for spring/summer. However, the bigger retailers will be forced to offer promotional prices to move merchandise as they need to make room for the transition fall, and back-to-school is lingering nearby. Once one or two retailers start promotions, others will need to follow. Also, larger retailers that have private branded product have more goods just waiting to be put out, which means there is a backup of inventory for stores without avenues to return or cancel the private brand products.”
Here, brands outline their inventory strategies:
Tanya Taylor, a contemporary sportswear firm, devised a plan to salvage her pre-fall collection, which would normally be arriving in stores between May and June. Instead, she has agreed with her retail accounts to ship it in November and December, following holiday 2021, and call it “resort.” Acknowledging that all retailers were faced with a shortened spring/summer season, Taylor played with a few scenarios and they ultimately decided that this made the most sense. Retailers such as Neiman Marcus, Nordstrom, Bergdorf Goodman and Shopbop are on board.
“As a brand you have to take it upon yourselves to propose solutions,” she said. She realized stores would push back their deliveries because they were not accepting new merchandise for two and a half months “Our strongest time of year is actually right now. We’re a very spring and summer kind of brand, and it’s the toughest time for us not to be able to have access to customers,” said Taylor.
The company understood that pre-fall for them was very transitional and worked as both a lead-in and lead-out to the fall season. Putting it at the tail end of fall, it gave Taylor more space for spring and summer to sell, and also allowed them to talk to the retailers and have a different flow of product in the fourth quarter.
Taylor cut back the pre-fall (now resort) collection by 30 percent. The orders were placed with the factories and they were at the beginning of production. “That’s why we have the flexibility,” she said. Originally that collection would ship between May and June.
Asked whether that collection was more takeaway or “wear now” clothes, she said, “It’s magically both. We looked at the assortment, we have a navy base print that you can wear in November and December, and it feels very transitional. You can wear it with a knit, and it can also be takeaway. They’re neutral-based prints that are khaki-based, and they can be transitional. A lot of our business is actually in the South, so it felt kind of seasonal. We’re kind of resetting what I think makes more sense in what the customer wants to buy during that time of year.”
Of course, getting paid for that collection is another matter. She said the “resort” collection is in production now. Taylor will receive it really early, and stores won’t pay for it until they get it. “That’s one of the cash flow issues we’re dealing with. Our production will be done when it was supposed to be done in June. We’ll be sitting on that inventory and not getting paid until January. We kind of evaluated, ‘is that a bigger risk,’ or was it a bigger risk to lose the dollars?’ We wanted to get the assurance that we would have the dollars,” she said.
Taylor’s first fall delivery won’t ship until July 15 to Aug. 15. The second fall delivery is Aug. 15 to Sept. 15. “We have knits and a lot of faux leathers. You’re not buying that in July anyway,” she said. She said fall has been pushed back almost eight weeks.
After fall II has shipped, Taylor will have a capsule of holiday. This what they’ve been developing remotely. It’s 30 pieces. “Hopefully by October, people will be looking for fun, fresh product. Then they’ll ship resort right after, which will be the previous pre-fall.
Asked whether she will continue to ship to Neiman Marcus, which filed for bankruptcy protection Thursday, Taylor said, “Neiman Marcus has been a good brand partner, and we have no doubt we will continue to partner together as we move through this next phase.”
“It’s important not to be the only brand doing this, and to make sure there’s alignment so that when a customer walks into a store, it’s not crazy cotton resortwear next to traditional holiday. Smoothing out the tone and the mood of what each retailer stands for, I think coming out of this is going to be very important,” she said.
Taylor also said she’s adding new product at a lower price point just for the web for the next six months. They’re putting it into production now. “I feel like going through this, so many people may be fans of our brand, but can’t be customers because of our price point. There’s a need for more casual clothing. We have this optimistic point of view on color. T-shirts, pajama sets with upscaled fabrics,” said Taylor.
Ellen Kinney, president of A.L.C., the Los Angeles-based contemporary sportswear firm, did some moving to fourth quarter as well. Basically, she challenged her sales and merchandising team to think like retailers and figure out what they would need as far as product and how they would want a vendor to partner with them. When stores closed, they were fully stocked with spring. “People were going to be incredibly over-inventoried, and with stores closed, nobody would take in new goods,” she said. So for May and June, they took all their product and reassorted to make three drops into one drop, which would ship in June. Then they took 70 percent of that (summer and pre-fall) and moved it to the end of the year.
She said during that time period, her customers generally purchase buy-now, wear-now pieces and true takeaway clothes. From a product perspective, they looked at the merchandise that was moving from the second quarter and what could live in the fourth quarter that fit into that product description. “We basically migrated 70 percent of Q2 into Q4,” said Kinney.
She said that 70 percent is pretty much bought and cut already. The difference in moving to the end of the year was they were able to bring it in on a boat, instead of shipping it by air freight. Obviously they won’t get paid until the fourth quarter.
“That’s what hurt us. We had to pay the factories for the fabric and the work. We don’t have cash until the end of the year,” said Kinney. “We’ve had to pay for the goods that we are not shipping yet.” They worked with design on a merchandising plan and eliminated development for that quarter, with the exception of holiday. That is something they do uniquely in the market, and doesn’t look like any other month. It’s occasion wear.
“We kept holiday even though we scaled it back 70 percent,” said Kinney, noting it would be more casual.
Asked if she believes reopened stores will put spring merchandise immediately on clearance, she said, “People have already started marking it down. I know there’s some talk in the market of brands bonding together and asking them to hold markdowns. It’s just unrealistic, they’re so over-inventoried.”
With the reopening, they do anticipate a heavy, promotional markdown period. Even with the last delivery they couldn’t ship (they had shipped spring 1 and spring 2 and part of spring 3 (and are eating and absorbing the rest), they are offering their DTC consumers and wholesalers a considerable discount.
Their web site is selling spring, and some of it is marked down. “We’re not taking deep discounts ahead of our retailers,” she said. In speaking with other vendors and retailers aside from pajamas and lingerie, “it’s sale [merchandise] that’s moving the needle,” she said.
She said her fall 1 delivery in July is small and transitional. The biggest fall statement is in August, and the third is in September.
A.L.C. has an East Coast flagship in New York’s SoHo neighborhood, and a West Coast store in Pacific Palisades. She said she doesn’t know when either store will open. “With New York, honestly I have no idea. When it’s safe to open, there won’t be international tourists in SoHo, and people who live in the city will be out of the city in the summer. We really don’t anticipate that business coming back until the fall,” said Kinney.
She said an exclusive product launch with Net-a-porter that she was planning for April has been pushed to October. “The product that was scheduled was more like takeaway product. We’re really hoping people will be in the mood to travel again,” she said.
Cinq à Sept
Jane Siskin, founder and chief executive officer of Cinq a Sept, had a different idea on how to salvage her summer inventory. “I think we reacted quickly and well. We immediately knew stores weren’t going to take the summer goods, so we pushed those deliveries until next year. It will be new, and will still be relevant, and we’ll pepper in new things and refresh it.” Some of it is in a warehouse, and some they were able to stop. She said it’s a very small delivery and is very wear now, summer, almost summer casual.
She said her regular fall line generally ships the first week of July. “As of right now, we’re shipping end of July. Basically, everything got pushed out a month.” This year, holiday was completed when they shut down. She took holiday, resort and pre-spring, and created two deliveries out of the three, and will deliver that at the end of October.
“Luckily my holiday collection this year wasn’t very ‘quote unquote holiday.’ We did very well last year on fun takes on bestselling items and we redid that idea for holiday. Resort will be a small drop. I understand the stores’ rationale, the goods that are there are still there. I’m concerned that when they reopen, if they don’t start to ship newness, people are going to be very bored. Especially in the higher-price world. People shop regularly. Now they’ve been seeing it for two months on their phones and they saw it for two months or a month before the stores closed. I’m a big advocate on how we can loosen up some money to bring in new goods,” said Siskin.
Do the stores have money to loosen up? “Not really. It’s a whole new world, you have to think very creatively and very differently. I don’t want to get a false read, and have everybody come and say, ‘ugh, nothing new’ and leave, and say, ‘retail’s over.’ You have to give them a reason to go shopping. That’s been a conversation we’ve been having.”
She said she has no problem with pushing deliveries out. “Three or four weeks later, they’ll be even more seasonally appropriate,” Siskin said.
The team basically designed the spring collection remotely. Assuming they’re returning to the office in June, the plan is to show holiday and resort virtually and to send out swatch and color cards.
She said the web site is doing OK. Its casual segment, Tous Les Jour, has been selling well. Dresses have been soft. “When you lose a big segment like dresses, it’s hard to sustain. Even our e-comm last week was better than weeks prior,” said Siskin.
In her resort and spring lines, does she still plan to offer dresses?
“We do. We talk about it a lot. Should we reduce the number of dresses? I’m choosing to believe that we’ll go back to some sort of normalcy where there will be events, and there will be weddings and bridal showers and reasons to get dressed up,” she said. She also wondered if there will be “a counter-revolution” to this where people are just tired of what they’re wearing, and want to get dressed.
The Miami-based knitwear firm is delivering its spring/summer line through May, said chief executive officer Lisa Todd. Some of her stores pushed it to June and she will deliver fall in July. She was fortunate and shipped a lot of spring early. She said she’s been getting calls that stores are ready to bring in their goods. Stores have gotten very creative in reaching out to their customers, she said. She’s been working with them in getting direct shipping to their customers with special orders.
She’s prepared to ship fall, depending on when the bulk of the stores open and when they see movement. “Our goal is for the stores to be able to sell hopefully at as full a price as possible, their spring/summer, and not panic because they have fall backing up,” she said. “We’re looking to be thoughtful partners and delay the deliveries to give them a longer selling season on their spring/summer,” she said. “We’ll push fall out an extra month.”
With resort, she said, they were supposed to be at Intermezzo May 4 and 5, which was canceled. “What we thought of so that we could be sensitive to our stores and allow them more time to move through their fall inventory, we curated our resort collection and instead of bringing a full-on resort collection, we’ve culled it down and curated a really special, fun fresh pop of newness. And we’ll roll the rest of resort that we have developed into spring,” said Todd. “I think the stores will need a little longer to sell through their fall, when everyone opens and gets comfortable and gets into a groove again.” Normally they would sell in resort at the end of October. “We’re rooting for everyone to go back and have some really nice full-price business through the fall season.”
Does she feel customers will be excited to see spring when the stores open up, or are they over spring?
“No, not all all. From what we’re hearing, they’re hungry, and we’ve got some great feedback,” she said. “We’re in a fortunate position that we have a feel-good product. What we’re hearing from our customers is they want to buy something that will make them feel good right now that makes them happy and is a mood-lifter, ” said Todd.
“What I’m hearing from our retail stores, I think most of them are going to be opening up with incentives for their customers. They’re trying to keep them as low as possible, but we’re hearing 20 percent as a welcome back and to get them in. I really hope everybody can keep an even keel and not panic to be discounted. From the ones that have started to open, they have a loyal following. Their customers want to come in and support them,” she said.
Desiree Thomas, vice president of global sales at 3.1 Phillip Lim, said they got a bit of a jump on planning for this. “Because we’re a global brand [more than 50 percent is international], we really started feeling the effects of COVID in January in our Chinese market.” Lim has retail stores and a large percentage of its international business takes place in China. “It gave us the opportunity to plan a little further in advance, obviously not without knowing what the outcome was going to be and what the timing would be for the other regions, we anticipate there would be some shift out and some cancellations,” she said.
The brand worked intimately with its supply chain for any product that hadn’t been cut yet, and Lim would hold onto materials rather than finished goods. “We do have different needs by market and everyone’s on a different time line. Right around late March, early April, China was starting their first phase of not being locked down any longer and people were going back to work. Where I could shift some inventory from one region to another, I did. For pre-fall, we did a combined approach,” Thomas said. Anything that had not yet been produced, Lim worked with clients on a custom approach in terms of cancellations. They also amortized the pre-fall product that had the longest shelf life, and globally moved it to pre-spring.
For example, they took their core footwear group, Alexa, and moved that from pre-fall to pre-spring, which would ship November and December.
Its main fall season will start to ship at the end of July, which is the normal schedule. She said she worked with Net-a-porter, which has been closed, to customize based on when they’d reopen. They will take in pre-fall. “We worked with them on the footwear program to move that out to pre-spring,” she said.
Thomas said that any products that landed in stores in January up to mid-February, she’s allowing to stay on a designer cadence. After that arrival, she’s going to move later in the summer for a later markdown. “As a small independent brand, it’s difficult to weigh the challenges of wanting to be good partners, but to be able to protect the integrity of our business when the merchandise hasn’t been able to sell at regular price. Retailers are having conversations with us, how we can all come together and have a unified voice in when we’re going to be marking down.” Lim has been selling new spring merchandise on its web site at regular price, while pre-spring styles are 40 percent off.
She said e-commerce business has been quite strong. Seven months ago they planned their first archive sale, which launched March 1. “That’s predominantly been what’s driving revenue,” she said. There are some one-of-a-kind pieces from 2016 through 2018, up to 75 percent off.
The company’s Chinese business has started to pick up. “Over the past two to two and a half weeks, we’ve seen a nice recovery. When we first returned, we were in the range of 30 percent of total volume versus last year, now we’re between 70 and 80 percent. It’s a lot of creativity to help support the small, independent brands, more opportunities to do pop-ups and livestream events,” said Thomas. She said traffic is down in the stores and a lot of the clients are still shopping through WeChat.
Discussing the brand’s overall relationships with retailers, she said, “It’s really a negotiation. Everybody is hurting. Everyone is trying to contribute so we can all hold hands and hurt less on either side. We relied on our partnerships with our retailers quite a bit, and have had a lot of conversations, and for them to consider the challenges of a small independent brand, not only to our internal financial position, but also to our supply chain. Everybody’s been very open. It’s been a hard couple of months because of the uncertainty. We’re all just trying to support each other to see it through to the best it can be on the other side.”