California Apparel News

It’s been a long, tough slog for independent boutique retail.

Faced with a bruising economy and a changing fashion market, Southern California shopping streets and malls—once packed with thriving independent fashion boutiques—are now a sea of branded shops and fast-fashion emporiums. It’s a bad time for this side of the business, which has traditionally been the vanguard for inspiration and innovation in the industry.

But industry insiders say this dynamic scene is far from finished. Independent boutiques will continue to set the pace for national retailers and even shape new mall developments, said Paul J. Kurzawa, chief operating officer of Caruso Affiliated, the developer and owner of leading retail centers The Grove and The Americana at Brand.

At a Jan. 25 International Council of Shopping Centers forum in Long Beach, Calif., Kurzawa said Caruso Affiliated is developing plans—possibly at The Grove—for a district of boutiques similar to those stores seen in neighborhoods such as Los Angeles’ Los Feliz. Injecting an independent flavor at the mall is crucial because these new boutiques often attract young, well-off people with an influential fashion style. “Mom-and-pop retailers are getting harder to find,” he said. “But they’re popping up, and they’re coming up with great concepts.”

If boutique retail is going through an awful struggle, it’s only a matter of time until it will bounce back, said Dick Outcalt, a consultant for Seattle-based Outcalt & Johnson: Retail Strategists LLC. “In our view, it’s like watching the housing industry. It has bottomed out, but housing will come back,” Outcalt said. He estimated that privately held retail makes up 90 percent of America’s retail establishments and 50 percent of the nation’s retail sales.

There are still ways to survive and thrive in boutique retail, according to retail veterans and industry consultants.

Be an expert, and be creative

For retail analyst Mercedes Gonzalez, the demise of the boutique has been greatly exaggerated. The boutique market has been through a punishing correction. “Boutiques that are in business are doing amazing,” said Gonzalez, director of New York–based consultancy and buying office Global Purchasing Companies.

To thrive in the fashion game, retailers need to excel where they traditionally led the market—by providing excellent service with a knowledgeable staff and offering brands and fashions that no one else does.

But if taking a risk on new styles seems like a scary proposition during tough economic times, Gonzalez counseled that there are ways to take the sting out of this crucial aspect of boutique retailing. Get educated on costing and other ways to increase margin. The more a boutique retailer knows about saving a few dollars from costing, the easier it is to take chances on unproven designers.

“The buyer needs to understand costing and their consumers’ price resistance,” she said. “Some designers will cry about how the fabrics, labor and everything are more expensive for them. It’s not the retailer’s problem that the designer doesn’t know how to source.”

Alisa Loftin was a retailer who shuttered high-profile Los Angeles boutique Aero & Co. in 2010. Maintaining a more dynamic relationship with designers would have helped Aero & Co. stay in business, she said.

“If I were going back to retail, I’d keep a much smaller roster of designers I believed in. [They] would be more flexible with changing merchandising out when it was not working,” she said. “They have to take responsibility for badly produced merchandise and go back to the drawing board and figure out who their customer is. It’s not a one-sided relationship. The customer has to buy it, and the designer has to create something which maintains their identity.”

The American and world economies continue to change at a quick pace, said Mark Werts, owner of pioneering specialty store American Rag Cie and new specialty chain Industrie Denim. Werts urged boutique owners to reinvent their shops for a global consumer. He estimated that 30 percent of his sales at his American Rag shop on Los Angeles’ La Brea Avenue comes from tourists. “We moved into a global economy. People who understand that will survive. People who don’t understand are finished,” he said.

Play the real estate game

“There is no question that the number of independent multi-brand retailers is shrinking,” said Fred Levine, co-owner of chain M.Fredric, which runs a fleet of eight bricks-and-mortar stores in Los Angeles County. But he also is actively scouting real estate to open new locations this year. The independent retailer is in demand these days.

Independent boutiques inherited the loyal consumers of stores that shuttered, he said. Mall leasing agents and landlords on retail streets also are looking for businesses that can spice up their retail mixes. They are on the hunt for independent retail boutiques, and many are willing to make deals.

Keeping the right balance of independents and national names is crucial to maintaining a fresh, healthy mix of shops, said Jay Luchs, executive vice president of real estate company CBRE and also a partner with the Malibu Village retail center in Malibu, Calif.

“Smart landlords realize boutiques and restaurants bring traffic. You embrace them,” he said.Independent boutiques and restaurants make a property unique and keep fickle consumers interested. However, he said, landlords make money on vertical retailers with national names. “You wouldn’t fill [all the] empty spaces with [independent] boutiques,” he said.

Landlords often make special rent deals with independents and popular neighborhood businesses so these places can continue serving their customers, Luchs said. But national names attract big crowds, he said. It’s a big brass ring for landlords to attract one of these shops to their mall. “They really want the financial stability and financial strength a vertical retailer brings,” he said.

Power in numbers

For Gila Leibovitch there are two choices for retailers: “Be in your business all of the time and cut back on overhead and staff. The other way is to do business in spaces with low rents and make higher margins from the low overhead,” said Leibovitch, who co-runs more than five stores in Los Angeles and Laguna Beach, Calif., under the nameplates Premier Men, Premier Kids, The Vault Men, The Vault Women and Melrose Place.

“If the passion is there and you really love what you do, you will find ways to stay afloat,” she continued. “But it takes a lot of creativity.”

Diane Merrick has run her self-named Diane Merrick boutiques in the Los Angeles area since the mid-1970s. Some of Los Angeles’ fashion luminaries—including Tracey Ross and Juicy Couture label co-founders Pamela Skaist Levy and Gela Nash Taylor—started their careers working for her. She’s seen ups and downs, but the past few years have been especially trying.

“Where did the competition take a left turn?” she said.

Branded retailers such as Juicy, Vince, Splendid, True Religion, Theory, 7 For All Mankind and American Apparel; fast-fashion chains such as Forever 21 and H&M; and e-commerce retailers such as HauteLook are but a few of the retail channels that have posed a mighty challenge for independent retailers, she said.

Added protection could come from numbers, she said. “Start a group like a grocers’ association and pool together private-label resourcing so [boutique owners] will have better buying power, in-house advertising, distribution and control when to go on sale,” she said.

The next generation

The independent boutique will return, said Dick Outcalt and Pat Johnson, consultants with Outcalt & Johnson: Retail Strategists LLC.

One reason is demographics, Outcalt said, predicting a renewed interest in small-business ownership after the massive layoffs of the Great Recession. With the barrier to entry low in the boutique market, the field will attract many new people, Outcalt said. “The high failure rate will continue,” he forecast. “The success rate will be high, too.”

But Johnson stressed that boutique owners must become financially literate and must know their way around balance sheets and debt-to-worth ratios.

“There are many ways to succeed,” Johnson said. “But there’s only way to fail—financial.”