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Businesses pull together in recession

The tough trading climate is forcing branded suppliers to dream up new ways to support their stockists and ensure their own survival

As the recession takes its toll on the fashion industry, retailers, brands, suppliers and other fashion operators are discovering that partnerships and pulling together have become more important than ever to ensure mutual survival.

During the past couple of weeks, young fashion brand Luke, and lifestyle label Paul & Shark’s UK agent G-Wood have both renegotiated terms to help support their stockists following currency fluctuations.

Luke managing director Simon Poole says its retrospective discount for stockists made good business sense. “Our costs went up by 15% to 20% on product from the Far East when we were selling autumn 09 stock. We had originally put our prices up between 8% and 12%, so were taking a hit because we hoped it was going to get better,” he says. “But if the retailer has to put their prices up, that could affect our sell-throughs.”

He adds: “There is a big difference between a jacket at £100 and £105 or £110. With the improvement in currency in recent months we could afford to make sure that didn’t have to happen with the retrospective discounts. We’re in partnership with indies and we’re in it for the long term at the end of the day. They trust me that I’m not going to put the brand in the nearest multiple retailer. We are significantly increasing our spend on marketing going forward as well, which I believe is what you need to do when times are tough. We’re also working on some other consumer incentives to boost sales.”

Fashion businesses are finding other ways of working together to leverage their respective strengths and protect against market instability. Distributor Four Marketing has teamed up with London menswear indie Marlin to launch a franchise store, and with etailer Clothingsites, which operates multi-brand transactional websites.

Four Marketing brand director Ben Banks says his business is transforming its relationships with stockists. “The industry has been turned on its head in the past nine months,” he explains. “We’ve offered extended payment terms and taken stock back and so on, and this just takes the partnership to a different level.”

Banks adds that many of his wholesale customers had been feeling the squeeze, especially as credit insurance has been slashed. “About 80% of our customers used to have some level of credit insurance. Now it’s less than 40%. We are trying to de-risk the position for everyone involved, leveraging our own position and relationships with brands and the expertise of retailers, like Marlin’s local market knowledge, or an online operator’s database,” he says.

In January, Glynn Alwyn-Jones, partner at agency Parkers Fashion Group, launched a payment plan to allow stockists of the group’s brands, including Airfield, Nice Connection
and Sonja Marohn, to buy autumn 09 stock at a fixed exchange rate. The aim was to protect customers if sterling weakened further against the euro when invoices were due for payment later in the year.

Alwyn-Jones, who is also chairman of the International Fashion Federation, says he has been calling for more supplier retailer partnerships for some time. “It’s all about partnership, between retailers and agents, between agents and brands,” he says. “We’ve had examples of autumn ranges getting delivered before spring is paid for, which was unheard of before. Brands understand that a retailer has to have new stock. Obviously the retailer has to give something for that, maybe a personal guarantee, but also show that it will be loyal to the brand and is committed to building its customer base.”

Despite increased manufacturing costs due to the volatile exchange rate, with sterling declining against the dollar and the euro at the beginning of the year, Alwyn-Jones says brands are generally not putting up their prices for spring 10. The result is that stockists are not being forced to take a hit on margin if they want to keep retail prices level.

He says: “My experience is that prices haven’t gone up, and the recent improvements in the strength of sterling have helped things.” 

-       How are you supporting your stockists through the tough times? Drapers wants to hear about any initiatives or partnerships between suppliers and retailers. Email laura.weir@emap.com

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