It appears the panic has already set in. The difference is that this time around most retailers and manufacturers built the 30% off into their pricing strategy. However, if this is what’s going on on November 15th, imagine what after Christmas is going to look like.
I have recently received 30-40% off offers on everything from Brooks Brothers, Ralph Lauren, JCrew, Cole Haan, Coach, and Banana Republic. These aren’t exactly the lightweights of the industry. Word is that Nike, The North Face, and a host of other vendors are already dumping excess Christmas inventory in China. It’s not like the factories are going to let them out of their orders, and the goods have to go somewhere.
For the vendors that own their own stores, the excess inventory is going to cause a real threat to their cash flow as we head into Q1. In the past, their factory orders were placed on the seasonal orders from their accounts: The goods came in, got shipped, and the invoices went to the factor for immediate payment. It was quite a risk free boon to both profit and cash flow; but now many of the vendors own their own inventory for their online and brick and mortar stores, and it is a whole new game. Both profit and cash flow will be challenged. Then, as these vendors offer deep discounts direct to the retail customer [in order to move their rotting in-house inventories], they will further compromise the core accounts that provide them with the base of their profitability. The risks are overwhelming, and several major brands won’t make it through another downturn.
On the other hand, retailers that are their own brand: GAP, Zara, JCrew, etc. should be in a better position to compete with the online and big box nemeses that plague our industry. They will not be compromised by the online onslaught led by Amazon, nor will they be undermined by the Groupon’s of the world.
For a retailer like TW&Co, a downturn works to our advantage. The supply pipeline starts to back up and hemorrhage, and we not only have a better choice of product, but premium vendors are more anxious to sell us.
I saw a Joseph A. Banks commercial last night advertising a “Buy 1, Get 7 Free” promotion. When you buy one suit, you get 2 additional suits, 2 shirts, 2 ties, and even an Android Smartphone. I found the smartphone to be an odd promotional offering.