Hudson’s Bay closures leave brands in search of new home for selling inventory

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Yair Altman is about to have a lot of extra pillows on hand.

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His Montreal-based company SmartSilk has been selling bedding to Hudson’s Bay since about 2010, but with the department store closing all but six of its stores by mid-June, Altman has to find a solution for his Bay-bound merchandise.

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“It creates a bit of an inventory situation,” he explained.

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“We have more inventory and the inventory sits in the warehouse, which is space and rent, and now we have to find another home for that inventory because we have more coming in.”

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Altman says the situation unfolding at his company is likely also taking shape across the hundreds, if not thousands, of businesses whose wares have been sold at the Bay and its sister Saks retailers.

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Since their parent company filed for creditor protection last month, many merchants are scrambling for a new sales point for goods once destined for Bay and Saks shelves.

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Finding a new home for merchandise that would have been sold at the Bay and Saks won’t be easy for several reasons.

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Many department stores faltered long before the Bay and those remaining won’t have room to take on every brand its competitor stocked. La Maison Simons, for example, is dominated by private labels and Holt Renfrew has too ritzy a standard for several Bay brands.

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“The only ones that are really left are the Walmarts of this world, and the TJ Maxxes,” said Altman. “They’re the ones who do the most volume but they’re price shoppers.”

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He said that means if you sell a product for $10, these companies will often only pay you $5 or $6 and most businesses “can’t survive that way.”

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Altman will move excess merchandise through other retailers that already sell SmartSilk, like Costco, making the situation “not something horribly terrible.”

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But some may have no other choice than to go with a retailer demanding deep discounts because time won’t be on their side.

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Because many have to manufacture in advance to meet demand, they’ve long since placed orders for the summer and are already focused on fall and winter.

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Any delay selling merchandise puts their entire season, supply chain and profit at risk.

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“Every day that a product is in a warehouse or available, it’s diminishing in value,” said Michelle Watson, whose apparel brand Michi has previously had to pivot when other retailers have closed. “We want to be selling it as quickly as possible and then not having it reach markdown status.”

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At SmartSilk, production can take between 45 and 60 days and shipping merchandise from Asia to Canada takes another 30, so Altman has to plan four months in advance.

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“What we’ve bought to come in for April, May and June, we can’t change,” he said.

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“We may be able to ask the factory to delay a shipment by two to three weeks, but we can’t do much more than that because that puts a tremendous strain on their cash flow. We’re all intertwined.”