Sunday Musings – May 3rd Edition

I’m sure you all sense that things are beginning to move in a more positive direction. There is no denying that we all have been changed by this crisis. Hopefully, we will be able to cull from the dire circumstances we have all been enduring, the positive elements. There are positive elements to come from this! Hopefully, we will all be guided by what we have learned and experience and make the requisite changes to our businesses and lives accordingly. Times like these force us to acutely reevaluate our personal and professional needs. Change is the inevitable outcome, but it’s incumbent upon us to be the effectors of that change, and not its victims.

What we have not yet determined regarding any of the consumer goods industries, particularly those dominated by seasonality, is what the stores are going to want, when they are going to want it, and most important, how the consumer will behave once the doors begin opening again. We are fortunate that retail will roll out selectively as opposed to everywhere, all at the same time. It will give retailers the opportunity to learn, on a smaller scale, what they will need to do operationally once they are fully functioning, to make the consumer comfortable again in their venues. And this rollout is beginning right now.

What results do we really want to achieve? Certainly, everyone wants to see their cash flow resume, their payables negotiated so that they will be manageable going forward, to begin the re-hiring of essential employees, for design, production and delivery to resume and so much more. But what we are lacking in the apparel, home and beauty industries is guidance from the major retailers. No one knows for certain what the future will bring, but what we do know is that logistical plans regarding hours, hygenics, and personnel are being put into place at every large and small business for their re-openings. But the planning regarding the issues which directly impact the vendors haven’t been shared in a meaningful way. The food chain of consumer goods begins and ends with the consumer, of course. But the next link in the chain is the distribution channel. Many aspects of this link are in your full or partial control – DTC sales and marketing, your own brick and mortar should you have it, and marketplace websites like TMall, Amazon and Alibaba. But by far the largest channel of distribution is still the wholesale channel. Everyone needs guidance from this critical network.

The big questions that need to be answered before you can resume a semblance of normalcy are manifold and crucial to everyone’s future. Will our retailers finally provide product to the consumer when the consumer actually wants it and needs it? If they do then hopefully the markdown syndrome will be mitigated to a large extent, and retailers and vendors can earn a reasonable margin together. What will the new relationship be between the vendor and the retailer? The brands cannot continue to bear the weight of meeting margin agreements and arbitrary markdowns of their products, as well as the demands for returns, swaps and discounts on orders that were generated by the retailers for product chosen by their representatives. Much of this problem can be solved by a more appropriate calendar of deliveries and a better assortment of product. There also needs to be a desire on the part of retailers to see merchandise live longer at full price. This requires a concerted effort to reeducate the consumer, but it also means that vendors must provide less product and more desirable product, and it means that retailers must respect full price sales longer. It seems almost as if retailers have been throwing more and more product against their walls in order to see what sticks, instead of choosing more carefully at the onset, working with the vendors more closely, and providing the consumer with what it will ultimately purchase and feel emotionally aligned with. The syndrome of buying and then charging back the vendor for whatever does not sell through has virtually turned net terms into consignment sales, and this isn’t sustainable for the vendors.

What should vendors expect regarding budgets and numbers of deliveries per year? How do vendors plan design and production without guidance? Will seasonality as we have known it change? If fall is delivering much later than in the past, will there be a need for resort collections? What expectations will retailers have regarding replenishment during the months of November, December and January? What product are they planning on selling?

There are so many questions that absolutely need to be answered. And our major retailers who still make up the bulk of most apparel sales must establish new guidelines. If they don’t provide leadership then the industry will take much longer to recover, and profits will elude everyone. Retail cannot succeed without you! Homogeneity among all the majors won’t sell product. It marginalizes it instead, and it simply becomes a question of price for the consumer. Large brands cannot pivot as easily and quickly as smaller brands can. The retailers recognize this, and they recognize the essential value of diversity and specialness. You are all positioned to seriously take advantage of your maneuverability and design talent, to provide unique and not overly distributed product to a starved consumer who will need emotional gratification and who will crave the ability to make personal choices once again.

I intend to press our major retailers for answers to the questions I and many others have raised. I’m in constant contact with those that many of you do the bulk of your business with – Saks, Nordstrom, Neiman Marcus, Bergdorf Goodman, Intermix, Bloomingdales etc. – and I will continue to speak with each in an effort to obtain the guidance that the industry so desperately needs. I will of course share any relevant the information I’m able to obtain, with all of you. What we do as an industry now will impact everyone’s revival going forward. We must get it right.

Stay Safe. Stay Healthy. Stay Hopeful.

Gary