Fitigues owner Steve Rosenstein really goofed last month when he closed his Rush Street flagship store for a two-week remodeling job: He forgot to put up a sign telling shoppers the shutdown would be temporary.
Fans of Fitigues’ upscale sweat pants and tank tops besieged Rosenstein’s office with distressed appeals to keep the store open. Real estate brokers left messages offering to sublet Fitigues’ space.
Rosenstein blames himself for the confusion, but he understands all too well why everyone jumped to the wrong conclusion about his store.
“There’s so much bad buzz going around right now,” Rosenstein said, “with what’s happening at Ultimo and Bigsby.”
To be sure, many once-hot names in Chicago retailing are now history.
Chernin’s Shoes Inc., the 92-year-old footwear chain, filed bankruptcy in May and liquidated its remaining stores in July.
Evans Inc., the 70-year-old fur and apparel chain, followed suit, filing bankruptcy in September and selling off its assets in November.
Just last month, Bigsby & Kruthers also went to bankruptcy court after almost 30 years in the men’s apparel business. Its remaining three stores are holding going-out-of-business sales.
Those dead retailers had one common feature that made them especially vulnerable: All were midsize chains, with big ambitions that could not be sustained. And their failures reflect the unusually hard times facing merchants that are neither big nor small.
Giant competitors known as category killers are offering lower prices because they get better deals from suppliers. They also have more money to spend on everything from advertising to management talent.
Meanwhile, a host of new small competitors are springing up everywhere from revitalized neighborhood shopping districts to the Internet.
To make matters worse, many sources of capital have dried up for “brick-and-mortar” chains, as well-heeled investors throw money at e-commerce ventures that promise huge financial rewards from going public.
“The middle is an increasingly difficult place to be. You’re getting more compression at the top and more heel-biting from below,” said John Ward, co-director of the Center for Family Enterprises at the Kellogg Graduate School of Management at Northwestern University.
Yet a new generation of midsize retailers in the Chicago area are doing better than just surviving. Their names may not be as widely known as their predecessors, but they are profitable, growing and optimistic about the future.
One thing they aren’t is overconfident; they know the retail trends aren’t in their favor. And key to their continued survival seems to be an acceptance of their limitations.
In the uncomfortable middle of the retail world, too much ambition can be fatal.
“Customers don’t have time to explore new retail concepts,” laments Sid Doolittle, partner with McMillan/Doolittle, a Chicago retail consulting firm that caters to midsize retailers. “You have to keep it very different from anybody else, keep it narrow.”
That is what Rosenstein is trying to do at Fitigues, and the same philosophy is propelling two other midsize Chicago retailers, clothier Mark Shale and home accessories purveyor Chiasso.
Rosenstein and his wife Andi, who designs the collection, opened their first store in 1989 and turned profitable in 1991. They now have 30 stores around the country, which racked up $30 million in sales last year.
Their niche: gym-inspired clothing for men, women and children made out of everything from 100 percent cotton to silk and cashmere blends. The brand name says it all: Fitigues is offering comfortable clothes to increasingly stressed out, time-starved consumers who want to look hip, not sloppy.
“As great as the economy is, people have less time to shop,” Rosenstein acknowledged. “There’s no room for the guy in the middle anymore. You can either be the best or the cheapest or you’ll get lost in the shuffle.”
Fitigues had its own brush with mortality in the late 1980s. The Rosensteins got into a battle over quality with a partner who was manufacturing their clothing line and also providing the financing.
The only way out was to file bankruptcy. After 45 days, the Rosensteins reached a settlement with the manufacturer and were free to go their own way.
“It almost cost us the company,” Rosenstein said. “We gave up more control than we should have.”
Now that Fitigues has been around for 11 years, Rosenstein is more philosophical about how big his business can become. He and Andi have had plenty of offers from venture capitalists who want to take Fitigues public, but the couple didn’t want to give up control. They own 100 percent of Fitigues’ equity.
“We’re not as focused on getting big as we used to be,” Rosenstein said. “Thirty stores is a lot for little guys like us.”
Their biggest challenges, he says, are finding highly qualified people who want to work for a midsize retail chain, and making sure every Fitigues store operates as if the Rosensteins were behind the counter.
Another midsize Chicago retailer that has given up dreams of fast growth is Chiasso, a chain of 11 home accessories and gift shops.
David Marshall, Chiasso’s president, went looking for $5 million in venture capital last summer and couldn’t get his phone calls returned because he wasn’t asking for enough money.
Eventually, more than one venture capitalist told him that if Chiasso (pronounced key-Ah-so) became an Internet play, Marshall could have as much as $50 million.
He and his private investors, who include members of the Searle pharmaceuticals family, didn’t take the bait.
“It’s funny. I find myself apologizing for not growing faster and having big dreams,” said Marshall, who spent eight years at Bigsby & Kruthers as chief operating officer.
“We can continue to strategically grow our business. We can become a $75 million business without an off-to-the-races mentality.”
Last year, Chiasso rang up $10 million in sales.
Currently, Chiasso is focused on growing through expanded catalog distribution and its Web site, which was launched last September. But it hasn’t given up on opening new stores. Chiasso will open a store in Oak Brook Center in April, and is searching for a larger location to house a prototype that will include new categories such as furniture, flatware and pillows.
There’s plenty of competition to keep an eye on. Chiasso’s niche of offering high-style, modern housewares such as Alessi teapots and foldable vinyl vases is being chipped away at by everyone from CB2, the new Crate & Barrel prototype aimed at young customers, to Target, the upscale discount chain that is adding designer products from big names like architect Michael Graves.
In fact, Graves, who designed the popular Alessi bird-whistle tea kettle that Chiasso sells for $112, now has a teapot with a similar look on sale at Target for $49.99.
But that isn’t worrying Marshall, who says his Alessi teapot is much better quality.
“Target helps us. The American consumer is just starting to appreciate good design in the home,” he said.
He still believes Chiasso has plenty of room to grow and could end up as a 50-store chain. Luckily, he has patient investors who aren’t looking for a home run at every at-bat.
“If this is a triple, it’s OK,” Marshall said.
That’s the same attitude held by the three Baskin brothers who run Mark Shale, the upscale career apparel retailer based in Burr Ridge.
The upscale men’s and women’s apparel chain is profitable and generating revenue well in excess of $50 million a year, said co-president Scott Baskin, grandson of the company’s founder Al Baskin.
Even though other retailers that focused on selling career apparel, including Bigsby & Kruthers, suffered from the shift to casual dressing, Mark Shale was able to make the shift because it always had extensive offerings of sportswear.
Attitude has been just as important as fashion, Scott Baskin said.
But great service wasn’t enough to keep Mark Shale out of trouble in the mid-1990s.
The company, which had recently expanded to other markets, including Kansas City and St. Louis, was forced to seek bankruptcy protection when customers turned a cold shoulder to merchandise they viewed as too young and trendy for Mark Shale’s traditional customer.
“We were a healthy business with a bad cold. The necessary medicine was to close a couple of stores, although we didn’t want to,” Baskin said. By the time it emerged from Chapter 11 in 1997, Mark Shale had closed a store in Minneapolis and one of two Dallas outlets. It also closed its store in Woodfield mall and let a lease in Joliet lapse.
Today, Mark Shale has eight stores, four of them in the Chicago area, and is doing about 80 percent of the amount of business it was before the store closings.
Going through a crisis like that was tough, Baskin acknowledges, but it was a little easier because he had two brothers, Mike and Steve, who share the management of the company with him.
Mark Shale’s challenge is competing with players such as Nordstrom or Bloomingdale’s, which get special deals from vendors because of their size and can invest more in technology, Baskin said.
But being small has advantages, too.
“We can make decisions much quicker. Most importantly, we are closer to our customer,” he added. “We know more customers personally than any business 10 times our size.”
