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Gordman Says: Mark It Down Now

J Crew windowIn his most recent Trending Report, consultant Bob Gordman noted weak retail traffic and sales and predicted the next step at most stores: fall inventories would start backing up. He predicted that merchants would react by cutting back holiday and spring orders, and sure enough, Women's Wear Daily reports this week that retailers have reduced their spring apparel orders 10 to 15 percent.

Pity the poor store manager, whose edict from headquarters is to keep a tight rein on inventory levels and gross margin. Gordman argues that this approach is short-sighted because it keeps inventory from July, August, and September on the floor through the holidays, deferring the inevitable markdown. People will buy, but not if they find the same tired stuff they saw at back-to-school time.

"The consumer is far more likely to spend money on fresh, exciting merchandise than leftovers," Gordman writes. What to do? Write off Fall 2008, get that merchandise out of your store as quickly as possible, and move on.

  • Take your margin hit now. Promote aggressive markdowns into early November, using them to bring in traffic.
  • "Get new holiday and transitional receipts on the floor as soon as possible."
  • Make others' troubles your business advantage. Buy desirable holiday merchandise at off price and put it on the floor at full retail.
  • Take big markdowns in late December and start moving in transitional and spring merchandise.
WWD adds that apparel vendors are working closely with their important retail accounts to match production to conservative demand forecasts for spring and beyond. "We have triple- and quadruple-checked assortments, and we are not pushing," said Paula Sutter, president at Diane von Furstenberg, who adds that the company is only cutting to order to keep inventory lean. "We are being very cautious, as are they. We don't want them to buy anything they don't think they can sell."

Ron Frasch, president and chief merchandising officer for Saks Fifth Avenue, has told his buyers to cut back -- or eliminate -- brands that aren't performing. Elle Tahari and Ralph Rucci have laid off staff, and Gap Inc. asked headquarters employees to take the rest of this week off to -- with pay -- to reduce the company's balance sheet burden of accrued vacation time.

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