Stores push aside designers
And now, retail Darwinism.
Macy’s and other stores increasingly are focusing on their own fashions, putting them in intense competition with the very apparel manufacturers that helped build the stores’ business in the first place. And that has created what one industry observer called a “survival-of-the-fittest” battle for display space that has turned the traditional department store floor plan on its head.
Many big-name brands still get decent play, but private and exclusive labels, cost-effective for national chains, are often assigned choice locations near the entrance or sprawls of square footage.
The trend is evident at the JCPenney at Westfield MainPlace in Santa Ana. Enter from the parking lot and you’ll pass a brightly colored assortment of Penney’s Flirtitude underwear before reaching pricier offerings from Jockey or Maidenform. Walk in the opposite direction and you’ll find the Levis, but not before passing racks and stacks of the Original Arizona Jean Co., which Penney’s produces itself.
A demoted national name can find redemption, though only if it comes up with clothing a retailer decides is hot -- or hotter than its own lines at least.
“If you’re a brand, you’re either right or your gone,” said Britt Beemer, chairman of America’s Research Group, which specializes in shopping trends. “It’s that simple.”
This is theoretically rewarding for consumers because designers are forced to produce fresher fashions faster. But women shopping at a Kohl’s in Westminster this week weren’t losing sleep over which brand was where. They care about price, durability and fit.
“I look for quality and value,” said Cindy Langford, 50, a sales executive from San Luis Obispo who checks to see there are buttons, not plastic snaps, at a waistband along with double pockets and sturdy stitching before dipping into her wallet.
Neither were they worried that brands might disappear from the stores that they frequent. In fact, a thinning might be welcome.
“There’s just so many brands anymore; it’s hard to keep track of them,” said Deanne West, 66, a receptionist from Fountain Valley who favors Liz Claiborne and Croft & Barrow, a Kohl’s label.
Private-label brands have been multiplying for years and not only on clothing racks. A recent Nielsen report on consumer packaged goods said a typical kitchen cupboard had more than 20 private-label products.
Historically, shoppers bought store brands -- often plainly packaged basics such as canned vegetables and paper products -- to save money. Private labels often are less expensive than big brands. But the quality and presentation have improved so much that it’s easy to be confused about what’s a national brand and what’s not.
There’s no indication, for example, that the INC women’s apparel line -- which takes up a huge section of the first floor at Macy’s South Coast Plaza store in Costa Mesa -- is a Macy’s-only brand. Not that Macy’s is hiding the fact. The department store goliath just wants to keep customers coming back, and private labels are one lure.
Another is striking deals with celebrities and well-known designers for exclusive collections, such as Kohl’s Daisy Fuentes line, Macy’s O Oscar from Oscar de la Renta and Penney’s Nicole by Nicole Miller.
The strategy seems to be working. Macy’s exclusive and private-label brands, which include Charter Club and Style & Co., account for about 35% of sales and represent the fasting-growing segment of its business for the last five years.
Pacific Sunwear of California Inc. in Anaheim, seller of hot local surf and skate brands such as Roxy, Volcom and O’Neill, reaps nearly 30% of its sales from store labels like Bullhead, Kirra, Lilu and Nollie.
And about half of Penney’s revenue comes from its own labels, including Worthington and a.n.a., which generated sales of $300 million the year it debuted. “Every couple months it seems we announce a new private or exclusive brand,” spokeswoman Kate Parkhouse said.
The effects of the private-label trend intensified as the Macy’s juggernaut rolled across the nation over the last two years, with Federated Department Stores Inc., as it was then called, lassoing stores from coast to coast.
Before, “when you walked in the door, our brand might have been front and center, said Lonnie Kane, president of Karen Kane Inc., a women’s contemporary clothing maker in Los Angeles. “Once Macy’s took over, they put their private brands front and center. We got moved farther back on the floor.”
He called it a “power struggle” between retailers and wholesalers and said that “to a certain degree, the retailers won.”
Why wouldn’t retailers stock stores with their own products? Profit margins generally are fatter when the middleman is eliminated and retailers gain control over all phases of the business.
On the other hand, if their fashions flop, they take the hit alone. The vendor won’t be standing by with “markdown dollars” to help fill the gap between the anticipated selling price and what shoppers are willing to pay.
Still, if you create your own merchandise, you can fills gaps in the marketplace. That’s what Macy’s did when it couldn’t find the tween brand it wanted, spokesman Jim Sluzewski said. The result was another private label: Epic Threads.
“There are brands that come and go,” Sluzewski said. “It’s a natural part of the business. It all goes back to what’s selling.”
Liz Claiborne Inc. got the message recently -- the hard way. Its shares plunged 17% in one day last month after it reported a steep drop in first-quarter earnings because of slumping department-store sales of some of its brands, including Ellen Tracy, Sigrid Olsen, Liz Claiborne and Dana Buchman.
The “wholesale industry is at a critical turning point,” Liz Claiborne President Trudy Sullivan said in a conference call with analysts at the time. Chief Executive William McComb said it was causing “a sea change in how we manage our business.”
Industry experts said shoppers should rejoice.
“It’s a great thing that’s going on,” said Patricia Pao, founder of consulting firm Pao Principle, which helps develop turnaround strategies. “It’s forcing everyone to be sharper and quicker.”
That’s fine with Diane Johnson, a 66-year-old retiree from Placentia who was working her way through a shopping rack at Penney, so long as designers -- of a national brand or a house brand -- remember what’s important.
“Give me what fits and has a good price on it,” she said, “and I’m a happy camper.”
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Major retailers logged a 2.5% sales gain last month in stores open at least a year. Luxury chains generated strong gains, but some of the largest companies continued to disappoint.
Year-over-year percentage change in May sales at stores open at least a year
*--* Company % change Saks +37.5% Neiman Marcus +6.6 Pacific Sunwear +6.4 Nordstrom +6.3 Target +5.8 Limited Brands +2.0 Wet Seal +1.9 Ross +1.0 Wal-Mart +1.0 J.C. Penney -2.0 Bebe -3.0 Gap -3.0 Macy’s -3.3 Hot Topic -6.1 Sharper Image -8.0
Sources: International Council of Shopping Centers, Thomson Financial, Times research