NEW YORK — As Target and Wal-Mart up their fashion quotients, moderate department store vendors have their work cut out for them.
Target is pushing its Isaac Mizrahi and Mossimo collections and Wal-Mart, which has a deal with Levi's and labels such as White Stag and George, is eager to move in a more fashionable direction. As a result, more consumers are looking to the mass merchandisers for their apparel purchases.
According to Retail Forward, 90 percent of U.S. consumers visited Wal-Mart last year. And with more stores planned, covering more ground, that 90 percent could increase and produce dramatic results in the coming years. The company is projected to reach $500 billion in sales in 2010, nearly double the $285 billion last year.
Marshal Cohen, chief industry analyst at the Port Washington, N.Y.-based NPD Group, predicted the moderate sportswear market could be in a lot of trouble if vendors don't change their ways.
"The world has become a smaller place; as the Targets and Kmarts of the world are becoming more trend-driven, the moderate vendors are really starting to feel the pressure to match that kind of competition," he said. "They can no longer put just anything on the floor. They have to be fast and think more about fashion trends. Retailers aren't taking the sorts of risks that they used to take; even private labels are no longer offering just the basics. These moderate vendors have to step up."
Some of the majors — Liz Claiborne Inc., Jones Apparel Group and Kellwood Co. — are feeling the pressure and have already started to make some changes.
While the Liz Claiborne label accounts for $1.4 billion of the firm's $4.6 billion overall volume, the company has aggressively worked to diversify itself. It now owns and operates 38 diverse brands (from Juicy Couture to Emma James). But Claiborne is still keeping its hand in the moderate business, with plans to launch six brands this year — all for the midtier retailer. Jones Apparel Group is also working to grow with its newly acquired Barneys New York deal, planning for major expansion, along with its own large brand portfolio ranging from Nine West to Anne Klein. Kellwood, whose moderate Sag Harbor line is still the company's most profitable label, is getting its hand into new areas with women's sportswear licenses such as O Oscar and Izod, and Liz Claiborne suits and dresses, as well as ownership of hip-hop brands Phat Farm and Baby Phat.Even Kohl's has been working on its fashion assortment and has been pushing more exclusives as it has with its Daisy Fuentes and axcess brands. In addition, the store offers such well-known names as Lee, Adidas and Dockers. Sears, too, which owns the Lands' End brand, carries the basics exclusively in its stores. And J.C. Penney is building a higher fashion profile with labels such as Bisou Bisou and Nicole by Nicole Miller.
Another trouble spot for moderate vendors is the speed factor. While mass stores are going to vendors that can supply product fast and cheap, department stores selling moderate brands must find new ways to keep the pace up, prices down and style right.
Some moderate sportswear companies have already begun to step up the pace.
"In the old days, like five years ago, one would shop Europe for the trends, come back to report and we would produce merchandise based on those trends," said Jonathan Spier, chief executive officer of Apparel Holdings Group, which produces the Caribbean Joe line. "Now we are going directly from Europe, seeing the trends and developing product there. We also have an office in China and another in Guatemala.
"Understanding the need for international offices is important to speed up the process. It's really helped us to replenish goods and cater to what the stores are asking for at a much faster pace," Spier said.
Wal-Mart already dominates in many product categories, including food and health and beauty products. Its plans for growth include an aggressive push into the apparel industry, offering more than just the basics, which is what now dominates the apparel sections of the store.
"All Wal-Mart does is apparel basics," said Alfred Meyers, vice president of business development for Retail Forward. "J.C. Penney gets exclusive designers and celebrities and brands. Wal-Mart needs to create some excitement in the stores."
While mass retailers are growing and thriving, they are still facing their own challenges. As gas prices continue to rise, consumers are feeling the pressures of the economy, which undoubtedly influence how much spending they do at retail.
So what does the moderate sector need to do to compete with the power of mass retailers?"The key is to be what Wal-Mart is not," Meyers said. "Invest in exclusivity, and create a shopping 'experience.'"
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