Luxury Apparel - August 2008
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Table of Contents
The Big Picture
The U.S. economy continued to show signs of weakness in August, as inflation outpaced wage increases. Consumer prices are up, and so are jobless claims. Despite this, the Fed has decided to hold off on raising interest rates, saying that the soft economy will bring inflation under control. The good news is that gas prices have stabilized due to falling demand.
Some economists are revising forecasts of an uptick in the second half of the year, saying that they now expect the rebound to come in the second half of 2009. We still predict retail operations to see stronger sales in the later part of this year, even though they will be nowhere near the levels they were at a few years ago.
July Trends
As expected, we saw decreases in July, followed by some renewed activity in August as new merchandise rolled in. Women’s wear dipped 4% in July compared to the previous year, while menswear sank 11%, led by strong decreases in furnishings and clothing.
There was not as much demand for sales goods this summer, leaving many merchants with declines. The diminished demand was part of an overall pattern we are seeing in the marketplace: the traditional sale customer is being hit the hardest by the current economy.
In addition, we are seeing less of our high-end customers. They have bought a tremendous amount of luxe products over the last two years, and the current economy is having a psychological impact on their buying patterns, telling them not to buy as much, even if they can still afford it. Given this drop in demand, we are anticipating a soft holiday season.
The Bright Side
Sales may be tough to come by now, but keep in mind that we are at the end of a very normal retail cycle. These cycles usually last for 18 to 24 months, and the current downward cycle began in April/May of 2007.
For clues on when your business will pick up, you need to figure out when this downward cycle began to affect you, then calculate out 18 to 24 months. Where are you in the cycle? When will your particular business begin to see the light at the end of the tunnel? Once you know this, you can plan accordingly by rolling in fresh merchandise and gearing up your sales and marketing efforts.
Of course, we also need fashion to help us out of this down market. You want to constantly be introducing fashions and developing trends in your business. Experiment by flowing lots of new, small buys and seeing what sticks.
While each operation will experience different, micro trends, we are seeing overall trends toward constructed sport coats for men, replacing the long stream of soft jackets, and skirts for women, following on the dress trend.
Blacks Bottom Line
Find out where you are in the current retail cycle.
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