Referencing {FAQ}

Thursday, January 15, 2009

The State Of Retail: J.Crew's Drexler Weighs In

"Thanks!" to Matt for sharing with us an interesting article over at WWD (click here for the article in its entirety) about a recent Financo, Inc. Annual Industry Seminar, where retail executives were debating the state of the retail industry. In the article, "Drexler portrayed the department store business model as flawed, with stores lacking control of their destinies and at the mercy of brands that set prices and often open their own stores, which cannibalize sales from the very retailers they supply". The following is a preview of the article:

Retail CEOs Debate the Landscape
By Vicki M. Young
January 13, 2009

It was the battle of the two retail titans at Financo's Inc.'s CEO seminar Monday, with J.Crew's Millard “Mickey” Drexler and Neiman Marcus's Burt Tansky butting heads over the state of retail and what needs to be done.


Drexler said he "didn't think we'll ever get back up to where we've been," and how "no one knows where we're going." In short, "Customers have hit the reset button," according to Drexler.
He pointed out that change was needed since the country has "too many stores and not enough differentiated product.” But he still believes there's a customer who still wants quality goods.

Tansky, known for loving the rich, was clearly frustrated at their lack of spending, even though he acknowledged the "rich aren't so rich anymore."


He even blamed the media for writing about how and where consumers can find bargains, as well as husbands.
"Husbands used to say 'enough.' Now they say 'Don't even think about it,' " Tanksy told the attendees. While it’s "hard to be a retailer, it's harder to be a luxury retailer," he added.

Nevertheless, Tansky insisted "luxury is not dead" and that there is still a luxury consumer out there, but that retailers "have to stimulate the customer to buy at full price."


All the talk about discounting prompted J.C. Penney chief executive Myron "Mike" Ullman III to joke at the evening's dinner that his company's "biggest price point problem is we have Neiman's and Saks [Fifth Avenue] within our price points."


For another take on this event, read the "Retail Execs Debate Price, Positioning at Financo Event" over at Home Textiles Today (click here for link).

First, I have to agree with Mickey about the "department store business model" being flawed. In particular, they need to address why customers should turn to them considering the competition- from both direct (e.g. Saks, Macy's, etc) and indirect competitors (e.g. specialty retailers like J.Crew, and even discount stores with designer collections like Target). Second, what is up with the "husbands" comment? At first, I was upset for the spouses, but then I got upset for the husbands. I mean, they are getting a lot of blame for the retailers' woes. ;)

What are your thoughts on the article? Disagree or agree with any of the points made? For instance, do you think the department store model is flawed? Do you agree that "husbands" should be partially blamed for customers' current spending habits? ;)

67 comments:

  1. Egads. I had to read the husbands comment a couple times. Wha--?

    Why are they blaming the consumer?For them to run the companies well, they need to get a grip on the market research.

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  2. I say they should quit whining & somehow make me want to purchase their products.

    Oh, has any noticed the lack of customers at clothing stores recently? Ghost towns. I've never seen Madison Ave & the Soho area so quiet before.

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  3. I know, the malls around me are absolutely empty. Of all the shops, Neimans and Saks were the most crowded, followed by Starbucks ;) The smaller shops never seemed to have more than one or two customers in them.

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  4. Jeff - LOL to youir first paragraph. Scary re: your second paragraph.

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  5. Interesting that these excerpts didn't once mention customer service, nor quality of goods (or potential lack thereof)...Discussion about merchandise and pricing seem to be on their minds, but if a retailer wants to focus on gaining business in lean times, I think they need to go back to the basics.

    And that "husbands" comment made me cringe...

    (Apologies in advance for not reading the full article, but I don't want to sign up for the online mag - too much stuff in my inbox as is! :))

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  6. Regarding Mike Ullman's comment about Neiman's and Saks being in JC Penney's price point- ZING!

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  7. A @ 1:50 AM: Lol, well it's true. As for the empty stores, a friend of mine went into a JCrew B&M today with only customers & 2 visible sale associates. Pretty extreme . . .

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  8. I'm having contractions...first baby. How long before I have to check into a hospital? You gals have always helped me with clothing...I figure some mommies out there can give me a heads up...before I see an actual head pop out of me!

    This is not a joke...

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  9. Well I'm not a mommy but once your contractions are about 5 - 20 minutes apart & continue even as you walk around or lay on your left side, then it would be about time to go.

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  10. Jeff,

    I love all your comments on this post! So glad you contriubute. I don't always agree with you but I am so glad we have a--well, can I say it--token male--on board. Would love to see more male posts!

    The whole baby thing with Alice too funny too!

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  11. P.S.

    Alice,
    Congrats on the baby and get yourself to the hospital girl!

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  12. I know a husband who says this to his wife, she is a shopaholic, even though she holds a very good job it causes alot of problems for their family. It is sad.

    Back to J Crew, I agree with they have to get back to the basics, I know this is what I will be buying this Spring a few key pieces, I look at my giveaway bag and all I see is too many bad purchases and wasted money.

    I read an article the other day that luxury goods have taken a big hit this time around so it is no time for JC to sell so many luxury pieces.

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  13. congrats to Alice. :)

    I didn't appreciate the "husband" comment either. In our household we both work, and I spend my own discretionary income after putting the rest into the household budget. if that's neiman marcus' target demographic it's no wonder I don't shop there.

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  14. The J.C. Penney comment made me laugh. But seriously, these are scary times...for individuals, not just stores.

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  15. What luxury retailers fail to recognize is how out of control opening price points have become. Six years ago I bought a Chanel wristlet on sale for $80. The original price was $140. I regularly buy Chanel ( I work at Saks one night a week for a discount) and a resin ring with fake pearls is $200+ dollars! The the change in income and the rise of inflation is not keeping up with the escalating prices of luxury goods.Two years ago I bought a Chanel 2.55 (the classic quilted bag). the price was $1650. The current price for the same exact bag is $2450. How on earth do you explain that jump???

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  16. ITA...blah, blah, blah, blah, BLAH!

    I'll forget I read that article.

    As for Alice, LOL. Thanks for the laughs :) I know, I'm sure you're not in a joking mood at the moment. I'm a mother of 6. When in doubt, call your Dr.(but believe me, YOU'LL KNOW!)

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  17. Yes, luxury good are taking a hit and even before things got bad people on this blog were saying, JCrew--luxury brand? I don't think so?

    Monica,
    I agree with you and the whole out of wack inflation thing compared to incomes rising at a much slower rate...but, then again, many people don't care and just pay whatever and don't even check price tags.

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  18. P.S.

    That's what got American in trouble in the first place...spending more money than they actually have.

    I pay my CC bills in full each month and don't spend more than I have...but I know I am the exception.

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  19. Re: the husbands comment. We both work and i handle all the money, and am the shopper for myself, our daughter, and him. Sometimes he will go clothes shopping for himself but only at my prompting.

    Anyway, at times I do check in with him before I make a huge purchase. He does not spend much on "toys" so I feel I need to let him know when I am making a big expense. It also helps me to stay in budget. We pay our bills off each month and save like crazy (at least 20% of pre-tax income) so it is important for me to have him understand where the money goes for two reason: I handle it, and we don't buy a lot of big-ticket items (TVs, Wiis, etc.).

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  20. Wow, that husbands comment alone made the already unappealing Neiman Marcus even less appealing to me. What is this, 1950? But I agree that the overall decline in clothing store quality has driven many people to thrifts and stores like H&M.

    If you get the same quality for hundreds less, why buy it at some luxury box store? You used to spend more on investment pieces but why bother if those pieces are so poorly made that they fall apart in a year? I see plenty of crowded stores in NYC, but it's places like Uniqlo, Mango and Forever 21; not Burberry, Saks and Bergdorf.

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  21. Roxy, I was just going to write the same thing. When I read the husbands comments I was like this is 2009, not 1955. This is not a time when husbands give an "allowance" to their wives and check how much they spent. If golddiggers and the women that are on the "Real Housewives of..." series are NM's target group, then I'm very glad I don't shop there.

    Alice - congrats on the baby!!

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  22. What is wrong about the media telling us where bargains are? I think that is a good thing :) As for the husband comment? Silly. Most of the women I know are not ruled by their husbands - they are in charge of their own spending.

    As for me, I sort of stopped shopping in dept stores a long time ago. I don't have as much time to sift through racks and racks of clothing anymore. I target smaller stores (like our beloved J crew) that that I can whip in and out quickly and make purchases fast.

    Alice, I hope you are at the hospital now....congrats!

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  23. What a sexist view of female spending habits. Yeah, because all of us depend on a man to give us some spending money and sort our finances for us; we can't bother our pretty little heads. Screw that. I earn my own money and spend/safe how I see fit.

    And wouldn't bargain hunting mean we're handling our money more wisely? I only buy jcrew at full price if I need it for an event and am worried it will sell out beforehand (especially with petite sizes, they seem to disappear quickly). I used to buy jcrew at full price more often, but a) I have grad school loans + etc. to pay off, and b) I don't think the higher prices are worth it. The quality is not better than it was 5,8, 10 years ago-- my old shetland sweaters hardly have any pills, but a cambridge cable crew from this xmas is already pilling.

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  24. The article contains a sexist assumption that the husband always makes more money. Not true in my case, and probably in many people's case.

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  25. When I worked for 10 years my husband never said anything about me shopping or how I spent money.

    Now that I have stayed home with kids he says he makes the money and does limit what I can spend and does comment if I spend too much in his opinion. Hey, he is a wonderful man so I guess I can't complain but I don't agree that just b/c I stay home the money he makes is his to decide on how it is spent.

    Like it or not, there are MANY men who still think this way...(we are in our 30's)

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  26. I'm in the minority when I say this but I understand where Mr. Neiman's is coming from with his husband comment. I have at least 5 friends who husbands are well to do and they are lucky enough not to have to work. A couple of my friends have told me that their husbands have flat out told them "no" and they have had to return the item. It is hard b/c there is only one income coming in and they don't know if hubby will get laid off or if he will get that 40% bonus so frivolous spending is out of the question. I have one friend who spending was so out of control hubby had to put her on an allowance. She blows through it in the first week and spends the next three weeks miserable.....

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  27. anon @ 10:20,

    I could see how there are women who would love to have access to lots of cash simply due to the male company they keep, but wow, I would be *mortified* if my SO kept me on an allowance. No freakin' way. Might work very well for others, but it's definitely not a lifestyle I could lead. Even if it meant all the jcrew I could imagine...

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  28. I'm not married yet so maybe I don't know that well but I still think it's somewhat wrong for a husband to control what his wife spends just because he earns the money. Taking care of kids is a job of its own and can be more exhausting that a regular office job. If the wife doesn't work, the husband's income is money coming into the WHOLE FAMILY not just his bank account so that he can allocate it as he pleases.

    Of course it depends on the woman too. Some are crazy spenders and don't know how to budget. I happen to think I'm a bit responsible. I pay off my CC bill monthly and have never been in CC debt. I also save and invest wisely.

    I know this post about the retail industry is turning into a conversation about marriage and gender roles lol.

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  29. "Husbands" - ouch. I don't know if that's more insulting to women or to men.

    As far as buying at full price, I'm going to need a lot more "stimulation." Or reasonable full prices.

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  30. Amy,

    I agree (also not married yet and never want kids, but...). It's a partnership, raising kids and housework IS full-time work and the money the man (or woman) makes is for the whole family, not just to allocated how the breadwinner deems appropriate. When I was unemployed, my SO took care of the shared expenses (I still paid my own bills like car insurance, etc.) and I did all the cleaning and cooking at home. I felt guilty like I wasn't "pulling my weight," but I also understood that is what couples do--you help each other in whatever way you can.

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  31. Sounds like Tansky has no concept of his customers and today's world. Bad for someone in the retail business!!

    As for a lull in the crowds in the stores, it's always seemed to me that this is a slow time of the year regardless of the economy. Most people have bought what they wanted to in the after-Christmas sales, and spring really hasn't hit the stores yet, so there's no reason to go browse.

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  32. I think the quality of luxury clothes, shoes and bags has gone down. Luxury retailers are spending less on the production and quality assurance but still charging high prices. I think this is the main reason customers who have 'luxury' money to spend - haven't been spending it. Jcrew, while I don't consider it luxury, used to have very nice quality clothes and the prices reflected the quality. Now I feel like the quality on a lot of Jcrews items has definitely decreased.

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  33. Precisely, I believe that something in the American consumer has been reset, particularly relating to luxury goods and spending, and they are reevaluating what is "worth it". Sure, the rich are still fairly rich, but perhaps their spending has decreased because they've woken up to the fact that paying more these days is just that; one is getting more or better, the cost has just gone up. Retailers have been in a self-destructive cycle of lowering production costs and therefore quality while jacking up prices more than the market will bear. And now consumers have made it clear to everybody but those retailers that that is why they are retaining their purchasing power instead of using it. If an item in a tough economy is still worth its price tag, it will get bought. If it's seen as throwing money away, it won't.

    Drexler was correct, there still is a consumer, but we're looking for quality goods, not junk. Retailers are not taking this seriously. I think that when I say, if it's better quality, I'm willing to pay what you're asking, fair is fair, most retailers don't take me seriously. That is why I shop at very few stores in general these days- I'm quite selective. That, in my opinion, is the only stimulus I need.

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  34. Alice, congratulations!! You're probably having it by now. Boy or girl? Will you name it "Jay"?

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  35. Heather-
    Her allowance is 2k for a month. I don't think that is mortifying. When things started getting rough her SO came to her and said that he wasn't sure if he would loose his job and that they had to get spending under control, himself included. They made a budget and he gave everyone in the family their own allowance. She spends her allowance on whatever she wants and he deosn't say anything. The rest of the money has been going into savings to pay off debt. She has never been the type to budget herself. Her SO is a VP and if he lost his job they would be F***** to say the least b/c it is not like those jobs are easy to come by.

    I'm not saying it is the right thing but it works for them and I don't think she is mortified by it otherwise she wouldn't have talked about it.

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  36. Husbands comment - yikes!

    Congrats Alice!

    Thanks for posting this article Alexis! Its always interesting to hear the business side of J.Crew.

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  37. anon @ 11:29,

    *I* would be mortified. Your friend expects a certain standard of living b/c her SO is an exec, and that's fine if it works for them. I wonder if hubby loses his job, will she look for work? Or expect him to bear all that pressure?

    To me, a $2,000 allowance is huge. My car isn't even worth that much. :D

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  38. I'm not getting married - ever!

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  39. Heather,

    I agree with you, I would be mortified too.

    In my opinion, when you're at home, you're a team and all the members are equal. I can have a boss at work, not at home. There's something about a grown adult woman getting an allowance that creeps me out. Sorry...

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  40. A @ 4:24 AM: Thanks for the comments.

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  41. being a former stay at home mom, I TOTALLY see where the husband comment came from. my husband was laid off last November and has yet to find a job- he's in the construction field, a professional who was making a very decent living. I went back to work FT b/c he can't find anything. when he was working, I pretty much bought what I wanted, when I wanted. he knew, but acted like he didnt. As soon as he started to get concerned about the future of his job, he said STOP. And I did for the most part.
    Yes, when the husband solely works, he does it for the family. But when wives are out freely spending money with no "Leash" (as was my case), I think it's within reason for the husband to put a stop to it, as well as other spending the family is doing ( eating out, entertainment, etc).
    I for one have DEFINITELY curbed my spending at JC. Don't even really look at the new arrivals anymore...they're going to go on sale anyway and I'd rather wait.

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  42. I agree that the rich who shopped at NM and Saks don't have the money that they used to with the market crash.

    I agree with Mickey that the customer still wants quality goods.

    And the husband comment by Tansky, I cringed when I read that.

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  43. jcrewlover-
    i'm in the same boat as you. basically the same thing happed to my husband and i had to get a job and massively cut back on my spending. at the beggining my husband did have to tell me to stop many times but now that the reality has sunk in i just know i can't buy like i used to. i think there are a lot of women of this blog who think the husband is trying to use their power to dominate them but in many case i think some women just simply dont realize that some of the spenidng has to stop.

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  44. Based on the husband comments by Tansky & my fellow readers I've come to the conclusion that some people thrive in THIS mindset.

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  45. anon at 1:19-Agree!

    And let's not kid ourselves...being a fomer SAHM, who's at the mall shopping during the week with the kids? MOMS with kids in tow! I can't tell you how many moms would be in a jc store with kids in tow during the week...moms whose husbands were working, while we were all out spending. I never took my husband telling me to stop spending as form of power...just a form of common sense!

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  46. anon 1:19 - Some people don't realize that bad things can happen to them i.e. lose a job in a safe profesion but it can, it has happened to me. In that case for the sake of the family the wife or husband has to stop spending for the sake of the family welfare.

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  47. Congrats to Alice! Hope it's a short labor.

    My friend would say it's McCain thinking vs. Obama thinking. The dude that made the husbands comment is stuck in the past. I realize that there are still women who are given allowances for clothing, etc... but now there are so many more women who have careers and are making their own money. They're going to thinking twice before spending money. And they/we definitely want to spend it at a place that is welcoming. I don't feel welcome at Neimans, Saks, so I don't shop there. Surely they don't want to make the brand accessible to anyone, but they aren't reaching for the new moneymakers. They're not stay at home wives.

    Times have changed and it's apparent that some of the retailers are stuck in an old way of thinking. Target is an excellent example of new thinking. They're telling us we can have fun and save money. Essentially, their store brand is accessible to the consumer and they have attracted a wide range of incomes in their demographic. Not to mention that they give back to the community. Elitism and class consciousness is on its way out. The retailers better pay attention.

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  48. Jeff,

    Too funny:)

    Signed Evil Girl

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  49. Jeff you are so funny!

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  50. Spending discretionary income should be a team decision -- that is, both the husband and wife deciding how it should be spent. For a wife to go shopping at Neiman Marcus -- even if she and her husband are wealthy -- could in the current environment take quite a bite out of the discretionary income. Therefore, while it seems neanderthal for a husband to say "no more," it may be logical, considering wives will spend what they want to spend, and husbands are quite often responsible for spreading the income thin enough to cover all bases. I don't think it's meant to be insulting to the wife; no more than she means it to be insulting when she goes shopping and unloads the paycheck.

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  51. Wives who NEED to be told by their husbands to "stop" must have no common sense or grasp of reality. Not a very attractive aspect in a relationship partner. Luckily, it seems that modern couples are moving past the old sexist paradigm: women are making their own money, know how to budget, and do not have to take orders from their husbands. And to say that some women must be kept on a "leash" is seriously demeaning.

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  52. I work and my DH doesn't. He stays at home. I make more money and it makes sense for him to be a stay at home dad for the time being. I sometimes have to tell him to stop spending. He's not a compulsive shopper and he means well but I think sometimes he gets bored and just doesn't realize he has over spent. I don't think the husband comment is meant to be sexiest.

    I find Mickey's comment about quality goods annoying. I do think shoppers expect quality, esp. more now than ever but he is really the last one who should make a comment about quality. J Crew quality has severely declined.

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  53. Congrats Alice, for whenever the new one arrives.

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  54. The comment about some women have to be kept on a leash is no more demeaning than some men have to be kept on a leash from overspending. The fact is both sexes can overspend and need to be reigned if it becomes a problem.

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  55. Jeff that's the first funny thing I've seen you post.

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  56. I've been in both positions-SAHM and FT working Mom.

    I'd like to know the percentage of FT working women WITH CHILDREN, FT working women WITHOUT CHILDREN and SAHM's who were offended by the "stop spending" comment.

    Until you're in that position, it's really easy to comment, isn't it?

    And for the record, I don't take orders from my husband. We are a team and talk about things-neither one of us is the boss of the other.

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  57. Marriage is teamwork. I love clothes, and DH loves audio components. We spend with reasonable limits, although we would remind each other about our spending. I do more reminding since I am the finance manager of our household, but I never would use the term putting my DH on a leash unless I have little respect for him.

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  58. Most women don't rely on their husbands for income but in a lot of wealthy households, that is the case. I lived a wealthy man and he wanted me to dress a certain way, very upscale and reserved, the right shoes, jewelry, etc. He gave me a credit card with a $50K limit that he paid off every month. In our circle none of the wives actually worked, although some were quite active with charities. The men were all corporate executives or had family money.

    These are the rich people that Neiman's caters to and that is what Tansky is talking about. He really doesn't care about you and me shopping with them, but maybe he should.

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  59. Anon 6:00 - I agree, Neiman's CEO is talking about the very wealthy and not the average Joe's. In those circles, few women work because it is considered declasse unless you have your own company or are in the entertainment business. At least that is what I have seen working in an industry that caters to the very rich.

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  60. "He even blamed the media for writing about how and where consumers can find bargains, as well as husbands."


    What a badly written sentence. It makes it sound like the media has written about where consumers can find bargains and husbands.

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  61. I think the whole definition of what luxury has changed greatly in the last thirty years.

    Once upon a time true luxury was something like a cashmere sweater that was saved and passed on and cost so much that a person would save months for, then buy and treasure.

    Many of us here have several cashmere sweaters and with that the cashmere sweater has lost its cache and sense of being a luxury item. In the quest for growth in sales true luxury has been watered down by stores. And with the watering down they have increased the amount of product available.

    I feel that true luxury is limited and not available for everyone due to cost and limited numbers. Armani black label, Tom Ford and Hermes are what I think of as being true luxury.

    What retailers are seeing now is an adjustment and the 'reset' being mentioned. By pay full price, they will mark it down, 50% or more, thus making it a deal and not a luxury, full price item.

    To get back the customer retailers must sell things that we dream of and lust for and will buy at full pop. The heavily marked down items show what we don't want to pay full price for.

    If you look back to times of recession fashion was amazing, it had to be to draw in customers. To survive they must bring their best game, not something that quickly moves to the sales rack. Both service and goods must be the very best.

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  62. Anon @ 6:20 - I thought the same thing. I was like, "What is he talking about, Match.com.?"

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  63. RE: J Crew Guy comments
    Analogy-
    Buying a cashmere sweater today is like running a marathon. It didn't use to happen to the average person, nowadays, it does.

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  64. i don't have much new to add, but i would like to add my voice to the chorus about a few things.

    1. J Crew quality (and the quality of many other retail stores) seems to have gone down. i can't tell you how many times i've had to return something to j crew because there was a rip, or a hole, or a button fell off.

    2. Husband comment--unbelievable. But, on the topic of allowances......(and maybe my situation isn't the same as what was meant....) My boyfriend and I (shared finances) have a budget, and in that budget each of us has an allowance. (Which is a very, very small fraction of $2000!) So, "we" give me an allowance, and "we" give him an allowance. Nothing mortifying about it! Just a column in our budget, like that for groceries.

    Now, I agree that it would not be nearly as easy a situation if he had dictated the budget, but since it was a joint project I'm totally cool with it.

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  65. Here's a more recent article on retailers and the current market:
    http://news.yahoo.com/s/ap/20090119/ap_on_bi_ge/retailing_makeover

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