Department Store Woes: Part II

Department stores experienced a brutal reality check during the 2016 holiday season, and 2017 hasn’t brought much relief. We continue to hear about store closures, missed sales estimates, and declining traffic – in sum, the general consensus being that something is off, but no one knows how to fix it. The rise of e-commerce crept up behind department stores while they were still basking in the thrill of expansion mode, and now the internet has lunged ahead, changing the very nature of the retail game. Department stores have invested heavily in order to keep up, but adapting old systems to this new retail has proven to be a challenging task. And yet, according to Macy’s CFO Karen Hoguet, e-commerce isn’t even their biggest competitive threat. The real culprit? Off-price retailers.

As brands and retailers pivot to follow the growth in our industry, they’re shifting more and more resources into the off-price business. Product in this channel falls into one of two categories: closeouts or make-up product. Closeouts are extra inventory in styles that were originally shipped to mainline department stores. At the end of the season, this inventory is sold to off-price retailers at a discount. Make-up product, on the other hand, is produced specifically for off-price accounts. It’s manufactured to meet their pricing requirements, meaning the product is usually a stripped-down version of what department stores sell – cheaper materials and construction, fewer hardware accents, etc. This product was never sold in department stores – in fact, that was never the intention.

Price Matters

In my mind, it is very clear that we as consumers are demanding impossible prices for the clothing we buy. Since we hold the purse strings, our wish actually does become the industry’s command – it may seem like the retailers and brands have all the power, but if we aren’t buying? They’re SOL. Just take a look at the record number of retail bankruptcies this year.

Circling back to my original point: we want cheap prices. As the industry bends to accommodate this perceived need of ours, pressure begins to build. Everyone has margin goals they’re trying to achieve, from the retailer to the vendor and the factory – no one wants to budge in this arena. So, as the customer asks for cheaper prices, the retailer presses the brand for lower costs and for goods with higher markups. The brand then turns around and presses their factory for better pricing – sometimes the factory will be able to negotiate higher order quantities in exchange for bulk volume discounts, sometimes they just have to make it work for fear of losing the brand’s business entirely. And where does the factory turn to release this pressure, you ask? Well, there’s always their employees…

A perfect example of this process recently surfaced in the news. In February, Walmart held a conference with its major brands to make a proposal: in order to maintain its reputation with consumers as the retailer with the lowest prices, Walmart called on these brands to slash prices by 15%. If you’re a vendor at this meeting, you just felt the crushing weight of dread descend on your shoulders. There is no room to negotiate here: either (A) you make the necessary changes, or (B) you lose what is probably your largest account – you can bet your competitors will be more than happy to fill in for you if you choose Option B.

At every point in this scenario, the players are maxed out: they are giving as much ground as they can in hopes that the orders will keep coming (and ideally increase in volume). There is no flexibility – any small fluctuation could upset the entire chain. Does it seem likely that anyone in this situation would be thinking about the environmental consequences of production, the life cycle of their product, or the well-being of the employees and communities they impact? Not exactly. To be fair, that might not be because they don’t care about these things. Intentions aside, they just don’t have the bandwidth – they lack the capacity to act. The problem is that choosing blindness and ignorance in this area ultimately reaps the same harvest as truly corrupt intentions: both avenues contribute to the perpetuation of a broken industry.

Department Store Woes: Part I

The selling period between Thanksgiving and Christmas is critical for retail – and 2016 holiday sales did not disappoint. According to the National Retail Federation (NRF), spending between November and December rose 4% to $658.3 billion, beating the projected 3.6% increase. Nonstore sales (e-commerce) rose an impressive 13%. Unsurprisingly, Amazon accounted for the lion’s share of this growth at 38% of total online revenue (next in line was Best Buy with a 4% share).

And yet, retail news has been pretty bleak lately – filled with grumblings from some prominent players. In the past couple weeks, major retailers have reported holiday performance figures that drastically swerved from the overall retail trend, causing significant drops in share prices: Nordstrom -9%, Macy’s -14%, and Kohls -19%. Macy’s reported a 2.1% decline in holiday sales, coupled with the announcement of 68 store closures and the elimination of 10,000 jobs. Sears experienced a more precipitous sales drop of 12-13%. They’ll be closing 150 unprofitable stores this year. JC Penney also reported a decrease in holiday same store sales (-0.8%). Nordstrom, which has historically been the strongest of the bunch, has repeatedly missed sales targets and even reported that traffic levels in stores are at their worst levels since 1972.

So, while overall retail sales grew, it appears that not a single department store shared these results.

Fashion Police

Only organic natural fibers.

Or what about just natural fibers?

Scratch that. But no polyester. Oh wait…

Okay I guess recycled polyester is alright.

Only brands that list their factories.

Only brands that list the countries where their factories are.

Only brands that address factory conditions in their code of conduct.

Only brands that have a code of conduct?

Over the past year I’ve tried to abide by a number of guidelines when it comes to purchasing clothing. I curbed the total number of pieces I added to my wardrobe and I thought long and hard about each addition. Before each purchase, however, there was research. Lots and lots of research. If I wanted to fill a hole in my wardrobe, I went through a list of questions:

Which brands/retailers do I trust? Believe in? Support their mission? Bottom line: can I shop here with a clear conscience?

Which of those companies offers the type of garment I’m looking for (work-appropriate, basics, swimwear, etc.)?

At my price point?

Are they using responsible materials?

In my style? Size?

As you can imagine, the list becomes pretty short after asking the first question – trying to apply the last few filters often leaves me with a very limited set of options. If, as is often the case, I am left without any contenders, I move back through the list, deciding where I can budge. Slowly but surely, my list of non-negotiables becomes very negotiable, the lines I drew in the sand so blurry I start to second-guess their value. I inevitably find myself asking “What’s the point?” and wishing I could blindly trust that no brand or retailer would still be in business if they were doing something truly horrid. Right?

Brand Profile: M. Gemi

There’s something about New York City during the holidays.

It’s almost criminal to duck into the subway on your commute when the streets are lined with tree stands and Christmas lights. Then, of course, there are the window displays.

Extravagant only begins to describe it. These windows demand your attention, never failing to draw crowds of onlookers. I recently walked home via Madison Avenue so I could see the best of the best, a willing victim of the big players in luxury fashion. I was practically begging New York to show off for me. Yet, instead of the awe I was anticipating, I realized something quite startling: these names I’ve grown up hearing about – studying, researching, even pining after – meant nothing to me. I didn’t feel anything when I walked by the shops. What happened?

Made in: USA

‘Made in the USA’ has received its fair share of attention lately. This doesn’t come as a huge surprise, as conversations surrounding domestic manufacturing tend to be more emotionally-charged than discussions about foreign manufacturing partners. With it being an election year, we’ve heard candidates promise up and down to protect American jobs and boost domestic production – talk of job creation and retention has been front and center for several months now. Then of course there was that hiccup with Donald Trump’s “Make America Great Again” hats not actually being made in the US.

“The true origin of the fabric in that hat remains a mystery — whether US- or foreign-made and by whom — and a striking example of how difficult and murky it can be to verify something is actually ‘Made in USA.'” –BoF

Unfortunately, this isn’t an isolated case. True, Trump’s campaign hats are sewn at a factory in Los Angeles, but that isn’t enough to satisfy the stringent requirements of a ‘Made in USA’ claim. Shinola, the watch company based in Detroit and lauded for its American heritage, came under fire recently for a similar discrepancy.

“But as you can imagine, many of the components and raw materials are simply not available in the U.S. and because of that we are unable to meet the almost unattainable Made in USA standards created by the government.” –WWD

In 2015, watchdog agency Truth In Advertising filed a complaint against Walmart saying over 100 of its products had “Made in USA” labeling errors – leading the FTC to initiate an investigation. The case was closed three months later after Walmart clarified its claims and made more detailed disclosures about the percent of American-made content.

Clearly “attention to detail” needs to be one of your skills if you’re bold enough to make a Made in USA claim. What are these labeling standards, and why are brands struggling to meet them?

Brand Profile: Tradlands

I’ve loved this company for awhile now, but then I saw this post on their blog and decided their brand profile just couldn’t wait any longer.

Tradlands is a maker of menswear-inspired staples, designing pieces that are truly tailored for women. Every detail has been taken into consideration: whether that’s the 8-button front to eliminate awkward gaping, or the slightly longer hem so your shirt stays tucked when you’re on the move. These shirts have substance – a far cry from the tissue paper you’ll find passing for fabric at other retailers. That’s because a Tradlands button down is meant to last for a long long time.

Gap’s Latest Release

Spoiler alert: we’re not talking about their Fall collection.

Oh no, this is much better. Gap just released its global factory list, detailing every supplier that produces clothing for the Gap, Banana Republic, Old Navy, Athleta, and Intermix brands.Excuse me while I pick my jaw up off the floor.

Brand Profile: Elizabeth Suzann

In an age when the word “Amazon” no longer merely refers to an online retailer, but is more frequently used as if it was an economic theory (“the Amazon effect”), the concept of a 2-3 week ship window seems nearly archaic, an unfathomable inconvenience experienced by people of generations past. With free two-day shipping, overnight delivery, and even 1-hour windows available, why would we have any reason to wait more than 48 hours for a new purchase to arrive at our doorstep? Faster is always better, right?

Elizabeth Suzann would beg to differ.

Retail Woes: A Formula for Coping

If you’ve been paying any attention to the retail environment, you know it isn’t pretty out there. The retailers that were once cornerstones of our beloved shopping malls back in their heyday are reporting dismal results, day after day. In April, Macy’s reported their profit was down 40%. In May, Nordstrom posted a profit of $46 million, down from $128 million a year earlier. Due to sales declines, Gap shares have tumbled 45% over the last year. Even fast fashion hasn’t escaped: Uniqlo advised that operating profit was down 46.4% for the 9-month period ending in May, Forever 21 is closing some of its larger locations, and H&M reported growth of just 5% despite having opened an additional 438 stores within the past year.

Ouch.