Department Store Markdowns, Who Feels The Pain

I explained in my post about the Fashion Business Club, that selling to U.S. department stores is not for the faint of heart. There are many onerous requirements a designer must meet, but perhaps worst of all, when a department store decides to mark down goods it is the designer who must cough up the difference.

Since this year is shaping up to be one with major markdowns -- Reuters is reporting that stores are trying limited-edition markdowns to lure customers in early in the holiday season while sale prices are only 30 percent off, not 60 -- the effects are having a knock-on affect on vendors.

WWD says that small labels in better and moderate (not the most expensive designers) are expecting to be asked for twice the usual amount of markdown money. They're responding by trying to capitalize on the value of their companies now by merging or being acquired.

Net Worth Solutions has seen more than a 50 percent increase in inquiries from vendors looking to be either acquired or merged... healthy companies "who want to get out while they still can with value" are looking for buyers, while more troubled companies -- particularly those doing less than $50 million in volume -- are looking for strategic partners with which they can grow sales while sharing costs.

The president of Net Worth Solutions said he thinks only half the companies in this space have the means to weather the added costs of markdowns without teaming up with a bigger player. Some of the pain has already been felt, as retailers knew a bad season was coming and cut back on inventory. Shoppers holding out for the big 60 percent off, may find that what they want is just not there.