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Saks Fifth Avenue - 3 executives fired

post #1 of 12
Thread Starter 
http://www.nytimes.com/2005/05/10/business/10saks.html Was wondering if anyone else saw this article. I thought it was an interesting window into the business of fashion.
post #2 of 12
The term "markdown money" is a new one to me, but I know the grocery business is rife with payments from wholesalers to retailers. Almost every aisle one walks down in the typical supermarket is a profit center for the grocer. Soft drink bottlers pay big money to get "facings"; most of the time to the detriment of their competitors. Small brands often have an impossible task to try to get their products. Another source of large sums of hidden money to grocers is the sale of space in their newspaper advertising. I know one grocery chain that made more money selling slots in their ads and shelf facings than they made actually selling the groceries.
post #3 of 12
yeah, in france, it's called "marges arrières" which would loosely translates to "back margins". It's very popular in the large grocery companies, the vendor has to pay part of the markdown to the retailer to go "on sale" and thus benefits from the supposedly higher exposure. .luc
post #4 of 12
Thing is, it's not illegal or unethical that I know of. When I was a cub business reporter many years ago I did a story on this and asked a top executive at a local grocery chain. He was very forthright and said, on the record for attribution: "Look, that shelf space costs a lot of money, and we ask our vendors to help defray those costs."
post #5 of 12
Quote:
In the traditional practice of collecting markdown money, retailers demand payment from suppliers to cover the cost of putting items on sale when demand is soft - or, at least, when the stores say it is. If the vendors do not go along, suppliers say, the retailers often threaten not to order their clothes again.
Nasty business. It was on the local Birmingham news. Apparently the corporate offices are here. Very odd.
post #6 of 12
Basically markdown money is charged back to ensure that the department store meets minimum margins. Designers can get screwed by the department store by it claiming markdown money even when items sold at full price. It can get nasty as they threaten to pull written cutting tickets and everything.
post #7 of 12
Quote:
Quote:
In the traditional practice of collecting markdown money, retailers demand payment from suppliers to cover the cost of putting items on sale when demand is soft - or, at least, when the stores say it is. If the vendors do not go along, suppliers say, the retailers often threaten not to order their clothes again.
Nasty business. It was on the local Birmingham news. Apparently the corporate offices are here. Very odd.
Yeah, I found that odd as well...you think they would be in NYC, no? Jon.
post #8 of 12
Quote:
Quote:
(AlanC @ May 10 2005,17:03) Quote In the traditional practice of collecting markdown money, retailers demand payment from suppliers to cover the cost of putting items on sale when demand is soft - or, at least, when the stores say it is. If the vendors do not go along, suppliers say, the retailers often threaten not to order their clothes again.
Nasty business. It was on the local Birmingham news. Apparently the corporate offices are here. Very odd.
Yeah, I found that odd as well...you think they would be in NYC, no? Jon.[/quote] Nah, Parisians bought them about 10 yrs ago from Investco and changed its name to Saks to capitalize on the investment.
post #9 of 12
Quote:
Basically markdown money is charged back to ensure that the department store meets minimum margins. Designers can get screwed by the department store by it claiming markdown money even when items sold at full price. It can get nasty as they threaten to pull written cutting tickets and everything.
Do the clothing companies have some kind of protection regarding fraudulent claims? Jon.
post #10 of 12
You'd think we'd rate a better Saks, then. And at least an Off Fifth at our lame outlet mall.
post #11 of 12
Quote:
Thing is, it's not illegal or unethical that I know of.  When I was  a cub business reporter many years ago I did a story on this and asked a top executive at a local grocery chain. He was very forthright and said, on the record for attribution: "Look, that shelf space costs a lot of money, and we ask our vendors to help defray those costs."
Selling shelf space is the only 'juice in the deal' for many grocery stores.
post #12 of 12
As the Times article says, vendors giving markdown money to stores or taking back unsold goods are age-old practices. In fact, the arrangement tends to perpetuate the relationship between a store and a vendor. Typically, whatever "refund" the store negotiates is credited against its next-season purchases. If a store drops a vendor that is holding a credit, the store, in effect, forfeits the credit remaining on the vendor's books. That, in turn, explains why some stores are notoriously slow about paying bills. They want the leverage of the unpaid bill when it comes time to press for concessions at the end of the selling season. The recent twist in the game is stores unilaterally taking credits for "contractual" offenses by the vendor. Many of these offenses involve computer and scanner technologies that are used to aid shipping, receiving and distributing goods. The sales contract (i.e.: the order) now includes provisions requiring the vendor to adhere to rigid guidelines in packaging and shipping the order. When these instructions are violated, the stores impose cash fines on the vendors. The rise of such unnegotiated, unilateral fines has opened the door for unscrupulous merchants to charge cash penalties anytime they need cash.
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