BrainTrust Query: Has a Fashion Apparel Bubble Burst?
By
Ted Hurlbut, principal
of Hurlbut & Associates
Walking
the local mall this past weekend and watching customers react to merchandise,
it was hard to escape the thought that fashion apparel retailing is
in trouble. Customers passing by stores, looking in windows and doorways,
indifferent to what they are seeing. Customers in stores, aimlessly
touching garments without purpose. Customers leaving stores empty handed.
And
as I shopped for myself, I felt what I was observing in these customers,
men and women, young and old; there’s nothing compelling, there’s no
urgency, it’s just…stuff.
Of
all the major retail segments, perhaps only jewelry is under more duress
than fashion apparel. Shopping
fashion right now feels like witnessing the after affects of a retail
bubble having burst.
In
the last 20 to 25 years, fashion apparel retailing exploded with new
concepts, segments and retailers. Money was readily available. Consumers
hopped on the fashion train and went along for the ride. Shopping
these stores now is like experiencing a morning-after hangover.
The
last time we saw profound changes in fashion apparel retailing was
during the ’81-’82 recession. Customers found department store assortments
to be dated and dull, and the stores responded by increasing the number
of promotional events they ran a year from three or four to twelve
or fifteen, on their way to the permanently-on-sale store. Designer
shops-within-a-store emerged as an alternative to category merchandising.
New concepts like The Gap and The Limited came on the scene. Nothing
came between Brooke Shields and her Calvin’s.
Is
this a similar inflection point? Was there a fashion apparel bubble
that gradually built up over the past several decades, and has it now
burst?
Over
the past couple of years, consumers have looked in their closets,
and out of necessity have said that what’s there is good enough.
They’ve looked in their closets and seen their own… stuff, and
many have probably wondered if they really needed to buy all of it in
the first place. The unanswered question is whether this is merely
a temporary response to the recession, or whether this reflects a
more profound shift in consumers’ attitudes and shopping patterns.
One way or another, there can be little doubt that the competition
in fashion apparel retailing is likely to be ferocious for the foreseeable
future.
Discussion
Questions: Is the current weakness in fashion apparel a temporary
response to the recession or a more profound shift in consumers’
attitudes and shopping patterns? What will define the winners going
forward in fashion apparel? Do you see anything on the horizon that
might revive the category?
The first discussion question is the proverbial $64k question–and not just for apparel. And I don’t think we’ll know the answer until 2010. This holiday season is shaping up to be its own unique singularity–different from last year, but most likely still “pre-recovery.” When we’re in official “recovery” (i.e, unemployment is sinking and consumer spending is picking up), then it will be fair to look at purchase trends and make a decision as to whether they’ve shifted for good. Until then, we’re all just speculating.
I have to say I agree with Ted, though. As I’m beginning my back-to-school shopping, I have found the assortment to be less than compelling. It’s almost like buyers did not capture the right mood of consumers this year. Is it that they went conservative and subdued when people are weary and want something cheerier? I can’t put my finger on it, but as a consumer, I agree, it’s not quite right.
We’re just not that into you, fashion stores. Like a bad date, you keep trying to woo us but you haven’t changed. Read my full blog at http://bit.ly/LnRDh
I see a lot of people shopping for apparel with the mindset of “fewer, better, lasts longer” but they’ve been conditioned to wait for the markdowns and many are just walking around and waiting for the deals from retailers who jump on the discounting drug only weeks after the new merchandise hits the racks. I’ve also heard a lot of women who do have good jobs and steady incomes defaulting to the classic money-saving work wardrobe strategy of new shoes, new purse, new necklace, new lipstick.
Decluttering is still abundant among the late Gen X, early boomers I spend time with. I can’t speak to the teens’ mindset but I know many parents who have shifted access to endless cash back to a very regulated spending environment for their teens.
Consumers are still recovering from their 10 year spending binge. While that recovery process is happening, they are going to live with what they have in their closets and only replace items that no longer fit (in the case of children) or have worn out. Many consumers probably look in their closets and wish that they had saved the money and not bought so many garments.
This buying malaise is not limited to clothes. We are seeing it in almost every sector. Wall Street may have rebounded somewhat over the past few months, but consumers are still feeling acute pain and are worried about their financial futures.
In every economic downturn, there is a recoil in consumerism followed by a return to a more normalized pattern of consumption. I think the apparel category is still experiencing the effects of the recoil.
There will be a return to a more normal pattern of demand but this will be marked by an undercurrent of responsible spending behavior. Consumers will buy more with cash, buy lower quantities and question the true incremental value of designer brands. All of this will have a continued numbing effect on sales. I wouldn’t expect this new responsible purchase pattern to change for some time.
Yes, the economy is having an impact on purchasing but let’s not forget where we are in time. It’s August and stores are trying to sell autumn apparel at full retail. Any wonder people are playing touchy feely with the goods and passing them by?
But the bubble is not bursting, it’s getting smaller. people are becoming smarter shoppers. For some fashion items that have a short shelf life–and most of them do–people are opting for discount retail knockoffs. Better to pay $80 for an ’80s-retro wrap dress than $350 at Bloomingale’s for something that will be in style for one season. Fashion is more perishable than produce.
I think more and more retailers recognize the value of creating fashion-forward designs at discount prices–which is what people will want for a long time to come. Look at JC Penney which just opened its first Manhattan store. Aside from the bitchy comments of one “reviewer” who couldn’t find a size two in what she wanted, the company has done a great job of getting ahead of the fashion game.
If you ask me, apparel retailing is in a horrible place right now for anyone who doesn’t wear denim 24/7. Walmart over-corrected after venturing out into the new (not nearly as edgy as portrayed in the media) so they’re back to boring basics. When people say that Target has focused too much on apparel at the expense of grocery and other categories, I get really concerned; Target completely under-delivers in apparel. Nothing compelling between sometimes over-the-top Go International and BO-ring Merona, unless you are seeking throw-away clothes for the beach. Women’s specialty retailers still haven’t put an end to the frump-fest and teen retailers…well, back to denim. Gap? denim, denim, denim and would you like a boring shirt to go with your denim? Even J. Crew seems to have extracted many of the elements that used to make it a go-to for suiting and smart casual wear. The fits and fabrics do not seem to be as meticulously chosen.
I can’t blame the economy when newness and excitement is so blatantly missing. No reason to open up the wallet!
There are two issues at play here:
1) The already discussed lack of fashion freshness. That’s not so new, really…but it’s also driven by the next issue below:
2) We have to look at the “buy side” along with the sell side, and I think this is the MOST important aspect. It’s not just about sales, it’s about working capital.
You mentioned jewelry stores as being the only segment in worse shape. It’s easy to assume that this is because buying is way down. But it also has to do with w/c. Jewelry turns 1x per year. Payment terms are (on a good day!) net 30. For Rolex, apparently you pay 50% when you place the order and 50% when you take delivery. So it’s not so easy to fund new purchases, and there’s less freshness in the store.
So it is with fashion. So much of it is sourced in China…which means bets have to be placed, large and early. And you might even have to pay on a Letter of Credit. That inhibits both creativity and buying power.
As always, it’s important to follow the money. Both backwards AND forwards. Lack of available money is affecting EVERYONE; consumers and businesses alike.
And, by the way, if CIT had gone down, the fashion industry would have been pretty close to toast.
I think what you’re seeing here is the result of the “play it safe” drumbeat that has resonated through apparel retail in 2009. Retailers believe that the consumer has been hurled into a “back to basics” mentality; basic food, basic clothing, basic life and is there forever or at least almost forever. They seem to be making the leap that the consumer deleveraging out of necessity is somehow a bellwether of the consumer de-stuffing their lives out of desire. In response to this belief they have sparingly stocked their shelves and racks with non-compelling and safe basics.
I believe that theory is flawed. For sure, consumers are being more careful and thinking about every dollar they spend, but has their desire for new and fresh fashion gone away? I think not. The retailers that will win in this environment are the ones who offer “gotta have that” new and compelling fashions. The consumer is beaten up and depressed, but offering the same old same old isn’t going to get them excited at any price.
There is definitely a secular shift in the amount that the consumer is going to spend on fashion. It will be a long time, if ever, before we see a return to the level of explosive growth in throwaway apparel.
That said, when business gets tough, fashion retailers tend to “play it safe”–safe cuts, safe colors, lower levels of inventory, etc, etc. This plays right into the observations made above. The customer goes into the stores and thinks “Hey, I’ve already got all this stuff. Why would I buy more of it?”
At the same time, Amazon is going from zero sales in 2007 to over 500,000 unit sales of the Kindle this year amid all the end-of-world gloom and doom. Why? Because the Kindle is new, it’s different, it is cool, it saves money (books at half the price of print), it saves trees and gas. I saw a presentation the other day that said that a third of Amazon’s book sales (units) are now downloads to Kindle.
So what’s this got to do with fashion apparel?
Over the Drexler years at Gap, it became an article of faith that every time he opened a season with earth tones, his business would be mediocre. Every time he opened a season with bright colors and new fabrics, business boomed.
The stage is set for a fashion retailer to have a great season. All they have to do is give the customer a reason to spend money. Offer something that is new, fresh, different, bright, and optimistic. All that’s needed is some merchants with courage.
Consumers have re-calibrated needs vs. want values and this is affecting fashion sales. The need list has gotten smaller while many things have dropped off the want list. The overall perspective is, I don’t have to have everything. Couple a reduced spending mindset with lack of must-have items and it results in lower sales.
Apparel retailers selling basics or standards are doing OK. High-end fashion is being hurt and will likely take a few years to come back. We are in a period of not showing wealth. Fashion retailing is showing wealth, so it is first off the list. This is not a bubble, just a normal cycle.
Consumers have been seriously freaked out by this economy. They’re hearing Suze Orman on the Oprah show telling them to cut up their credit cards and shop their own closets. So while shoppers will still troll stores to see what’s being shown, they’re leery of bring things home. I’m guessing that this may result in some pent-up demand at Christmas.
Fashion, like the economy, is cyclical. One year woven shirts are in, the next year knit shirts are all the rage. In the 1970s, high-end denim was in, in spite of or perhaps because of the economy, in the 1990s, it was basic denim jeans.
The economic situation is definitely having an impact on spending. But the economy will bounce back (it always does), and people will start spending again on clothes.
The only long term trend that I see is a shift to casual clothing in the workplace. But like all things, that too might pass. Hopefully not in my working lifetime. Going to work in a suit and tie, for me, has come to feel like ancient history.
There is enormous potential is this question. Intrinsically, what drives fashion? It is a “soft” need in that it’s not dependent on the function of the clothing but rather the image obtained from wearing the clothing. Consumers have many different avenues for feeling “better” on wearing new fashion. External validation is generally the strongest determinant, and linked to either positive attention or positive group identification. Without getting too psychological, is it possible that the consumer psyche really has changed?
I am not a fashion historian. However, I think that with upheavals in income come adjustments in lifestyle drivers. There will come a time, in the near future, when disposable income has rebounded and consumers begin again to derive value from aspirational group identification. Also, there will come a time when consumers once again derive benefit from being “new” and “different.” Right now, spending money simply for the purpose of looking good and different is dissonant with the overall consumer outlook.
Is it permanent? No evidence exists to support this. Will it last for some time? Probably, and to lesser or greater degrees across age and income variables. Is there opportunity today? Yes. Some groups, teens as an example, lack the world maturity to understand the economic conditions and apply them to their own needs. Social standing, group identification and individuality remain enormously important to this group. Fashion is and always will be a dominant way to meet those needs. So in my view, opportunities exist for specific niche fashion retailers…and MUST be generated through the all-too-risky approach of being different. Not for the sake of being different, but for the sake of providing that particular consumer a compelling reason to buy.
The runways for fall 2010 looked good. If it doesn’t transfer well to retailing, then buyers need to be fired. It’s not due to designers not designing well.
That said, yes, it is a new day though I don’t think that has dawned on the retailers as yet. If they didn’t get the formula right for fall and the holiday season, then they won’t be here to tell the story right next year.
That said, I believe we will have a whole new shopping experience developing in time before us and it includes the internet; somehow that experience has to be brought into the malls at the same time.
While this changeover will take time (I lived through the ’80s when department stores started dropping like flies and the discounter became the new new thing…that’s the pendulum that will swing the other way, but I don’t necessarily think to the department store side unless they manage to reinvent themselves at the same time), retailing as we know it will cease to exist.
Fashion Dead? No!
The largest generation in the history of our Nation, Generation Y born 1985 to 2004, is about to enter the peak apparel buying age of 25 to 35 years old. The apparel industry will have a hard time making clothes fast enough to keep up with the demand. These kids are all about choice so new fashion will flourish. Expect to see a sea of new boutique type stores serving up new hot styles vexing the big box retailers because they can’t turn fast enough to keep up with changes. Good-bye Wal-Mart.
I am a demographer with a best selling book “The Age Curve, How to Profit from the Coming Demographic Storm.”
Ted Hurlbut’s query says it all. “In the last 20 to 25 years, fashion apparel retailing exploded with new concepts, segments and retailers. Money was readily available.” Emphasize, “Money has been readily available.”
The economy of the recent past has been an illusion. There has been no real growth in income for the vast majority of Americans. The money people have been spending has not been money they have been earning but money they have been borrowing. It has not been “the new concepts, segments and retailers” that has driven the explosion, it has been the easy money that has made the “the new concepts, segments and retailers” possible.
For a look into the future, take a look at Europe and map the shopping patterns there to see what they will continue to be like here.
There is fashion, there is marketing and then there is reality. The reality is that America’s closets are full to the brim and most families realize they can easily go a year or more without even THINKING about buying new shoes or clothes. Even growing kids who do occasionally need a larger size don’t require the complete and extensive back to school wardrobes of the past.
I vividly recall last fall on this site a lot of very sincere and smart retail people were saying “What credit crisis?–Americans LOVE to shop and will NEVER, EVER put down their credit cards.” Well, the stormy combination of a darkening job picture, loss of wealth in 401Ks and home equity, and credit card companies closing accounts while raising interest and lowering credit limits on others (all things which were clearly on the horizon last fall) has pretty much shown that theory to be false. The societal and economic things that are causing retail sales to be down are not going away any time soon and a better assortment of “cuter clothes” isn’t going to change that. This is not pleasant to contemplate as a retailer, but it’s true.
Les Wexner used to say, if your fashion’s right, a recession won’t hurt you. He’s right. Look at Forevery XXI. Every time I go into one of those stores, they’re packed. Then walk down the mall/street and go into Express. Dead.
Yes, there’s a profound shift in the way consumers shop fashion now: their attitude is “this better be good,” and it’s about time.
“Temporary” is in the mind of the Consumer. There is no question that She/He will come back to “fashion” at some point in time–6 months, 18 months, 3 years….
The closets are full of serviceable clothes.
The winners will effectively buy deeper in the proper merchandise, trim items that are the “nice to have,” invest in the Store Operations to keep service, associates, and store looking sharp. By holding the consumer in the store, they have an opportunity to capture share of the pie.
The pie is not going to grow in the next 6 months.
Say what you will but from my vantage point, we are still in the major throes of the recession for the everyday American and I am afraid this is going to continue right into the Holiday season . I believe we are going to see unemployment continue on the upswing and when you combine this reality with the total lack of freshness in the fashion world, you end up with horrible numbers–I can not see how it can be avoided–for the near term.
I do also believe, however, that there is an underlying difference that started BEFORE things got really bad. With a lot of people, especially the generation X’rs but spreading into other age groups as well, asking the simple question–“Don’t we all just have enough stuff?” Their answer to themselves seemed to be YES and that bodes badly for the time following recovery.
A combination of the simple recovery itself as well as some newness to fashion will help to bring things back–but I AM AFRAID that a lot of people are going to be happy and make due with all of the things that they have in their closets
Placing MORE pressure and difficulties on retailers and merchants already stretched to their limits.