Friday, January 23, 2009

The "Selling" of the Recession.

Bear with me, as I pursue this line of thought. I haven't heard anyone else talk about it, so it's a bit more work to reason it all out.


It seems to me that the news coverage and corporate spin on the recession has been going through a subtle transformation.

At first, there was mostly denial from the major retailers. It was a short term problem, but they were taking care of it.

Then it was an acknowledged serious problem, but they were in better shape than the other guys.

Now -- it's almost as though they've realized that there is no way around this recession, and are looking for ways spin it as an advantage, as something they can exploit.


This Associated Press story (bottom) has been making the rounds, including the Bulletin a couple days ago. I ignored it the first few times, but it seems to be resonating with people, so I'm going to comment on it.

I think it's a lazy and superficial analysis.

While it is no doubt true that retailers are tightening their inventories, I doubt most of the slack was because they could "afford to be sloppy." I suspect that much of this material sold, at least quickly and often enough to warrant ordering it. That which didn't sell, they usually wangled discounts out of the manufacturers.

If you order five and sell four, it makes you no more sloppy than if you order four and sell three. I suspect it's all just for show.


But they get to fire people!

They get to cut unwanted lines of product!

They get to cut services!

It's not their fault, it's that nasty dirty recession!!


I mentioned before all this change in tone that I thought the customers would be surprised by what was going to happen. The media was making it sound as though the customers had the retailers over the barrel -- and they did, in the short run.

But once all those SALES, SALES, SALES!!! were through the pipeline, I was convinced that the customers would find less selection, less service, and eventually less price moderation.

The Big Boys get 'leaner' by piling even more work on the remaining workers. (And I thought it was difficult to get clerks to help me before!)

The 'spin' in this article is so furious, it makes me dizzy.

Less product = "less cluttered."

Lower price = "affordable luxury."


But even more maddening is that the article continually contradicts itself, because it is taking the retailer's words at face value. So it constantly talks about "weaning the customer from discounts" and in the very next breath, talking about enticing the customers with discounts!

" years past they would buy one color and three different styles, he said, now they're buying three colors in one style."

I'm sorry, what in the hell does that even mean?

I suspect it means the retailer want to buy one brand in three colors because IT'S CHEAPER for them to carry, not because the customer is demanding it.

I know reporters aren't trained economists, but they should be able to think.


The funniest part, was the creation of a Recession brand of clothing.

Yeah, right...

It's almost as though the Recession is turning into a new marketing opportunity, like "Fat Free" or "Carbohydrate Free" or "Green" or "New and Improved."

Buyer beware.

Like I said, this article got wide distribution.


Sales, keeping inventories down as consumers stay reluctant to spend.

For years, retailers could afford to be sloppy about running their businesses because customers kept buying. No more. Stung by the worry that shoppers — who cut spending by the most dramatic amount in at least 39 years this holiday season — may not start spending again for a long time, stores are making drastic changes. They are cutting out marginal suppliers, hiring outside experts to keep inventory lean, holding special events for those who are still buying and making extraordinary efforts to gauge customer satisfaction.

The new discipline will be mostly good news for shoppers, who will find stores less cluttered and see an array of products at lower prices, from ordinary groceries to jeans from brands they could once only aspire to.

Of course, the downside is that consumers who want something out of the ordinary — an olive green prom dress, for example — may have to look harder. Stores are rooting out offbeat, unpopular colors and styles, which will mean fewer choices.

Sales clerks are also checking back with customers to see if they're satisfied with their purchases.

"We are in a sea change," said Millard "Mickey" Drexler, J.Crew's chairman and chief executive and former CEO and visionary of Gap Inc.

Pricing goods within reach of strapped consumers is also a big focus, given the way nervous consumers have stopped shopping. Same-store sales, or sales at stores opened at least a year, fell 2.3 percent in November and December together, according to the International Council of Shopping Centers. And the worsening sales slump in January has many worried about the industry's prospects over the next few months.

J.Crew is working with its factories to adjust its prices on certain key items like ballet flats, which now start at $98 rather than $118. It's also stocking fewer of its high-priced items like $1,300 leather trench coats. It's cutting inventory and slashing expenses.

Status denim brand Rock & Republic will ship a new Recession Collection this spring that runs about half the usual $200 price tag for its jeans.

Even supermarket chain SuperValu Inc. has promised lower everyday prices on groceries and more promotions.

Chief executives from Crate & Barrel to J.C. Penney acknowledged during the National Retail Federation meeting this month that they're navigating new territory, predicting that the fundamental shift by consumers to spend less and save more will linger.

The biggest unknown is when or if shoppers will ever resume spending the way they did when the housing market was booming, credit was easy and jobs were more plentiful.

"Customers wanted and wanted and wanted some more and we sold and sold and sold some more," said Burton M. Tansky, president and CEO of The Neiman Marcus Group. Now, "frugality is more important."

This sudden hibernation of customers is leading even the luxury retailer to try new strategies. Neiman Marcus is eliminating some vendors and focusing on serving its best customers. It's trying to retrain its shoppers to buy regular-price merchandise by throwing more smaller private events for 20 to 30 customers.

Weaning customers off discounts is a big challenge for the industry, as people have gotten used to them — particularly on luxury brands that hadn't been discounted before sales all but dried up.

For the last two years, many of the best-run nation's stores like J.C. Penney Co. had been reducing inventories in response to the consumer spending slowdown. But no one anticipated the severe retrenchment that hit in September as the financial meltdown ravaged shoppers' retirement accounts, reduced credit availability and resulted in massive layoffs across industries.

As shoppers simply stopped buying, stores were forced to discount as much as 75 percent off in some cases even before the official start of the holidays — resulting in the weakest season since at least 1969, when the ICSC index began.

Some companies like KB Toys Inc. couldn't make it through the Christmas season, and many more are expected to file for bankruptcy in the coming months. Circuit City Stores Inc., which filed for Chapter 11 bankruptcy protection in November, said Friday it will go out of business — closing its 567 U.S. stores, after not being able to work out a sale.

With no sign of the economy improving soon, and no pressure on people to buy now that the holidays are over, merchants are preparing for times to get worse. Those who have survived face battered fourth-quarter profits and are slashing expenses and hoarding cash. Apparel merchants are cutting inventory by 20 percent to 30 percent for the summer and fall seasons from already reduced levels a year ago, according to Kathryn Deane, president and CEO of Tobe Report, a fashion consultancy.

But it's just not about slashing how much merchandise they carry. Companies like Polo Ralph Lauren Corp. are turning to outside specialists in areas like sourcing and currency hedging to reduce the impact of volatile foreign exchange rates. They're working with suppliers to reduce the time it takes to produce an item. And they're trying to understand the new mindset of shoppers, scrutinizing the products they offer to see whether the prices and quality meet the new standards from consumers who are questioning the real value of things.

Apparel suppliers say they have noticed the difference in recent weeks as the buyers for big chains visit their showrooms to order for fall. They want eye-catching pieces that have longevity — and nothing too radical.

"They're not buying disposable clothing," said Allen Schwartz, owner of fashion company A.B.S. by Allen Schwartz. He noted that store buyers are taking styles with staying power like daytime dresses. But while in years past they would buy one color and three different styles, he said, now they're buying three colors in one style.

Fashion company Nicole Miller is now shipping 80 new styles per month instead of 120. Bud Konheim, president of the business, said even buyers from upscale stores are questioning the prices of its top designers, which top at about $1,600. He said he's doing more clothing business in the $200 to $300 range instead of the $700 to $800 range.

Such scrutiny from buyers is forcing Nicole Miller to do its own editing, cutting out styles or colors. For prom gowns, Konheim said the company used to do oddball colors like olive green — but not anymore.

Michael Ball, founder and creative director of Rock & Republic, said he immediately lowered the prices of the company's most expensive jeans in September before they hit the floors when the economy imploded. The premium line, which had been priced from $180 to $320, now peaks at $280.

"The days of the $300 jeans are gone," Ball said. While other high-priced denim brands have been heavily discounted in recent months, he said he was able to avoid such heavy price cuts because of limited distribution that kept demand high. Still, given the new climate, Ball cut the number of styles and decided to offer a less expensive, cleaner look that features two styles for men and two styles for women. The line is priced from $128 to $132.

The Recession line, to be offered at Bloomingdale's, Neiman Marcus, Nordstrom and Saks Fifth Avenue, will be sold alongside the premium denim collection.

But Ball plans to end the Recession Collection when the economy recovers. For now, he believes he's doing his part to keep the economy rolling and help shoppers "open their pocketbooks."


Olde Dame Penniwig said...

What goes around, comes around, dearie. We've seen it before. I think your wife hit the nail on the head when she quoted "'s the same damned thing over and over." And the "thing" in this case is getting money out of people. Everyone is constantly trying to extract money from other people, be it via goods or services. It's one or the other. Hell, nothing is free, nothing is noble; it never was. You even have to pay for the air ye breathe.

As one bookish person to another: Go reread Thackery's Vanity Fair, Goldsmith's The Vicar of Wakefield, and Anne Frank's diary. Take a look at Populuxe. *sigh*

Olde Dame Penniwig said...

By the way, to address the article you reprinted -- it makes me sick, this empty-headed and underhanded prattle of these posturing, prancing, psuedo-intellectual and preposterously unclassy pissers. What f***ers, with their talk of people returning to "quality clothing: and "timeless fashions" and their boo-hooing at the same time as congratulating themselves on their brave forebearance in ordering "oddball colors" in stupid prom dresses. It's all starting to sound like a 1950's redux and that is a very very very bad thing.

Unknown said...

Actually Duncan, Martin Kaste (NPR's Seattle bureau reporter) did a story on almost this exact thought last night during ATC...sort of the branding of thrift:

Leitmotiv said...

Yeah I heard the spin about the recession on NPR as well.