Thursday, January 03, 2008

Shabbat Robes, for example.

Someone left a comment to a post on UOJ's site which was this cut and paste of an article from the Jerusalem Post. There are so many issues illustrating the dysfunctional internal economy of our orthodox communities that I hardly know where to begin. I will intersperse my comments within the body of the article.

Anonymous said...

MICHAL LANDO, Jerusalem Post correspondent , THE JERUSALEM POST Dec. 30, 2007

A few days before New Year's, the racks at several haredi loungewear and hostess gown stores were still full of winter "Shabbos robes," elegant but practical velour robes worn by haredi women at home. Women were browsing, but they weren't buying. Most years, the secular new year comes and goes without the haredim noticing, as they are already months into the Jewish new year. But this year, a group of haredi women are waiting impatiently. Come January 1, the 29 retailers across the US and Canada that sell loungewear and hostess gowns are slated to begin a coordinated sale, months after the usual sale time. The legality of such an agreement, however, is questionable under US antitrust laws, which forbid businesses to collude to keep prices high.

The legality is not "questionable" at all - it is illegal to collude in sales or prices in order to prevent customers from finding bargains at other times or among the retailers participating in the collusion.

A growing concern over the survival of this niche market led a group of retailers and manufacturers this summer to form the Loungewear and Hostess Gown Council, which synchronized sale dates and markup prices. Sales are scheduled to be held on January 1 and on July 4, 2008, and the markup price for shabbos robes increased from 50 percent to 65% above wholesale.

That means if the retailer buys the robes from the person/company that makes them for, say, $100.00, then the retail price that they charge us is $150-165.00, quick and dirty. That seems like an incredibly high margin to me, but I understand it is standard across the board (and not just because of collusion - it was standard before the collusion occurred).

"We, as a robe business - unlike any other business - have something very unique to give the religious customer," said Beverly Luchfeld, president of Raza Designs, one of the most popular manufacturers of shabbos robes. "Most of the other merchandise can be found in Walmart, Macy's, etc., but we cater to the needs of this unique customer and should therefore be able to profit."

That "we" there is the problem. Clearly, there are too many boutiques selling Shabbat robes. Why? Because it was one of the few businesses that actually brought money in to the orthodox community from other sects at one time, and because it was something that everbody in the community "had" to have. It was lucrative in the past for those reasons. The makers of the robes were orthodox, those who sold them were orthodox, and those who bought them were not just orthodox but other sects as well. (I'm wondering, now, who manufactures these robes?) But this, apparently, is no longer the case. The customer base has shrunk due to simple economic reality, changes in the wider culture and fashion - and the number of boutiques has increased because it is one of the few "acceptable" and tznuit items that won't get bleach thrown on your merchandise or your shop, or Heaven forbid, a firebomb.

The robes, an essential part of most haredi women's wardrobes, are typically bought twice a year - before Succot and Pessah. They are designed to be elegant enough to honor Shabbat and holidays, but comfortable enough for women to wear even while working in the kitchen. "They look like an evening gown, but fit like a jumpsuit," said Luchfeld, who also manufactures weekday robes, modest Christian clothing and Muslim garb "reflective of an era past."

"You can wear them all day, sweat and entertain in them, and even sleep in them," Luchfeld said. The robes date back to the "old world," where they were called "pondele." Though similar robes were worn by secular women through the mid-20th century, secular fashion became increasingly less formal, and hostess gowns became a thing of the past. But for haredi women, the shabbos robe has never gone out of fashion.

I think they are incredibly beautiful, and I would LOVE, yes LOVE, to have more than the one hand-me-down that I have. But there is no way that I can afford them at those prices - and I, for one, refuse to go into debt to have some.

Every year, women wait for the robes - which range in price from $150-$250, depending on the style - to go on sale. But this year, they have had to wait several months longer than usual. Winter has already chilled the city to the bone, and the women are getting impatient. "They haven't bought that much before the sale, and they come in very angry that [the robes] are not on sale," said Luchfeld.

This should give Luchfeld a clue, but somehow doesn't. Women want the robes, but cannot afford the already high prices - prior to the collusion. THERE IS DEMAND for the robes - what there is not is income to support such high prices.

Typically stores begin their sales at the end of the Jewish holidays in time for the new season, when warm-weather robes are replaced with winter ones. And women have become accustomed to buying only on sale. "I never buy at regular price, I wait for the sales," said Borough Park resident Tobi, who stocks up for the next season a year in advance. "I don't believe in paying these prices."

Don't believe in it or simply can't? For most of us, it's the latter.

But for many years, the stores have been struggling to make ends meet, said Luchfeld. "I've seen the business go downhill, and I told them [retailers] it's a real shame, because this is a unique product," said Luchfeld. "You can't get it at Nordstrom." But many retailers are losing money on shabbos robes, said Luchfeld. "It's become a hobby, and you can't stay alive." In order to increase sales, stores would price each other out by competing to go on sale first.

This proves there are too many stores, and that those stores are not diversified enough in their offerings for their market. It is not a viable business model to depend on one product bringing in a ridiculously high profit margin.

To avoid competition and ensure profitability, the retailers and manufacturers agreed in an August meeting to stave off sales until January 1, allowing them more time to sell at full price and avoid competition. "We were all running on each other's throats," said Leah of Borough Park's Lingerie Shop. In addition, the group agreed to increase the markup on the garments gradually to "secure a healthy margin." A 65% markup was initiated for the 2007 holiday season. Next Pessah, they plan to increase the markup again by a percentage still to be determined.

This is suicide. They already know that women can't pay the prices they have already, and that too many boutiques are competing for the same customers. Ignoring that reality won't make it go away. Raising prices will just cause women to buy LESS than they want to - than they would have.

But US antitrust laws call into question the legality of such an agreement. According to the Sherman Act, the principle antitrust law, every contract, combination or conspiracy in restraint of trade is unlawful. "That law has developed to mean unreasonable restraint of trade is unlawful," said Saul Morgenstern, chair of the antitrust group at New York's Kaye Scholer law firm. "The court will go through hoops to measure whether the agreement is good for competition or bad." Price-fixing is usually considered "per se" unlawful, said Morgenstern. "If all sellers of a particular good get together and say, 'Competition is not helping us, we have to raise prices,' it looks pretty bad."

Competition is what keeps the poor buyers from being taken to the cleaners with mark-ups they can't afford. Not every business can or should stay in business. Those who really want the customers to buy will lower the prices to a level their customers can afford. Those who refuse to do so should go out of business or diversify their merchandise to a more reasonable spread of risk.

Jewish law allows price-setting by associations of manufacturers and suppliers, but says such price-fixing must be approved by a communal authority, according to an article on by Prof. Nahum Rakover. A far-reaching opinion on consumer protection can be found in the writings of Rabbi Menahem Ha-me'iri, the 13th-century Provencal Talmud commentator. Ha-me'iri holds that artisans do not have the authority to stipulate prices, even with the approval of a distinguished man, since such practices cause a loss to the townspeople: "It appears to me that the members of a particular trade are not permitted to set prices for their work without permission of the townspeople, since the townspeople would otherwise be forced to take an unfair loss" (Bet Ha-behira on Bava Batra 9a). Luchfeld says the Shabbos robe sellers are trying to create a "healthy, diverse market that respects a full retail markup."

No, they're not trying to create a healthy, diverse marketplace. They're trying to prop up an overextended marketplace - one they maimed by pricing themselves beyond the market's ability to pay. Making them more expensive will only kill their sales faster. It would actually be more efficient and profitable now for some women with seamstress skills to begin making robes at home and selling them to their friends and neighbors for less than $100 each on average. That appears to be the price range that women buyers can actually afford. (And again, who's making the ones they're selling now? Why aren't those persons/business offering wholesale prices at home or on the web?) That is what real competition is - finding the price your customers can afford to pay and filling their needs and wants AT THAT PRICE. Trying to force customers to pay more for something that in reality they don't need is simply a sure-fire way to make shabbat robes an extinct species.

"Antitrust laws refer to a retail outlet that tries to take over the market and destroy the competition," said Luchfeld. "We are all-inclusive and are working together to encourage diversity, competition, and survival of an industry." A similar effort by robe sellers to band together failed five years ago. "Some broke the sale, hoping to beat everyone else," said Luchfeld. But this year, everyone has kept to the agreement. "They saw the writing on the wall: If they didn't take a stand, they wouldn't have business."

Not all of them, but once the shakeout ended, the financially sound businesses would remain standing - enough to serve the needs of the relatively low number of women who actually want and are willing to shop for shabbat robes.

Earlier this year, ads announcing the sales and a list of participating stores were placed in Hamodia and Der Yid, two haredi newspapers. And signs are currently posted in the windows of all the retailers, notifying customers of the agreement. "It might be that some stores will lose out, and others will succeed," said Luchfeld. "They will have to find ways to bring people in." Three weeks ago, the council held an "emergency meeting" to do just that. Luchfeld wrote an e-mail urging retailers to attend: "We have succeeded in avoiding a 'Sale Mode of Business,' but we are not succeeding in attracting traffic to the store." The letter urged store owners to come ready with ideas to stimulate traffic "without breaking our 'Sale Policy.'"

This, again, should be a wake-up call. If they know the customers are out there who want to buy the product, they are going to have to sell the product at prices the customers are willing to pay. The customers have made it clear that they don't have the budget to spend $150-$250 for a single shabbat robe. Some botiques are going to have to merge or diversify - there are too many stores for too few customers.

"If we break any form of sale, we will lose the customers' confidence, and we will never be able to regain credibility again," wrote Luchfeld. Luchfeld also encouraged retailers to poll their youngest customers. "Are Shabbos robes, as they are now fashioned, still in vogue? What are the young kallot [brides] looking for?" wrote Luchfeld. "We have to understand the shifts in fashions, and the public's response to fashion." Some new trends are already noticeable. In the last few years, the weekday robes, which are shorter and less elegant and cost roughly $70, have begun to be replaced.

The weekday robes are not as attractive and, frankly, have little chance of surviving changing cultural and social trends. Clinging to a dead product line is hurting them, not helping them.

"Lately, women have started wearing t-shirts and skirts at home," said Tobi. "I can be dressed well in t-shirt and skirt for $30, which are easily replaceable, instead of wearing housecoats, which I find ridiculous." But no one expects the Shabbos robe to be replaced. It is simply a matter of how to make businesses and customers see eye-to-eye. "I don't think it's a dying phenomenon, we just have to retrain the customer," said Luchfeld, "If we could afford to close doors for a few seasons, the customers would come begging for their Shabbos robes."

Anonymous - posted 11:22 AM, January 02, 2008

I wait with baited breath to see how they are going to "retrain their customers" to cough up money they don't have to pay for products they don't really need. In reality, it is themselves who need to be retrained. If the shabbat robes were less than $100 each, retail, I would buy one every two months or so for at least the next year or so. I would buy some for my "other" friends and relatives as gifts for Purim or Chanukkah or birthdays. Probably there are many more women who feel the same. But I don't have $200 or more to spend on a luxury item, and as the economy continues to tank further and further, neither will many other women. Instead of illegally colluding to fix prices (which will just get them thrown in jail, eventually), why not do things the old fashioned way - find a need and fill it at a price people are willing to pay. That's free market economics at work.

Instead of an unsustainable number of boutiques selling shabbat robes, how about some boutiques selling other items made by local cheredi or MO women - household items that can be beautifully sewn, knitted, crocheted, or embroidered - and not just clothes, but bedskirts, quilts, tablecloths, curtains, and wall-hangings? Why are we buying these things at wal-mart when we could be supporting our own internal economy?

It is important that we realize that in the real world, people are going to have to scale back their shopping - the consumer/materialism paradigm of society is very sick and has a bad prognosis. Retail is not doomed, of course - but it's going to have to be organized along new lines with realistic expectations about the numbers of people who can buy a given product, and the price they can pay - and new business models that don't focus so much on quantity and turn-over instead of quality and focus on "localism." Instead of doing these things, the boutiques have instead decided to resort to illegal price-fixing and collusion to stop innovative competition and re-focused business models. Well, class - good luck with that. When you get out of jail or bankruptcy court, whichever comes first, send me a comment and I'll see if I can give you some REAL help to lower your overhead and your prices and diversify your merchandise - to help you figure out what is working for your business and what is not, and hopefully use careful market analysis to prevent a genuinely lovely and desirable product from disappearing forever.

1 comment:

Goatberry said...

I'm appalled by their basic lack of knowledge in selling! However have they survived this long?
I love beauty & comfort & would gladly buy a few robes if they were less expensive, but there's no way I can afford what they want.
I'm not Jewish, but ask a trad Catholic who prefers to dress modestly, but in comfort. These forms sound perfect, except for price!