GUEST EDITORIAL: OUR NEW NORMAL
As an experienced (old) industry executive, I’m fascinated and very worried while watching the drastic and rapid changes in our business. Some of these have been a long time coming; others were forced by the pandemic. Keep in mind that my perspective is major stores. I believe problems for the smaller specialty stores are even greater since their capital base is smaller. In a recent interview, Chip Bergh, CEO of Levi’s, said the pandemic had accelerated bankruptcies by five years: stores that recently filed were probably on that road anyway but without COVID-19, would have lingered another five years. I could not agree more.
We’ve had a continual and steady shift from bricks to clicks. The standard thinking was this was coming but would take a while so the best solution was an omnichannel strategy. Even pure-play people (like Amazon) were thinking they also needed a physical presence. Now, in a probable over-reaction, no one is promoting brick-and-mortar. I recently visited a major reopened mall in New Jersey with 1.8 million square feet of retail space. Now Sears is gone. Nordstrom is gone. Lord & Taylor is gone. J.C. Penney should be gone. Can Macy’s alone sustain this mall? The food court is closed. It felt like a morgue. How will mall-based specialty chains survive in these mostly empty malls?
This pandemic is training consumers that they can and should shop exclusively on-line. Every day that Amazon package arrives at their door, this behavior is reinforced. Those impulse purchases that used to tempt customers as they walked through stores are no longer happening. Worse still, on-line apparel purchases are now out of need, not desire. Is anyone being rewarded for simply having a great product? PVH just announced the closing of its massive outlet retail business for Izod and Van Heusen. This just keeps going.
The CEO of Barclays, the financial giant, announced that “never again will I have 7,000 people working in one building.” Industry managers have been amazed by how efficient most employees have been working remotely. Despite missing some socialization, this pandemic necessity of working from home has become perfectly acceptable. One apparel owner told me he plans on reducing his five-floor office space in midtown to just one floor, adding that he doesn’t really need even one but can’t emotionally shut it all down. Does anyone really need Manhattan anymore? Does anyone need market weeks? Or trade shows?
A friend in the real estate business told me all his closings are now via Zoom, so don’t even ask what he wears from the waist down. When was the last time anyone needed a suit, dress pants, or a dress shirt? Incredibly, Brooks Brother’s filed. On Monday, Men’s Wearhouse/Jos. A. Bank (Tailored Brands) was at 70 cents a share with a total market cap of $33 million, followed by the announcement on Tuesday of the closing of 500 stores across the company. Does anyone really believe dress clothing is ever coming back?
Some stores that have re-opened are doing well, based on pent-up demand and steep price promotions. But what will happen when the PPP money expires? What happens if Back-To-School doesn’t happen? Walmart and Target stayed open as essential businesses since they sell food. I fear we’re training Macy’s/Kohl’s/J.C. Penney shoppers that it’s just fine to buy apparel at these stores.
Sourcing is changing. The goal to ‘Shop America’ will never work for the apparel business: the consumer will not accept the much higher retails plus we now have almost zero infrastructure for textile/apparel in the United States. China is absolutely a problem. Vietnam is full and I’m certain will soon lose their favored status. Where will future product be made? All of this is exacerbated by the traditional stakeholders: the banks, vendors, Asian suppliers, and others’ interest is in keeping these businesses alive. Most significant are the shopping center owners who, facing no replacements for empty stores, are actually buying bankrupt retailers. These stakeholders are disturbing the evolution of the failures.
As I review this note I become even more concerned. Absolutely our industry is having a huge sea change. This is a perfect setting for a disrupter. Something will happen. I just have no idea what it will be.
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Fred Rosenfeld is an industry consultant; he can be reached at frosenfeld@comcast.net.
While I share Mr. Rosenfeld’s high-tension angst, mine is focused quite differently. Independent merchants are not as beleaguered by COVID as Fred’s outlook worries. Indie retailers reacted quickly and assertively to avoid demise, and they had a better grip on THEIR businesses than the dying glut of FAUX out there. Indie retailers are the bright spot in this whole mess. Upon reordering, business is far better that it could have been. Still nervouses us, but we are NOT going away anytime soon. “Capital base”, I think, is a term used only for publicly traded companies, which are dying by the sword they lived by and destroyed with.
48 years is enough to be self-assuredly emphatic in MY perspective about our industry. It has changed SO radically since my start in 1972. I used to be enthralled with it all, the magic of it, and I am still enthralled with the IDEA of it all as I remember it, and envision it becoming again as countless scam pretenders fall by the wayside.
In 1972, THE trade show was NAMSB. Thinking now to the scope of the shows in Vegas, it was tiny in the days of the Statler Hilton and even the Coliseum. But in those days, the attending retailers were overwhelmingly LOCAL and independent, from all over the country. In the 1980s and 90s and beyond, Wall Street saw the opportunity of the baby boomers that would have insatiable demands for more and more product, and they began an assault that has never ended. They (over)built a system of distribution of apparel in the USA, creating a level of supply that was, by the last assessment I made, roughly 5 or 6 fold what demand warranted, if not as much as even double those estimates. For a while, it worked, overall, but the resultant death rate of independents during that time was calamitous. You didn’t hear anyone bemoaning the shift from “trickle up” to “trickle down”, now, did you? The loss of independent in the Detroit metro area was astonishing, staggering, and I’m sure it’s true in every city. All that personality and point of view, poof. All of that square footage was replaced and expanded on by FAUX retailers, bean counters. They inserted hypodermic needles into the capital resources of every city in America, squeezing local out and replacing it with infinitely lesser excuses for retail that once served regions. They weakened the economies of cities across the nation, leaving many severely damaged and shuttered. They achieved economies of scale by directing as much of our capital as possible to the shareholders and executives of their financial institutions, while creating a worthless wasteland of sameness with so little service as to be meaningless. I just can’t care – – – at all – – – about the hardships of that which dumbed down my beloved profession so badly.
As the house of cards collapses, it creates drama and fear, but it is GOOD. We all ought to be celebrating, not wringing our hands. When it all settles out (evidently fairly accelerated from what I wished for), you will find a cadre of INDIE retailers that cares about their customers as unique, individual people, not simply sku units. You will find smaller cities reclaiming their market share as independent stores create their own niches with their specific, unique and quirky visions of apparel vending, and malls become more widely seen as the embarrassment they became. There will be less supply overall, and price competition will return to 1970s and earlier; scarcity will become more prevalent, health will return to retail. The virus is a nightmare, but it WILL have a finite time of disruption.
Remember when it felt better? Those my age and older will agree, it was BETTER; it was real and genuine. For all of us, on both sides of the tables, and the very economy in which we try to make a living. We have been scammed, friends; we let it happen. Watching the scam fall apart elicits nothing but glee for me, even as I set my sites on other scourges on America like Walmart and Amazon. I’m still here, and I still believe that there is a path forward. As clearly angry about the idiocy of what happened in my time as a retailer, I am also still not conceding any points. I want my industry back.
“Cool” and “Real” cannot be replicated. An apt illustration comes to mind: Remember Banana Republic before the GAP? Will anyone care a whit when what it morphed into is no longer viable and must go away? Yet I still remember that original concept as electric, startling, nervy, compelling and fun. I have to find more fun. If we build fun, they will come.
This whole response to Fred is an assertion of love for our business in the time of Covid, sure, but far beyond. I am upset by the effects of the virus on every aspect of our lives. It is depressing, it is terrifying. I choose to focus, though, on my increasing awareness of it all ultimately working out very well indeed for the industry that was built by local and independent merchants everywhere.
Bravo Peter. Well said.
well done peter. Being in the business since 1975 i couldn’t agree more with you.. I love this business and have waited a long time to see if it could ever come back. We may have a chance. The question is can indies hold on long enough for it to happen. Can guys our age make it to the time of its resurgence. Boy i sure hope so. If not for me than for some young gun to take over were we left off.