The State Of Retail: J.Crew's Drexler Weighs In

"Thanks!" to Matt for sharing with us an interesting article over at WWD (click here for the article in its entirety) about a recent Financo, Inc. Annual Industry Seminar, where retail executives were debating the state of the retail industry. In the article, "Drexler portrayed the department store business model as flawed, with stores lacking control of their destinies and at the mercy of brands that set prices and often open their own stores, which cannibalize sales from the very retailers they supply". The following is a preview of the article:

Retail CEOs Debate the Landscape
By Vicki M. Young
January 13, 2009

It was the battle of the two retail titans at Financo's Inc.'s CEO seminar Monday, with J.Crew's Millard “Mickey” Drexler and Neiman Marcus's Burt Tansky butting heads over the state of retail and what needs to be done.

Drexler said he "didn't think we'll ever get back up to where we've been," and how "no one knows where we're going." In short, "Customers have hit the reset button," according to Drexler. He pointed out that change was needed since the country has "too many stores and not enough differentiated product.” But he still believes there's a customer who still wants quality goods.

Tansky, known for loving the rich, was clearly frustrated at their lack of spending, even though he acknowledged the "rich aren't so rich anymore."

He even blamed the media for writing about how and where consumers can find bargains, as well as husbands. "Husbands used to say 'enough.' Now they say 'Don't even think about it,' " Tanksy told the attendees. While it’s "hard to be a retailer, it's harder to be a luxury retailer," he added.

Nevertheless, Tansky insisted "luxury is not dead" and that there is still a luxury consumer out there, but that retailers "have to stimulate the customer to buy at full price."

All the talk about discounting prompted J.C. Penney chief executive Myron "Mike" Ullman III to joke at the evening's dinner that his company's "biggest price point problem is we have Neiman's and Saks [Fifth Avenue] within our price points."

For another take on this event, read the "Retail Execs Debate Price, Positioning at Financo Event" over at Home Textiles Today (click here for link).

First, I have to agree with Mickey about the "department store business model" being flawed. In particular, they need to address why customers should turn to them considering the competition- from both direct (e.g. Saks, Macy's, etc) and indirect competitors (e.g. specialty retailers like J.Crew, and even discount stores with designer collections like Target). Second, what is up with the "husbands" comment? At first, I was upset for the spouses, but then I got upset for the husbands. I mean, they are getting a lot of blame for the retailers' woes. ;)

What are your thoughts on the article? Disagree or agree with any of the points made? For instance, do you think the department store model is flawed? Do you agree that "husbands" should be partially blamed for customers' current spending habits? ;)