Sell through guarantees?
To those of you selling to chains and department stores, how common are requests for sell through guarantees? I’m just curious how many of you are approached by buyers who ask for them and whether there’s any wiggle room. Also, what percentages do they ask for? I’ve heard some buyers want 85%, is that standard? Then, I’m wondering how pilferage plays into the mix. If products are shoplifted on a sell through guarantee, who takes the bite? One would think it’d be the retailer since they had it last but in these days of shrinking allowances and increasing chargebacks, one should assume nothing.
And speaking of chargebacks, you may recall that Federated acquired May department stores. From a story in WWD yesterday, at a meeting in April, Federated announced they were treating the May stores as “new doors” and were planning to exact a 5% “new store allowance” from vendors (in the echelons of department store retailing, buyers are known to request an allowance from vendors to offset the costs of opening a new store and stocking it from scratch). Suppliers are saying this fee is unwarranted because -in taking over the May stores- the switchover doesn’t amount to much more than a nameplate change.
Since many vendors affected by the allowance were already selling to both Federated and May, the changing of the nameplate doesn’t necessarily add new doors to the vendors’ business. In some cases, the closures of certain May doors may have even reduced the overall business for some vendors…
One Seventh Avenue apparel executive who has lived through several past retail mergers observed, “This is the first time I’ve seen it,” referring to Federated’s store allowance. The executive added that the way Federated is defining “new door is not the concept that most people” would understand, based on past industry practices.
I watch retail consolidation coupled with consumer defection at all time highs and can only think this is good news for independent designers and retailers -or it just me? Either way, file this under “Yet another reason why you don’t want to sell to department stores”.