Reality Retailing: Designers Battle for Space
Here’s the reality. Fewer department store chains means designers have fewer places to sell their clothing and accessories lines.
According to a USA Today report, general consolidation within the industry along with the elimination of regional department stores in favor of Federated’s national branding
strategy for Macy’s has found some popular designers fighting for rack space as line offerings have been greatly reduced or eliminated altogether.
“You have to stand for something incredibly strong to sell into department store channels, because there is so much competition,” said retail analyst Jennifer Black of Jennifer
Black & Associates. “Some brands aren’t well-known enough.”
“Both the retailers and the suppliers are looking at their business with new scrutiny,” said Arnold Aronson, a former CEO of Saks Fifth Avenue. “How are we going to get better
so we can survive? How are we going to get more efficient, more customer-friendly and give better product for the price?”
Liz Claiborne CEO Paul Charron admitted there are challenges brought about by the new department store reality.
“I’ve got to bite a short-term bullet,” he said of store closings resulting from industry consolidation. “But those (stores closed) were not the best stores … or the more profitable.
I do not lay awake at night and worry.”
Liz Claiborne, which owns 43 clothing brands, has hedged its bet by developing lines not designed for department store sale as well as opening its own stores.
Dan Butler, vice president of merchandising and retail operations for the National Retail Federation (NRF), said other designer brands have followed routes along the lines of
Claiborne because they saw a need over the years to reduce their reliance on department stores.
“In the industry, there has been speculation that this type of merger might come down the road, so vendors have had the opportunity to think in advance, prepare and diversify
what they do,” he said.
Jones Apparel is among those that sought growth outside the department store. The company’s chief executive Peter Boneparth said department store sales have gone from 80 percent
of Jones’ business 10 years ago to 20 percent today.
Discussion Questions: Does industry consolidation make it more or less likely that the right brands/items will find rack space in department stores?
How will consolidation impact how new brands make it into large national chains such as Macy’s?
The opportunity created is to have expertise in marketing, as opposed to product creation and sales. Any brand which understands how its product offering is positioned appropriately for a specific segment within the mix of a given retailer’s customer group will succeed…assuming it can communicate this fit.
Department stores have multiple consumers. No single brand or limited set of brands will address this. The extent to which a new brand can show an emotional connection to a poorly served but existing segment within the overall consumer group, this is the extent to which it will be successful.
To all new brands, existing brands and suppliers of all kinds: learn how to market, not sell. Be meaningful to a distinct segment, develop product which clearly appeals to and meets needs of that segment in a unique or better way, and price it such that the retailer can make money.
Oh, and teach your sales function how to be marketers, not sales people or order takers. And teach your designers how to be product developers, not runway-designer-wanna-be’s.
Consolidation will result in less opportunities for second and third tier brands in traditional department stores. Even some former top tier brands will be squeezed out. The “losers” will migrate to Kohl’s, JC.Penny, et. al. The “right” brands may not all be in Macy’s, but they will be available somewhere if they provide value (price, style, quality) to the end-consumer.
Recent department store ownership consolidation does not hurt brand assortments. That may sound counterintuitive, but look at the facts. Over 25 years ago, most major department stores’ assortment imitation increased radically, so the same brands were seen at “competitive” stores, regardless. It wasn’t easy to find a department store without Clinique or Ralph Lauren. The “competitive assortments” often only differed by fabric color (not design) or a different “gift” with the purchase of $X worth of Clinique. The key reason Federated can easily change the names of so many “different” stores to Macy’s is that they aren’t different.
When the Department Store buyer selects the right look in sync with trends all goes well. The problem is, no one has been able to do this over a long time period. Consolidation will lock out some designers. The result will be one of two reactions. Some designers will open their own stores. This is difficult due to limited range of offerings. The more likely reactions will be a group of designers banding together like a co-op to open stores.
Liz has done its best to hedge against consolidation by realizing that grow-your-own branding is a slow route to extinction. They have steadily acquired lifestyle brands that have it going on then got better and better at getting out of the way post-acquisition (Juicy Couture being the most obviously bound-for-success example, in my opinion). That said, even with self-branded retail going full speed ahead, department store consolidation has packed a mean punch to so many companies that haven’t explored these strategies simultaneously.
Successful designers (depending on how precious your definition) will rely on fire-on-all-cylinders strategies as never before; getting while the getting is good by launching concepts at buzz-creating tent shows/events, blasting out accessories, fragrance, and licensing deals as soon as the crowds start swelling, then spinning off secondary lines and mass alliances as fast as possible before the shine is off the penny . . . all facilitated by major conglomerate backing.
Much has been said about Proctor & Gamble’s shuttering of the house of Rochas. Olivier Theyskens, known as one of a handful of truly influential and brilliant modern designers, turned out gorgeous collections, won awards and cultivated a loyal following . . . yet not enough to keep P&G interested. Was P&G the wrong parent at the wrong time? Did P&G’s lack of fashion understanding have them yanking the cord prematurely rather than patiently developing a budding fashion powerhouse? . . . or did Mr. Theyskens need to take a page from Tom Ford’s book and be more about the bottom line . . . churning out “it” bags and high-margin accessories to plump up profits? Oh, sorry – I’m getting a bit “pansy boots!” – ha.
Most retailers focus on buying, not selling. This goes way beyond supermarkets and mass merchants, into the very heart of pansy-boots “fashion” retail. Everybody be cuttin’ deals for the right terms. Paul Charron, the Liz Claiborne guy, sez there’s challenges? Ya’ think?
There’s a cycle that is familiar to all of us: The big retailers grow until they begin to trip on their own petards. Then small, nimble, unique retailers take the stage and capture consumer curiosity. We used to call them boutiques. Vera Wang, the current high priestess of celeb-couture, has recently launched “Very Vera,” a fashion line for the rest of us. Rumor has it that brand-dedicated storefronts are included in the plan.
If we don’t understand history, we’re doomed to repeat it (you heard it here first). Department store consolidators must show stockholders the resulting economies of scale by, among other things, decreasing buying staff. That limits the varying buying tastes that add flavah’ to diverse shopping experiences, while restricting opportunities for designers to strut their stuff. Look for more fashion boutique storefronts to pop up, as the historical cycles presages.
The recent retailer consolidation will certainly affect designers. The competitive environment has just gotten more competitive. In the end, the consumers may benefit. Designers are now forced to compete in the marketplace at a pace never seen before. This potentially means competitive pricing strategies, innovative styles, etc. This could be a healthy shake-up in the apparel industry.
The consolidations may also bring back to life the classic “boutiques.” Designers large and small will either open their own outlets or work with smaller businesses to get their lines out in front of the consumer. Again, another win for the consumer – selection, variety, competitive price, etc.