The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
NEW YORK, United States — The craziest thing about the fashion business, and there are a lot of crazy things, is that sweaters ship to stores in June, when it's warm, and bathing suits ship to stores in January, when it's cold. But that's not the only head-scratcher. Fashion shows, once an opportunity for the trade to preview products that they would, six months later, sell in their stores and photograph in their magazines, are now consumer-facing events that are held long before anything is actually for sale.
This peculiar way of operating, which reflects a time when consumers made all of their seasonal purchases at once, has exacerbated the need for discounting. Most boots are sold between October and February, and yet, most boots start going on sale in early November. Black Friday, America's discount bonanza — when price-conscious consumers traditionally head to big-box retailers for "doorbuster" sales on things like televisions and dishwashers — is now a category-agnostic phenomenon with global recognition. With markdowns happening earlier and earlier the calendar, often a full month before American Thanksgiving, the amount of time products are for sale at their original price has been drastically shortened. It equals slimmer margins for retailers, and brands, too. It's a vicious pattern.
The fashion industry has been talking about making changes for years, but “no one could get out of the cycle,” said retail consultant Robert Burke.
Now, in the midst of the worst economic downturn since the Great Depression, a pandemic that has left 36 million Americans alone unemployed and killed nearly 300,000 people globally, they see a chance to finally make a break. So, they’re starting to take action.
A few weeks back, Saks Fifth Avenue announced that it was in talks with 20-something independent brands, including Brunello Cucinelli and Proenza Schouler, to sell products in stores when it was seasonally appropriate. Then, on Tuesday, Dries Van Noten and a consortium of mostly independent designers, executives and retailers, including Tory Burch and Marine Serre, announced a proposal to shift the seasonal delivery schedule back so that cold-weather clothes are delivered to stores from August through January, and warm-weather clothes February through July. Under this new scenario, end-of-season sales will take place in August and January.
Just two days later, a group of 60-some designers and executives — many overlapping, including Joseph Altuzarra and Andrew Keith, president of Hong Kong-based stores Lane Crawford and Joyce — published a parallel proposal for resetting the fashion week calendar, as well as the buying, delivery and discounting calendars, starting with combining men's and women's shows to twice per year in January and June.
The development of the manifesto, facilitated by The Business of Fashion, also included ideas on reimagining the concept of a fashion show, as well as a visual of what the new calendar might look like. By end-of-day Thursday in the US, it more than 600 signatures of support. (Designers including Neil Barrett, Emilia Wickstead and Rachel Comey, as well as executives including Tomorrow Chief Executive Stefano Martinetto, and retailers including Ikram Goldman, Selfridges' Sebastian Manes and Machine-A's Stavros Karelis were active in the discussions, which were private and off the record. )
We're all financially hit anyway.
Success, however, is far from guaranteed. First off, these are not legal agreements, but instead suggestions. US laws in particular prohibit retailers from agreeing to buy or sell a product at a fixed price. While most retailers follow a similar pricing methodology, they cannot be found colluding on exact standards.
But more importantly, the groups are fighting against deeply engrained ways of doing business, some that stretch back decades. The discounting began in earnest after the September 11 attacks, when US luxury department stores were forced to go into markdowns much earlier than expected. They have never been able to kick the habit.
Generally, the US is a more promotions-driven market, but in recent years, that attitude has spread into Europe, and even into Asia, as global online players adopted similar selling cadences in order to compete with their US-based counterparts.
“Online platforms give customers global transparency in terms of discounting,” Keith said. “We’re not a market driven by discount, but when the rest of the world goes on discount, we are in a situation where customers are being trained in many respects. It undermines customer sentiment, and margins have been severely impacted.”
With huge volumes of unsold Spring/Summer inventory already in the market, there is more distress than ever about discounting. To pile it on, deliveries for the “Pre-Fall” and "Fall/Winter" collections are late because of supply chain disruptions. (Many stores have also cancelled orders because of the surplus of goods on which they are currently sitting.)
The peculiar silver lining: During the Covid-19 pandemic, hitting any sort of predetermined revenue goal is going to be impossible for nearly all brands, so it's actually a good time for a reset.
"A lot of [what has been proposed] creates a sort-of negative financial impact in the short term," said Altuzarra Chief Executive Shira Sue Carmi. "We're all financially hit anyway, so we're starting at a lower base."
While different in their specifics, these efforts reflect a genuine interest in transforming the way fashion businesses operate so that they can be more profitable. It’s rare for designers to cooperate like this, or to take a public stand against the system they still need.
"It's almost like people are okay to be vulnerable because what's at risk is their business and their livelihood," said Julie Gilhart, chief development officer at brand-platform Tomorrow, who participated in the BoF-facilitated discussion. "I've been in the culture of designers for my whole entire career and I've never seen a situation of designers coming together, and also listening to each other."
Online platforms give customers global transparency in terms of discounting.
The hope is that moving the discounts back will also force brands and retailers to produce fewer products in the first place, better aligning supply and demand, and ultimately resulting in less destruction — including the burning of garments — at the end of the season. Less waste and more creativity equal a better end product for the consumer, and a more sustainable business model in every sense of the word.
Practical thinking aside, however, not everyone is interested. The megabrands, including those owned by Kering and LVMH, as well as Hermès and Chanel, have been absent from these conversations. In part, because they haven't been formally approached in every case. But also because many of the industry's largest brands — the ones that drive both the sales and the profits for the whole group — already operate the way the others are hoping to.
For one, they sell the majority of their products directly to the consumer, either through their own stores or through department store shop-in-shops that they control. Those that do sell through the traditional wholesale model are typically able to negotiate better contracts than mid-sized players, meaning that they don’t necessarily go on sale with the other brands. (At the end of the Barneys New York liquidation, for instance, the only brands that were not on sale were those owned by LVMH.) They are also less reliant on ready-to-wear; for some big brands, sales of clothes only make up 10 percent to 15 percent of their total business.
And finally, they may be less concerned about the timing of the fashion calendar. As one executive said, Chanel can debut a collection whenever it wants and people will show up. Kering-owned Saint Laurent recently announced that it would not show at Paris Fashion Week in September, even if it does take place, instead opting to control "ownership of its calendar and launch its collections following a plan conceived with an up-to-date perspective, driven by creativity," according to a company statement.
It's a damage control situation.
For independent players whose businesses weigh more heavily toward apparel than accessories, that continue to rely on multi-brand retailers to drive the majority of their sales and that don't have a large cash reserve to see them through the crisis, there is strength in numbers. These companies, which can vary from $1 million to $200 million a year when it comes to annual revenue, often do not generate the volume to negotiate favourable terms on their own.
But is it possible to fix things?
Moving the fashion week calendar may be the most difficult challenge of all, as the megabrands, which attract the most attention during the shows in Paris and Milan, have less incentive to shift. (They can do what they want, as Saint Laurent has posited.)
What's more, the industry's governing bodies in those cities, the Camera Nazionale della Moda Italiana and the Fédération de la haute couture et de la Mode, may be compelled to stand in the way of a change that could potentially reduce the amount of money generated for cities and other industries around these events. (Fashion weeks make €1.2 billion annually for the city of Paris.) One solution is to move women's ready-to-wear to January alongside men's, and hold couture shows, a made-to-order business that isn't retail-reliant, in March and September.
When it comes to the delivery and discounting cadence, there is incentive across the board to change, even for retailers that currently rely on discounts to drive a significant percentage of their annual sales. "We want to sell things at full price," said Nordstrom President and Chief Brand Officer Pete Nordstrom. "The timing of deliveries, how that business works, lost connection with what's in the best interest of the customer."
In the case of the BoF-facilitated forum, designers talked to their retailers all over the world to figure out what is possible in terms of shifting the schedule. Across the industry, it is expected that no major changes will happen until the fall. Right now, multi-brand retailers and brands alike are stuck with a glut of inventory after physical retail was shut down during pandemic lockdowns. Most global online players have already held sales, some up to 50 percent off in-season merchandise.
This season is going to be more complicated.
"This season is going to be more complicated," said Anouck Duranteau-Loeper, Co-Chief Executive of Isabel Marant. "It's a damage control situation. From Fall/Winter, we need to start working on a different calendar."
If they are able to align, they will have to reckon with consumer expectations, especially in the West. Will shoppers buy sweaters in December if they are not 50 percent off? Retailers will have to hold back on discounting designer goods during that pivotal Black Friday markdown season — which often makes up the largest portion of the year’s sales. For those already hurting, that want to hire furloughed employees back, saying no to cash will be next-to-impossible.
“The trigger point will be the Black Friday moment,” Duranteau-Loeper said. “Once you start to discount for Black Friday, it’ll be complicated.” However, many retailers are already requesting that Spring/Summer merchandise not be shipped before January, which she believes is a good sign that the industry at large is taking the proposed changes seriously.
To be sure, what this all requires is a level of cooperation — something the fashion industry, known for its cutthroat, competitive nature — isn’t so accustomed to. “Having been on both forums, my hope would be that there is an opportunity for the industry to come together,” Keith said.
The next few months will be a test of that.