In a candid conversation with an executive at arguably one of the nation’s best specialty retailers, the current state of apparel sales was reported as such–
Womenswear = tough.
Menswear = worse.
Men’s tailored clothing (suits in particular) = abysmal.
Answer = a wide-sweeping retail price correction is much needed in order to start the process of regaining consumer confidence.
The pricing bubble in luxury clothing has grown at a very healthy rate to the point now that it’s a lot like the housing market– out of line with the current economy. Go back 4-5 years ago– that’s where the pricing needs to be today. The market simply will not bear it any longer, and vendors will have to either sharpen their pencils or watch their business shrink dramatically. For brands like Zegna, Brioni and Kiton this will be a hard pill to swallow, as they will certainly resist in order to maintain brand integrity and exclusivity. I get their thinking, but ultimately the customer decides the value of your goods in a climate like this. They will definitely continue to wait for a markdown and inventory turn will get even worse unless something is done. The retailers are responding by putting major pressure on vendors to share in the pain. For them it’s not about trading down to lesser brands, it’s about getting pricing in-line with the current vendor base. Luxury brands bring the customer in, and the retailers need to convert them back to purchasing at full-price by giving them a pleasant surprise when they look at the price tag.
Just like the picture below, it’s time for a little haircut.
Heads up Saks Fifth Avenue– the word on the street is that you’ll be in the doghouse a very long time over the pre-holiday, deep-discount shenanigans. The extreme preemptive strike is being blamed by many for upending the luxury market— forcing some firms into bankruptcy, tearing down long-standing pricing and distribution standards, and ultimately eroding the exclusivity and coveted air of the very brands that trusted Saks to look out for their mutual interests.
Saks Fifth Avenue may have succeeded at clearing goods quicker than most, but they hurt many in the process and tarnished their name. Short-term thinking resulting in long-term damage, some might say.
The Selvedge Yard 
Great post. I agree, especially regarding Saks.
It’s amazing how ticked people still are with Saks. Maybe amazing isn’t the right word, considering what they did, but lets say the wound is still very raw.
JP
It’s funny how I was talking about this just before the holidays. A week ago, I run across this blog & now it’s posted here. Really good post.
I really appreciate your blog for its discussion on the business-side of menswear, not just the latest aesthetic. However, do you think Saks will be punished? I don’t know–they still move a lot of merchandise, and while other retailers, distributors, and labels are furious I’m not sure if the consumer cares. It definitely hurts Saks within the industry, but will it hurt in overall sales (more than just the crushing economy)?
JP, have a question for you, if you don’t mind. What brands will drop price-points and which won’t? For example, I don’t think think the more exclusive brands (like Bottega Veneta) will drop, but the Vuittons and Pradas of the world seem ripe to be lowered.
Marcellus-
Thanks for the feedback, I like the dialogue.
Saks will feel it when the exclusive luxury brands choose not to do business with them in order to protect their brand integrity. I wonder if Kiton would still chose to open a shop-in-shop with Saks if they had to do it over again? I would guess not. And who knows what the assortment will look like at Saks next year? November may have shown us that they truly don’t have the stomach to be in the high-end luxury market.
To your point- Prada, Vuitton, (Zegna) etc. are point-of-entry luxury brands and will be the first ones to usher in lower prices- either directly or through diffusion brands or offerings. They have volume to protect, where as the Brionis and Kitons of the world, with their sacred prestige, will be slower to follow.
JP
Issue 22 of Monocle (out soon) has a global survey on the state of retail (cover story). Although I agree price points need to be addressed, so many other issues need to be looked at too. It’s a fascinating article.
SD
This situation, like the wider financial crisis, was a one time disaster. Saks chose to take the discounts fast which is an effect of our financial enviroment. “Your first markdown is your best markdown” they taught us!
Whatever the position of the luxury retail boutiques I suspect they were on the way out anyway and more because of real estate/taxes costs. Their customers are in their 90’s-the ones still alive. And the rest of us can’t just buy on credit and pay over time-we may need our Amex for groceries that is unless we haven’t had the credit cut off or put at 30%.
Has everything changed? Yes, for a long while it has. Besides, now it is fashionable to cut corners and get by!
It is also possible to visit the outlets and purchase perfectly acceptable men’s suits and get them tailored for 50% off.
Advertising no longer creates the motivation to dress so why not cut the built-in ad margin from the luxury providers?Are clothing producers worried their clothes do not justify the prices? Look at the poor fabric and quality of formerly great lines. Sad. The China effect is having its day. The industry downgraded quality long ago. Prices are just now catching up.
As for the ladies? Since when did anyone I know wear a suit? The $15,000.handbag is looking pretty unfashionable to me. Fashion Survival requires as it always has, a knack for finding a way to dress for less.
I keep hearing about how this downturn will change peoples buying patterns permanently. I don’t buy it. Clearly this is and will be a SEVERE recession. It’s still not clear whether it will be considered a depression, but unless it lasts for four to five years or more, I really think that the American consumer is primed more than ever for the luxury market. People in the US today are FAR more sophisticated than they have ever been. They know more about food, wine, travel, clothing, etc., than ever in the past. And they still want it! Flash is out, but quality is still in, so I think that luxury brands may have to earn thier money more than in the recent past by upgrading quality to justify higher prices. The recession won’t last forever.
JP2
I think the move is inextricably towards value in clothing just like most other consumer products. People just want to feel lik ethey are not being ripped off by over-priced, over-hyped lux brands. They will pay more for better goods but there is a limit.
My $0.02 (it’s down to $0.01 after my stock market losses)
AMEN to price corrections -we need them all over. It amazed me in the 90s how prices started reflect status more than quality. We need a return to ‘less is more’ and ‘you get what you pay for’ (but I mean that for real – it use to be quality cost but you had less of it) There is nothing I hate more than not being able to see a true value reflection in price of goods.
On Madison Ave, Mens is often out-performing womens RTW sales. Go figure….
I’m not entirely clear as to what you were trying to say with this post. It seems as though you make the very factual claim that luxury labels are out of sync with the current spending power of the global consumer, but then you follow up with an indictment of Saks Fifth Avenue for unilaterally making a panic-stricken adjustment to their prices last season. Are you saying that this movement towards more reasonable pricing needs to occur industry-wide so as not to completely upend the natural order of things?
Also – and this is just a general question for everyone out there – what are we to make of newish, high-end (though not global luxury) designers actually raising their prices? (Especially smaller designers like Nom de Guerre, Rag & Bone, etc.) Are they asking us to ignore our bleeding wallets and patronize them to encourage new and appealing lines? If so, will it be necessary for them to learn the same harsh lessons as the rest of the industry (and to a greater extent) the economy at large?
Finally, I think that the obvious lesson is that luxury brands were never meant for the population at large. Since when did “aspiration” shopping mean actually buying the real thing? For better or worse, those who are not exceeding wealthy, or at least well off, may wish to return to Club Monaco now that 5th Avenue (not the store) is out of reach. And should these designers wish to keep the moniker of exclusivity, they will need to expect to be patronized by a much smaller share of the population.
Thought-provoking as always. Thanks for the post.