Is the Retail Exclusive Disappearing—or Is it Changing?
E-commerce can bring out the worst in some shoppers, said Sandy Lew-Hailer, owner of the Seattle boutique Sandylew.
A woman once came into her store and demanded a discount on an item. “I can get this for $15 less online,” Lew-Hailer remembers the woman saying. Lew-Hailer didn’t attempt to match the price. She didn’t attempt to make a sale. Rather, in a market of increasingly blurred retail boundaries, she demands that e-commerce and bricks-and-mortar retail remain separate.
If a brand sells its products online, she won’t stock them in her fashion boutique. “I can’t compete with them,” she said of labels that do direct sales or sell their goods on their own branded e-commerce site.
The issue of brands selling goods online has been brewing for years and has given some boutique retailers pain.
Liza Zagha believes that she lost business at her Lisa Z boutique because some of the brands she carried also sold their goods online. “It made me wonder, ‘Why do you have to play both sides of the fence? What edge are you going to give us?’” Zagha said of brands that wholesale and also do direct sales. Zagha retired in January after 26 years of running Liza Z in Redondo Beach, Calif.
But since e-commerce has become an increasingly conventional way of doing business, different boutiques, retailers and manufacturers have found different ways to balance the conflicting demands of e-commerce and retailers’ needs for exclusivity.
Demanding a territorial exclusive has been a traditional part of the way retailers have done business for years. It’s still very important, said Pepper Foster, a veteran designer and fashion entrepreneur. He aims for clarity on who can sell his brands online and which stores can sell them. His Monkey Sport by Pepper Foster is supposed to be online only while the brand Chip & Pepper California is only sold at Belk department stores and the company’s e-commerce site. Brands that try to sell online and compete against retail partners can get burned.
“You get an unhappy retailer, an unhappy salesperson, and then you get an unhappy customer. You kind of lose the customer,” Foster said.
But in the age of e-commerce, a territorial exclusive has less impact if a product also is being sold online. It’s also tougher to expect an exclusive in a post-recession market in which every dollar counts.
Paulina Castelli, a boutique retailer, said that there is no way to avoid competing with e-commerce.
Castelli runs a boutique retail space at 1638 Abbot Kinney Blvd. in Los Angeles’ high-profile Venice neighborhood. The space has been the address for pop-up shops and fashion boutique ventures such as Kith NYC and this spring will debut a new boutique concept called Venice Heights.
She contends that bricks-and-mortar stores often build business for labels.
But as a small-business retailer, Castelli concedes that her boutique cannot always buy the volume that a label needs to survive. E-commerce, often seen as a threat, can help the boutique and the brand stay in business for another day.
If a brand does e-commerce, it puts more money in the brand’s pockets. It may stop them from seeking to do business with department stores or major e-tailers, which can sell an item for a steep discount and wreak havoc with a small business’s bottom line.
“My goal is to keep these really amazing labels in business. They keep me in business. There is enough to go around,” Castelli said. If she misses out on some business in the short term, she believes that a label’s direct sales will eventually build a boutique’s business in the long term. The more a brand builds its reputation, the more people will eventually come into her boutique to look for the brand.
Wolf & Man is an emerging men’s brand headquartered in Whittier, Calif. Brian Chan, the director of Wolf & Man, said direct sales make up 50 percent of his brand’s business. His label looks to respect the territorial exclusivity of boutiques by giving retail partners different segments of the Wolf & Man line.
“Wolf & Man is sold in almost every block in downtown Los Angeles. Every shop has its own character, its own story, its own customers,” he said. All of these shops might carry the same brands, but if they all offer different looks from that same brand, they will have an exclusive, Chan said.
The market is changing further because of the rise of omni-channel commerce. Fashion companies are increasingly acting in the once-distinct roles of retailer, manufacturer and e-commerce vendor. Tankfarm & Co., headquartered in Seal Beach, Calif., has wholesaled its men’s styles for years. However, it does e-commerce at www.tankfarmco.com. It started a burgeoning boutique division in the past few years with a flagship in Seal Beach and a Tankfarm & Co. boutique in the Americana at Brand retail center in Glendale, Calif. It is scheduled to open a new boutique at the upcoming Pacific City mixed-use development in Huntington Beach, Calif., in October.
Good relations with retailers are important to Anderson, and he keeps them by selling Tankfarm goods at a suggested price on his website. It is up to the retailer how they want to sell their Tankfarm goods. “I don’t undersell them,” Anderson said. “I make sure that there is enough margin for them. We give them a 2.5 times markup. It’s all about respect.”
Being undersold is a possible scenario that he has to face at the Tankfarm & Co. shop, which sells garments from fashion brands such as Naked & Famous, Pendleton, Publish and Zanerobe.
Even if the market for retail has changed rapidly over the past decade, there is a lot of space for physical retail, according to the California Fashion Association, the Los Angeles–headquartered trade group.
E-commerce made up around 20 percent of the retail market, according to a survey released by the CFA in 2014. Specialty stores make up more than 25 percent of the market. A brand’s direct sales could even help out a boutique’s sales, said Ilse Metchek, CFA president.
“As a matter of fact, a presence on these sites helps the boutique retailers give validity to their merchandise,” Metchek said.