New York Fashion Week: The Apple Bites Back

There's really only one topic of conversation at the shows this week and that's the economy. Well, there's a lot of Obama and Hillary talk too. But as far as the industry goes, there's just one question on people's minds, and that is: "How bad is it going to get?"

American retailers are a tough bunch at the best of times. They require that designers guarantee profit margins and any discounting comes out of the designer's pockets. But with recession looming on the horizon, it's getting even worse. Retailers tell me that the U.S. stores have been cutting back on their orders, refusing shipments that are a day late or taking a whopping 40 percent off of the price. The big shopping guns are readying themselves for battle.

This season, one source says stores are sticking to the letter of their contracts. Normally, contracts have a clause that allows stores to opt out if things don't arrive on time, but it's usually waived for runway pieces. No waivers this season, however. And if brands want to negotiate a discount, the stores are asking for 40 percent whereas previously they'd settle for 10 or 20. "40 percent means they don't want the stock," said a retail source.

I got a hint of this trend last November, when I went to a talk with Mary Gehlhar, the fashion coordinator at Gen Art. She explained how U.S. department stores operate in a regular economic climate--and it wasn't pretty. She told stories of shipments being sent back for the smallest of flaws--a pin hole UNDER a collar, say. And of a designer ringing each day to find out how much of his shipment was selling, only to find after a week that it had never even made it onto the sales floor. The big stores here have all the power. And when the going gets rough--it's rough indeed for the designers.

The primary source of the problem, of course, is the uncertainty surrounding the residential real estate market, which has collapsed over the last year, bringing consumer spending down with it. The first indication of the pullback came in the all-important December holiday shopping season, which saw sales fall 0.4 percent. January sales figure for retailers - scheduled to be released Thursday-- look similarly grim with an expected rise of 1 percent, a figure typically associated with recessions.