Liz Claiborne to Open Stores
By George Anderson
Liz Claiborne Ltd. is looking to get lucky with new stores the fashion design house is opening to promote a line of the company’s jeans.
The stores promoting the Lucky Brand jeans line will not be the company’s first foray into retailing. It has opened stores before under the Liz Claiborne and other banners and it, along with Apple, Bose, Nine West and others, have found the strategy helpful in controlling and projecting their brands’ images.
Walter Lamothe, who runs the retail division of Liz Claiborne, told The Globe and Mail that the company’s stores provide “tremendous exposure” for its various fashion lines.
The fashion wholesale market has been shrinking, he said, and Claiborne’s stores help distinguish its brands in the marketplace. “If there was unlimited potential for wholesale, everybody would just do wholesale and never do retail because the cost factor is 10 to 1. But there are other advantages, long term,” he said.
While there are benefits to manufacturers and wholesalers opening their own stores, there are also risks.
David Howell, a merchandising consultant for Associate Marketing International, said some such as Wolverine shoes have found that getting into retail can avoid numerous risks.
Moderator’s Comment: Do manufacturers opening their own banners have a different benchmark for success than those
companies that are pure retailers? What product categories offer the greatest potential for manufacturers and wholesalers considering opening their own retail outlets?
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George Anderson – Moderator
This article seems to imply that Lucky Brand Jeans are not already sold through their own retail stores. I’m not sure how many outlets they have nationwide, but in California alone there are 28 Lucky Brand Jeans Stores and 4 Lucky Brand Outlet Stores already.
If they are expanding further on the Lucky Brand Jeans retail concept, I would assume it is because Liz Claiborne already knows it is working – or, at least, is one of few options for growth, as discussed above.
Single-brand apparel stores are certainly nothing new. As has been pointed out, there are a number of reasons why vertically integrating would be in the best interest of the brand. For Lucky, it is my belief that the image-marketing-advertising value is the greatest potential return on the investment. It is possible that Lucky can evolve into a dynamic lifestyle statement, distinct from it’s funky denim origins. At the moment, the benefit to Liz is establishing a “pull” demand for the brand. As has been pointed out, Federated now carries extraordinary leverage. The best way to offset that leverage is to be a “must have” brand. Aspirational purchasing depends on the belief that the brand brings lifestyle associations. Lucky stores, with higher end styles, merchandised with flash and excitement, generates this lifestyle association.
The key point in evaluating the potential for any given brand, aside from the already discussed breadth and depth issues, is the willingness of the brand to build the skills, processes and technology that retail requires. Just as an aside, the core of most manufacturing information technology is an IT system based on manufacturing and distribution. The core of most retail information technology is an IT system based on assortment planning and dynamic replenishment.
Yes, brands have different success metrics than true retailers, assuming the brand actually is not trying to be a true retailer. If it is, then the metrics should be identical. And all too often they are not. So decide what the point of the store is (marketing or profit) and operate accordingly.
To answer the question regarding which product categories have the best opportunity for manufacturer/retailers, one answer certainly is denim (ala Lucky). It seems that no matter where we are in the fashion cycle, the denim business vacillates somewhere between hot and very hot. That said, it is one category that gets lost in translation in a department store environment and this is particularly true for premium denim. Denim brands are also natural lifestyle brands and this can best be executed in dedicated retail venues.
There is always retail store opportunity in fashion goods if you are trend correct or if you can create brand exclusivity. The real issue here though is that Liz Claiborne has the need to reduce its dependency on the “new” Macy’s and to find other outlets for its production and they must do this fast. Why? Without moderate department store competition Macy’s has too much leverage and will use it to squeeze LC’s profits and also will force more returns and more markdown money, etc. The new Macy’s will be pigs at Liz C’s trough, as well as all their other key vendors in the short run and until vendors become less dependent on Macy’s business.
It seems that more and more manufacturers are now entering the world of retail. There are many good reasons for them to do so. Some include the creation of a brand image, more focus on the product and brand and more control over the marketing. In most retail outlets where Liz Claiborne fashions are found, they are competing with other brands. In a Liz only store, they are competing with their own styles AND other retailers. All business people are looking for new outlets and sources of revenue. Manufacturers are no different. Whereas part of the reason a manufacturer opens a retail outlet is to market the brand and control the marketing, they want and need to make a profit just like any other retailer. Thus they will need to learn that there is a difference in selling to the buyer of a retail chain from selling directly to the consumer.
Some manufacturers open a handful of stores just for image purposes. Some manufacturers open dozens or hundreds of stores because they want the volume and profit opportunity. The wholesale apparel business is generally not a growth channel because of department store mergers, the growth of private label in department stores and mass merchants, and the decline of the mass merchant channel. The greatest opportunities for the manufacturer occur when (1) the line is broad enough and updates itself enough to be an interesting store worth returning to and (2) labor costs, compared to gross margins, can be reasonable.