As menswear retailers struggle with a changing marketplace, few are as smart as they used to be.
“I always thought I was a really smart retailer: I no longer think that…” quips one independent menswear merchant in the Northeast, (who happens to be one of the smartest merchants we know). “How do we compete with all the price promotions and online selling? I don’t have a clue,” admits another highly respected U.S. store.
Clearly, a new retail landscape in which 16 percent of total apparel sales are sold online (about $40 billion out of $250 billion), and the majority is sold well below ticket price has proven challenging for both independents and department stores. In a recent consumer survey of 18 to 45 year olds, 87 percent said they check Amazon first before making a purchase anywhere else. That said, few independents are set up to sell online and even fewer use social media all that effectively, if they use it at all. (One menswear vendor recently set out to “like” the Facebook pages of all of his accounts and soon realized that most don’t have a Facebook page.)
Many surveyed retailers noted that even with decent sales (averaging low double-digit gains in October and November after a slow September), their traffic is way off (especially noticeable on Saturdays): “With fall traffic down, it was hard to get a read on potential holiday items,” complained one buying office. “Sales are good with the people who come in, but fewer are coming in,” confides a merchant in the South. Says a retailer in the Northeast, “We’ve traded up to the point where there are fewer customers in our price range. Yes, they’re spending money, but the fact that there are fewer of them does not bode well for the future…” Another Northeast merchant points out that while November sales were strong, how could they not be since they were up against Hurricane Sandy.
Bottom line: Not only have few stores regained their pre-recession volume (the decline began five years ago, this past October), several merchants still have nightmares about that devastating financial fiasco. “We tend to forget that in the first two months following the Lehman Brothers debacle, we lost 40 percent of our revenues, which continued to decline for several more months,” recalled one.
Retail consultant Steve Pruitt acknowledges that few merchants are back to ’08 levels, but points out that their profits are okay. More than okay, in fact, with maintained margins in the 49 to 53 percent range, and higher annual turn in the 2.0x to 2.7x range (averaging 2.4x, but as high as 3.5x) according to the group of independent stores that he advises. “The goal for independents used to be finding quality goods. That’s now a given, so the new goal is increasing productivity. Fortunately, most stores are doing a good job of that.”
Retail consultant Danny Paul agrees. “I’m hesitant to say that we’ve recovered, that the worst is behind us, because we’re not quite there yet. But stores are definitely making more money: their inventories are leaner, their expenses are down, and their turnover is 20 percent better than it was five years ago.” Paul, who analyzes sales for about 90 specialty stores, says that fourth-quarter business (after a really bad September) is better than it’s been in five years. “The upscale shopper is feeling better about his personal finances and is spending money on clothing and outerwear. Even with the same number of transactions, retailers are selling higher price points so they’re adding 8 to 10 percent to their volume.”
Most surveyed retailers complain that there are few “hot items” in menswear assortments. “Maybe the ID/hybrid sportcoat, but that’s been around,” says one store. “This is the toughest year in the past 10: everything looks the same,” confides another. Fred Derring from DLS agrees: “Assortments need something fabulous and/or unexpected: nice product at a good price isn’t enough.”
That said, it appears there was enough strong product on selling floors to generate sales gains. “Independent retailers with double-digit fourth-quarter gains attribute much of it to custom clothing,” reports Derring.
Says Steve Pruitt, “Hot items included outerwear, blazer-type softcoats, and casual bottoms, especially Incotex and PT01 in colors like light grays and shades of green. It’s the new modern looks that are selling best.”
One southern merchant singled out custom clothing (strong Samuelsohn trunk shows in September resulted in terrific suit sales in November), sportcoats, Barbour outerwear, and Peter Millar sportswear. At a northeast store, the menswear buyer listed strong casual pant business (new fits, new vendors, new fabrics that have blurred the lines with dress pants), softcoats out of collection lines, footwear (dress, casual and boots) and luxury in general. “But we’re also seeing strong sales in some of our opening price lines (Peter Millar and Agave), so I guess you can say that the business is polarized, with the middle prices still the toughest. In clothing, suits are selling better than expected, sportcoats less well.”
At Harry Rosen in Canada (16 stores strong), Larry Rosen touts the luxury segment (Brunello Cucinelli, Tom Ford, Zegna), accessories, outerwear and footwear. “The shoe area at 9 percent of our business is exploding. We had these $800 running shoes that sold out in a week!” At Rothmans in New York City, strong sellers include footwear (Cole Haan, John Varvatos, Wolverine), and brands like Canali, Vince and Duckie Brown. At The Clotherie in Phoenix, bright spots were suits, sportcoats, Eton dress shirts, jeans and footwear (To Boot and Donald Pliner were exceptional; monk strap dress shoes were the hot category.) At Levy’s in Nashville, Eton shirts were “a phenomenon;” other winners included sportcoats (hybrid casual looks from Flynt and Kroon), furnishings, denim (Agave and 34 Heritage), crocodile belts and made-to-measure clothing (thanks to some very strong trunk shows).
Among the disappointments at retail for fourth quarter: most merchants maintain that there was little excitement in tops business; neither knits nor wovens sold great although sweaters picked up as the season progressed.
Asked about their biggest challenges and opportunities, the lists were long. “Learning how to deal with inventory so we’re not overbought,” wrote one small specialty store typical of many. “For us, EDI is a big burden.” Others complained about not knowing how to spend their marketing dollars. Wrote one, “As the old saying goes, we know that 90 percent of our marketing dollars are wasted, but we have no idea which 10 percent is working.” A few stores noted that they will increase the penetration of vendor shops now that the few they have are proving successful.
A growing (but not new) challenge involves stores competing with their own vendors, many of whom now have single-branded stores (regular and outlet), as well as their own websites. Most retailers complain about this, but few are strong enough to drop the vendors in question (although some have cut back). “Our vendors are all in the retail business, and most are in the off-price business,” notes one retailer. “And who can blame them: when you look at the volume they do in their regular stores compared to their cost of doing business, they’re barely breaking even, whereas in their outlet stores, they’re making a fortune!”
Another merchant wonders if today’s designer collections might be less interesting, more watered down, now that they’re selling direct to consumers. “First of all, in their own stores or on their own websites, they’re not competing with other designers so they don’t have to be as fabulous. Second, since they make so much more money by selling direct, they’re less worried about the design aspect and more about unloading goods. It seems that many once-exciting designers have lost their creative edge.”
Several luxury independents are finally jumping on the bandwagon with e-commerce. Writes one, “We’re building a platform to sell online. It’s starting with better technology to send images to our customers, but will eventually evolve to e-commerce. How big can it be? I’m not sure. Right now it seems like a lot of aggravation for not a lot of payoff.”
Other strategic moves among independents: co-marketing with car dealerships, hotel chains, etc. and continuing to create fabulous events/collaborations/pop-up shops. Others are fine-tuning their social media strategy. Sums up Ken Giddon from Rothmans, “Our marketing plan is to make more noise, and making noise is no longer all that expensive.”
Among other goals, Harry Rosen is focused on expansion. “We’ve gone from 15,000 to 32,000 sq. ft. in Yorkville; 50 percent of our portfolio is enlarged, ” says Larry Rosen, who seems unfazed about all the new competition coming to Canada. “They’re going to make us look even better,” he predicts.
According to Steve Pruitt, 2014 should be a very good year. “There’s a strong upward trend at retail and the economy is good. We’ve learned this fall that what’s going on in Washington doesn’t directly affect business. Plus, we’re up against a soft first half in 2013. All indications are good.” Danny Paul agrees: “Business is good despite what’s going on in Washington. If they’d just get out of the way, it could be a really strong 2014.”
Big Store Perspective
Russ Patrick, Neiman Marcus
“The menswear business remains strong at Neiman Marcus, both in the stores and online. It’s exciting to see growth in all of our primary divisions. Newness continues to drive the business. It’s wonderful to see our clients embracing the changes that we have made to our assortments. An example is sportcoats, which are having a very nice season.
“We continue to invest in our stores and the visual presentations are looking very special and current. Our fall men’s issue of The Book was also one of the best we’ve ever produced.
“My biggest concerns continue to be about weights. Spring weights were heavier as vendors focused on buy-now, wear-now. However, as we have begun shopping fall 2014, several collections did an amazing job showing transitional weights in fall colors, while others presented collections that were much too heavy.”
Tom Ott, Saks Fifth Avenue
“We had a great third quarter with menswear business up over plan; fourth quarter so far has been strong, including our own brands (holiday started checking in October). Our big ad campaign was great for the NYC store; business in the South is more difficult as it’s wear-now. Key fourth-quarter items focused on coats and cold weather categories: quality leathers and shearlings in the Northeast; lightweight jackets in the South, slimmer updated peacoats, contemporary coats from Burberry, Moncler and Canada Goose. Shoes and accessories (watches, leathergoods, men’s jewelry) also sold well.
“In order to make our in-store menswear business as relevant and visually stimulating as possible, we’ve switched to lifestyle presentations that incorporate multiple categories. Rather than tables of just sweaters or just gloves, we’ll show multiple gift ideas for different customer types: a rock & roll customer, a luxury customer, an outdoors-y type. (And we’re reinforcing this message online since our customers shop both channels.)
“As for strategic plans, we’re renovating Beverly Hills and Boca Raton, and we’re growing e-commerce. As for product, we’re excited about contemporary—silhouettes that are trimmer and more youthful, color but more toned down. We’re also excited about some fresh new designer collections coming in from Paris.”