From Runway to Recession
how the economy is affecting the fashion industry
PrintThere wasn’t much of a New Year’s celebration for consumer-driven companies this year. Reports of disappointing sales and drastic budget cuts tempered the usual holiday cheer.
The luxury fashion industry, once immune to the ebbs and flows of economic prosperity, is now facing the realities of the recession. Massive jobs cuts, unsatisfactory sales, and inevitable bankruptcies are just a few of the problems the fashion world is facing today.
Prominent fashion houses and luxury retailers have started the new year by acknowledging the effects of our faltering economy. LVMH Moët Hennessy Louis Vuitton S.A., the world’s largest maker of luxury goods, announced that they are lowering retail prices for the Louis Vuitton brand in Japan by seven percent to boost sales. In addition, they are canceling plans to rent a 10-story building in central Tokyo for a new flagship store. Saks Fifth Avenue had a disappointing December, when same-store sales plunged 20 percent. In mid-January, Saks eliminated 1100 jobs, which accounted for nine percent of the company’s total workforce. Similarly, upscale retailer Neiman Marcus Group, Inc. laid off 375 people—3 percent of its workforce.
After featuring heavy discounts throughout the holiday season, retailers are now worried that consumers won’t go back to paying full price. To make matters worse, spring orders were generally placed before the financial crisis in September, which means that stores have more items in stock than are needed to meet their customers’ demands. Some retailers are going so far as to cut prices on early spring merchandise as soon as it hits stores. Premium denim-maker Rock & Republic is even producing a special Recession Collection of jeans priced at $128 to $138, around $50 less than the label’s usual price for denim.
Will these price cuts revolutionize the luxury fashion industry and force its clientele to completely rethink their spending habits? Burt Tansky, CEO and president of Neiman Marcus, doesn’t seem to think so. “Remember, when our customer tightens her belt, it’s generally ostrich or alligator,” he stated at a conference on the industry-wide recession. Mr. Tansky’s confident assertion doesn’t change the fact that both Saks and Neiman Marcus ran unprecedented sales of 75 80 percent off within the past year.
Retailers are particularly vulnerable to a recession because of their high fixed costs and sensitivity to consumer demands. While some retailers are rethinking how they should do business in today’s economy, others prepare for bankruptcy and store closure. The International Council of Shopping Centers predicts that there will be 73,000 stores closing in the first half of 2009. Even once-profitable shopping districts in the West Coast have not fared any better. There have already been a number of store closures in Los Angeles, including agnès b., Diabless, Magenta, Presse, Il Primo Passo, Parasuco, Tryst and Vanity. Kira Plastinina, the Russian teen designer’s namesake clothing chain, filed for bankruptcy just seven months after launching and is delaying original plans for expansion. Analysts estimate that around 10 to 26 percent of all retailers are currently in financial distress and in danger of filing for Chapter 11.
The recent changes in the retail industry have also had a detrimental effect on manufacturing businesses in Asia. Because many retailers are downsizing and cutting back on their orders, Asian manufacturers, faced with shrinking demands, have had to follow suit. Exports account for about 32 percent of Asia’s gross domestic product, according to the World Bank. Japan, Hong Kong, and Singapore are already in a recession, and analysts predict that the worst has yet to come.
Designers are coping with challenging economic conditions by cutting extraneous expenditures—namely, Bryant Park runway shows during New York’s upcoming Mercedes-Benz Fashion Week. Vera Wang, Betsey Johnson, and Monique Lhuillier are among the many designers forgoing their usual extravagant shows, which generally cost upwards of $100,000, in favor of more intimate presentations.
In the midst of economic chaos, what is a fashionista to do? Trendy consumers can follow the savvy new “recessionistas” who are finding more affordable ways to spend without compromising their individual style. As proven by the strong profit gains of pocket-friendly retailers like H&M and Mango, consumers are finding more economical ways to satisfy their fashion cravings. H&M, which has stores in 33 countries and more than 100 locations in the United States, recently announced plans for expansion and the creation of up to 7,000 new jobs. H&M hopes to open 225 new stores by the end of the year, while Mango hopes to open 150. Celebrities and magazines alike are showing us that mixing high-end pieces with low-end finds is a great way to ride out the recession. Remember, as fashion icon Sarah Jessica Parker says famously in her clothing line’s ad campaigns, “style is not a luxury.”
12 February 2009
vol. 6, issue 3
More ARTS
No one wants to admit that they like playing video games.
Questioning Narrative Conventions
Jesse Ball's The Way Through Doors defies the strict classifications of genre—although it appears to be a novel, its dizzyingly complex narrative structure resembles poetry more than prose.
I didn’t consider running away from home until halfway through the third grade, when my mother bought me E.L. Konigsberg’s From the Mixed-Up Files of Mrs. Basil E. Frankweiler.
Comments
We're looking for comments that are interesting and substantial. If your comments are excessively self-promotional, or obnoxious you will be banned from commenting. Consult the comment FAQ and legal terms.