The luxury-goods business is “absolutely flying blind” in this new market environment...
When Saks Fifth Avenue slashed prices by 70% on designer clothes before the holiday season even began, shoppers stampeded. “It was like the running of the bulls,” says Kathryn Finney, who says she was knocked to the floor in New York’s flagship store by someone lunging for a pair of $535 Manolo Blahnik shoes going for $160. Saks’s deep, mid-November markdowns were the first tug on a thread that’s now unraveling long-established rules of the luxury-goods industry. The changes are bankrupting some firms, toppling longstanding agreements on pricing and distribution, and destroying the very air of exclusivity that designers are trying to sell.

The problem Saks faced last November is one that haunts the U.S. economy as a whole: From car makers to home builders, companies are stuck with inventories that are far too fat.
By Vanessa O’Connell and Rachel Doses, Feb 9, 2009, WSJ

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