← The Glossy Podcast
The Glossy Podcast
The tariff chaos, Prada's Versace acquisition, and the state of the department store
00:58:18
Loading summary
Transcript59 lines
- [00:02]
Advertiser
Want to launch a promotion, but instead you're launching another IT ticket. Does expanding into a new market feel like building a tech startup? Sounds painful. Enterprise commerce shouldn't hurt. And with Scale, it doesn't. Scale is the flexible, scalable e commerce platform built to grow enterprise brands. Pain free. Don't just take our word for it. Brands like Harrods, Manchester United and Snipes trust scale to power their business. So why are you still suffering? Visit scale.com today. That's S C A-Y L E. Yes, the why is silent because you never have to ask why Scale isn't performing or find the link in the podcast description.
- [00:53]
Danny Parisi
Hello and welcome back to the Glossy Podcast. I'm your host, senior fashion reporter Danny Parisi, and I'm here with international reporter Zofia Zyglinska. Hello, Zofia. Thank you for being here.
- [01:03]
Zofia Zyglinska
Lovely to be here too. Thank you so much for having me on again.
- [01:07]
Danny Parisi
Yeah, no problem. This week we have two big stories we want to talk about. We will catch you up on all the latest updates on the tariff situation. I know we literally just talked about it, but there's just so much to dig into and it's changing all the time, so we're going to talk about that. The second big story is Prada just announced the morning that we're recording this that they're going to buy Versace. It was kind of rumored beforehand, but now it's official as of Thursday morning. So we will dig into that. And then later after the break, stick around to hear me and Zofia and our editor Jill discuss the current state of department stores both in the US and in Europe. There has been a lot of changes in the department store's role in the fashion industry, so we will dig into that. But let's start by talking about the tariffs. So this is like the big story. I know we literally just talked about it last week. We will probably talk about it again in the near future. But it's truly a huge deal. Every single brand that I talk to is thinking about it and kind of freaking out about it. Last week the US Economy was just imploding because of fears of this massive disruption from the tariffs. And to be clear, in my opinion, I think the freaking out is justified. It's like a blanket 10% tariff on every country, almost every country, I should say, with a few exceptions, and then higher tariffs on a bunch of countries within that above the 10%. The stated idea was to encourage more production in the US I think pretty much every economic analysis I Read of it was like, that's not going to happen. Lots of other bad things will happen. This week they announced, and by they, I mean President Trump, one of those trademark last minute switcheroos and delayed the tariffs for another 90 days for many countries. Not China, which actually got even more tariffs and the stock market, which was collapsing and investors I think were just like desperate for any good news, immediately shot back up. It was like the single, it was the biggest single day gain since 2008. Of course it was coming after the biggest single day losses like right before. So maybe not something to be really proud of, but anyway, they're delayed again, basically. So brands now have another 90 days, unless you're manufacturing in China to figure out how to handle this. Like I said, Zofia, every single brand I talk to, even if I'm talking to them for a story that has nothing to do with tariffs, it comes up, everybody's thinking about it. Is that the same? Are you having the same experience?
- [03:24]
Zofia Zyglinska
Yeah, definitely. I think for a lot of them they're expecting so much instability coming from the tariffs that even if they're not immediately kind of impacted, they're already kind of planning it into either their cost structures at checkouts or thinking about it when just looking at future sales or future buys that they're going to be making.
- [03:48]
Danny Parisi
Yeah, and I think you're right. Everyone's affected. Even if you're not directly in the path. I think American companies are thinking about it a lot because, and we said this last week, but we should say it again just because I feel like I still see this misconception all over the place. The importer pays the tariffs. If it's a tariff on China, that does not mean China pays it. Like that's not how it works. If it's 10% or now it's 100 or something percent for China. If you're importing something from China, you pay it. China doesn't have to pay anything. You could work out some deal where you, you know, with wherever you're importing from to like share the cost or something. But that is not how it works. By default, it is paid by. So it's American companies, I think, who are getting their materials or their finished products or retailers who are selling stuff from brands in other countries. Those are the ones who I think are the most affected. But like you said, you don't have to be an American company to be affected. Because if you're trying to sell to an American department store, which we're going to talk about, department Stores later, they might not want to buy your stuff anymore because it suddenly became more expensive for them. So even though if you're, you know, an Australian brand or something, you're not the one paying the tariff, it does affect your business because the person you're trying to sell to does, and they might not want to, you know, it might not work for them financially to buy your stuff anymore.
- [05:05]
Zofia Zyglinska
Yeah, exactly. And I think that that's kind of the big issue in the fashion industry is it's become so dependent on this very international way of doing, like, trade and doing buying and selling across borders that any kind of changes or like, tariff impacts, I mean, even the 10% that still stands for most countries is still going to be impacting a lot of the brands and the companies in the US as well.
- [05:30]
Danny Parisi
Yeah, I mean, a lot of companies have very thin margins that might be less than 10%. So an additional 10% just suddenly makes something from, you know, takes it from barely profitable to actually losing you money to do so. I think we'll see a lot of companies kind of change their, their approach there. And I think you make a good point. Like, the US has been setting up its economy for like 70 years to not have to make stuff here to be deeply intertwined with other countries. And the whole premise of the. The way the tariffs were calculated, which I think we mentioned last week, is like, it's based on the trade deficit between two countries. So how much I sell to you versus how much you sell to me, but it's only, you know, in those two directions, like, just country by country. But that's not really like how it works because you might have a deficit with Australia in one area, but they have a deficit with China in another area. And then China has a deficit with you in a third area. It's like it's all flowing in a circle. It's not just back and forth with every single other country. Like, you know, materials from one country get sold to another, it gets assembled there and sold to another. Like, it doesn't. If I'm buying more from you than selling to you, that does not mean you're ripping me off, which I feel like is kind of how it's been presented. And I just don't think that's how it works. But I think that's part of the reason that disruption feels so disruptive is because literally for decades and decades, the entire world has been getting more closely entwined and the supply chains are global. And it's, I think, been a good thing for a lot of people. But now it's kind of like just ripping that away very abruptly. And that's part of why you're feeling. You're hearing so much kind of fear and consternation from the people who are enmeshed in the supply chain.
- [07:19]
Zofia Zyglinska
Yeah, definitely. And I think it kind of taps quite in, like. Well, and in an interesting way into sustainability and the conversation around supply chains that has been happening in the last couple of years in that field, because a lot of that has been based on the fact that, you know, the supply chains are so fragmented. The problems are because the fact that one garment goes through 10 countries, for example, because it's assembled here, gets buttons here, the seams are done in a different country, all of those things end up having some kind of a trade implication on those countries, either benefiting them or not, depending on what the agreement is. And any kind of changes in that, such as the tariffs, will also change how that supply chain works. So a lot of that sustainability conversation has been focused on near shoring, which is, funnily enough, the same thing that Trump is hoping will come out of this in some ways, or at least that's what people think, is that the near shoring for the US or the kind of bringing production to the US Is the intended effect. However, none of those supply chains are set up that way. I think most of clothing manufacturing in the US Isn't at a big scale, even in places like la, which has the Garment Center. And I think that there's still a lot of abuses happening in that system where even supply chains in other countries elsewhere might have a better labor force set up, might perform better in audits than it does in the US Right now. So I think it would take a long time before those systems would be on par with what you're expecting from, you know, what you're getting from international manufacturers.
- [09:09]
Danny Parisi
Yeah, there's. There's so much to unpack in the idea of, like, all this production will move to the U.S. we. We, meaning the U.S. did used to make a lot of things, and that's often brought up in these conversations, like, all these jobs went away. One thing, though, that made those jobs, like, good was that they were all unionized. And I think if we, you know, if they're all kind of hollowed out, and then decades later, we bring the manufacturing at a time when union participation is way lower, and it's like a much unfriendlier labor kind of environment in the US Than it was back then. I don't think those jobs are going to be so good anymore without union protection. So that's one thing. The other thing is there's plenty of products like you mentioned, there is like clothing manufacturing that happens in the U.S. louisiana is a big one, but there's also, there's little workshops in New York City. There's a brand that we've talked to at Glossy many times, Markarian, that makes their clothes in New York City. But I'm pretty sure they're getting their materials, some, maybe some from the US But a lot come from elsewhere. So even if you're making it here, you still have to import the materials. Like the only way you could avoid tariffs completely would be to like do literally everything here. Like have all of the raw materials here, all of the manufacturing here. And I just don't think that's. I think it's practically very, very difficult. And there's some products that I think literally are impossible because like the material just doesn't exist here. You know, like if you want like Cobal Bolt or whatever, which maybe is not as useful for fashion, I'm pretty sure that's only found in like maybe not only, but the biggest and most plentiful sources are like in the Congo and places like that. So there are some things we just don't have here. And the expectation that we could just source everything and do everything here overnight seems very unrealistic to me.
- [10:52]
Zofia Zyglinska
Yeah, definitely. And to be honest, the one industry that I'm thinking about, you know, we've spoken about diamonds and kind of the jewelry industry in a broad sense. And a lot of that is coming from Africa and other regions of the world where the diamonds are being imported in. And that industry has been already suffering because of lab grown diamonds and kind of the growth of that, that sector. I'm wondering, you know, with this tariff impact and the changes and already difficult situation within that space, you know, is this going to be the final kind of death kneel for, for the natural diamond industry, you know, if these tariffs will change? Because I fully expect that 10% is not going to be the final number and there's still going to be many changes in the next couple of months. What will that mean for industries that are extremely reliant on international trade and those kind of international partners, especially with raw manufacturing like the diamond industry.
- [11:52]
Danny Parisi
Yeah, I hadn't considered that. But you're right, the diamond industry is 100% probably going to be impacted greatly by this. I wonder if it'll accelerate like you said, maybe to like the lab grown diamond, which movement which was already Happening. But I'm pretty sure you can grow lab grown diamonds right here and you don't need to, you know, doesn't matter where you are, wherever, wherever the lab is, I guess. Also I mentioned cobalt and actually that was a bad example because I just looked it up and you can actually mine it. In the US there's way less of it than in Congo, which is the biggest producer. But you get what I mean. There's other materials that we just straight up don't have here. The other thing that has been interesting to watch in the last week is the reaction from other countries. We talked a little bit, I think, last week about what you're hearing and seeing in the UK and in Europe. One of the kind of funniest reactions to me was China being like, okay, well, we're not going to show any more American movies. And I think they said they're going to show fewer, not totally ban them or anything. But I know that every Hollywood movie studio was freaking out about that because they get so much revenue from China. A lot of American movies, you know, a big significant portion of their box office, you know, take is from China. There's just a lot of reactions like that, like kind of retaliatory either in the sense of like, like imposing reciprocal tariffs, we love that word now, or doing things like that, like just punishing, you know, cutting off American revenue sources or, you know, discouraging the purchase of American goods in other countries. And I, I mean, another big one I don't think we talked about this last week is like China, Japan and South Korea formed like a new economic agreement to support each other, which is a miracle since those three countries have not got along well historically. The EU is obviously talking about, you know, ways that they can support themselves without having to rely on America as much. There's just so many things like this, like we talked about, it's alienating allies and kind of causing a lot of trouble for to me, seemingly no good reason. I don't know. Have you seen any new updates on that front? Kind of like what the talk is like in the EU or in the uk?
- [14:00]
Zofia Zyglinska
Yeah, I mean, the main thing today is obviously that the EU has paused the retaliatory tariffs of 25% on the US so obviously if one player makes one move, the other one stops. So if this is something that's going to continue, I'm guessing there's just going to be a lot of kind of moving those pieces around in the eu. Obviously, the reliance on American kind of products or like, I Guess it would probably go more the other way around. And I think it would be particularly kind of effective for luxury products because obviously anything imported from the EU on the luxury side would most likely be coming from the eu. And you know, for, for a lot of big luxury brands, you know, lvmh, carrying all of the ones that we're going to be also speaking about later today is, you know, it's something that will have to be tariffed if it's brought into, into the U.S. so, you know, since a lot of the, the brands and the companies have been relying on the US as almost like a stable market, last year for luxury, you know, it was kind of a backup after China went a little bit down the drain because a lot of the kind of margin sales were eroded there. Following Covid, I think that, you know, there's been a lot of movement towards the US whether that's opening new retail locations or kind of focusing more on the US customer. So I'm wondering if those tariffs kind of affect all of those things that might end up changing the way that these luxury brands look at their spend in the US and whether that's going to be affecting how much product they're putting out there. One thing as well is that, and this is something that I wrote about in the Luxury Briefing this week, is that because of this there might be a little bit of a boom for travel retail from the US Obviously this has already been happening that luxury customers buy products elsewhere because of tax rates or because the products are different elsewhere. If they're traveling to the eu, they might be able to buy products that would be a lot more expensive because of the tariff impacts if they had bought them in the US So that might be a possible other effect happening there.
- [16:19]
Danny Parisi
For sure. The luxury customer can afford to fly to France and buy a bag there and fly back rather than, you know, if that's cheaper than, than buying it here. One more thing I want to say about tariffs and then we'll move on. Just to offer some, some practical kind of wisdom I've been hearing from brands, but I just talked to a brand this week that they said they had been sort of anticipating this for a while. They may had proactive discussions with their manufacturers. They manufacture in lots of other countries, India, China, like, like all the ones that are targeted by the tariffs. And they told me that they sort of worked out some, some deals with their manufacturers where they would kind of share the cost all around. So it's like the manufacturer agreed to absorb a little bit of the tariff Cost, the brand agreed to absorb a little bit of the tariff costs, and then they raised their prices just a little bit for the customer. And like, it's not ideal, everyone involved is now paying more, but at least this way, it's sort of spread out a little bit. And because of that, this woman was telling me that she feels a little bit more stable, a little bit less freaked out because she had those conversations ahead of time. So if anyone's listening and wants some practical advice that may be possible to just talk with your partners and see what's doable. Let's move on and talk about Prada buying Versace, which I actually think does have some connection to what we're talking about a little bit. But rumored all week prior made official early Thursday morning. Prada is going to buy versace for nearly $1.4 billion, which is a pretty huge luxury deal. I also think it marks a turning point for everybody involved in a number of ways. First off, Versace's current owner is Capri holdings, which owns Jimmy Choo and Michael Kors. Capri was for a few years trying to position itself as the American answer to Kering or lvmh, these big French luxury conglomerates. There was this attempted deal, which we covered extensively on Gossi, to merge with Tapestry, another big American affordable luxury company. And that would have instantly made this. Joined this merged company the closest thing to an American LVMH that did not work. The deal was scuttled by regulators. Both Capri and Tapestry kind of walked away sort of bruised from the whole ordeal. And then now Capri's selling off Versace. And to me, I think that marks maybe the end of their kind of goal of becoming this American lvmh, because the biggest and most prestigious luxury brand that they had was Versace, and now they're selling it. So to me, that just sounds a little bit like them maybe giving up on that specific vision of being this American LVMH or American carrying. I have more to say, but I'll pause there. What do you. What do you make of the sale?
- [18:56]
Zofia Zyglinska
Yeah, I mean, I, I think I covered it as well in a luxury briefing about a month ago when the. The deal was first rumored. And, you know, considering I gu. Prada's broader brand space and Capri's as well, I think for Capri, it obviously simplified their structure in terms of the brands that they were controlling. If Versace was off their books, I think that it allowed them to focus on a little bit more of that affordable luxury or kind of Mid tier luxury with Michael Kors. I think for Prada on the other hand, it would take quite a bit of work, I guess to get Versace into a profitable position. It's a brand that has been doing, I would say, relatively well, but on the same, at the same time it's kind of not been as successful as maybe some of the other luxury players because of the trends that we're seeing in the luxury space, you know, towards craftsmanship or you know, kind of quiet luxury like Versace has typically been very bold. And even though it did have, you know, a little bit of a rebrand a couple of years ago to focus more on that very high end segment, I don't think it was quite enough for customers and for people wanting to buy the brand. And you know, compared to maybe some of the other brands who I would typically correlate with Versace, maybe someone like Dolce and Gabbana who've, you know, built up their, their kind of universe to, to include like, or couture and like, you know, they've got a huge kind of presence just being themselves. I think Versace maybe lost a little bit of that brand identity and you know, that appeal and kind of celeb culture kind of thing that made them popular in the first place in the 80s.
- [20:41]
Danny Parisi
Yeah, yeah, I think you're totally right. And I think Prada is positioned much better to do something with Versace than Capri is. It felt a little bit trapped there maybe. Interesting thing with Prada also. So I think Prada is. If Capri was trying to be the American lvmh, I think Prada has a much better opportunity to maybe be the Italian lvmh. Prada has been doing super well, especially Miu Miu, which is one of their brands which was doubling its revenue last year, grew like 109% or something in the third quarter of 2024. So it's been exploding. I think Prada is one of those companies where it's like one brand for a while at least made up probably the majority of its revenue. Prada Group is mostly Prada, whereas LVMH and Kering, they have their bigger brands like Louis Vuitton or whatever, but it's maybe a little more even. I think Chanel is another one. Chanel owns other companies like Orla Bar Brown, but I'm pretty sure most of Chanel the group is Chanel the brand. But Versace now I feel like they're spreading out a little bit, buying more. It's a little bit different because I think it's ready to wear compared to like Prada, but it's like slowly kind of like they're expanding their portfolio. And the other thing is, I think the same way that we say, we always say that LVMH is France, it's so tied up with the nation of France. I think Prada could possibly do that for Italy. It's a very iconic Italian luxury house, but it also owns an Italian shoe brand, Church's. It owns an Italian boat racing team, it owns an Italian pastry brand. They've got all this classic Italian luxury stuff under one roof. So I could see them maybe trying to become to Italy what LVMH is to France, if that makes sense.
- [22:30]
Zofia Zyglinska
Just a little correction that Churches actually is a UK shoe brand. They started off in Northampton in the uk, I think with the Prada group as well. The bigger thing is its stable of brands has been relatively small until now. It hasn't invested seriously in M and A, because I think their focus was on, you know, doing what they know and doing that very well. And I kind of like thought that maybe that was a bit more similar to Hermes. You know, they kind of wanted to focus on their own brands. So I'm wondering, you know, what kind of, I guess, like creative but also C suite direction they're going to take with Versace, because I think it will still take a little bit of. Of a bigger thing to build it out into something like Prada or Miu Miu. And the fact that the sale is happening now as well has knocked off quite a bit of their sale price, I think. According to public reports, its purchase price was slashed by about $200 million because of the tariffs. So I'm wondering if that's also a bit of a. A troubled kind of time to finish up the deal. And I do wonder why they're doing it right now when the deal has already been kind of dragged out for over a month, maybe two. It's something that's been in talks for quite a while.
- [23:58]
Danny Parisi
Yeah, for sure. I think that's all the time we have. I don't really have more to say about Prada, but it is a big deal and that's 1.4 billion deal. But, yeah, I think that's all we're going to talk about. But thank you, Zofia, for discussing this with me. For those of you listening, stick around. After a short break, me, Zofia and our editor Jill are going to talk about the state of the department store. We're going to dive into Saks and Saks not paying its brands Nordstrom and Nordstrom Rack. We're going to talk about some European department stores like Print Tomp and Selfridges that are doing seemingly a lot better than their American counterparts. So stick around for that.
- [24:44]
Advertiser
Does your E commerce platform suck? Painfully slow updates, a patchwork of sluggish systems, and TCO that makes you sweat. That's enough to give anyone a migraine time for an upgrade. Skale is the only E commerce platform built to cure enterprise pain, replatform in under seven months, launch in new markets in minutes, and execute even your most ambitious promotions fast. No more bottlenecks, no more headaches. Just a platform that really works. You know your platform stinks, so visit scale.com today. That's S C A Y L E. Yes, the why is silent because you never have to ask why Scale isn't performing foreign. So department stores are in a state of transition, obviously. Last week we had on Jean Marc Balay, who is the global CEO of pr, which just opened its first US Store in, in the financial district of Manhattan. So exciting. But he had a lot to say about how they're doing it differently. He said that they're not a department store, despite the, you know, description of the store online that it is indeed a department store. So it brought up a lot of questions about what is a department store. We want to talk about that this, this week. And also there's the news about Saks, as of December, acquiring Neiman Marcus. Now the company is called Saks Global. There have been some recent layoffs. The consolidation brings up a lot of questions about the, the future of the luxury retail footprint. Several malls do have a Neiman and a Saks. Will that remain? And yeah, what, what happens to all of these workers as the streamline, the streamlining goes on. And it gives, definitely gives Saks Global more power. It gives the brand less, I guess, negotiating power. We're going to talk about all of that and more. I'm here with Danny Friese, our senior fashion reporter. Danny, what's up?
- [26:45]
Danny Parisi
Hello, Jill. Thank you for having me on our own podcast.
- [26:49]
Advertiser
And Sophia Zwiglinska, our international fashion reporter. What's going on?
- [26:54]
Zofia Zyglinska
Lovely to be here. Thank you so much for joining me in this discussion.
- [26:58]
Advertiser
Yeah, this will be great, you guys. So the department store, we are going to start with, like a wedding toast where we're going to say the definition of a department store is.
- [27:09]
Danny Parisi
Yeah. Webster's Dictionary defines it as.
- [27:12]
Advertiser
It is a large store stocking many varieties of goods in different departments. Now, I mean, that's a traditional take on what it is because you think about old school Macy's and. And others. I think there are. There are some department stores that forever have been more focused on fashion than there are the others that had a variety of departments, from luggage to furniture to home decor, and even like, if you think it back to Sears and there was like, I don't know, that's where you got your. Your home appliances, refrigerators and. And washer and dryer. Now it seems to me definitely those that have remained focused on fashion are the ones that are thriving. But we can get to that. But circling back to Prontom, what he had to say, Jean Marc, was why they're not a department store. Their departments, quote, unquote, are more like curations, vignettes of these. Like, it's a hodgepodge, although, you know, around a theme. It's not. It's not strictly shoes. It will be like shoes, bags, dresses, around set, around a set theme. And it makes it very. Opportunities for discovery. And it's very inspiring. And it's a new take on the department store, which I think it technically is. But anyway, do you guys have a negative connotation about. About a department store or how has it landed? We're all in different parts of the world, so I'm sure we have different perspectives. Dandy.
- [28:39]
Danny Parisi
What would you say my perspective? When I think of a department store, I think of like, the big, like Fifth Avenue, like Bloomingdale's or Saks Fifth Avenue or Bergdorf Goodman, that kind of place. I think the splitting hairs on definitions of like, it's not technically a department store because the departments are curations. It's like, well, you're. It's kind of still a department store. The thing I was thinking about, though, with like, the definition and what is a department store? I was thinking about sort of why they were relevant for so long and why they kind of like, maybe waned in relevance and then why maybe they're relevant again, which is that it made sense in previous decades to kind of like group all of these different categories into one big store. And, you know, the bigger the stores got, the more they could spend to add in a new department. And now we're going to do ovens and stoves and stuff, or now we're going to do cookware. I think the big change was in like, the 2010s, the DTC movement, a lot of brands, because before that it was like, if you were a new fashion designer or something, you wanted to get seen. One way to do that would be to have a collection bought by Bergdorf Goodman or something and have it show up on the shelves. And that was like how you would be discovered by your audience, by your customer. And then the DTC movement was all about, we don't need that. We can grow through Instagram and social media. We are newly flush with investor capital, so we can just spend as much as we want, do these big flashy marketing campaigns online and not have to even deal with department stores at all. And I think that was like probably the, the biggest thing that I can think of that had an impact on department stores businesses. And you can, it's like, it's not a coincidence that right as that was happening, a lot of big department stores that had been around for like a century kind of disappeared. Like Henri Bendel. One of my first stories for glossy in 2018 actually was writing about Henri Bendel shutting down after 123 years. And I remember they said at the time L Brands was the owner, that they were doing it to focus on their more profitable non department store properties that they owned, which was Victoria's Secret was the big one. So that's kind of what I think of now. Obviously the DTC world is very different and a lot of the tools and strategies that those brands used, like just spending a whole bunch of investor money to grow online is like not nearly as easy. And for that reason I feel like department stores are maybe a little more appealing because of that thing where, you know, they buy your collection, they put it on the shelf and then like free advertising, free marketing, which comes with its own downsides. But that's much more appealing now that the DTC path is a lot more difficult. So that's my long winded take.
- [31:15]
Advertiser
You make a good point about direct to consumer kind of disrupting this because it was about convenience. And you can come to this one department and you can see all the jeans you could possibly want to see and they're there for you, they're curated. Take a look. Then direct to consumer it was like all about the brand story and everyone wanted to differentiate and you don't necessarily want to be on the rack along next to your, your competitor. You have a, you're a totally different brand in their eyes, so definitely cause some conflict. Zofia, you're in the uk, I mean, home of the actual cool department stores, tourist destinations, Harrods and Selfridges. What's your take?
- [31:55]
Zofia Zyglinska
Yeah, I mean, I think the Parisian ones are some of literally the oldest ones in the world. So I think There's a long and kind of storied history around department stores, but even here they have evolved over the years, and especially after Covid, I think there's been a kind of return to retail, and in many ways that means a lot of kind of experiential activation. So I think one of those places that has tapped into it is Selfridges, and obviously that's such a big department store in, in the uk. You know, even though Harrods is definitely older and more kind of luxury focused, Selfridges is kind of the one which is seen as a little bit younger, a little bit more fun. They've. They sent me some information around their corner shop concept, which is something that they launched a while back, hosting kind of rotating lineup of different retail concepts and kind of innovations, collaborations. They've been home to a boxing ring bathroom, an atelier, a swimming pool, and a giant yellow slide. So it feels like there's a lot of fun being brought into the UK department stores. And it does feel like a lot of the focus is on kind of making it an interesting place to be when you are contending with so much going on kind of online, making it almost like a fun theme park for fashion, for a retail experience. And I think that that's, that's something that a lot of other department stores are now tapping into. Bon Marche is kind of similar. They've sprawled out to include a lot of different types of activations. And I think that that's also why the Samaritan in Paris, which was renovated a while back, maybe that's where it's kind of losing a little bit of that fun. Because even though the renovation is beautiful and the space is amazing, it doesn't feel like it's drawing in quite as many people as Le Bon Marche, which is also getting a lot of its Dr. Of just by people seeing stuff on social media and being really interested in going there, because it's like this epitome of French culture. And Selfridges is the same for the uk.
- [33:57]
Danny Parisi
It's interesting, the experience kind of element. Oh, sorry. Go ahead, Joe.
- [34:01]
Advertiser
Oh, no, I. I was probably. We're probably gonna say something similar because I can't really think of anything in the States that does anything. I mean, everyone uses that term retailtainment, which makes me laugh, but I don't know that there's like fun in game then and actual entertainment beyond, like changing it up via a shop and shop or like Bloomingdale's does some of those more curated again around a theme shop and shop if it's not a brand. But I don't know, have you guys seen anything like that in the States?
- [34:30]
Danny Parisi
The first thing I think of is American Dream, which is not a department store.
- [34:34]
Advertiser
That's what I thought about.
- [34:35]
Danny Parisi
It's not a department store, but it is like it does use like roller coasters and like an indoor ski slope and like all that kind of crazy theme park stuff as a reason for you to come into the store. And I was thinking about like department stores. The original pitch was like you said, Jill, all these different things in one location. So you don't need to go to 10 different stores if you want to buy clothes and then a toaster or whatever. But now if you want to buy five different things in five different categories all in one place, it's like you can just use your computer for that. It's like not as novel. You know, online shopping does fill that niche a little bit. And so it's like what is the reason to go to a department store? It could be, you know, exclusive product, exclusive deals, something like that. But also it could be something you can do in the store that you couldn't do elsewhere. Like it doesn't have to be an experience like you know, a water slide or something, but it could even be like customizing your clothes. It could be like tailoring alterations like stuff like that that you can't do online and that kind of stuff. I do see at some United States department stores, but yeah, not as much in terms of the tourist destination. I guess in New York some of them are tourist destinations with the windows, like the window displays. But it's kind of like you're outside and you look at them and then you keep walking and you get in one of the horse driven buggies and go through Central park or something.
- [35:58]
Advertiser
Totally. I think the closest we've got is Bergdorf Goodman. I mean it used to be Barney's, may it rest in peace. But also Macy's Herald Square just, it becomes so iconic with, with the parade and all. But I think people still like to go in, see what it's all about. Macy's is one that is like you, you can't fault them for not trying. You can. You hear that they open like an in store market with various brands that they don't carry and they're always trying things. They tend to come off from the outside as being somewhat short lived and then they try something else. But yeah, definitely not one that's I would say, quote unquote thriving.
- [36:35]
Danny Parisi
I also wanted to talk about the relationship between the brands and the department stores, which we touched on a little bit when we talk about dtc. One of the biggest things that I have covered and heard about from brands, the biggest frustration, and there's a lot of frustrations that come with working with a department store, selling into a department store. The biggest one is sometimes they just don't pay you as the brand. And the absolute worst offender is Saks, which last year in August, I wrote a story for Glossy talking to a number of brands who were owed tens or sometimes hundreds of thousands of dollars from Saks for product that they sold to Saks, which Saks then sold in the store and made money from, and then just didn't pay the brand for it. There was one estimate that they may have owed hundreds of millions of dollars to hundreds of different brands. A lot of the anger, I mean, there's anger, obviously, just for not getting paid, understandably. But also at the same time, Sachs was in the middle of closing this big deal to acquire Neiman Marcus and spending billions of dollars there. And so a lot of the brands I talked to were like, so Saks has $3 billion to buy Neiman Marcus, but they don't have $15,000 that they owe me. And that caused a lot of headache. A lot of people told me Saks is the worst offender. But it is not just Saks. It is not an uncommon experience for the department stores to be kind of slow, you know, slow walk your payment or delay things, or they just have a lot of leverage, or maybe, maybe they had more leverage back in the day, but they still do to kind of take your product, sell it, and then, you know, you'll get paid whenever you get paid. So I know for a lot of brands, that was a huge headache. Caused a lot of brands to not want to work with Saks ever again. I think a lot of them did anyway, because it's still. They're hoping that the payment stuff gets figured out and it's still lucrative. But I know it really soured a lot of brands feeling toward Saks in particular and department stores in general. I don't know. Do you guys remember that whole controversy last year when that was happening?
- [38:32]
Zofia Zyglinska
Yeah, it was a big one. And obviously with, I guess, the way that department stores work, the fact that brands typically only receive 30 to 50% of that final sale price, and that's after markdowns, which, again, department stores are famously bad with, I think that it's kind of shifted those. Those relationships in a way where, you know, especially in times when it's a little bit tougher economically. I think that, you know, brands and, you know, brand founders will be looking at ways to retain as much of that margin as possible. So. And that kind of ties into the whole like wholesale shift that we've seen happening over the last couple of years.
- [39:10]
Danny Parisi
Yeah, and Saks does have like a new plan that they announced after the, the Neiman deal was closed. So I think it was like February of this year, they put out this new plan where they're going to pay everybody within 90 days of receipt of the product. And for all of the outstanding payments, they're going to start paying them back in installments starting in July. And I did not see any indication of when the, they expect them all to be paid out. And I was like, I'm sure that's reassuring to some degree, but they probably had some, you know, rule about when we'll pay you back beforehand that they clearly were not honoring. So I don't know if that's going to be enough. But now that the deal, I think a lot of people at the time who I talked to guessed that it had the delayed payments were because of the Neiman deal, that they wanted their finances to look really good. So they were trying to hold on to as much cash as possible throughout the deal process. And now that it's finalized, maybe that will even out. And that was when Sachs put out this plan of when they're going to start paying people. But I think it's still too early to say because they haven't even started these installments. So there's still, you know, people who are owed money from like last year or even two or three years ago who haven't gotten paid yet.
- [40:18]
Advertiser
Yeah, I think brands are going to deal with it as, as to the extent that they need these partners because, you know, we hear a lot about brands that formerly relied heavily, more heavily on digital advertising that's become cost prohibitive. They can't afford it anymore. They're going to these channels for discovery, the foot traffic, all those. And you know, it's changed where right now with the Saks Neiman deal, like I said before, they have Saks Global said, you know, we'll have stronger buying power with this new scenario. So what they're saying is they'll have more power over brands, basically less leverage for smaller brands to, to be able to negotiate. They want the presence in the 30 something Neiman stores, the 30 something sack stores, plus all of their, like, I don't know, off sex, all of the other brands that are Affiliated. So it's not new. Like back in the day, I can recall, and I probably have mentioned this before, where all of the brands were telling us, including Tibby, that like, there was an era where everything was about the self portrait lace dress and all the buyers had the power. They, like, they were demanding, like, this is the style we want from these brands who would never in a million years make a lace dress. But they were like fighting with the buyer because the buyer said that's what sells. And so, you know, you have to make sacrifices to be able to show up in these channels. And depending on the size of your brand and you see so many moving to DTC that are larger and can afford to do so. But I think for a smaller brand, it's just like they've got them by the. Something I'm not going to say, you know.
- [41:57]
Danny Parisi
Yeah. And also, like, to your point about the smaller brands being like having less leverage. I mean, also a lot of brands that were not paid by Saks literally had to like, seek legal recourse and like send their debt to collections to like force Saks to pay them. But that also costs money. And imagine you're owed $10,000 by Saks and it's going to cost you $25,000 in legal fees to get that money back. It's like maybe not even worth it or maybe you can't afford it. So, yeah, I think the power of the department store buyer has, is probably a little bit less now than it was in the 70s or whatever. But if you're a small brand and getting on the shelf in Bergdorf Goodman or Nordstrom or whatever can still be a huge boost to the brand. You want to impress the buyer. Like you said, Joe, sometimes the buyer will make demands of you that maybe you don't want to do. They make 10,000 pieces from this one product and you're like, I've never made more than 500 at a time or something. There can be a lot of ways that the department stores kind of of can push and pull you into different directions. Sometimes in a good way and sometimes not.
- [43:04]
Zofia Zyglinska
Yeah, I agree. I think that there's definitely been a shift and to be honest, brand control and whether that's presentation or the pricing as well, because the department store markdowns are also an issue. So if you're thinking about, okay, well, as a department store, if I go to them, it's going to potentially cost me in delayed, like sales payments potentially and legal fees. You know, I might not have presentation control over what my brand Looks like in a department store and I might get lower pricing. I think at that point you end up thinking, okay, well maybe as a smaller brand it pays more to maybe go to a different type of store or else look to go online because at least there you have kind of better control. I'm wondering, you know it with you guys because I don't. Obviously coming from Europe and the UK it's a bit different. How much power, I guess do these department stores still have as a kind of name brand thing? Does it boost the sales or visibility of smaller brands if they end up getting stocked in Saks or in Macy's or Neiman's?
- [44:13]
Advertiser
I mean it depends. It does still have power. But then also there's become the rise of the retail media network. So in many cases brands are paying for to turn up on their, on their website and in their marketing channels a great deal. So I mean it's going to cost them. A company that we haven't really talked yet about is Nordstrom, which I have heard better things in terms of them being a partner to brands that we know that they were an early friend of direct to consumer brands and they did a lot to be able to bring those brands in house. And I don't know what those contracts look like but I do think that they gave a lot of leeway. We do know for one example like Good American was hell bent on keeping all of their sizing in one in one department and not splitting up the plus size and they allowed them to do that. And I know like the plus size department. Speaking of the, the evolution of the department store that, that I don't know, it doesn't exist in the same way that it used to like up on the 10th floor or whatever, very separated and, and making people feel bad about shopping in a different secluded area. But yeah, Nordstrom is one and I mean it's a family run business. We know they're taking and I feel like they're doing some things to kind of combat this negative connotation.
- [45:26]
Danny Parisi
Yeah, Nordstrom is definitely like when I was reporting on this Saks thing a lot of people told me that Nordstrom is among the better partners out there. Same reasons you said, Jill. They also pay on time generally, I think almost always. So at least that's what I heard. So I think that's a good thing. The other thing Zofia, is there is a brand boost, I think to being in a big department store. How big of a boost? Yeah, may be debatable, but there's also like a Financial thing where it is presuming the store pays you, it is like guaranteed sales. Kind of maybe not guaranteed, but it takes some of the work off of your plate. There's reasons to do it. If you sell 500 pieces or 1000 pieces or whatever to Saks, those pieces are sold, those are a thousand pieces. You don't have to sell yourself on your own website. And yeah, you don't get as big of a margin like you're sharing it with the retail. Well, you're not sharing, you're selling it to them at a lower price, at a wholesale price than what you would sell directly. But it's like then that's a big chunk of money all at once instead of selling them off one by one and having to deal with all the headaches. So I definitely see why brands are still interested in it. And again, as digital advertising gets really, really expensive, I think there's also the branding element too.
- [46:44]
Zofia Zyglinska
Yeah, definitely. And I think that that's something that you see as well, that maybe there's a bit more volatility around now compared to what it used to be. You know, department stores used to be almost like a surefire thing. Like you sell those things, in that case you're going to get that margin back. But you know, so many department stores are closing down or in trouble. Like either there's delays or payments. I think, you know, in the uk, Browns closed down and people had to go looking through storerooms to try and find their product that hadn't sold. And I think that that causes other headaches as well if that financial situation isn't as stable as brands are led to believe. So I'm wondering if the communication aspect between brands and department stores has broken down with some of these bigger ones and maybe partners like Nordstrom are doing a little bit better with that.
- [47:37]
Advertiser
I don't know, I don't know about the communication. I do know that like more partnership in terms of we're hearing more brands doing more like, I don't know, training with the staff and just like be having more hands on access to, to what's happening in store. I think we also need to mention the fact that apart from awareness and foot traffic, I was doing some on the ground reporting on our podcast today and asking some folks at the Modern Retail Summit what department stores they like to shop at and why. And this fellow Louis from Saver, he was saying his family like constantly shops, they just like if they need something they go to Bloomingdale's because they really like their loyalty program and they get cash back, money back and so they get their towels there. They get, whenever they need something they go there because of the loyalty program. And we all know, you know, bells and whistles are expensive to pull off, whether that's expedited shipping or whatever. So to be able to leverage your retail partners to be able to offer these services, whether that's loyalty or what have you expedited shipping, maybe buy now, pay later, whatever it is, those things definitely help and are what the customer is looking for.
- [48:42]
Danny Parisi
Another thing on department stores maybe a small contributing factor but I do think is interesting. A number of the big luxury department stores also have some sort of in store luxury resale element. Now Fashionphile works with like Saks Fifth Avenue Rebag is in Bloomingdale's and these, it's not just you know, selling secondhand bags in store but also you can bring in your bags and sell them there. So there I think that to me is a sign of you know, keeping in touch with a growing interesting part of the industry and some of those department stores trying to get a piece of this luxury resale element that's become really big in consumers eyes. So I don't know how big it is like to their business but it does to me show a little bit of adventurous thinking.
- [49:26]
Zofia Zyglinska
Yeah. In terms of like expanding business models. On the UK side there's also been a kind of I guess like an explosion around rental and even like companies like Selfridges have been partnering with others, you know, to focus on rental especially around occasion where, where you're looking at higher ticket kind of items that maybe people wouldn't want to buy necessarily but would very much go towards department store for just to see what the selection is like and then rent those pieces. So I'm wondering is that something that you're seeing as well on the US side?
- [49:59]
Danny Parisi
I don't know actually I'm not sure of any like if Rent the Runway or anybody's like working with any department stores.
- [50:05]
Advertiser
Not that I'm aware of that I'm aware of either. But it's interesting because when I did go to, to Europe last year, I just remember that I was like this is brilliant. Why don't US stores do this about the like dedicating a full store to vintage and resale. I was having a field day. It was the best thing. But when PR came here I was. They also did the same thing. They've got a whole, the whole floor is what I hear. I have yet to visit dedicated to luxury or just resale in general. I don't know if it's vintage but I was like I gotta get there. I think that yeah, it definitely shows kind of keeping with the times and yeah, it would make sense for them to offer all of the new business models, rental, resale, if that's what people are gravitating toward.
- [50:49]
Danny Parisi
The only other thing I want to say about department stores is also we should note that the discount like versions of a lot of these department stores are doing really, really well. Nordstrom Rack is like still the best performing sector of Nordstrom. I think Nordstrom's most recent earnings, they're still reporting earnings even though they're going private soon had their kind of main store down 2% but rack was up like 2% or something and it was the only section that was. I think there's something similar holds with Saks off fifth too. So even though there's like kind of the Prestige is like the main kind of store, a lot of these department stores are, are making bank off of their discount off price kind of wings as well.
- [51:27]
Advertiser
Also worth mentioning like some of these smaller or maybe less buzzy maybe because they're in the Midwest where I live. But like stores are doing well, doing better than some of the big dogs like Dillard's. We I just saw a story that this Von Mar department store is expanding and opening more locations. So expansion mode. So a lot of the talk is that they are, they do have more of a focus maybe and evolving. I know Dillard's for some time had a partnership with what Goes Around Comes Around. I think it was like on the down low and maybe it wasn't stamped what Goes Around Comes around but they were supplying their luxury resale bags so they're good ones to know.
- [52:07]
Zofia Zyglinska
Yeah, I think a lot of it also comes down to ownership around these department stores as well. Because I mean who owns these department stores or also dictates how stable they are. I think with Selfridges, even though there was a lot of drama around the ownership, that ownership itself is non public and it's patient so it thinks about long term rather than kind of immediate wins. And maybe that's also something that's dictating some of these strategies.
- [52:35]
Advertiser
Agree.
- [52:36]
Danny Parisi
I think if we're wondering if tariffs are going to affect department stores, the only way I can think of this is that in the sense that it will affect literally everything. Yes. Like the brands that department stores carry, most of them are probably making at least partly their stuff. Outside the US there's very few brands that are making everything including all their materials in the US So that means there's very few brands not affected, which means every department store will be affected. So beyond that, I don't know if there's anything particular that will, you know, hit department stores other than just the general sense of the economy exploding. But that's probably the biggest one and.
- [53:15]
Advertiser
It'Ll be interesting to see how brands respond because they're, you know, everybody's going to be pinching pennies, the brands and customers. So are they going to want to focus on DTC sales when advertising is expensive? But like again, their margins are going to be squeezed even more so they're going to be paying more for products and I don't know, they'll. A lot of, a lot of brands that we've talked to have actually said, you know, I'm not making any money on the retail floor, wholesale floor, I'm doing it for awareness. And I mean a little money, but it's not like a significant portion of their business. But anyway, the margins element definitely in terms of the brands that are selling in stores and the tariffs, my God. It'll be interesting to see if department stores also work with them because we're hearing that brands are negotiating with their manufacturing partners to, I don't know, for the manufacturers to also pick up some of the the difference or some of, some of the slack. But like will department stores redo their negotiations to kind of keep brands in house? Based on what we've talked about today, it's questionable that some of them will go there, but others, yes.
- [54:21]
Zofia Zyglinska
Yeah. I mean, I think that for the main thing for me is like the operating model of like the buying on a department store side because obviously a lot of the times these departments would buy months in advance. So then tariff impact doesn't hit until much later. And then obviously since you're buying so far ahead, that stability of those orders is really important. So if that ends up affecting prices, for example, if Printemps is bringing in product directly from France and it's having to pay an import tax on that, is that going to be a tariff impact for them? And then the other thing is, does that end up rebalancing, I guess the mix for these department stores as well, Are they going to prioritize local brands or brands that are going to be made in the US for example, or anything that's kind of store owned? Because then they'll have a higher portion of margin control there. But I think that that's very high level considering how many moving parts are changing here.
- [55:22]
Advertiser
Right on. Well, I think we're going to wrap it up, you guys. This is great. Chatting department stores. Next week we have a kind of an old format podcast with a, with an interview. Brittany Hampton, she's the WNBA stylist. As we know, next week is the WNBA draft. So lots of fun talk there about what, what the players are wearing. But yeah, fun talking department stores.
- [55:44]
Danny Parisi
Yeah. Thank you, Joe.
- [55:45]
Zofia Zyglinska
Thank you, Joe.
- [55:46]
Advertiser
Thank you. That's all for this episode. Our theme music is by Otis McDonald. If you liked this episode, be sure to share it with someone else you think would. Thanks for listening to the glossy podcast.