Earlier preseason order deadlines put the big squeeze on retailers, industry

Throughout the month of February, SNEWS will recap its coverage of Outdoor Retailer Winter Market 2012 with select stories from the O.R. Daily we published at the show Jan. 19-22. It’s an opportunity for you to catch up on stories you might have missed in O.R.D., and for us to update and upload the articles to our searchable archives.

Flash back to early December. The brunt of the holiday shopping season is hitting stores like a tsunami. Outdoor retailers are facing consumers scrambling for goods, special merchandising and perhaps some new seasonal employees, not to mention their own family obligations.

It’s the busiest time of year for retailers. And at that exact moment, some of the first vendors come calling for preseason orders — forcing decisions on the following winter’s product. Put aside the hectic time of year, retailers told SNEWS, and consider that they barely have a grasp on 2011 sales, while being asked to make decisions for 2012. The same story will replay itself in June, when some preseason orders for summer 2013 come due before the current season is in full swing.

The reality, retailers said, is that 80 to 90 percent of their open-to-buy dollars are spent before Outdoor Retailer. That’s no surprise to those in the industry, who said Summer and Winter Market have become much more of a social event, albeit a valuable one for making in-person professional connections.

SNEWS takes a look at preseason ordering from the perspective of Outdoor Retailer participants — from retailers pleading for more time to make professional orders, to manufacturers crunched by global production pressures, to nascent small brands fighting for the few remaining open-to-buy dollars at the show.

The need for a professional order

Every specialty outdoor retailer SNEWS spoke to opened the conversation with the same words: “Our goal is to write professional orders,” said Travis Zarins, vice president of merchandise for Great Outdoor Provision Co., which has seven stores in North Carolina.

“We have a slight idea what consumers want to buy for themselves by Dec. 1, but certainly not what they’re going to buy as gifts for others,” he said. “We can’t analyze the data that early.” Preseason ordering is tougher for the winter season, amidst the holiday rush, Zarins said. “We’re fortunate to have dedicated buyers, I could not imagine the pressure for a smaller retailer who has part-time buyers who split their time on the sales floor.”

Tom Valone, president and founder of Great Outdoor Provision Co., said the larger manufacturers such as The North Face, Patagonia and Columbia were the first to start pushing their preseason order dates earlier and earlier. Then it became like nursery school: “every one has said, ‘me, too,’ right down the line,” he said.

It’s about getting “first ink,” or those first contracts, before competing brands make their pitch, Valone and Zarins said. But, “just because someone got first ink on an order, doesn’t mean it will stay that way,” Zarins said. “We want to see all that’s out there.” No preseason order is set in stone, they said.

Squeezed production

From the viewpoint of the large outdoor product manufacturers, such as The North Face, production and supply pressures from overseas are driving the earlier order dates. That squeeze further tightened on the heels of the recession, said Michael Millenacker, vice president of sales at The North Face.

“As things slowed down with the recession, then rebounded, the factories weren’t able to build back up as fast,” he said. Demand outstripped capacity, forcing brands to race for what was left. In addition, labor and material costs continue to rise. “So you want to try and get in as early as possible to lock in costs as well.”

And while Millenacker couldn’t divulge all of The North Face’s strategies, it’s no secret that keeping inventory levels in line with revenue is a key goal for any company. The North Face’s parent company, VF Corp., has been successful in this regard – its inventory growth rarely outpaced its revenue gains through the first three quarters in 2011, according to its public financial reports.

Manufacturers do offer incentives for retailers to meet the earlier deadlines — typically discounts of 4 to 12 percent and co-op advertising deals, retailers said. In a way, it’s passing on the savings. But both parties should consider the ultimate cost Zarins said. “The earlier the due dates get, the less professional preseason orders are, and that doesn’t help anyone,” he said.

Balancing the risk

Preseason ordering has a lot to do with weighing future risk, said Shelly Dunbar, co-owner of outdoor brand Sea to Summit. Because the company deals more with accessories and hardgoods — rather than apparel that goes in and out of style quickly — it has a bit more flexibility with order dates.

“We don’t have a deadline. A good four to eight months out in the future helps, but it’s not a requirement,” Dunbar said. “It’s tricky; I’m not saying it’s easy. I see why some large manufacturers want the orders in early from retailers, it reduces the guesswork — and really it’s guesswork because economic downturns are hard to predict. But if the retailer is doing a bulk of the guessing — that’s quite a burden. Shouldn’t we take back that guessing or at least most of the guessing?”

Sea to Summit makes a point to take on more of that inventory risk, Dunbar said. “That’s our business model, and it resonated with retailers in the down economy.”

Zarins said a brand’s willingness to work with a retailer, including “reasonable deadlines,” can lead to more business from the retailer. But only so much, Valone added: “Our role is to give the customer what they want.”

Millenacker said The North Face is well aware the preseason order process needs to improve. “As an industry, we look to innovate products,” he said. “I think this area also could benefit from innovation.” The North Face is working on it, he said, but declined to elaborate.

Few remaining dollars at the show

With a majority of their dollars reserved through preseason orders, retailers said they have about 10 to 20 percent open-to-buy left once they hit the Outdoor Retailer show floor in mid-January for Winter Market and/or early August for Summer Market.

That can be frustrating for smaller companies and first-time exhibitors at the show looking for new business, such as British outdoor apparel brand Mountain Equipment Co. The company recently began distributing in the United States and attended Outdoor Retailer for the first time at Summer Market 2011. The brand was well received, said Craig Dixon, Mountain Equipment’s U.S. vice president of sales and marketing, but many retailers told him they’d have to wait until next season because they had little left to spend.

“Our [winter season] orders aren’t due until February,” Dixon said. “And we can take a later order in March.” So it’s possible for retailers to see the new product at the show and order it afterward, he said. We have a good relationship with our factories, which are in Eastern Europe, not Asia,” which creates shorter lead times, he said.

In an ironic twist, sometimes it’s the retailer asking to see and make a decision on Mountain Equipment’s products earlier than the company wants, Dixon said. It’s so they can compare it to the other early preseason deals. “I’ve had people tell me they need something from us by Jan. 2.”

Dixon said he understands the Catch 22 for retailers. “Their big fear is that if they wait, they won’t get what they need from the larger brands. If enough retailers said, ‘We’re not ordering until Jan. 15,’ maybe things could change. By accelerating the whole thing forward, I think it negates the reason why anyone would go to the show.”

Outdoor Retailer is still critically important, retailers said. If they haven’t seen certain products at any of the earlier regional shows, or gotten a visit from reps previewing the line, the show is their final chance get the full scope of what’s out there and tweak orders.

“Nothing can be completely firm until after OR,” Zarins said.

Dianne Morgan, a buyer for The Base Camp, which has two locations in Montana, said the preseason order frenzy primarily is limited to apparel. About 80 percent of her apparel orders are filled by the time she reaches Outdoor Retailer, whereas she’s just beginning her shopping for travel, gifts, books and gear at the show.

As for that remaining 20 percent left in apparel, Morgan said she’s on the hunt for innovation.

“I know what I had success with this year and years past. Now I want to see something different,” Morgan said. “We tend to be conservative with the early shopping [of newer products] on the numbers side. But at the show, we try and go in with as much as a clean slate as we can. We want to see innovation – that’s what makes it more fun.”

Not that any orders are being written at the Outdoor Retailer. Retailers said they need at least a week or two back home to consider what they saw at the show to try and take advantage of any “show specials,” which have been dwindling in numbers, they said.

Valone said he goes into the show with about 10 to 15 percent left in open-to-buy dollars. “I’m out there fish-eyeing, getting a sense of colors and where the excitement is. We might put down half [of the money left], probably on something we’ve never seen before, or something from a larger vendor that we still had a skeptical eye, but now we pull the trigger.”

The time and investigation is what creates a professional order, Valone said, and the confidence can even lead him to write larger orders than he would have if forced to buy earlier in the season. “We want to write good orders,” he said, “not ‘pie in the sky’ orders.”

–David Clucas