Younkers Inc., a Midwest department-store chain that in June i
Younkers Inc., a Midwest department-store chain that in June informed vendors it would begin deducting 2 percent from each merchandise invoice in lieu of returning damaged goods, argues that such fees are always negotiable. ``We end up reversing a lot of chargebacks,″ says Alan Raxter, chief financial officer.
Of course, even the ubiquitous apparel brands are asked to pay up. ``Nobody is immune from this problem,″ says Richard Lander, executive vice president of Creditek Corp. in Parsippany, N.J., which examines chargebacks for popular clothing companies like Esprit Corp. and Levi Strauss. But, he says, while the big names recognize chargebacks ``as a significant expense to be dealt with,″ they’re large enough to absorb the cost.
The profit margins of smaller apparel makers are already dangerously thin, with apparel prices actually about 5 percent lower now than a year ago. A small vendor pockets about 10 percent on a sale, retail experts say. So if it scores a $10,000 order, earns just $1,000 on it and then gets hit with a $400 chargeback because the retailer claims the hangers are aligned the wrong way, the sale can be life-threatening.
Increasingly, smaller apparel makers are taking their goods to other outlets, like specialty and outlet stores and catalogs. Fitigues Inc., a Chicago line of funky apparel, just opened its ninth independent store because its margins can’t withstand department stores’ charging back 5 percent of their payments. DeLong Sportswear Inc., Grinnell, Iowa, refuses to sell to department stores at all. ``They ask you to ship on Thursday but not on Friday. At 10, but not at 10:30,″ complains Kevin Kolbe, North American sales manager.
Joan Mendlinger, vice president of New York’s F&J Designs Inc., once had to hire three extra people for one shipment of riding trousers. That’s because the retailer was requiring special shipping bags, boxes and hangers. She made no money on the shipment. ``It’s not worth it,″ she says.
Dion-Jones Ltd., a Chicago maker of large-size dresses, now sells mainly to specialty stores and boutiques. ``It’s too hard for people like me to do business″ with department stores, says Laura Dion-Jones, its president. She says she was once charged $50 a box on a shipment because the retailer said it couldn’t find the packing slip. ``I myself happened to see my head of shipping put it on,″ says Ms. Dion-Jones. ``What a cheesy way to do business.″
Of course, specialty apparel stores have been underperforming department stores for some time now, and the risk is greater that they will go out of business and leave their suppliers in the lurch. But Hans Albers, owner of Los Angeles apparel maker Christine Albers Inc., says, ``That’s a risk I’m willing to take.″