Fashion Pushes Sales of Store Brands Forward
With a new focus on fashion and better promotion, retailers are beginning to generate greater demand for their store-brand clothing.
Sales of store brands grew 5.8% in 1996 and an additional 5% in 1997 as department and discount stores revitalized a business formerly known for offering cheaply made, dated copycat versions of original fashion.
Today, many private-label lines are as fashionable as national brands. Retailers’ offerings for the back-to-school crowd this year are similar to fashion the big-name brands are featuring, analysts say. Boys can find store brands of khakis, cargo pants, sweater vests and dark-colored denim. Girls can choose retailers’ own versions of cardigans, pedal pushers--retro pants that stretch to the calf--poplin shirts and flared jeans.
Though sales of store-brand clothing for kids grew just 2% last year, it now accounts for 30% of that market. Apparel sales in the back-to-school shopping months of August and September is second to the Christmas season in volume. Retailers hope their store brands bring bigger profits this year with their new emphasis on fashion as well as value.
An American Express poll indicates teens might be more receptive to that pitch. The number of kids who said they preferred national brands dropped 13% from last year to 58% this year, the poll said. A more telling poll, however, is underway in stores as young buyers and their parents vote with their dollars.
Laurie Sheridan recently spent much of her day searching for bargains, not big-name brands, at the Century City Shopping Center. “I’m more interested in the look than the label,” the 16-year-old said. “If I find some good deals, I can purchase more items.”
Retailers want more shoppers like Laurie because the profit margin on store-brand clothing is typically 5% to 15% greater than the margin on national brands.
Kids like Laurie are paying more attention to store brands because the designs are trendier and the quality is improved. That’s because retailers now operate more like producers of national brands, industry analysts say.
“Department stores now have design teams and fashion directors who develop original apparel for the market,” said Meena Mansharamani, vice president of the retail practices division of A.T. Kearney, a Chicago-based consulting firm. “Consumers are beginning to find it more difficult to discern the difference between private label and national brands.”
The distinction between store and national brands is blurring in other ways, said Arthur Martinez, chairman of Sears, Roebuck & Co., which is spending more to promote its own Canyon River Blues label.
“Advertised private brands have their own personality,” Martinez said. “We’re also creating personality with better store display presentation and with better marketing.”
Specialty apparel retailers such as Gap and Limited--chains that sell only clothing with labels that match their store names--have long been aggressive advertisers. Their labels are as well-known as the top big-name brands.
Many department stores are just now following their lead. For example, Macy’s this year began to aggressively advertise its Badge line of clothing for boys and girls.
“We realized we had a brand name and we needed to raise the profile of the name,” said Michael Steinberg, chairman of San Francisco-based Macy’s West, which operates the chain’s western stores. “Retailers can use private brands to distinguish themselves from competitors.”
As the competition heats up, approaches to merchandising are changing. Traditionally, in-vogue stylings and popular logos generated demand for national brands while lower prices created demand for private labels. Those distinctions are also fading, said Bloomingdale’s Chairman Michael Gould.
“Some national brands are allowing lines to be heavily discounted, which eliminates some of the exclusivity and cachet and makes private label more attractive,” Gould said.
Bloomies still relies heavily on national brands and in-store designer boutiques. Interest in those fashion-forward lines--clothing with trendier designs or more distinctive fabric and color mixes--appears to be growing at the expense of older, more conservative big-name brands. This year, 38% of those in the American Express poll preferred Tommy Hilfiger, which replaced Levi’s as the leading brand for pants, tops and other apparel. However, store-labeled brands made gains too. The Gap brand rose 4% in this year’s polling, climbing from fifth place a year ago to third behind Levi’s.
Private-label jeans are also making inroads. The third-most popular line of jeans sold after Levi’s and Calvin Klein is Arizona, J.C. Penney Co.’s own brand.
Arizona has become so popular that teens nicknamed the label “Zones.” Penney responded in 1996 by introducing a line with a phonic tag: “Zonz.” The retailer recently updated the Zonz line, adding extra-wide versions and darker hues.
As for older teens, designer labels are less attractive than specialty store brands, American Express says. Four of the top five labels college freshmen favor are store brands--Old Navy, Victoria’s Secret, J. Crew and Abercrombie & Fitch.
“As they age, teens are more interested in specialty stores and less interested in [national] brand names,” said Dan Bethlahmy, retail services director at American Express. “Overall, more teens are considering the price-value equation. They’re shopping with more savvy.”
