Doing justice to the tens of thousands of numbers included in this study is a difficult endeavor. Here, a few nominees for the apparel "Oscars":
Discounters: "Jaws I, II and III." (sequels added just in case you thought it was safe to go back in the water...")
Dept Stores Redux: "Jurassic Park" (Ferocious comeback for the would-be dinosaurs.)
Chains: "Cocoon" (Re-engineered, face-lifted and back from the fat farm.)
Off Pricers: "The Hustler" (Lean, Mean and Ready to challenge the mall champs?)
Mail Order: "The Postman Always Rings Twice" (He needs to, with so many catalogs to deliver!)
The nineties seem to be shaping as the Discounter Decade. Discounters are estimated by Tactical to account for over one dollar in five, or 20 percent, of apparel sales this year. This will rise to 21.6 percent next year. By 1995, the discount store will have overcome a nearly four point deficit to become the number one type of retailer of women's apparel in the U.S. By next year, discounters, such as Wal-Mart and K-Mart, will even be the leaders in more expensive categories like coats and slacks. These merchants will gobble up half a dozen categories like sweatpants and panties with shares of 30-40 percent More Stats: by 1995, they will be number 1 in 14 key categories including key ones like jeans, shirts, bras and sweats.
Share of apparel, most simply reflects the aggressive growth of the discounters' format. The group is estimated by Tactical to rack up sales of roughly 30 billion this year and employing 1,250,000 nonsupervisory employees, making it far and away the largest retail segment in the US economy. Often acting as their own real estate developer (taking over from that cash strapped S&L ridden industry) Wal-Mart, K-Mart and their brethren have announced plans for dozens of new and larger mega stores in the next few years, totaling millions square feet. And "comp" sales keep growmg at a healthy clip, helped by assortments traited to a particular market's ethnic, age, and lifestyle characteristics.The competitive advantage of discounters is disarmingly simple. The concept has remained unchanged for over 30 years: Low expense/low margin/low price; low occupancy costs; chain like buying; large bright uncluttered stores; central check outs; etc..
What has emerged as central is the maintenance of key advantages like an "Always, Advertising" stance coupled with a "Never Out" merchandising position. The latter, always easier said than done in retailing, evolved from state of the art in~ inventory and distribution technology. Every merchant, whether hailing from department stores, specialties, or chains stands up at conferences, and after the obligatory profession of faith about running a "customer driven" store, boldly announces that his/her store endeavors never to be out of stock. Never mind that Tactical's research shows that over 40 percent of polled customers still leave the store not having found that which they came to purchase: out of size, color, style... whatever.
What about apparel? For the longest time, this seemed an antidote to any apparel expansion. But this has changed.
Discounters, confronting apparel issues, attacked it with the same tenacity they used in selling diapers, antifreeze and scotch tape. Advances in POS; Bar Coding; Quick Response; EDI and the "paperless" purchase order, invoicing, and payment have all seen their real implementation with Discounters. The low margin high volume merchants have not only pushed the envelope, but brought along with them a whole generation of manufacturers who were told, in no uncertain terms, that to do business with Wal-Mart, KMart or Target, certain standards had to be met: from sizing of garments to factory inspections to shipping consolidation; to pre-pack to shipping to one million square feet facilities that redefined the concept of "distribution center." Even more rigorous standards were used in producing the private label apparel they have increasingly perfected.
It helps, of course, to have access to the world's capital markets to fund the billions needed for expansion, technology, renovation and fashion, all at the same time.
It is for these reasons that our discounters are one of the few sectors of the economy not cowering in fear of invasion by German, Japanese or Pacific Rim operators. It is our guys who are the first to open up in Prague or Mexico City or Toronto. The only invasion of the last few years has been of foreign retailers on a metaphoric "tour bus" trying to learn what the magic formula of our Wal-Marts and Targets.The Department Store Redux
Reports of the department store's demise have been greatly exaggerated as testified by the stock market valuations of a reborn Federated and the enormous "brand equity" the glitterati bidding on Macy's are putting on that company.
A diverse family of products from futons to micro-skirts has been the haUmark competitive advantage of the "one stop" shopping offered by department stores. As apparel trends have drifted in recent quarters, the emporiums' offerings of bread, coffee and pasta makers (with heavy manufacturer co-op producing huge ad space) have helped keep traffic coming - and sold them some~ clothing as well! No such advantage for the specialty stores, stranded in their high rent malls, singing their one-note of key item. It's paid off: department stores, carefuUy amassing the greatest portfolio of retail real estate in the industry, shrewdly capitalized on their indispensability to the mall developer by negotiating the lowest occupancy costs around and first dibs on new locations. Not the blistering growth of discounters and specialties, but "sticky" growth.
Result: Over the next two years, department stores will enlarge their market segment from 18 to 20 percent. Better yet: by 1995, they will have an over 20 percent share in 19 different categories including tailored apparel, outerwear, and bodywear.
A back-to-basics approach is exemplified by Macy's re-embrace of Levis. Gone are the eighties self-delusions of department stores as purveyors of "Collections" (pauticularly in private label). The emphasis has been on more salable sportswear and dresses in the traditional stronghold of moderate price - whether it be through brands or product development.
Our research has shown that department stores do better with a customer as she gets older. Instead of chasing them, the department store shrewdly kept its wits. It's working too! Like credit, household formation, parenting, career building, the 60 million Baby Boomers have rediscovered the virtues their parents inculcated into them - key among them, an allegiance to and alliance with the department store. Tbe department store has been ministering the rites of passage of six generations with a tasteful, "no questions asked" approach to returns, credit (the lender of first resort) theatrical merchandise presentation when necessary; first introduction of branded goods; etc.Overall share will climb up to one dollar in five of all apparel by next year, only edged out by the big discounters. Department stores reign will continue in moderate and better price lines in fully fourteen categories, including key career ones like jackets, skirts, slacks and coats; dommance of many intimate apparel and accessory items.
"Cocoon" The Return Of The Chains
Squeezed from the bottom by the sharklike attack of the discounters; Sears, Mervyns and Wards have made a sojourn at the Spa. They shed many employees (particularly at headquarters) and unprofitable operations, and re-emerged with banner results.
The higher margins of apparel, their golden locations in the best malls in America, and their unmatched quality controls for private labels have all contributed to a triumphant "recolorized" return to the Big Screen. The Chains have capitalized on hard times for many manufacturers by waving the Big Pencil and attracted an unheard of panoply of heretofore department store brands which, like it or not, legitimize their image in fashion. Tens of millions of dollars of updated sexy advertising - particularly broadcast - and upscale presentations have helped them register in our focus groups as "department stores" - perhaps not Bloomingdales, but viable competitors to the secondary and tertiary stores in many markets.
The "Box Office"? Solid share in areas that are particularly exploited by department stores like tailored apparel. Instead, nightwear, jeans, and undergarments will be the answer for chains. There will be fully ten diverse categories where the chains will have 15 percent share or more - significantly above their national average. Career and active apparel will be the challenges for them in the next couple of years.
Specialties: "Requiem for a Heavyweight?" (Too many bouts and punched out?)
The darlings of the mall and of Wall Street have run into some tough contenders. As the Mantra for the 1990s has turned to value and home, the fickle customer has been seduced by the cheaper, deeper, or more convenient assortments of larger format operators. An obstacle has been the lack of a megatrend that took the specialties to the title in the distant late 1980s. Now, formerly unique interpretations of basic fashion denim, tunics and silks are copied in nano-seconds by everyone from department stores to mass merchants.Aggressive geographic growth has also begun to hurt. High occupancy costs and more importantly, cannibalization, as one unit opens within shouting distance of another, are hurtung comp sales. Like a struggling fighter changing weight classes from Bantam to Feather to Middleweight in an attempt to win the crown, the dizzying change of identity for the key players: from career purveyors, to young and trendy, safari-inspired, and then to plain casual at a price, have muddied the meaning of segmentation (a research invention much abused), have confused the customer.
The Scorecard ... A loss of four share points in 3 years as expected. But, still "Champions" in 1993 in eleven categories including backbone career ones like suits, dresses, jeans, blouses and sweaters. Dominance of the ring in seven categories next year including many of the key ones listed above; 20 percent plus shares in over a dozen categories. In other words, plenty of roon for a comeback of huge proportions!
Off Pricers: "The Hustler" (Lean, Mean and Ready to challenge champs of the malls?)
This past recession (like previous ones) has been good to off pricers who "run cyclical". We can argue that a sea change in customer values to "value" has buttressed them. A key addition has been an ~infrastructure of capital flowing to traditional off-pricers and factory outlets, which we now estimate to be over $9 billion.
Putting their bets on these hungry merchants have been the manufacturers who have established national brand equity bought with millions of dollars in national advertising. Viewing the recent retail carnage, manufacturers decided to control their own destiny (brands, factories and payroll) either in stand-alone retail operations or by distributing to off-pricers. Availability of merchandise - more in season than not, full run of sizes and colors and closer to the time of need - has been the winning bet that off-pricers needed to deploy.
That winning streak is leveling off. Off-pricers share will remain flat at 11 percent through 1995. The good times will last for off pricers like NBO and T.J. Maxx in outerwear, tailored apparel, and blouses but the headache will continue in jeans, hosiery, and shapewear.Mail Order: "The Postman Always Rings Twice" (He needs to, with so many catalogs to deliver!)
Mail Order has outgrown general retail by a factor of two-to-one, helped by the influx of career women; aggressive fashion marketing, availability of brands and an increasing hunger for convenience as the key motto by 46 percent of the population as we measure it. Dangers: Over proliferation of books segmented or not; immediacy of one-day and other promotions by stores; the continuing hyperstoring of America; TV shopping going upscale (but led by the best of the catalogers e.g. Spiegel's Neiman's Sonoma et al); reaction time if fashion should heat up again.
Catalogs, like L.L. Bean and Spiegel, will hold their own in the competitive 1994-1995 period. They will continue to be a poor relation to other retailers with a 1993 share of seven percent, but ~hold this through 1996. Intimate apparel, shapewear, and nightwear will be their salvation as Victoria's Secret pioneering continues to be imitated by others.
Background & Methodology Data Base Methodology
A model has been devised by Tactical Retail Solutions Incorporated which breaks down the U.S. retailing market by merchandise category and retailer type. This "Tactical Model" has been constructed to forecast retail sales and market shares by retailer type for 1994 and 1995.
These projections are performed for over 200 women's apparel categories. These categories are broken down not only on the national level but also at the regional level, for example, the Pacific States, and at the metro level, e.g. San Francisco. Due to space limitations, not all of the apparel categories were included in this supplement For example, Other Outerwear, was excluded. Also, some categories were presented in aggregate form, such as Skirts, which is made up of Golf Skirts; Maternity Skirts; Skirts, Kilts; and Tennis Skirts.
How Is The Model Put Together
The Tactical Model has, in addition to it's system design, several "data series" which are important components.
They include: Census data on population; Census data on retail sales; employment, personal income and other economic data by region and metro area; operating results and growth plans of individual retailers; and consumer purchase diary panel data from MRCA.Using the Data
The tables are arranged so that the merchandise categories are along the left margin and retail blocks are organized lengthwise across the top. If readers are interested in the market share of women's blouses in department stores, they should read across the blouses row until the department store column. The cell where these criteria meet indicates the desired market share. All rows add up to 100 percent.
The tactical model has been developed to communicate a vast amount of information. A specific retailer may want to use the forecast to investigate what regional competition exists in their area of business (how department stores were doing in relation to specialty retailers).
Many will want to know what the market share is by category of merchandise for different retail outlets in specific regions. A share configuration in the South West generally, or Houston, particularly, would give guidance as to whether to expand, retrench or diverge from the area. Furthermore, strategic planners in the retail, manufacturing, shopping center development and management, investment and retail service fields will unearth a plethora of information that is useful since it provides an outlook for the retail field for the past, present and future. Lastly, buyers and merchandise managers will find this material pivotal to their future ordering patterns.
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