No market for full price, or even 30% off

JP was working on Thanksgiving Day because Mrs. JP had to work (hospitals never close you know). While longing for Mom’s turkey and stuffing and being depressed at the fact that I wasn’t going to get any of it this year, my mind wandered from the grant writing at hand and I decided to see if Black Friday was starting early on the internets. Indeed it was, and the first place I went was doing something I hadn’t seen before.

There I was, at 9AM on Thanksgiving Day on the Saks website, noticing that they are having a fire sale. Before I went crazy with the shopping cart I headed over to Neiman’s, Barney’s and Bergdorf to see if similar sales were afoot. They weren’t, yet. In order to understand this, you have to know how the luxury dept stores normally structure their sales. I will use the classical Neiman’s terminology because it is what I am most familiar with (I am from Dallas after all). First comes “first call”. This is usually a 25-30% discount and it lasts for about a month. Then comes a further reduction, usually down to 50% and this reduction generally has no name, although there are usually some promotions built around it, including a pre-sale for card holders. Then comes the biggy, “last call”. Often times, this begins on Dec 26 (or mid-July for spring-summer collections); however, I can remember the days when Mom used to bring me along for this when it would happen in mid-Jan.

Well, this year, Saks apparently decided to start with “last call”. 70% discounts on virtually everything. Neiman’s, Barney’s and Bergdorf started the pre-Black Friday at about 30% but within hours, presumably as a result of the Saks pricing, they had a further cut online to an additional 25%. Still not as low as Saks but a substantial additional discount. Boy-oh-boy does the economy suck. There is an interesting article in the NYTimes about this whole deal and the apparent desperation that is running through the minds of the luxury dept stores. Its also interesting to see that the other retailers are a bit peeved at Saks for cutting from tradition and starting the fire-sale a bit too early. Since they’re all selling essentially the same things (with the exception of Barney’s Co-Op), they were more or less forced to follow suit or lose their Black-Friday sales. However, even though luxury goods are sold at a huge mark-up, one cannot help but wonder if they are actually making any profit at a 70% discount. I was (and am) under the impression that at -70% you are essentially getting rid of inventory. I guess that’s better than holding onto expensive stuff that you won’t be able to sell come Feb.

The impression I get from the NYTimes article is that the other retailers felt undercut by Saks early price slash. As if they didn’t see it coming. There is no Saks (or Neiman’s) where I live now; however, I did make a trip to Saks in another city while traveling, back in Oct. Something happened to me then that I have never seen before. I was looking at some clothes with Mrs. JP and a salesperson asked if I needed any help. I said, no, just looking, and the salesperson then told us that he could offer us 40% off on anything we bought that day, despite the fact that nothing was actually marked down. I actually bought something, so I can confirm that it wasn’t a bluff. Later on that day, we got a similar offer (50% off) at another luxury retailer where they were also not having a sale. Unheard of, as far as I am concerned. So, come-on Neiman’s, Barney’s and Bergdorf, you saw this coming. You’re just pissed that you’re not going to be able to dump your inventory as quickly as Saks!

The question now is, what are you luxury retailers gonna do for spring-summer ’09? A new bar has been set and I have to say, I’m gonna enjoy my Etro at 70% off much more than at 40% discount.

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7 responses to “No market for full price, or even 30% off

  1. I don’t think they’ll be making record sales, but people with money will probably not decide to shop at Target’s, so they’ll keep coming. Another thing to keep in mind is that the whole manufacturing industry is also suffering, so they’ll cut prices to keep the high end shops buying their products and services. Here in Montreal there is a high end place called Holt Renfrew’s that is currently doing a booming business, even with the economic problems.

  2. Quite true FN. DId you know Holt’s was once owned by Neiman’s? Not anymore, though, its back in Canadian hands since 1996.

  3. Not to be harsh, but methinks possibly you are just unable to come to terms with the fact they still make absurd profits off of you when you buy stuff from them at “70% off!”.

  4. Becca, You could be right; however, from what I’ve seen, they are not making money with these sales. Saks shares are down at least 30% and they appear to be in trouble. Now, the designers may be making an absurd profit still but how long will that last? Of course, the Middle Eastern market continues to grow (but for how long with falling oil prices?).

  5. *shakes head*

    /backs out slowly

  6. Dont get confused between “absurd profit” and “absurd markup”. These companies are pretty bloated between advertising, staff and overindulged design houses, things get expensive. Even though that shirt cost $1.20 to make, getting it to the store after all the bureaucracy costs a pretty penny. Yes I feel ripped off, but dont think Saks is making money like Exxon (was).

  7. Dr.F is correct, and since I once had an interest in becoming a designer myself, I know a bit about this. When you buy clothes, check out where they are made. That Banana Republic shirt made in Malasia may have cost 1.20 to make but that Etro shirt made in Italy or that Band of Outsiders shirt made in good old USA most certainly did not. Of course, this is obvious, but the degree of markup may surprise you. There was a great article in GQ last month about Thom Browne suits. They’re made in NYC and cost about $3000 (too much for me) but they run about $1000 to make. Just say’in.

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