Well that was fun.  Not fun like skiing in fresh powder, but fun like a root canal or when I had sinus surgery.  If I never see another four months like the past four, it will be just fine.  I mean, not that long ago it was the beginning of 2006 Hillary and Barack had just announced their candidacies and all we had to worry about was what mischief Bush could get the country into in his last 2 years.  But otherwise things were good and they stayed that way until a little over a year ago.  And then things weren’t good and then things got worse and then things got crazy and then scary and then came December which rocked everyone’s world. 

Some of this mess is our own fault.  Not you or me specifically, but our industry.  Going back to the early 60’s when I got my first retail job, I learned to relate this year to last year.  That was the benchmark… the only benchmark.  In the 70’s when I worked for Saks in New York, I remember the big joke my first Christmas.  There were these 2 buyers standing together talking and one said, “Hey, I just heard it was your son’s 16^th birthday, congratulations”. and the other buyer said “Thanks, you know last year he was 15, this year he’s 16, that a 6.7% increase”.  Retail humor.  We could all use some of that about now.  But back to the point.  Our industry’s obsession with beating last year, even in the face of this coming recession has gotten a lot of retailers in big trouble.  Our suppliers push us to buy the same or more than last year.  Cancellations are a big problem.  And we’re so obsessed with making or beating last year that we lose sight of profit and focus mostly on sales.  It’s a very ingrained and dangerous behavior.

As of right now, it looks like independents will be down an average of 20% to 25% and Big and Chains, excluding the Marts and Clubs, in the minus 10% to 15% range.  But that’s the sales.  Sometime in middle to late January we should find out about the Big’s and Chain’s December and 4^th quarter profits and it’s going to be a train wreck.  There are too many stores for our now smaller economy and for the most part, these stores, independents included, carry too much stock and spend too much time clearing unsold and over-bought inventory.  As an industry, we have to reacquaint ourselves with margin % and margin dollars. No more volume just for the sake of volume.  If Big and Chains want to play that game, so be it.  We can’t; we’ll go broke trying.

In the late 70’s I was working for a medium size chain that carried mostly Levi products.  Levi Strauss was sold only to better department and specialty stores.  We all charged similar prices and we all went on sale at about the same time.  No retailers strayed too far off the reservation.  But then it changed.  It was a tough economy and the guys I worked for decided to open a discount Levi business in old grocery store spaces.  Levi Strauss (not him, he died a while ago) freaked out, the department stores freaked out and the price wars were on.  Fast forward two years and Levi Strauss was selling to Sears and JCPenney, my old company was gone, Gap had given up on Levis as well as most specialty stores.  If Sears and Penney’s carried it and sold it cheap, no one else wanted it.  Now, back to 2008.  Just a few years ago, Juicy Couture was a specialty brand and an important line to many independents.  Juicy was sold to Liz Claiborne who expanded it’s distribution and began opening their own stores.  Today, Juicy is not represented by most independents and those that do, promote it regularly as a kind of loss-leader.  Again, if the Bigs and Chains carry it, most independents will avoid it.

Several weeks ago, I was with the independent owner of a Hugo Boss store in a big important mall.  We paid a visit on the almost right next door Bloomingdales and were not happy to find a just received Holiday delivery already at 40% off.  How does an independent compete with that?  Bloomingdales may have paid the same “line” cost (but probably not) but for sure received some kind of markdown allowance.  Clearly, it’s not a level playing field.

One more story.  In 1981, with a partner, I opened a men’s store in Santa Monica, California on Thanksgiving Friday in the middle of a recession.  For those of you old enough to remember, back in those days, NOBODY took much in the way of ANY markdowns prior to the 26^th of December.  It was like a retail law.  Not that year.  For the 1^st time, department stores took markdowns on best selling merchandise with the sole purpose of increasing their weak sales.  First it was Robinson’s, then Bullock’s, then May Co. and so on and so on.  Independents didn’t react.  We assumed the discounts would only be for that year, that next year the retail law would be back in force.  But it wasn’t and the pre-Christmas discounting has been getting worse for the past 3 decades.

So here’s the point of all these little stories.  December 2008 is not a one time occurrence.  There may be some small amount of roll back as inventory is reduced and the profit blood bath becomes apparent.  But big stores chase last year.  It’s the way they see the world.  They will press their vendors for lower prices, higher markdown allowance and take higher original markup, but a version of what we’ve all been through is here to stay.  It was with Levi’s, it was in 1981 and it will be for 2009 and beyond.

So what’s an independent to do?  We can’t solve all of this by ourselves.  Our vendors need to do their part.  They can’t sell the same product to us (specialty independents) and to them (Bigs and Chains) and we’re crazy to buy the same product as Bigs and Chains.  If a vendor wants to sell us both, they need to lay down the law regarding markdowns.  A few may be successful doing this, but I think it’s a fool’s errand without much future.  If a vendor wants to sell to us both, they need to offer us different stuff.  It’s already happening with licensed products sold to Target, H & M, Penney’s and others.  Why can’t Hugo Boss (for example) make a line for Macy’s and Bloomies and whoever wants to play with early markdowns and a line for specialty independents who can’t afford the early markdowns?  Why can’t Juicy produce a line for department stores and one for specialty?

For our part, independents need to significantly decrease our dependence on lines that sell into department stores.  This season, and to some degree, for many years, Saks, Macy’s, Bloomingdales and all the other “so called” department stores have behaved just like discounters.  Hugo Boss wouldn’t dream of selling anything to Target or 1st line goods to Men’s Warehouse, but, lately, what’s the difference between Target and Macy’s, except that Target’s doing better?  Department stores have evolved into discounters, but with a fancier building.  Independents don’t give what’s happening at Target a second thought and it needs to be like that for dispartment stores. Dis - partment… get it?

Another thing independents need to do is reconsider their pricing structure.  It’s pretty hard for a customer to hold the intrinsic value of a cashmere sweater intact at $550 when Searle in New York has cashmere sweaters at $99 plus take an additional 30% and Gap has all sweaters at $25 for a weekend.  Except for the very wealthy, the price of clothing accessible to the mainstream and better customers has dropped significantly.  This is something too ominous to ignore.

Before this blog turns into War and Peace, it’s time to summarize what I think independents should do: 

• for the foreseeable future , lower your expectations … at least through spring and most likely through fall
• watch your margin dollars… know what it takes monthly to keep the doors open
• promote, but only occasionally… try to save the big markdowns for the clearance periods
• don’t over-buy, in fact under-buy… goods will be there… the damage our industry has suffered because of cancellations and late payments has yet to be tallied
• edit your buy like never before… write small, precise orders… I can’t imagine much resistance to small orders… cherry pick… go for “A” styles only… buy only the best color
• drop your price-points… you know what they need to be… write down the retail selling price high and low for each category and then drop it another 10% and then don’t exceed it
• walk away from a line that’s too pricey… it’s how our industry changes… if you write it vendors will think you’re fine with it… tell them it’s too high to retail in your store… there can be no egos in a tough recession…
• lines will close and new lines will start up… their prices will be better… find them before your competitors… always be on the look out, and finally
• work hard on being more special… know your customers by name and what they’ve previously purchased… have quick access to good tailoring… put on trunk shows and special evenings… earn your title of specialty store!