Tough times for conventional retailers

Sugarbakers and Margaret’s Consignment are expanding when some conventional retailers might be on their way out.

Consumer prices in May posted their largest decline in 59 years, according to U.S. Department of Labor Statistics data. A survey by America’s Research Group indicates that about 30 percent of consumers planned to spend more money on clothing and accessories in May than they had in April, but 27 percent of those people stated that they would purchase only merchandise marked down 50 percent or more.

Earlier this month, Seattle-based Eddie Bauer Holdings Inc., which operates two Louisville stores, sought Chapter 11 bankruptcy protection for the second time in six years.

The list of women’s apparel retailers reporting second-quarter losses include mall stalwarts such as Ann Taylor Stores Corp., Talbots Inc. and Liz Claiborne Inc.

While retail sales have dropped, consignment shops — at least in Louisville — are increasing in number and expanding into expensive sidelines such as consigning jewelry.

Browning and others in the business said consignment shoppers represent the full financial spectrum — from people on welfare to millionaires.

If the recession has changed any part of her business, it’s the supply-side dynamic, Browning said.

She sees increasing numbers of people “who need money” bringing clothes to consign rather than the wealthy women who simply get bored with what they have or who shop compulsively.

A woman came in last month wanting to consign a set of expensive English bone china dishes. “One of my [clerks] said, ‘You don’t want to sell these.’ She said, ‘I need the money,’ ” Browning said.

Competition increasing

At the moment, consignment stores are deluged with goods and buyers.

But can a business model survive growing competition and uncertain supply systems when its inventories depend largely on past and current over-consumption? Success has spawned competition for high-quality consignment goods, and in the last year, two upscale consignment shops have opened within a few blocks of Margaret’s Consignment.

A block west, Tamara Neal started Urban Kitty about a year ago in a trendy space.

Her customers mostly are upper-middle-class women whom Neal calls “creative shoppers,” looking for high-end clothing and accessories at a bargain.

Her sellers, though, are increasingly distressed. “I get calls every day from people who want to sell clothes for cash,” which no consignor does, Neal said.

Two blocks west of Urban Kitty, Gerry Mattingly opened a menswear-only consignment shop, Evolve Consignments, three months ago.

Both Neal and Mattingly acknowledge that they’re in the business because Browning long ago broke through the secondhand stigma by turning consignment shops into essentially fancy clothiers filled with high-end inventories.

To a certain extent, Louisville consignment stores thrive because well-traveled consignors often bring in brands from New York or Chicago retailers that don’t have Louisville operations, Browning said.

Big-ticket items pushing sales

And it’s the affluent shopper who is driving sales, they said, not people who can’t afford full retail. In her first year, Neal said, Urban Kitty sales have increased week over week, and she has been surprised by shoppers’ willingness to spend serious money in pursuit of a comparative bargain.

She said her most successful move during her year in business was to add consigned jewelry, which sells for as much as $1,000 per item.

Among her largest single sales are $225 for a Kooba purse that sells for $700, Neal said.

Her biggest mistake was to try children’s clothing, though she added that the closet-sized space she used to display the kids’ goods was a factor in the lack of kids apparel sales. “I’ve only been open in the recession. Do you attribute (the increasing sales) to the recession getting worse, or to my being better known? Ask me next year, and I’ll know,” Neal said.

Mattingly said his experiment at Evolve with children’s clothes also was a bust. His thinking was that wives coming into shop for husbands also would buy inexpensive clothes for sons, Mattingly said. Instead, his clientele has turned out to be men shopping alone.

Those men most often are younger, entry-level executives looking for quality suits, Mattingly said. He believes the recession has divided his shoppers into two camps.

“There’s the guy who comes in and sees the Zegna suit for $325 and falls over dead,” Mattingly said. “Then there’s the other guy who sees the $325 price tag and says, ‘that’s one-third of retail’ and thinks it’s an amazing deal.”