[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

ChannelAdvisor:
Online Selling Strategies
Offerpop:
Social Marketing Campaigns
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[8 comments]

Loehmann's Hits the Clearance Rack

December 18, 2013

With the filing of its third bankruptcy, Loehmann's, renowned for its discount designer duds, has apparently struck out.

Failing to find a last-minute buyer, the Bronx-based bargain institution filed for Chapter 11 bankruptcy protection and reached an agreement with a group of liquidators to start going-out-of-business sales at its 39 remaining stores in January.

In Monday's bankruptcy filing, Chief Operating Officer William Thayer said Loehmann's was "late in introducing the e-commerce channel relative to its peers in the 'off-price' retail sector." The retailer launched its online shopping site in late 2011. The "decline in economic conditions" in Loehmann's markets such as California, New York, Florida and the Midwest also had "an adverse effect," Mr. Thayer said.

Finally, Mr. Thayer blamed "increased competition in the off-price retail channel, limited access to capital and a number of strategic, financial and operating decisions."

Not surprisingly, many reports on the 92-year-old off-price chain's demise focused on new competition that has made designer goods at cut-rate prices more widely available. They include the emergence of TJX Cos. (the parent of TJ Maxx and Marshalls), and Ross Stores into off-price powerhouses as well as the arrival of outlet centers that provided homes for Rack Room, Off 5th, Neiman Marcus' Last Chance and many designers' factory stores. Deeper discounts across retail over the years also diluted the store's promised savings of "between 30% and 65% off department-store prices."

More recently, flash-sale websites such as Rue La La and Gilt Groupe have arrived with a new twist on the designer deal.

Although its other remaining competitor, Century 21, appears to be doing well in the New York market, Loehmann's was seen by some as following in the path of Filene's Basement, Syms and Daffy's, all Great Recession casualties.

Yet in a June 2013 Crain's NY article, "Loehmann's defies the odds," Loehmann's appeared to be making progress. The article detailed how its new CEO, Steven Newman, hired just before it emerged from its second bankruptcy in early 2011, was finding success reaching out to the younger set with spruced up departments, enhanced service and by bringing more contemporary brands to the front of the store. It also added personal-shopping program to support its famed Back Room, the section where the big couture items is located.

With TJX, Ross and other major off-pricers reportedly getting specifically-made merchandise, Loehmann's was said to be in a better position to acquire the limited assortments of excess product and overruns from fashion houses.

Said Mr. Newman at the time, "We consider ourselves the specialty of off-price."

Discussion Questions:

What does Loehmann's pending liquidation say about the the evolution of off-price retail? Can other off-pricers succeed with a focus around surplus designer merchandise? Will the design community miss Loehmann's, Filene's Basement and its other traditional clearance venues?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Which channel appears to have put the most pressure on Loehmann's?

Comments:

It says a lot about Loehmann's and how the company was run, but little to nothing about the evolution of off-price retail as it's here to stay. People will continue to buy and some company will step into to fill the gap on offering surplus designer merchandise.

[Image of: View Braintrust Panelist button]
Bill Davis, Director, MB&G Consulting

Why on earth would the design community miss Loehmann's? For all the reasons cited in the article, the design community and the rest of us won't miss them. Frankly, I'm surprised they lasted as long as they did.

Calling themselves 'the specialty of off-price' is laughable too. Specialty denotes service which couldn't have been farther off their radar - especially in the fitting room!

[Image of: View Braintrust Panelist button]
Marge Laney, President, Alert Technologies, Inc.

The rise of destination "discount outlets" for which famous makers deliberately manufacture and sell often lesser quality products under their own tags (and in a full range of sizes and with logo shopping bags) really ended the party for the Loehmann's, Filene's Basements, and Syms, where for many decades wonderful surprises could be found with their tags cut out. But it took work and patience to find the gems, and many shoppers now just don't have the time or the skills to separate the wheat from the chaff.

'Liatt'

Loehmann's was part of an era, and the next generation is on a very different path. Trying to find the better value items among so much lesser stuff was a thrill at one time, but now, savvy shoppers have switched to stores and online venues that are much easier to navigate and carry more popular items. Off-price retail is here to stay, but expectations are much higher.

[Image of: View Braintrust Panelist button]
Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

Off-price retail, in general, is very much alive and well. If you add gross sales of the top ten, the findings will be that of growth. It does put a premium on execution, however! Someone will take Loehmann's place and the design community will be fine.

'vgallese'

Loehmann's is nowhere close to prevalent. In fact, spell check redlined it while I was typing this. The same bargains they were known for are everyday items at other retailers. Good bye!

[Image of: View Braintrust Panelist button]
Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

The demise of off-price chains like Daffy's, Filene's Basement, Syms and Loehmann's might have more to do with debt financing than a flaw in their business model.

These mid-volume chains don't have the sales volume of a TJ Maxx or a Ross to absorb the costs of remodeling or designing a store (like in both Daffy's & Filene's case), or buying a rival (like Syms' purchase of Filene's).

In Loehmann's case, being bought by a private equity firm that 1) uses debt financing to acquire the company and 2) may withdraw millions of dollars in "management fees" to give to the parent company, may have been too much for the retailer to handle.

'myopinion'

Loehmann's will not be missed and TJX and Ross now fully own off-price, given their size and scale. The whole market of that type of retailing has completely changed as well. Last Call and Off 5th as well as other venues for higher end discounts removes a large part of what used to make Loehmann's "fun" but as stated, people don't have the time to search and find the needle in the haystack. Also the rescue and saving of Loehmann's likely had a lot to do with its demise as well.

William Passodelis, associate, ML Co.

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters