Fred Segal failed to compete in the 'very hard beast' of L.A. fashion retail. Here's what went wrong

It was peak 1990s when Cher Horowitz, the fashionable teen queen in the hit film “Clueless,” needed her “most capable-looking outfit” to take her driving test at the DMV.

“Lucy!” she bellowed from her Beverly Hills bedroom, a mound of discarded designer clothes at her feet. “Where’s my white collarless shirt from Fred Segal?”

The beloved Los Angeles boutique retailer got another shoutout in the 2001 rom-com “Legally Blonde”: “Two weeks ago, I saw Cameron Diaz at Fred Segal,” Reese Witherspoon’s Elle Woods said, “and I talked her out of buying this truly heinous angora sweater.”

For more than six decades, Fred Segal was a fixture of L.A.’s retail landscape and a pop culture touchstone. Locals and tourists alike flocked to its ivy-covered walls for upscale but laid-back looks that epitomized effortless Southern California style. It was also one of the city’s most reliable hot spots for A-list celebrity sightings, from the Beatles in the 1960s to, more recently, stars including Britney Spears, Kendall Jenner, David Beckham and Jennifer Aniston.

That all but came to an end Tuesday, when Fred Segal shut its two remaining L.A.-area clothing stores: its West Hollywood flagship on Sunset Boulevard and its Malibu location. (A Fred Segal Home showroom in Culver City remains open.) The retailer — which once had nine locations in California and outposts in Switzerland and Taiwan — blamed the lingering financial effects of the pandemic and the challenges of running a multi-brand company that carried nearly 200 labels.

“Things were really going great until COVID hit,” owner Jeff Lotman, who bought Fred Segal in 2019, told The Times in an interview announcing the closures.

Industry watchers and rivals said the brand’s downfall was the result of several missteps. Once at the forefront of cutting-edge L.A. style, Fred Segal had become stagnant and lacked newness, they said. A lack of product differentiation, stiff competition and the shift to e-commerce also contributed to the chain’s demise.

“One of the challenges for us was that 90% of the brands that we carried were available elsewhere online,” Lotman said in a follow-up conversation Thursday. “Margins became very thin.”

In a city where retail stores flame out quickly, Fred Segal for years was able to stay on top of the latest trends — and set many of them, thanks to its visionary founder.

In 1961, the Chicago-born, Los Angeles-raised Fred Segal opened his first store, a 300-square-foot space on Santa Monica Boulevard in West Hollywood. Segal had already been embellishing denim with rhinestones, elevating them from everyday closet staples into something one-off and bespoke, and pioneered an in-store “jeans bar,” a concept that would be copied by rivals around the world.

“When Fred Segal the man opened Fred Segal, it was a truly unique place,” Lotman said. “He invented the fashion jean, pop-up shops and experiential shopping. Also he had brands that were not sold anywhere. It was truly one of a kind. He was the original curator of cool.”

In 1965, having outgrown the original space, Segal relocated to the corner of Melrose Avenue and Crescent Heights Boulevard. By buying up other properties in the area, he cobbled together what would eventually be a 29,000-square-foot complex that kick-started the transformation of that stretch of Melrose into the designer-filled destination it is today.

Segal began to experiment with the then-novel shop-in-shop concept, first tapping employees to take charge of different areas within the store, and later recruiting other retail innovators to fill the warren of disparate spaces, making sure each complemented the others.

“They were influencers before there were influencers, before there was social media,” said Nicole Craig, a professor at the Arizona State University Fashion Institute of Design and Merchandising. “One of the reasons why they were successful is that they curated a lot of really cool, up-and-coming brands.”

Among them: Kate Spade, Juicy Couture, J Brand and Hard Candy, all fledgling businesses when Fred Segal granted them coveted floor and shelf space.

But in recent years, amid the 2019 ownership change, the pandemic and a challenging retail environment that has led to a rash of store closures for brands big and small, Fred Segal struggled.

“It’s much harder to stand out than it used to be,” Craig said. “That’s where Fred Segal lost its way a little bit. They didn’t have enough of that fresh product that you couldn’t get elsewhere.”

Shelda Hartwell, a vice president at the retail and fashion consultancy Doneger Group, said that although consumers value heritage brands with history and name recognition, Fred Segal needed to do more to keep the excitement going.

“They stayed too much in the sameness for too long,” she said. “You had other retailers that were coming in and opening up their first brick-and-mortar stores that were just offering much more of an experience.”

The experiential aspect is even more important nowadays because so much shopping can be done online, said Mac Hadar, buyer and director of operations for H.Lorenzo, a competing boutique retailer with a store a couple of blocks away from the now-shuttered Fred Segal flagship.

“The retail stores that have continued to do well are the ones that are continuing to push the boundaries and push the limits,” Hadar said. “With the rise of online, you can find almost anything, so you have to have a very original point of view and be pretty daring with what you choose to bring into the store.”

Fraser Ross, owner of Kitson, one of Fred Segal’s biggest rivals, called retail “a very hard beast right now.” Successful brands need to figure out how to evolve quickly, he said.

“People aren’t shopping the way they did,” he said. “In the days when you didn’t have Instagram and the web, you could open lots of stores in every neighborhood in L.A. But now, you’ve got to be specific in trying to get the traffic through your door.”

One change that Kitson made is that “we’re not really chasing the hottest brands anymore,” Ross said, because those brands can easily be found online.

Instead, Kitson, which was founded in 2000 and now has four L.A.-area stores, has leaned more heavily into exclusive merchandise and SoCal-inspired products and brands that appeal to tourists, such as Aviator Nation, FreeCity and Sol Angeles. Fred Segal, he said, didn’t embrace that lifestyle aesthetic as much.

Fred Segal also failed to amplify its online presence, which hurt the brand’s relevance, said Ilse Metchek, an industry analyst and former president of the California Fashion Assn. She said the company did a poor job of advertising on social media and through fashion influencers, who now play an outsize role in the industry.

“The idea of legacy brands doesn’t appeal as much anymore,” Metchek said. “You’d rather look at something new that Instagram or TikTok is showing you.”

Lotman, who is chief executive of licensing company Global Icons, bought Fred Segal with ambitious plans to open roughly 20 new shops in major cities around the world and oversee a move into home decor and accessories. Before the pandemic, he had pending deals to open stores in Dubai, Canada and Japan.

Now, the future of the storied brand is unclear.

The Segal family owns the Fred Segal trademark, Lotman said, and any decision about whether to open new stores or begin selling online again would be up to them. Two Fred Segal shops at Resorts World in Las Vegas, which Lotman is not involved with, are still operating.

Larry Russ, the family’s attorney, said this is not the end of the road for the brand but could not share more details.

“We are going to be looking for a new operator to open up more stores in the future,” he said.