The world of fashion and retail is going through continuous changes; it seems as if as soon as anyone gets a new system set up, it changes again. There is more confusion than there are remedies. Old timers, as well as new fashion houses, have either down sized or completely closed their doors in the recent years. Every time someone reads an article from so-called professionals, they notice even more emphasis on customer service; although customer service is an important part of the business, by now it is pretty much a standard procedure throughout high end retailers.
If we review all businesses in general, what we notice is that those who are succeeding, at least comparing to most others, have certain elements in common and one in particular: value. Operations, such as TJ Maxx, are growing and forcing most other department stores to become irrelevant. Major specialty European chains, such as ZARA or H&M, deliver fashion, a cool place to shop, as well as value. They are taking market share from their U.S. competitors season after season. Most U.S. stores, up until the closures began a couple of years ago, were forced by Wall Street to grow without any concern for profitability. There is a very big conflict with most top executive’s interests and actual business models. They are expected to grow the top line first, so that the chains and other retailing majors continue over saturating all U.S. markets with their foot prints; only to be rewarded on the short-term, while their tenure may last. When they left, they also left a less manageable and more challenging business for the next group to navigate; they kicked the can down the road.
The biggest challenge for the larger companies is the fact that everyone wants to tweak the business, rather than reviewing all nuts and bolts of their model. Now, discounters must give department stores a run for their money, and some Europeans are doing the same to U.S. chains; no one is willing to take a major risk, they are not even looking at those issues and who can blame them for being scared? As for the smaller “mom and pop shops,” unless they can come up with something other than trying to buy better or give a better customer service, their years will be numbered in all major markets. There was a time where there were a few boutiques on most New York City blocks, but today, aside from just a few, they nearly are all gone. Those models would likely still work for suburbs where those major chains do not find it profitable to have a presence.
Technology has forced retailers and businesses to look into e-commerce, however, most have not yet discovered how to make it profitable. With online return rates being an average 35%, restocking and putting items back into their original shape could become a labor-intensive process; all assuming the items are unused upon their return. Shopping online, while great for technology purchases, gives no personal immediate gratification. Shopping for fashion has been an outing for many individuals, to bond with friends and family. We keep hearing different ratios of numbers of online selling versus brick and mortar selling. According to the co-author of Conversion Optimization, Khalid Saleh, in 2018, 8.9% of all retail sales in the U.S. came from online selling. This meant there were still another 91% of sales that went to brick and mortar operations; a rather large number. If we also take into account that between 20,000 to 25,000 stores have closed their doors in the past few years and split those sales through their remaining stores, the potential becomes even greater.
ZARA, and its counterparts, have effected every country in the globe. All this, while registering success and growth year after year. They deliver fashion at a good price, however, they are focused mostly on a trimmer woman and a younger generation. American women are sized, on average, between a fourteen and a sixteen; most cannot shop that type of product. This leaves a space open for fashion in the U.S. that is made for individuals actually residing in the U.S.
What needs to be looked at, is an exciting collection that will not be all over specialty chains and is done for the U.S. market. Most U.S. stores have their customers trained to buy when they are running sales; when the merchandise is marked up merely to be marked down. In other value oriented chains, they market at the price that they want to sell and when they run a sale for a limited time, the stores get packed. We often notice that most of these stores remove their staple items from their sales floor during sale period, while adding other leftover, or older items, to the sales floor. Thus, changing a customer’s perception and retraining them to buy at full price will become a daunting task that will put most chains in a now in situation.
One would like to assume the landscape will change within the next decade or so, since we will be evolving as each year passes.
Barami Hakakian
BARAMI stores MM
About the Author
At the age of 24, fashion designer Bahram Hakakian opened his first retail location, BARAMI, with a vision of giving women what they deserve out of fashion. Now, founder Bahram Hakakian, aka BARAMI, and his three daughters are proud to announce the new direction of their fashion empire, by creating a wholesale collection as Patrizia Luca. Their collection is being sold within a wide variety of specialty stores, as well as their own BARAMI locations; turning their retail stores into a multi-brand, one stop shop for the professional on the go.