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Because the duties situation is assymetrical and objectively unfair. The importer and retailer are obligated by law to pay duties on the same item that is exempt from duties when the individual customer buys it.
There is no way to make up for that difference in taxation and not have that result in the death of the price-matching US store. It is basic economics 101 : in a commodities market (interchangeable suppliers) the lower cost supplier will always win.
Many brands are only starting to realize this as their US accounts (like us) tell them: if you're going to let Matches and End and all those guys who are using the tax and duties loophole to dump their product in the US, we won't buy it anymore and you will let your entire US retail network self-destroy. If you're okay with that and the resulting concentration of sales into three mega-UK online monsters, do nothing. If you're not okay, establish simple pricing rules to level the playing field.
I would guess that a lot of these would be domestic denim brands, which seem to be desirable in both Europe and in Japan. For a lot of these brands, the sportswear is still often made in the China, and the footwear in Portugal, of course.Now, "desirable US made brands", that is something we're always in the lookout for. There are few that are not just a designer with relationships with factories in China or Portugal.
Again, going back to our early discussions, I think your best bet is to offer a combination of product and services that doesn't even allow a customer to comparison shop. Stop carrying some stock Craig Green thing. Have him make you a special model in an exclusive fabric. Or modify the design a little. Or frankly carry some other brand that allows you to carve out some other niche. Or whatever. But don't carry some navy jacket that someone is just going to buy from Bulgaria, where they pay sales associates 1/10th of the wages in San Francisco.
The italicized part, you are going to do a ton of marketing work, and there are two possibilities: 1) The brand will not catch on, and you will take a bath. 2) The brand will catch on, you will reap the rewards for one or two seasons, and then everyone who has read your marketing, read about the brand on Instagram, Styleforum, whatever, will be on that same brand like a fat kid on chips, and your comptetive advantage will be lost. This means that you will have to be doing this in perpetuity, and hope that your skill and luck do not run out, since every miss will mean a loss.
Essentially, no matter whether or not you are going to compete explicitly on price, you will be paying a significant cost. I'm suggesting that maybe it's not so bad to compete on price but try to control it to some degree. It's not the ideal solution, but it may be the optimal one.
My question then is why the US store has to sell for $1000 out of the gate, instead of $800, like the European retailer (and most of those are out of major European cities)? This includes out of the UK, where a lot of the retailers we talk about are based out of London, a city that has long been notoriously expensive. What is making the US retailer, or at least, certain US retailers, uncompetitive? And who is competitive? And why?
Those models seem to rank superior to fashion's "average joe". I have some friends who buy into the FiveFour subscription service. It's not bad but definitely for guys who wanna look good without the backing of quality products. That facade, if you will, seems to be pervasive right now in men's style.
@LA Guy This in a way sounds like the original operating plan for Opening Ceremony. Constantly focused on the "new" and bringing unique offerings to the market every season. Oki-Ni in the UK was doing this like a thousand years ago too.
Oki-ni originally did exclusive collaborations exclusively. Then then closed down, and reopened as a multibrand store.
I know that you do a great job with your branded items. However, there is obviously a strong demand for third party goods. How would you suggest that retailers market those? I mean, we can even take Europe and Japan out of the equation and talk about American brands, like the Vanson example you gave earlier. Yes, a lot of people showroomed that one jacket, but given the high price of Vanson in Europe and Japan compared to US prices, it's a near certainty that a US stockist made that sale off your back. Is it a zero sum game in which certain retailers just have a better internet presence for specific brands and pieces? There are a significant number of other ubiquitous American brands in the same situation. Off the top of my head, Filson, Pendleton, Schott, are carried by stockists throughout the US. Is everyone just selling out of state only? In that case, the only net loser are the individual states.
@LA Guy good question. Plenty of brands are in that boat, especially footwear. Think about Red Wing, Wolverine, etc.
Honestly, I don't know. There are going to be boutiques with a strong neighborhood presence and a very dedicated customer following who can endure based on good will. Our storefront in Brooklyn certainly had that. Our local customers would buy a Filson bag from us at full price, even knowing that they could save 10% plus the sales tax if they bought it from Filson's site. They liked and wanted to support the store, and that still happens.
The problem is.. those people are coming in less and less to many shops. Online is just a lot easier. And the idea of paying more online.. when you know that there's a cheaper option a click away.. that's a tough pill to swallow, no matter how much you like the retailer in question.
With the loss of foot traffic (that's happening everywhere), the stores that survive have to be good at online sales and social media promotion. If they're carrying something that other vendors have (basic Schott perfecto), then they'll need to compete, and price is always the number one way. Even in our strongest multi-brand years, I never had remarkable sales of any 3rd brand item that wasn't an exclusive (shell cordo Alden makeup that no one else had at that time) or a markdown (CDG Play at 30% off end of season).
So should everybody operate the same way as Dries does?
He keeps a limited number of stockists, you have to be approved to sell things online, and you are not allowed to sell/ship product outside of your region.
It makes it hard to buy for people outside of major stockists, and things still go on sale obviously, but it helps keep his line desirable and (I imagine) keeps down on discount warfare.
Do you find that with better quality items in general that it may be hurting your traffic and sales? IE someone buys a Filson bag that lasts for years and thus they don't need to shop for that again. Apply that to a jacket, trousers, etc.
Not really... in fact it may be the opposite scenario for clothing and footwear. Once someone gets a great quality pair of trousers or boots, they tend to want a lot more.
-Would you sale that creating your own products or even brand helps to differentiate you from the competition thus helping your business?
Absolutely, and I think that it's becoming pretty crucial for survival. If not your own brand, then at least a range of exclusive items.
-Funny you mentioned online and it being easier. I had a friend mentioned that at her hair salon one of the girls mentioned she gets things from Amazon because they have Prime and she can get it so fast. What strikes me about Amazon after a quick browse is they have pretty much nothing worthwhile. At least on the men's side. I noticed Jack Spade. Not really my thing, but being familiar with the brand I was curious as to the pricing. Before even checking the Jack Spade site I could tell prices at Amazon were higher. It also said order would be sold and fulfilled by Amazon. I did still check Jack Spade's site and it was cheaper across the broad and with free shipping, free returns and better selection.
Agreed with that... in terms of the menswear that we (Styleforum) like, there's not much to choose from on Amazon. And I find the search function to be really difficult. But outside of "our thing" they're definitely selling a lot of clothing and footwear to a lot of people, and taking a huge bite of the volumes formerly done by B&M stores.
-Do you find that people are more likely to buy something at a % discount off even if it's more expensive than a straight markdown? IE you've got a jacket which fat full retail is $900 and it will sell better at $799 and 40% (so $480) vs just marking it down to $449. That's my experience with friends who don't do the simple math. In fact I've seen it in stores where the sales associate is trying to convey this to the customer who still doesn't get it.
Yes, I'd agree with that. It's human nature to want a discount and "believe" the original tagged price. Sites like Gilt took advantage of this. Mass retailers are aware that many customers will not purchase without a perceived discount and they price goods accordingly. I did this at Saks. We'd pay $50 for a cashmere scarf and make it $350 original retail. That way, it gets marked down to $195 at Black Friday and everyone feels like they're getting an enormous deal. All that they're doing is paying the typical markup. It's a head game. If some units sell at the inflated full price... well that's just a bonus.
So should everybody operate the same way as Dries does?
He keeps a limited number of stockists, you have to be approved to sell things online, and you are not allowed to sell/ship product outside of your region.
It makes it hard to buy for people outside of major stockists, and things still go on sale obviously, but it helps keep his line desirable and (I imagine) keeps down on discount warfare.
Could do the Cucinelli strategy, which is to sell a solitary beige crewneck sweater per season for $$$$$$ and be done with it.