Sample Sale: Thriving outlet stirs a debate

Although they do not contribute huge amounts to the bottom line, they have become an important outlet for excess stock, manufacturers say, and are often -- although not always -- preferred to alternatives, such as off-price merchandisers.

"Sample sales have become much more important to designer sportswear companies," said Ken Merlo, chief financial officer at Charlotte Neuville, Inc. "They're much more prevalent. It's like a cottage industry now."

There are firms that for a percentage of sales will run a sample sale; publications that carry listings of sample sales, and a telephone number (212-, 718- and 914-540-0123) a bargain-hungry consumer can dial for a weekly schedule of sample sales here.

Some vendors still hold true sample sales but the term is now largely a misnomer on SA, where several sample sales offer hundreds of stock units over the course of a three-day event.

Among the more prominent sportswear houses that have held sample sales recently -- ranging from the small, employees-and-close-friends-only events to large stock sales -- are: Anne Klein & Co., WilliWear, Charlotte Neuville, Patrick Kelly, Basco, Perry Ellis, Michael Kors, Ralph Lauren, Harve Bernard Isaac Mizrahi, Tahari, Isaia, Patricia Clyne Dianne Beaudry, Gordon Henderson, The Moses Collection and French Connection.

In addition, scores of lesser-known companies, many of them concentrated at 1411 Broadway, 1441 Broadway and 1466 Broadway, contribute to the steady stream of samples sales held each week around SA.

Despite their burgeoning popularity, sample sales remain a sensitive subject for retail and manufacturers. They seem to be viewed as a necessary evil produced by a variety of market forces, including retailers' demands for long lead times and manufacturers' reliance on imports, which have combined to create large amounts of excess merchandise.

Industry opinion is split into two camps. On one hand, there are retailers and manufacturers who refused even to discuss sample sales because they see them as a particularly delicate topic. Officials from Lord & Taylor, Bergdorf Goodman and Abraham & Straus were among those who would not comment. Said one spokeswoman, "It's a little too controversial."

"Sample sales have always been a touchy subject for us because we don't want to step on anyone's toes," said a manufacturer who holds sample sales but requested anonymity.

On the other hand some executives, while acknowledging the potential threat sample sales pose to retailers, believe they can exist without cutting into retailers' business, provided the sales and their accompanying promotions are limited to SA.

"If a manufacturer made a big splash with a sample sale, with [consumer] advertisements, for example, it would perhaps pique our tempers," said Missy LoMonaco, vice president of fashion merchandising at Bonwit Teller. "But if they keep it low key, the way they have been doing, it won't affect our business at all."

Executives said regular-priced stores are not in danger of losing customers to sample sales because they attract two distinct groups of shoppers.

"The sample sale customer is very different from the Saks customer, so I don't view them as competition," observed Ellin Saltzman, senior vice president and fashion director at Saks Fifth Avenue. "They appeal to a different audience."

Jim Tinijero, president of Anne Klein and Co., which holds small sample sales four times a year as a benefit for Anne Klein employees, agreed: "The customer who is spending $1,200 for an outfit at retail isn't going to shop around for price. Some sample sales don't hurt the retailer and others do."

Manufacturers are mindful of the fact that as sample sales become more popular, a vendor could undercut his or her own business with retailers. "We don't want to disturb our retail distribution in New York City because it's an important market for us," said Tinijero.

Like a few other manufacturers, Bern Conrad, president of Dag Merchandising, Inc., here, which produces sportswear under the Bern Conrad label, has dispensed with sample sales since opening an outlet store in Secaucus, N.J., in April 1988. The sales, he said, had begun to get "out of hand."

"The original thought was to sell samples or slightly tattered merchandise you couldn't sell to stores," he said. "But that has all disappeared. It has become a very big business.

"I would like to continue my sample sales because as a manufacturer you're always trying to keep distribution as clean as possible, but if you're not careful you're running a retail business from your showroom and the Saks Fifth Avenue customer is buying from you at half price."

SA executives said they avoid direct competition with retailers by offering only off-season goods or merchandise that has been on retailers' floors for months.

In fact, said several of them, if the sales are promoted in a low-key manner to a limited market, far from being competition for retailers, they resulted in a healthier sportswear business overall because they are a better alternative than off-price stores.

"As part of revenues, sample sales' contribution is negligible, less than 1 percent," said Laurie Mallet, president of WilliWear, Ltd. "They are more important for solving the problem of space.

"One thousand pieces of anything is a problem. Instead of giving them to charity why not recover some of that?

"I think it's a great system," she said. "We need the stores but we also need the sales because we have to deal with this problem."

WilliWear cleared 90 percent of 4,000 to 5,000 units offered at its June sample sale, held in the basement of 1466 Broadway.

Like other manufacturers, Mallet said sample sales offered several advantages over off-price merchandisers.

"We try to go directly to the consumer. This way we can recover at least our cost," she said. "Sometimes it seems the offers from discount operations are not reasonable."

Manufacturers can keep more cash for themselves going the sample sale route. "I'd rather have a sample sale than sell people off-price," said Gordon Henderson, whose sportswear collection, here, is produced by World Hong Kong, Inc. He held his first sample sale this month in the line's warehouse at 315 West 39th St. He plans to hold them two or three times per year.

"When you sell off-price you have to sell 50 percent below wholesale or less," he said. Henderson's sample sale offered merchandise at 10 percent below wholesale. "The more we can sell at regular wholesale, the stronger our business is," he noted.

Even those sportswear firms that do not hold sample sales, such as Donna Karan and Calvin Klein, agree that the increase in sample sales is necessary to the business and a better choice than discount stores for selling off excess stock.

"A lot of places having so-called sample sales are overruns of real stock," said Julie Stern, president of Donna Karan, whose overruns move to Loehmann's.

"When you have overruns you have to get rid of it," he said. "A lot of companies run [sample sales] and it cuts into 50 percent to 60 percent of the excess merchandise."

Nevertheless, for now Stern will continue to sell excess stocks to off-price channels because he believes that practice is more acceptable to its accounts than sample sales are.

However, Merlo at Charlotte Neuville argued that the reality is far different from the perceptions of some industry executives: "When you're going the off-price route, it's a much more visible route and you do hurt your regular customers." By choosing sample sales over discounters, Merlo said, manufacturers "preserve the integrity of the business."

Furthermore, sample sales help get consumers interested in the line, he said.

Charlotte Neuville hires Simply Samples, Inc., here, one of several service businesses that have sprung up recently in response to the increase in sample sales, to conduct its biannual sales.

A sample sale for Patrick Kelly merchandise, held June 1 and June 2 at the firm's 485 Seventh Ave. address, featured samples from fall 1988, spring 1989 and fall 1989. Most were size 6.

Mary Ann Wheaton, president of Patrick Kelly said that while she is able to limit sales exclusively to samples because the Patrick Kelly collection is cut to order, other manufacturers must contend with large overruns, a result of the production commitments they must make before actual bookings are in.

"Sample sales are a growing development which evolved as projections have become more demanding," said Wheaton.

"One of the reasons sample sales have become so important to manufacturers," said Roberta Saft, "is because of all the offshore production coupled with the shrinking retail stores." Saft worked in piece goods for three decades, most recently as vice president at Warnaco, Inc., before launching Simply Samples eight months ago.

Saft and partner Doris Schulman have coordinated eight sample sales since the company's inception. For a fee of about 27 percent of the value of merchandise, they will organize a vendor's sample sale and hold it at their facility at 150 West 36th St. The space also is a fulltime shop stocked with samples and overruns sold at 10 to 25 percent below wholesale.

Another entrepreneur profiting from the new interest in sample sales is David Sacks, who owns off-price stores here and in Los Angeles. He has held about 20 sales for 12 or 13 different vendors since he started BFD Productions a year ago.

Revenues from the firm's first year in operation were close to $3 million, said Sacks. "If I could spend full time on this business, it would do better than my stores," he claimed.

Vendors are turning increasingly to sample sales as opposed to discount stores because it puts money in their pockets immediately or in the case of credit cards, a week later, he said.

Sacks generally advertises his sample sales using flyers distributed around SA. In addition to flyers, other vendors also use ads in trade papers. However, one of the most popular advertising vehicles is the S&B Report, a monthly booklet published here, which goes out to 7,000 subscribers every month.

Elysa Lazar, a former banker, published the first issue in December 1986 with 80 sample sales listed. Today a typical issue carries 230 listings of fashion industry sample sales. She has also raised the subscription price, beginning with the June issue, from $32 per year to $40 per year and plans to launch a California edition of S&B in October.

"Sample sales are a big business now," she said. "It has become a way for young designers to build a following. It's become much more organized. More and more designers are taking credit cards, where we didn't see that before. Manufacturers are aware of holidays, for example, planning sales around Christmas or Mother's Day. We are getting calls now from people reserving space for December."