Luxury Apparel - September 2008
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Table of Contents
The Big Picture
Just as we were coming to the end of our current weak retail cycle, the collapse of the housing market brought down three major investment banks, sending shockwaves through the financial markets. The Dow and S&P 500 have dropped dramatically in recent days, and analysts are warning that the credit market has dried up. The government is now hoping that a proposed $700 billion bailout plan will stabilize the situation.
This financial crisis is sure to affect retailers as we head into the holiday season, especially those located in the U.S. Northeast who counted Wall Street bankers among their clients. Even for those not directly affected by the market tumble, the fallout will have a psychological effect on consumers’ spending habits.
The Good News
Despite the economy, business throughout the month of August and in early September was better than expected. Women's wear jumped 9%, in August while menswear notched up slightly, by .01%.
Fall merchandise is selling well, thanks in large part to the quality of goods this season. Designers have produced great looking knits, boots and hats in deep jewel-toned colors.
Outerwear and layering knits have been selling well so far. Some of our clients have even had to reorder their cashmere goods. Boots, for both men and women, look to be a hit, and are being shown in a wide variety of styles and fabrications. As the season progresses, we predict that dresses and skirts will also do well.
Of course, the most important thing is to find the trends in your business. You can only afford to back winners this holiday season so focus all your energy on finding and funding trend items.
Mid-Market Woes
While the season has gotten off to a decent start, continuing uncertainty about that state of the U.S. economy will take a toll on retailers, particularly in the mid-market segment.
Consumers who shop at mid-market department and specialty stores will be the most affected by a downturn in the economy. These consumers are apt to go to discount stores to save cash, meaning that retailers like Target and H&M are probably in for a decent holiday.
Where we are seeing strength is in online retail, especially among the youth segment, which is least affected by the fallout. If you are a retailer without an online presence now is the time to start promoting yourself on the Web. Remember: you don’t have to sell online to benefit from investing in online real estate.
The other area you should focus on in this economy is your outstanding on-orders. If things get worse, you may want to cancel any orders that are nonessential, but keep in mind that you still need to be flowing fresh merchandise on a regular basis. Your good customers need a reason to keep shopping, and you need to keep your margin up and your markdowns at a minimum.
Blacks Bottom Line
If you fund your trends and give customers a reason to return, you could still see a slight increase this holiday season.
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