The Post-Recession Fashion Industry: Discounted Sells

SeriesPart 2: The fashion industry is emerging from its cocoon post-recession, a changed sector where consumers are more cautious, manufacturers are on their toes and designers are struggling to stay afloat doing business as usual. In this five-part series, we take a hard look at the fashion world, speaking with industry leaders, luminaries and experts. This week we ask: Has the recession turned us into cheapskates so we can feel like fulfilled consumers?

Since 2007 they’ve popped up like dandelions: The discount clothing venues we love for all the hot bang we get for our hard-earned buck.

Gilt, My Habit, FashionStake, eBay Fashion, and now even discount eco-commerce sites like the recent launch of JP Selects and LovingEco tantalize us with a designer discount warehouse vibe that appeals to our need to shop. Recession? Heck no, we’re all the same when it comes to discounts whether wealthy or middle class, hoarders or sample salers who need to get more for less. If you think this concept is something new, just look back to post World War 2 consumer habits and you’ll see a direct link to the burgeoning of low-profit-margin strategies designed to attract price-conscious consumers.

The only thing that’s changed is the technology and marketing to hungry consumers and struggling designers.

NOW Showcase, 2011

Joslin Van Arsdale, owner of San Francisco’s Ecocitizen boutique, says sites like Gilt affect eco-commerce because they encourage the quick consumption of cheap, mass produced and disposable goods, and therefore skew the consumer’s perception of value.

“In the past a sample sale was last seasons leftovers. Today, designers who participate in Gilt sales are selling are specifically commissioned by the site and its buyers. Most of the items offered at flash sale sites, are past season designs, or popular designs reinterpreted into cheaper versions of  the original which enable companies like Gilt to maintain healthy margins while also offering  60-70% off.  This is similar to how Target and H&M do their designer collections, same name and design, just cheaper labor and lower quality fabrics,” says Arsdale.

If we think about low-pricing power in the classical sense of the term, we might look at the Wal-Mart volume model, with the idea that the more powerful you are (thousands of locations), the more you can drive your cost down. While we can understand that lower prices drives more sales in the short term, what about the integrity of the brand being sold? Do thoughtful designers really want to brand themselves as deep discounters offering bottom-barrel markdowns?

Designer Eliza Starbuck says it’s become a fear-based business for sustainable designers.

“It’s hard enough to be eco and fashion, an oxymoron in itself, but then having to go against the sustainable model and sell a whole lot of stuff seems pretty counter-intuitive,” says Starbuck.

Van Arsdale says sites like these are training shoppers to expect sales all the time and while in the short term this business model can be a great marketing opportunity for designers, in the long term, it erodes a brand’s perceived value.

“Judging from the success and proliferation of flash sites, it seems that the consumer is unaware that there is a difference in product and quality and mostly doesn’t care,” she says. “Shopping is evolving to a scale of extremes between the very cheap and the very expensive, with nothing in between, similar to what is happening to our middle class.”

But with a current valuation of some $400 million, Gilt Groupe appears to have more staying power than most fashion trends struggling to stay afloat in a traditional way. New York Magazine likens it to a safe haven for designers.

“Last year, as incomes tightened and the fashion industry was left with ruinous amounts of inventory, the company’s business model proved to be a counter-cyclical savior, sucking up goods that otherwise would have moldered,” says the magazine’s writer Andrew Rice, adding that some designers have found “Gilt’s model lucrative enough that they’ve decided to do away with their brick-and-mortar sample sales; others are now making clothes specifically for the site.”

As a result, more and more shops are turning to online sales only and closing brick and mortar venues.

Closed boutique on Newbury Street, Boston

We asked an eBay Fashion spokesperson, who insisted on anonymity, about traffic patterns since the company changed its selling model from what was already in the waste stream to recent high-profile collaborations with Alexander Wang and the CFDA. While they weren’t willing to release statistics at this time, they did respond with this statement:

“Fashion has a new home on eBay at – a dedicated destination that delivers an enhanced shopping experience with new features and sales channels like Fashion Vault that make it easier than ever to explore, find and buy items based on favorite styles, brands and popular trends.”

No longer a hot spot solely for automotive enthusiasts – who in 2005 were eBay’s biggest audience –  eBay has evolved into a clothing and accessory mecca for all financial brackets. And sites like Gilt and eBay Fashion aren’t alone when it comes to selling luxe labels for less.

Trista Dedmon, consignment manager of Brooklyn’s best secret Eva Gentry, sells higher end designers that include Zero + Maria Cornejo, Helmut Lang, Alexander Wang, Marc Jacobs, Chloe, and Marni.

Dedmon says business has picked up with both customers and consigners each season since it opened about five years ago.

“There are definitely a wide variety of shoppers we cater to from the college students looking for affordable Alexander Wang to the established professional who wants to save on a mint condition Balenciaga piece,” she says.

Brooklyn’s Eva Gentry

When asked why, Dedmon says, “It is more than likely due to the current economic climate and everyone reassessing their values. If we become more conscious of our spending habits, this doesn’t necessarily mean our taste level changes. Customers still want designer level garments, but like to stay within their new found budget, which is where a store like ours comes in.”

As recently as 2008, stores like Eva Gentry were gaining popularity quickly, not only college students but with wealthy shoppers accustomed to pricey labels. USA Today writer Laura Petrecca wrote: “There have been many euphemistic labels applied to secondhand goods, including ‘gently used,’ ‘pre-owned’ and ‘like new.’ But in the current economy, they have a new and candid label: ‘hot sellers.’

In the same article, Petrecca notes that three-fourths of resale stores polled said they had higher sales in September and October than in the previous year, and according to the National Association of Resale & Thrift Shops, “The average sales increase was about 35%.”

So what of the plight of the sustainable boutique owner, the entrepreneur supporting conscious consumerism?

Mission Savvy’s brick and mortar store

Vegan boutique owner, Jennifer Miller, has her hands full with her shop, Mission Savvy. Miller has had to forge her way forward through the muck and mire of retail since she opened two years ago in the midst of the recession.

“People want to get more, pay less. Despite its goodwill, the price point on ethical fashion for the average consumer is a big turn off – and I’m in the market to turn people on. Better to purchase something from my store, support the ethical fashion industry, feel good about it with no guilt of over spending and therefore continue to return than not shop at my store at all,” Miller says.

She says her nontraditional approach to operating a boutique has her stocking ethical products but selling at a less than average mark up which is challenging – but it keeps her customers happy and coming back.

“We’re just not there yet as an economy and in commitment. Especially if you are far removed from the fashion industry and the appreciation of the art of it, so that leaves a lot of people spending lots of money on clothes with absolutely no purpose other than to buy something new that looks awesome,” says Miller.

“And as much as people do understand the concept of responsible consumerism, it still comes down to what money can buy and for a lot of us money does buy happiness. Spending too much money on very little is not as appealing as spending a little on a lot.”

Amy DuFault

Amy DuFault is a conscious lifestyle writer, consultant and fashion instigator. She resides in Cape Cod, Massachusetts.