Given the outlook, it's necessary that smaller brands — who may not have the parachute afforded by a cash-rich parent company — prepare for trouble in the retail market:
"What's key for these brands is to be nimble, to be flexible and be able to fail fast."Author:Alexandra MondalekUpdated:Nov 14, 2019Original:Nov 14, 2019As news of Barneys's bankruptcy and subsequent sale spread, the collective mourning for a bygone retail era was tinged with at least some delight over the promised sales and steals that would clear Barneys stores of its unsold inventory before its new owner, ABG Group, closed the retailer's doors for good.
"This has been a wake-up call for small businesses that haven't yet weathered a downturn," says Susan Scafidi, director of the Fashion Law Institute, referring back to the Great Recession that challenged the retail environment a decade ago.
"The danger first and foremost is for any brand to get in bed with any retailer so deeply that if something happens to the retailer, it has a detrimental effect to a significant chunk of its business," Evers says. Though the brand declined to provide specifics, co-founder Fogg explained that Area plans to grow its recently-launched direct-to-consumer channel and rely less on wholesale buyers who may ignore some of the essential products that give Area its unique aesthetic. The brand also plans to carry products that are exclusive to it e-commerce platform to attract shoppers to its site. As for its remaining third-party relationships, Fogg says Area is approaching its wholesalers more cautiously today.
Alternatively, fashion and beauty brands might explore the consignment model, more commonly employed by jewelry brands, which allows the brand to "loan" its products to the department store until they are sold.
When retailers go under, seek legal helpIdeally, a brand's existing contract with a third-party seller will stipulate how the brand's products are repurchased or discounted in the event of a bankruptcy or poor sales quarter, though that may not always be the case. In many instances, smaller fashion brands have less leverage when approaching a wholesaler in the throes of bankruptcy, left to pick up whatever financial scraps are left after a retailer's secured creditors are paid.
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