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It will have benefits in the long run, too. “It also means more pressure on the creativity [side] to deliver the right price-value proposition,” Lagos said.
Still — citing centuries-old axioms about “not selling from an empty card” — some retailers have an almost genetic fear of being caught with low inventories.
Scott Collins, general merchandise manager of DTLR, the Baltimore-based urban chain, is keeping inventory levels steady. “You can’t do any business if you don’t have inventory,” he said. “We’re looking at everything very closely, but we’re not going to run scared. [Even in these tough economic times,] we’ve seen our sales blossom when fresh goods come in. Our pipeline has to be fresh.”
Collins said the privately held company, formerly known as Downtown Locker Room, posted a single-digit sales increase in 2008 and comps were up 10 percent in the first quarter of this year. May and June sales, however, haven’t fared as well. June is down around 9 percent but was up against an 18 percent comparable-store sales gain in 2008, he said.
“Every time I look back and see the point where our business got better, it was when we stood our ground and didn’t hide in a corner,” he said.
DTLR has cut back on the number of new vendors it is adding, at least for the time being, and is leaning more heavily on its top suppliers to help boost business. “We always test new things, but right now we’re working harder to fix the business with our existing brands,” Collins said. “We know that to go from the laboratory to the place where they’ll affect our business is a 12-month process. And we’re not in that business today. So we’re trying to reinvent and reposition certain brands so they either stop bleeding or flourish.”
LF USA’s Darling, whose firm sources for many vendors and retailers, said, “We now see that those who adjusted their inventories earlier in 2008 were more comfortable in the first and second quarter of this year than those who began adjusting inventory levels after September 2008. They are the ones who are now beginning to increase their inventory levels, although it is still down about 5 to 10 percent from year-ago levels. They are chasing product that is working and selling.”
Darling added that retailers are putting in more inventory in replenishment of both core and fashion merchandise. “There was this sense of a free fall from September to January, but we’re not seeing the same feeling now. There has been some stabilization of business to a degree, and there have been good sell-throughs at retail. Retailers are chasing fashion goods that sell, and they don’t want to be out of stock on basic items.”
He expects an increase in inventory levels for holiday, at least in stronger performing categories such as fashion accessories and fashion apparel, where retailers will look to maximize results. “The real key will be not only preserving market share, but also getting customers into the store,” Darling said.
Darling said great product and great new fashion, for the most part, are selling. “In almost every category, the reality is that customers are reacting to fashionable goods, not basics, and it’s the fashion that is stimulating the customers and getting into the stores. Retailers need to give consumers a reason to buy,” he noted.
Jeffrey B. Edelman, director of retail consumer advisory services at RSM McGladrey Inc. and a former retail analyst, cautioned one of the current problems with the sale mentality of the consumer is “she’ll see something she likes and wait for it to go on sale. What happens is that by the time it goes on sale, it is no longer the size or color that she wants. Retailers have to wean the consumer off of looking for the price cuts.”
Brooks Bros.’ Amendola said getting customers out of the sale mentality “will take years. Customers have to get used to going in and seeing something is sold out. Then maybe next year, they won’t wait as long.”
Gary Wassner, president of Hilldun Factors, which specializes in working with designers and luxury goods, said inventory levels for the high end have fallen significantly since September. “When I talk to the retailers at the high end, we’re talking about a 20 to 25 percent drop. They are cutting back on who they purchase from and the scope of how much,” Wassner said.
Wassner added, “Retailers across the board have been asking my clients to lower their prices.” He explained that retailers want to lower their costs when buying the goods, yet still sell quality luxury goods comparable to a year ago. The reduced prices will help the retailers’ bottom lines, but it is too early to quantify what it will mean, by percentage, to their profitability, he noted.