NEW YORK — Competition for the contemporary customer’s dollars is bubbling, as makers struggle with strategies to beat cheap-and-chic invaders in the New Year.

It’s the threat of fast-paced, trend-driven stores like H&M and Forever 21 making their way into shopping malls across the country that’s causing the angst. Contemporary designers provide fashion-forward merchandise month after month, but the clothes from such brands as Tracy Reese and Rebecca Taylor are more expensive than what is sold at H&M.

As such, makers are wrestling with questions like whether regular contemporary sportswear customers can still afford clothes at higher price points in this economy, and whether these consumers will trade in a hot item from their favorite designer for some new, cheaper duds. They say their customer is still out there, and while they are thinking cautiously about business in the next year, they are also concentrating on staying true to what they have always provided their customers: quality fabrics, a designer’s sensibility and service at retail.

"Generally, we feel the market tightening," said Beth Bugdaycay, an owner of Rebecca Taylor. "While we are still achieving high sell-throughs, we are reaching the same sales after four weeks on the sales floor rather than flying out at two. Although a slower economy is hard on everyone, we feel that we can still maintain our market share by continuing to offer a special product at good value."

And sometimes it’s best for a business to acknowledge its own size — and limitations.

"There is no way that a small company like Milly can compete with those big ones," said Andy Oshrin, president of Milly, a contemporary sportswear firm here. "But that’s not our plan. We are focusing on what we do well and what Milly represents. We aren’t trying to be somebody else."

With that in mind, Oshrin said he plans to develop the company slowly, first by adding more items to the core collection — it introduced swimwear this year — and then possibly opening up to licensing and advertising.

"That all comes with time, I want to make sure we grow, but not too fast," he said. He expects 2003 volume of between $4 million and $5 million.Cynthia Steffe is also concentrating on her core collection by expanding the product assortment and offering retailers two deliveries a month.

"We are growing with the stores that we are in already," Steffe said. "The larger the line, the better."

Steffe said she plans to expand her design team in the next few months in order to support the need for more products. She’s also beginning to think about licensing, but said she will be picky about her partners. Steffe said the company, which is owned by Leslie Fay Co., will continue to focus on quality-to-value issues.

"The person who shops in the H&M-type stores is a different consumer. She is a bargain hunter," she said. "For the contemporary customer, shopping is a recreational thing. She doesn’t pay thousands for her clothes, but she enjoys quality clothing and visits the store constantly. Sometimes the contemporary department sees the same woman shopping on a weekly basis."

Steffe also said consumers who regularly shop for high-end designer merchandise have begun to check out the contemporary departments.

"She might still shop for high-end designer, [or] wait for a couture piece to be marked down," she said. "But she is filling her closet with contemporary."

Walter Baker, president of View Collection, concurred that the contemporary sportswear customer shops regularly and depends on these designers to provide quality, fashion-forward merchandise. Baker recently launched a new line, Walter, which will be in stores for spring. The line, which wholesales between $60 and $150, is slightly higher-priced than the View line and is aimed at upscale specialty stores.

"Walter is a high-end contemporary collection, so I know that customer is still out there," Baker said. "She is a woman who makes money and isn’t going to go to H&M everyday. She doesn’t want to spend time there. She enjoys a nicer store, with good service."

Baker said by the end of this year, his business will reach $25 million and bookings for the spring collection are double what they were for last spring. He said denim has slowed a bit in the bookings, but jeans have been replaced with cargo pants, which Baker offers in both collections.For Cousin Johnny, a New York-based contemporary knitwear firm, staying true to what the company has been providing for more than eight years is becoming more important than ever.

"We try very hard to provide novelty like no one else," said Kelly Shelsky, co-owner of Cousin Johnny. "If you really look in H&M, they don’t provide a lot of that. They have a lot of solid pieces dominating the store. With all of that said, I love shopping there every now and then. But we like to think our items are more timeless than what H&M offers. Also, H&M tends to be more urban, so they don’t affect our business at all in the Midwest."

Shelsky said that fourth-quarter sales have been good, which they usually are since sweaters tend to make the perfect holiday gift. With trends in the category leaning toward long sweaters to wear with low-waisted cargo pants and lightweight knits for spring, Shelsky expects to reach $12 million in sales next year.

Tracy Reese more than doubled her volume to $12 million this year, from $5 million last year, and hopes to keep up the momentum in 2003. She is searching for a footwear licensee and thinking about a home license for her Plenty collection, a younger, more "downtown" line. She said she is confident that 2003 will bring good business for the contemporary market, but cautions: "We have to be conscious of the economy and keep prices affordable. While people may be making fewer purchases, contemporary is still a good place to be. It’s good prices and good quality."

While Lindsay Morris, designer for Fork, said she realizes the constant growth of stores like H&M, she believes this will only draw the customer to contemporary designs more.

"This customer wants what’s unique and not mass-produced," she said. "Maybe she will still go to Gap and H&M for her basics, but it’s the boutiques that carry so few of each piece. This customer dresses to make a statement."

For spring, Morris said the company has signed on 300 new accounts. Most of them are small specialty retailers, but she also is providing Saks Fifth Avenue and Marshall Field’s with small collections. By the end of this year, the company’s volume will reach $3 million.

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