News: Analysis & Commentary: MARKETING
WHY CLOTHIERS ARE FEELING PINCHED
Corporate lawyer Marsha Kolb spent the beginning of Labor Day weekend shopping for her fall wardrobe. The 32-year-old Mundelein (Ill.) resident found a $320 black-and-white-pinstriped pantsuit that would be perfect for work. But Kolb didn't buy it: She'll be back in October, when the weather is cooler and the prices are lower. "I know the price will come down at least a third during the next sale," she says. "I'm not going to pay full retail. That would be ludicrous."
Kolb is hardly alone. Personal incomes are up, and the recession is long past, but apparel sales have been dismal since 1991. Instead of getting a boost from back-to-school buying in August, merchandisers found themselves stuck with racks of fall clothes during a sweltering summer. Chains such as Federated Department Stores Inc. and May Department Stores Co. posted measly same-store sales increases of less than 1% during the month, while retailers Ann Taylor Inc. and The Limited Inc. got creamed, with declines of 11% and 6% respectively.
HIDDEN BOOM. Even optimistic retail executives are wondering how often they can blame the weather for the lingering malaise. Last year, they cursed the mild winter. Next, they complained about the exceptionally chilly spring. Now, it's the heat. When the weather's not to blame, it's the lack of a strong fashion trend or a shift in spending priorities of baby boomers.
Boomers, though, have never gone in much for self-deprivation: Their closets, in fact, are bulging with recent purchases, says David Poneman, senior retailing analyst at Sanford C. Bernstein & Co. in New York. Deflation in clothing price tags has masked a hidden boom in unit sales, he argues. Over the past three years, clothes prices have fallen by almost 10%, compared with the economy's overall price level, putting them lower than they were four years ago.
Shoppers such as Kolb are still buying, but they're waiting until the stuff is marked down. "It's chic to be cheap," says Robert Buchanan, retail analyst at NatWest Securities Inc. "Folks delight in going shopping and not spending much money."
Apparel sales in the first half of 1995 totaled $60 billion, an increase of 2% from the 1994 period. But unit sales were up almost 5% during the same period, to 6.9 billion, according to NPD Group, a Port Washington (N.Y.) research firm that tracks retail data. Meanwhile, the share of women's wear bought on sale rose slightly in the first six months of 1995, to 51.5%. "So much stuff has been sold on sale, consumers have been conditioned to wait," says Michael Hand, NPD vice-president for soft-goods services.
What's behind the weakening prices? There are just too many stores chasing too few apparel dollars, says NatWest's Buchanan. And market conditions are unlikely to improve anytime soon, as giant retailers and discount chains such as Sears and Target Stores expand their apparel offerings.
PHONE ALERTS. Retailers are trying to adjust. Hoping to lure preseason shoppers, Marshall Field & Co., a unit of Dayton Hudson Corp., sent out coupons good for $75 off August purchases of $300 or more for fall designer clothes. Others, such as Gap, The Limited, and Ann Taylor, which control the manufacturing of their private-label clothes, are trying to roll out new fashions closer to the actual wearing season, say retail consultants. But given August's disappointing sales, there's little evidence the strategy is working.
Rather than fighting the trend, a growing number of upscale retailers, such as Nordstrom, Saks Fifth Avenue and Neiman-Marcus, are going with the flow. Instead of pushing for a full-price purchase, sales assistants are offering to telephone their customers when specific items go on sale. Anne Trudel, a Potomac (Md.) real estate agent, figures that she has managed to cut clothing bills by 25% to 40% this way. "They really want to move the merchandise, and they've figured out this is what it takes," she says.
Still, many merchandisers remain optimistic the malaise will go away soon. When retail consultant Kurt Salmon Associates surveyed 45 retailers about 1996 sales expectations, 84% said they anticipated dollar sales to increase next year, with close to half expecting sales to rise more than 5%. But they had better not be counting on shoppers like Marsha Kolb with her bulging closet. Clearly, it's going to take more than a change in the weather to give apparel sales a good kick in the pants.By Susan Chandler in Chicago, with Ann Therese Palmer in Lake Forest, Ill.