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After last year, retailers are really going to have to get smart about their operations if they hope to stay afloat. Fashion retailers will no longer buy every style in every color but instead must focus on the necessary pieces that customers absolutely will demand.

Instead of the widest selection of trendy merchandise, retail buyers are looking for styles that will have staying power. Companies may have to carry over merchandise from season to season, which means timeless pieces will be more valuable. In an effort to reduce inventories, decision making likely will move to the beginning of merchandise assortments, because the budget is limited. Apparel merchants are cutting inventories by 20–30 percent for their summer and fall seasons, compared with last year.

Not only will merchandise selections be limited, but price points will fall. J. Crew has lowered the price of its ballet flats to $98 from $118, and it will carry fewer $1300 trench coats. Rock & Republic introduced a Recession Collection, priced at $128 to $132, whereas the company’s premium denim jeans usually sell for $180 to $320. The Recession Collection will appear side-by-side with premium denim in Bloomingdale’s, Neiman Marcus, Nordstrom, andSaks Fifth Avenue. When the recession is over, it will disappear.

When consumers question the real value of products, the widespread acceptance of the $300 premium jeans category starts to change. Companies like Ralph Lauren are reevaluating their prices to see how they might lower costs to lower the retail prices.

In 2008, retailers used discounts and heavy promotions, up to 75 percent off, to move inventory. This year, they will be buying less inventory and hoping to draw customers with better value, lower prices, and improved service. Neiman Marcus is trying to sell its regular priced merchandise by hosting small private events for its best customers. All retailers will have to try, more than ever before, to lure customers to dish out their money on expensive apparel in this poor economy.

Discussion Questions:

  1. How are retailers adjusting their inventories to help recession-pressed customers?

“Retailers Cut Inventory to Address Shift in Consumer Spending ,” Los Angeles Times, January 21, 2009.