May 24, 2014

MEGAN MCARDLE: ‘Flash Deals’ Won’t Save Retail.

The flash model does seem to work better in fashion — an industry that, after all, has long relied on sales to move merchandise. But even there, I confess to a modicum of skepticism.

Look at what happened to places like Loehmann’s, which in the 1980s was a great place to find actual high-end designer fashion at amazing discounts, provided you were willing to put in your time pawing through the racks. Or outlet malls, where, in the 1990s, I scored some fantastic deals on high-end clothing and accessories. These places and their successors now sell products specially made for the discounters, with lower quality and styling. In other words, they are no longer such great deals. Oh, sure, if you’re lucky enough to live in rural Mississippi, you may be able to score some actual high-end stuff at your local T.J. Maxx. But in general, you’re buying cheap stuff at cheap prices.

It’s not that that can’t be a good business — Walmart has done a great job at it, and TJX Cos. Inc., which owns T.J. Maxx and Marshalls, is doing splendidly. But it’s a tough business. You’re always fighting for margin against other people who sell very cheap stuff to consumers who will not pay a dime more than they have to.

But the flash business is just too small for anyone to stay in for very long — and getting smaller. As manufacturing lead times shrink, excess inventory naturally also shrinks, because retailers have a much better sense of the market conditions, and restocking is a lot faster. Meanwhile, the Internet makes it harder and harder to make money on the stock you do get, because you have to sell it at the lowest price out there or customers will just go somewhere else.

Stupid Internet.