In 2012, Colombian designers Melissa Losada and Marcela Velez had modest expectations for the launch of their luxury handbag brand, M2Malletier.
“We just wanted to create a beautiful product that we would both want to wear,” Velez said.
But the minimalist look of the duo’s signature linear bag handles caught the attention of major luxury retail stores. The designers flew to New York City to show their first collection at the Plaza Hotel during New York Fashion Week in 2012 and, soon, their handbags were being sold in such luxury retail stores overseas as Bergdorf Goodman, Moda Operandi, Net-a-Porter and The Webster.
“It was amazing, everyone responded so well to the product,” said Velez.
Fast forward to today, the pair and other young designers are moving away from retail stores, and not only because of the pandemic.
“We stopped working with a lot of stores that were giving us trouble, because at the end of the day I was not enjoying my job any more and I was just frustrated all day,” Velez said
M2Malletier handbags were once sold in 75 retail stores around the world, but the designers decided to focus on direct-to-consumer for the past three years.
Emerging designers like Velez are concerned about the restrictions imposed by retailers and are seeking other avenues to sell their wares.
“A lot of young designers are doing direct to consumer” said Jonathan Michael Square, a Harvard University history professor who specializes in fashion. “Retail was broken before the pandemic, and now the pandemic just completely obliterated it,” Square said. Retail makes sense for “a handful of established brands that have good relationships to department stores,” but for young designers, “it is better to focus on the direct consumer or making small batch orders with niche boutiques.”
Velez said the industry is oversaturated with brands and collections that overwhelm customers and buyers. Retail stores often impose predatory “sell-through” conditions that require designers take back all unsold merchandise if the collection does not sell at a certain rate, usually around 65 percent.
“It’s not a partnership,” said Velez.
The designer said that in October 2018, a store asked to return a Fall collection, which had been shipped in August. The store had sold 50 percent of the inventory in less than two months and there were still several months of prime selling time left.
“They said that they just preferred to return everything… The whole system is set so that small brands have no opportunity to win.” Velez said.
Some stores also impose end-of-season discounting, or place orders that are out-of-sync with weather patterns. Such stores, Velez said, would order summer collections in January. Then, by April, the stores enforce mid-season sales
Velez’s concerns are increasingly common.
Last May, hundreds of designers and retailers – including such luminaries as Tory Burch, Riccardo Bellini, Wes Gordon, Donna Karan and Angela Missoni – wrote an open letter asking the fashion industry for “change that will simplify our businesses.”
The group advocated for “adjusting the seasonality and flow of both womenswear and menswear goods,” and limiting discounting to “the end of the season to allow for more full-price selling.”
In the traditional calendar, retailers would go to fashion shows in February and September and place orders that they would sell in the next season. But as the system changed throughout the years—most notably after the public gained access to shows in real time through social media—customers wanted collections to be available more quickly.
Many brands began to add seasons like “pre-fall” and “resort,” transforming the traditional calendar from two seasons into four, pushing designers to produce at a faster pace. With an overflow of products, discounting became the norm.
The pandemic exacerbated the problems as some retailers shut down and others see sales decline.
Retail sales of clothing and accessories decreased by 23.5% from August 2019 to last August, according the U.S. Department of Commerce.
Meanwhile, the pandemic has kept shoppers away from stores. Consumer spending in e-commerce during the second quarter of 2020 of $211.5 billion was up 44.5% from $146.4 billion in the second quarter of 2019, according to data from US Census Bureau adjusted for seasonal variations.
A number of retailers have filed for bankruptcy: including Barney’s, Neiman Marcus, Lord & Taylor and Century 21.
In 2019, most of M2Malletier’s business came from pop ups, which allowed the designers to sell more in one temporary location than they would for months in a store, Velez said. In 2019 they did around 11 popups in Miami, New York, Barcelona, London, among other cities.
This year, they skipped seasonal presentations during Fashion Week to focus on launching a new website in November and invest in digital marketing.
New York fashion designer Jonathan Cohen also decided to focus on a more tailored business model. He has been slowing down his production cycle and narrowing the number of partners.
“We were already having problems with payments with stores from the season prior” Cohen said. When the pandemic hit, his company “decided to play it very cautiously,” and skipped Fashion Week shows.
He only has “a very few partnerships” with stores and wants to avoid “producing so much product that’s its overwhelming the customer.”
Behind the scenes at Presley Oldham’s fashion film for Spring/Summer 2021 (Photo by Maxwell Turner)
New York Designer Presley Oldham, who launched his jewelry brand in May 2020, sells his creations via Instagram and a website. He presented his collection during Fashion Week through a new platform launched by the Council of Fashion Designers of America, Runway360, with a dance film featuring his friends.
“I’ll need to figure out how to expand production and go into retail spaces.” Oldham said.
Emerging designers may need retailers to establish their name and find consumers, said Ana Lucia Jaramillo, a branding adviser who represents Colombian designers to stores like Saks Fifth Avenue. But sell-through conditions hurt brands’ businesses.
“Retail has to be more responsible,” Jaramillo said, adding that department stores should limit orders to what they really need to avoid returning products.
And the industry still has other issues, including environmental concerns, inclusivity and diversity.
“The pandemic has allowed many to hit the reset button,” said Square, the Harvard professor. “Let’s just hope that these changes are lasting.”