There is a seemingly never-ending stream of bad news for America’s department stores, facing declining foot traffic, struggling shopping mall environments, and competition from Amazon to Zara.
But there is, perhaps, one trend working in their favor: the ongoing shift in fashion to the see-now-buy-now business model. Department stores are doing their part to make sure their available merchandise matches what customers are buying: Nordstrom, Neiman Marcus and Macy’s are all speeding up the production processes for their private labels to get items on the sales floor faster.
“Customers are much more interested in buying now and wearing now,” said Nordstrom Inc. co-president Pete Nordstrom, on a conference call with investors on Thursday. “The idea that she would buy something and then put it in her closet for a couple of months until the weather changes — that has changed a lot over the years. And it’s not a great scenario for us.”
But when it comes to designers’ ready-to-wear collections, department stores’ hands are tied until the vendors switch to a see-now-buy-now schedule.
“As having been a buyer for most of my career, I can tell you: The later you order the merchandise, the smarter you are,” said Jane Hali, CEO of retail research investment firm Jane Hali & Associates. “If you have long lead times, you’re not going to make the right decisions. You can’t have a warehouse full of inventory just sitting around until a customer is interested.”
An out-of-season fashion calendar — one that shows winter coats on the runway right as winter is ending, for instance — negatively affects what department stores have in stock. They have fall clothes on sales floors in the middle of summer, while fast fashion companies like Zara are jumping on runway trends, capitalizing on brand new collections with knee-jerk production processes.
In effect, department stores with production cycles that are 18 months out are feeling the heat. For the fourth quarter of 2016, Nordstrom Inc. reported a 2.4 percent increase of net sales, to $4.2 billion. The department store is faring better than competitors: At Macy’s, Bloomingdale’s and Neiman Marcus, recently reported earnings that saw overall dips. Across the board, these department stores are in reconstruction mode: They’re closing underperforming stores, injecting extracurriculars like restaurants, cafes and events into stores, updating mobile apps, and investing in offers like buy online, pick up in store.
But no matter how cutting edge a mobile app is, department stores are ultimately competing on inventory. As designers like Tom Ford, Burberry and Ralph Lauren shift their entire collections to an in-season calendar, and others like Vetements, Gucci and Prada experiment with see-now-buy-now capsules, department stores have to be ready internally to adapt to this change.
This means buyers will need to make decisions months ahead of a runway show, potentially based on a photo or sketch of an image that hasn’t been created yet.
“Today, you have to have your buying and selling teams in a new mindset,” said Ken Downing, the fashion director at Neiman Marcus. “Buyers are smart. They know what to look for, and can buy a collection without seeing a runway show first. A buyer’s time is mostly spent in showrooms anyway.”
Downing said that today, the runway’s purpose should be for generating in-season excitement, not showing a collection to a buyer. If a designer isn’t taking advantage of the halo effect that surrounds a theatrical runway show, he or she is waiting six months for those products to land.
“We didn’t have this transparency before. You went to a store to see a collection, that visibility was on the store’s terms,” said Hali. “Anyone with a laptop or a phone can see a fashion show today, and they don’t want to wait six months. If they can buy right away, that’s a boost to the brand and the retailer carrying it.”
Downing cited Ralph Lauren’s two shows this past runway season as the prime scenario: Press and buyers were invited to a private showing months earlier than the public runway, which was live streamed. Tommy Hilfiger’s approach — an over-the-top event tied to a model collaboration — drives foot traffic to department stores once the production hits. According to Macy’s CEO Terry Lundgren, the collection was a top performer of the season. But it’s not just big brands with massive resources who can tackle this.
“New brands, emerging brands, they don’t have to do things the [traditional way],” said Downing. “What you do is this: Present the collection in your showroom to buyers ahead of time, then you do your actual fashion show and presentation in real time, in season. I’m a big believer in the in-season show.”
Neiman Marcus CEO Karen Katz echoed that sentiment during a September call with investors.
“Our enthusiasm around this, we’re trying to make sure that we’re communicating it to as many people as possible,” she said. “We have a lot of support for getting this done from many different factions in the industry. We are working very hard to get our vendors to think differently.”