“THE world is a strange place right now,” a salesman on the main floor at Bergdorf Goodman said as shoppers pawed through handbags piled on counters like discount merchandise at Century 21. “It’s off its axis.”

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The handbags, like a lot else at the Fifth Avenue retailer, had been marked down 40 percent and are likely to go lower as seasonal sale days wear on. “Sixty percent off is the new black,” as Patricia Marx wryly noted in the Dec. 8 issue of The New Yorker. Yet the discounts at Bergdorf are far from the deepest among luxury retailers around the city.

In a move that caused consternation among its high-toned competitors along Fifth Avenue, Saks slashed the bulk of its fall fashion and accessories up to 70 percent over Thanksgiving weekend — to what some termed limbo lows.
There is nothing new about retailers cutting prices at holiday time, and the discounts have been especially deep in this recessionary year.

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But few in the luxury goods trade can recall a time when the price-slashing started so soon or was so severe. By cutting prices radically, Saks’s chief merchant, Ron Frasch, turned his chain’s flagship emporium into a swank Fifth Avenue version of a discount outlet, moving merchandise in volume and spooking the competition as it struggled to hold on to a traditional mark-down sequence, and even to continue selling certain brands at full price.

Mr. Frasch declined to comment on his corporate game plan. “It’s not a conversation I want to get into,” he said.
Even seasoned bargain hunters were startled to see Saks’s wood-paneled main sales floor mobbed with consumers nosing like truffle hounds through shelves of marked-down cashmere sweaters and racks of designer clothes with prices seemingly too good to be true.
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Could those columnar Valentino evening dresses in signature red really be 70 percent below the original price of $2,950?
Was one reading the $329 tag right on a cashmere men’s blazer from the elite Italian woolen house Loro Piana, a jacket that typically costs $2,000 or more? What about the $129 price for a black satin skirt from Comme des Garçons? Was the tagged price a misprint? It was not.
“What I hear at every level of retail is that no one has ever experienced anything like this in their careers,” said Ken Downing, the fashion director of Neiman Marcus. And, while Mr. Downing suggested that the 40 Neiman stores would not soon tumble to discount fever, much of their merchandise had already been marked down by 40 percent, a sure sign that the line on price reduction cannot be held by any single player in luxury goods.

Privately, most retailers admit to being frightened by the severity of the economic downturn and are looking not merely to save the current season but their commercial lives.

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While it is true that early numbers suggest retailers across the country got a boost from Black Friday’s bargain-hunting frenzy, the margins on optimism remain slim. A report released on Tuesday by MasterCard Advisors showed that sales of luxury goods fell 24.4 percent in November compared with the same month a year ago. When individual stores disclose their own figures for November sales on Thursday, they are expected to show the deep declines of early fall continuing.

On Wednesday, customers of Barneys New York received an e-mail message promoting a “designer freak-out sale.” The savings of up to 50 percent encompassed goods like Christian Louboutin suede booties (marked down to $720 from $1,195) and coveted Marc Jacobs totes (reduced to $629 from $1,250). It should probably be noted that handbags and shoes are where luxury retailers turn to hear the music of cash registers going ka-ching, and so the event was a clear indication that somebody at Barneys must be freaking out.

“It’s painful,” Linda Fargo, the women’s fashion director at Bergdorf Goodman, said referring to a landscape in which carriage-trade stores are struggling not only to hold on to their profits but also their ineffable luster.

What seems inevitable is that the pain will worsen as the price reductions provoke questions among consumers of how stratospheric profits must have been when the economy was riding high. How great, really, was the surcharge to consumers for participating in fashion fantasy?

“I was in Saks last week, and there were these staggering discounts and it’s not even Jan. 1,” Tim Gunn, the “Project Runway” host and chief creative officer of Liz Claiborne, said Tuesday, before a discussion on “Redefining the Rules of Fashion in Today’s Economy,” sponsored by the textile manufacturer Dow XLA. “I was told by easily half a dozen sales associates that if I opened a Saks credit card, I’d get another 15 percent off. What I wonder is, “What are the real margins?’ ”

That question gives rise to another: once consumers become acquainted with slash-and-burn prices, how can designer fashion regain its mystique? Will shoppers ever again want to buy luxury goods at full price?

The depth of the challenge was suggested by the incongruity this week of seeing Prada wallets, usually kept under glass at Saks, dumped into display stands that at Wal-Mart are known as “end-caps”; lizard handbags at Bergdorf Goodman jumbled on counters as if that Fifth Avenue landmark were an outlet of Loehmann’s; and Ralph Lauren dress shirts at Lord & Taylor thrown together and offered at prices roughly equivalent to the cost of two McDonald’s Happy Meals.

The Saks strategy may be the first sign of a radical reconfiguration of the luxury goods landscape, said Beth Buccini, an owner of Kirna Zabête, the SoHo specialty store. “The intense and early discounting will negate the power of runway shows to drive fashion in both creative and commercial terms,” Ms. Buccini said.

“All anyone can afford to do anymore is to sell pre-collections,” she added, referring to the commercial collections designers offer during transitional periods between their statement-making, twice yearly runway shows.

“Runway clothes next year will arrive in the store in April, and we will have three weeks to sell them at full price before the department stores have put them on sale,” she said. “What I’m worried about is the creativity. Everybody is paralyzed wondering what people want, what they’re willing to spend, what’s going to dazzle us into not being able to live without certain items.” It could be, as Zac Posen remarked on Tuesday, that we are headed into a period when designers and retailers are “either stimulated and excited and challenged,” or else follow thousands of other failed American businesses into oblivion.

“It’s all going to be very Darwinian,” Ms. Buccini said.

 

 

* By GUY TREBAY , December 4, 2008