Brooks Brothers Bankruptcy Thread

[dieworkwear]

well, not at 70 off, but I assume in general people's point is if they're making enough margin at say 35 off why not just chop msrp by 35% and never do sale.

Every retailer has to figure out what to do with unsold inventory. The way the seasonal fashion calendar is organized, sometimes you also have the problem of early seasonal deliveries. This is something the entire fashion industry is trying to figure out.

When a retailer gets spring items in, they have a short amount of time to sell it. After four months, excitement loses steam. Sale schedules also mean you're competing for other people's dollars. And depending on your target market, people may not even come into your store to buy spring items until much later (winter coats can get delivered in October, but people may not shop for winter coats until December, well into marked down season).

So if you sit on a huge pile of unsold stock, what do you do? If you wait longer, you may not even be able to sell them at a 70% markdown. If you hold onto winter coats, you'll also have to pay for storage. Companies need to maintain a cash flow.

 

[smittycl]

I still don't understand.

When people say retail prices are a farce, they're suggesting that the out the door price is intended to be much lower than the full retail price. So:

Retail price: $1000
Intended out the door price, let's say: $500

And when people say that the out-the-door price is $500, they mean that the retailer is still making a healthy profit at $500.

But if the retailer is making a healthy profit at $500, why are Brooks Brothers and J. Crew filing for bankruptcy?

Maybe because BB has lower-end goods priced too high and customers have better options elsewhere?

 

[dieworkwear]

Maybe because BB has lower-end goods priced too high?

I feel like we're repeating ourselves.

Again, if you assume that the stuff is marked up higher than reasonable, then that means you expect there's a profit to be made even at a 70% discount. If there's a profit to be made on a heavy discount, then how does a company land at a loss?

I was actually thinking the other day that J. Crew and Brooks Brothers filing for bankruptcy should disabuse people of the notion that retail prices are farcical, but I guess it's the opposite.

 

[clee1982]

Every retailer has to figure out what to do with unsold inventory. The way the seasonal fashion calendar is organized, sometimes you also have the problem of early seasonal deliveries. This is something the entire fashion industry is trying to figure out.

When a retailer gets spring items in, they have a short amount of time to sell it. After four months, excitement loses steam. Sale schedules also mean you're competing for other people's dollars. And depending on your target market, people may not even come into your store to buy spring items until much later (winter coats can get delivered in October, but people may not shop for winter coats until December, well into marked down season).

So if you sit on a huge pile of unsold stock, what do you do? If you wait longer, you may not even be able to sell them at a 70% markdown. If you hold onto winter coats, you'll also have to pay for storage. Companies need to maintain a cash flow.

I don't doubt you, but I think people's question is mainly on some specific stuff they have in mind, like i assume the navy suit other than 4 season weight vs. summer weight is practically the same every year. Cut those by 25% (or whatever is your healthy side) and never do sale on those.

p.s. I think that's kind what retailer trying to do but even that failed, to me fundamentally it's always the same thing, too much supply, there is no easy way out of it other than just cut

 

[FlyingHorker]

I was thinking about this last night. What if the retail price is completely farcical? I feel I can trust certain stores to have fair retail prices. No Man Walks Alone for sure, the Armoury and Sid Mashburn, sure, but Brooks Brothers? Asking $1200 retail for an 1818 suit? Definitely overpriced for an entry-level suit.

The fact that they always seem to be two-for-$1500 now with plenty more seriously marked down in the sale section indicates they likely are not very costly to make.

Interesting, I always found NMWA, Armoury etc to be ridiculously priced.

I'm not paying $200 for a linen t-shirt.

 

[clee1982]

I feel like we're repeating ourselves.

Again, if you assume that the stuff is marked up higher than reasonable, then that means you expect there's a profit to be made even at a 70% discount. If there's a profit to be made on a heavy discount, then how does a company land at a loss?

I was actually thinking the other day that J. Crew and Brooks Brothers filing for bankruptcy should disabuse people of the notion that retail prices are farcical, but I guess it's the opposite.

I think it's somewhat in between no, if no item ever sold at msrp then that retail price is indeed not that real...

 

[dieworkwear]

Interesting, I always found NMWA, Armoury etc to be ridiculously priced.

I'm not paying $200 for a linen t-shirt.

For items that are made in expensive countries, using materials also made in expensive countries, imported from one expensive country to another expensive country, why wouldn't we think that these are fairly priced?

Say you source your yarns from an expensive country, ship those things to an expensive country to be woven, and then ship those things to another expensive country to be cut and sewn (say Japan).

Then you have your retail price for that item. Ship that finished item to another expensive country (say the United States). Factor in shipping and duties along the way for these processes. What would people expect an item to cost?

If somewhere along this way, the company outsources its production to lower-cost countries to keep costs down, then some members on this board will then cry about how quality has gone down.

Usual mark-up along this chain is 2x to 2.5x.

That means if a retailer pays $100 for an item, they sell it for $250 (or they try to sell it for $250). This doesn't include their cost for labor, real estate, marketing, etc. It's just the cost of the item multiplied by 2x to 2.5x.

So then if a $250 item is marked down by 70%, we have a selling price of $75. That's already below their wholesale cost.

Even at a 50% markdown, that may be above the company's wholesale price, but not take into account their operating cost.

With rare exceptions, I've never heard of a retailer deviating from this 2x to 2.5x model.

When people talk about inflated prices, they often point to the sneaker industry, where they assume some plastic sneaker costs $2 to make in Vietnam and the brand sells it for $150 or so. SoleReview once did a cost breakdown of what it actually takes to get a sneaker to you. If sneakers -- the supposed poster boy for inflated prices -- aren't as inflated as people think, why would we think this of other items?

What does it cost to make a running shoe?

Solereview goes where no one has gone before. Sneaker economics 101.

www.solereview.com

 

[clee1982]

We all know 70 off doesn't work, but if a retailer is doing a permanently at least 20 off (Banana Republic/J Crew/Ann Taylor, on and on), then I guess the psychological question become is it better to always 20 off then do another 25 off when you really need to do sale OR
start with a msrp that is 20% lower then the sale is only 25 off

 

[FlyingHorker]

For items that are made in expensive countries, using materials also made in expensive countries, imported from one expensive country to another expensive country, why wouldn't we think that these are fairly priced?

Say you source your yarns from an expensive country, ship those things to an expensive country to be woven, and then ship those things to another expensive country to be cut and sewn (say Japan).

Then you have your retail price for that item. Ship that finished item to another expensive country (say the United States). Factor in shipping and duties along the way for these processes. What would people expect an item to cost?

If somewhere along this way, the company outsources its production to lower-cost countries to keep costs down, then some members on this board will then cry about how quality has gone down.

Usual mark-up along this chain is 2x to 2.5x.

That means if a retailer pays $100 for an item, they sell it for $250 (or they try to sell it for $250). This doesn't include their cost for labor, real estate, marketing, etc. It's just the cost of the item multiplied by 2x to 2.5x.

So then if a $250 item is marked down by 70%, we have a selling price of $75. That's already below their wholesale cost.

Even at a 50% markdown, that may be above the company's wholesale price, but not take into account their operating cost.

With rare exceptions, I've never heard of a retailer deviating from this 2x to 2.5x model.

When people talk about inflated prices, they often point to the sneaker industry, where they assume some plastic sneaker costs $2 to make in Vietnam and the brand sells it for $150 or so. SoleReview once did a cost breakdown of what it actually takes to get a sneaker to you. If sneakers -- the supposed poster boy for inflated prices -- aren't as inflated as people think, why would we think this of other items?

What does it cost to make a running shoe?

Solereview goes where no one has gone before. Sneaker economics 101.

www.solereview.com

You're right, in regards to an apples-to-apples comparison.

I'm speaking from the perspective of a value consumer.

I'll pay $150 for a pair of MiUSA jeans, I'll pay $275-450 for shoes made in the US or UK, I will not pay $200+ for a linen t-shirt.

Whenever I see an Armoury coat or suit, I think "I wonder if my local trusted tailor could replicate this cut at a fraction of the cost." I haven't done that yet, but I'm confident he could.

I've tested getting a MTM safari jacket made vs. an OTR Armoury safari jacket, and it was still $50 cheaper locally, and that's not even accounting for taxes+duties I'd pay on an Armoury garment.

These are all quality goods made in "expensive" countries for a reasonable price.

 

[clee1982]

I thought as far as Ring Jacket goes the Armoury is pretty reasonable actually, no the rest, no comment...

 

[dieworkwear]

You're right, in regards to an apples-to-apples comparison.

I'm speaking from the perspective of a value consumer.

I'll pay $150 for a pair of MiUSA jeans, I'll pay $275-450 for shoes made in the US or UK, I will not pay $200+ for a linen t-shirt.

Whenever I see an Armoury coat or suit, I think "I wonder if my local trusted tailor could replicate this cut at a fraction of the cost." I haven't done that yet, but I'm confident he could.

These are all quality goods made in "expensive" countries for a reasonable price.

Whether you have other options seems to be a separate question from whether the mark up is fair.

You may be able to find a local tailor who's willing to make you the same item for less.

Or you may be able to find other brands who can supply you with better and cheaper goods.

But these seem to be separate from whether a mark-up is fair.

I think the usual 2x to 2.5x mark-up is fair. If a retailer buys something for $100, then a fair mark up is $200 to $250.

When people say that fashion prices are a farce, they're suggesting that the mark up is much higher than 2x to 2.5x. I don't understand how anyone believes this when retailers, brands, and factories are literally shuttering all around us. Clearly, companies that rely too heavily on sales are taking a loss. You can't run a profitable business if you're constantly marking down 50% (although, some companies still markdown because the alternative may be worse).

 

[FlyingHorker]

Whether you have other options seems to be a separate question from whether the mark up is fair.

You may be able to find a local tailor who's willing to make you the same item for less.

Or you may be able to find other brands who can supply you with better and cheaper goods.

But these seem to be separate from whether a mark-up is fair.

I think the usual 2x to 2.5x mark-up is fair. If a retailer buys something for $100, then a fair mark up is $200 to $250.

When people say that fashion prices are a farce, they're suggesting that the mark up is much higher than 2x to 2.5x. I don't understand how anyone believes this when retailers, brands, and factories are literally shuttering all around us. Clearly, companies that rely too heavily on sales are taking a loss. You can't run a profitable business if you're constantly marking down 50% (although, some companies still markdown because the alternative may be worse).

I believe you and concede that it's fair in terms of mark up and not a farce, I still find the overall price and garment(s) to often be ridiculous from a consumer standpoint.

For me it's a principal thing when looking at a relatively high priced linen t-shirt, I'm going to scoff.

I basically treat stores like NMWA, Armoury, Drake's etc as sources of inspiration or something to copy, rather than actually buy from.

 

[clee1982]

I basically treat stores like NMWA, Armoury, Drake's etc as sources of inspiration or something to copy, rather than actually buy from.

I think that alone has some value, just not very easy to monetize...

 

[FlyingHorker]

I think that alone has some value, just not very easy to monetize...

For sure man, I agree.

 

[smittycl]

I was talking mostly about the 1818 suit. I'd be curious to see their sales figures at retail and all the steps of discounting they go through over the year. The retail price may or may not be a joke but if customers are conditioned to believe it is the end result is the same either way.