Are Designers Declaring Death to Discounts?

Try saying that three times fast. From The Wall Street Journal:

Eileen Fisher is a mild-mannered woman — quick to apologize and even timid. But the famously silver-haired designer is pondering a radical shift in the way her clothes reach consumers.

In department stores these days, Eileen Fisher clothes “get marked down before they even have a chance to sell,” she told me recently. Perhaps it no longer makes sense to give Saks, Bloomingdales and other department stores so much control over the brand, she posited. She has asked her staff to consider a new model: renting department-store space in order to control prices and inventory.

Ms. Fisher’s comments illustrate the rift that has formed between department stores and many brands after decades of close cooperation. The rift means shoppers will see fewer of those deep, early luxury-brand discounts that they have enjoyed for the past year.

The relationship between the stores and the brands cracked last fall, when Saks Fifth Avenue and its rivals slashed prices around Thanksgiving.

In a matter of weeks, high-end retail’s carefully tended pricing structure began to collapse. Shoppers demanded discounts at brands’ own stores. At elite brands like Loro Piana, a flea-market mentality took hold. In Europe, even French stores, which are bound by strict pricing laws, are holding “floating sales” that include deep discounts. In the U.S., spring sales are arriving early, rather than coming at the end of the season.

To that end, Eileen Fisher will open six new stores of its own this year in the U.S. — slightly accelerated from an average of five new stores per year — and is launching a costly new technology platform for Internet sales that will offer greater flexibility, allowing online customers to pick up items in stores, for instance.

Ms. Fisher’s most extreme idea — renting space in department stores — won’t happen anytime soon, but she and her staff plan to broach it with store accounts tentatively. The project would be complex — equivalent to opening scores of boutiques across the country.

But the in-store boutiques have some precedents. LVMH’s Louis Vuitton brand has been doing it for years. Every LV-logoed wallet and handbag at Saks or Neiman Marcus is sold by a salesperson who is employed by Vuitton, on space that is leased by the French luxury manufacturer.

As someone who recently closed up shop due to the economy, all I can say is WORD. Early and frequent markdowns have turned into a vicious cycle across the board, as most retailers have found their coffers running dry and must ruthlessly get rid of any excess merchandise. For the more mom-and-pop stores, such drastic and frequent price cuts virtually assure the hard fact of closing up shop - how long can you stay open when you’re essentially paying people to “buy” your clothing below your cost?

On the flip side, the Outnet, Net-a-Porter’s discounted younger sister, has opened up this week to much fanfare amid online shoppers (including myself). I do predict that some “extras” that shoppers have come to expect, such as free shipping or extended return time, will be cut, as least by the smaller retailers intent on staying in business.