With department store sales declining dramatically, retailers may have to sharply mark down their exclusive lines of clothes and home goods--such as the American Living line at J.C. Penney, Simply
Vera Vera Wang at Kohl's, and Martha Stewart Collection at Macy's--which could hurt the image of both the brands and the stores.
What's more, retailers can't share the pain with
suppliers, as they do with national brands that offer allowances for markdowns. Retailers often commit to large minimum orders to get the best prices on their in-house products--and can wind up with
far more inventory than they need.
Department stores say they haven't yet had to make widespread markdowns, but analysts see these goods--which stores have ramped up dramatically in
recent years--as a vulnerable spot if the economy continues to worsen. And the higher margins in some private-label programs, which might have provided a cushion for retailers' markdowns, now are
coming under pressure as retailers grapple with higher sourcing costs in China and elsewhere.
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