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NEW YORK — Private label is becoming increasingly popular among major retailers as a way out of a sour economy and nonstop promotions.
This story first appeared in the July 1, 2002 issue of WWD. Subscribe Today.
While the concept appears to be straightforward — cut out the costs of the manufacturer, contract programs directly to a production source offshore and reap the profits by doubling the markup of a product — it is no easy task.
The beauty of doing private label intimates successfully is even if it’s discounted 20 or 30 percent, the retailer still comes off with extra points ranging from 2 to 7 percent, depending on how high the initial retail price is. The gamble, though, is if the private label line doesn’t sell, the merchant cannot pressure a manufacturer for markdown money or sell off the remaining stock to outlets, which typically are owned by national brand manufacturers who only sell their own labels.
A source of consternation that’s particularly frustrating in the bra market is the sameness of product when it comes to styling, fit and price, often making it difficult for consumers to discern the difference between national brands and generic labels.
A main reason for this problem is the same public corporations making the national brands systematically produce private label products that are similar in look to the branded line the company manufactures. Then there’s the thinning out of independent firms, which, before the advent of private label in the early Eighties, provided a melting pot of design talent for retailers to knock off ideas.
Now faced with the demise of scores of buying offices, as well as foreign production that requires longer lead times, some executives said it’s like asking a psychic what trends will be in demand six months down the road. Another sore point is sourcing overseas also provides a free snapshot of what the other camp is working on among competing retailers and manufacturers. The result is an assembly line of products that have a generic, cookie-cutter look.
Prerequisites outlined by industry insiders to insure a winning private label formula include:
l Securing creative in-house design and merchandising talent, or working with a manufacturer that has top talent.
l Targeting a consumer profile for a particular product and a retailer’s proprietary label.
l Creating brand identity for a generic name.
l Presenting a product that is different and special looking.
l Convincing the consumer that the value, quality and price is similar or better than an established name brand.
That’s the blueprint for Victoria’s Secret, the symbol of successful private label intimates that transformed a little-known label to a global brand in the late Eighties through slick marketing and its glossy catalog filled with sexy visuals. The result was aspirational, making many women fantasize they could look like a supermodel in a Victoria’s Secret bra, all the while creating a cult phenomenon among men, as well.
According to NPDFashionworld, Victoria’s Secret’s main competitor in the intimates arena is not exactly the example of glam. It’s Wal-Mart. In 2001, both Victoria’s Secret and Wal-Mart claimed an approximate dollar market share of 15 percent of the $12 billion retail sales of intimate apparel. Wal-Mart’s proprietary brand in intimates, which was introduced several years ago, is Secret Treasures.
Dollar share of the intimates business at retail is followed by J.C. Penney Co., with 6 percent; Target and Kmart, each claiming 5 percent; Lane Bryant, Sears, Roebuck & Co. and Kohl’s, each with 3 percent, and Macy’s and Marshalls, at 2 percent, according to NPD.
Private brands at a number of major stores include: Charter Club, Morgan Taylor and Alfani at Federated Department Stores; Go Softly, Cabernet and DIM at Dillard’s Inc.; Delicates and MIXIT at Penney’s; celebrity names Jaclyn Smith and Kathy Ireland at Kmart; Cachet and Personal Identity at Sears, and the Honors, Cherokee and Xhiliration labels at Target. Target also owns Gilligan & O’Malley, a long-established sleepwear label.
The biggest opportunities in the private label sector continue to be in the highly promotional bra and underwear markets, which are considered a basic commodity business. However, there’s been a dramatic shift in the designer and status brand sleepwear, robe and shapewear businesses over the past couple of years.
Marshal Cohen, president of NPD, said dollar share of private label bras claimed 32 percent of total bra sales in 2001 compared with 30 percent in 1999, and women’s private label panties moved up one point to 33 percent during the same time frame. In contrast, the percentage of private label sleepwear declined to 36 from 52 percent; private label robes went to 45 from 58 percent, and private label shapers slid to 19 from 30 percent of total market share at all channels of distribution.
Among the key designer and status brands in the sleepwear, robe and daywear markets are Natori, Donna Karan Intimates and DKNY Underwear, Calvin Klein Underwear, Crabtree & Evelyn, Tommy Hilfiger Intimates, Hanro, Nautica, Fernando Sanchez, Oscar de la Renta, Carole Hochman, Flora Nikrooz, Jonquil, Claire Pettibone, Mary Green, Eileen West and Liz Claiborne. Upscale names in foundations include La Perla, Natori, Felina, Wacoal, Eres, Chantelle, Aubade, Lejaby, Le Mystere and Simone Perele.
Kathy Nedorostek, president and chief operating officer of Natori Co., said: “Stores should have a balance of designer and private label [intimates]. If the private label is done in-house, I think that’s a disadvantage. We feed off of what we’ve built at the end of the day. So, whether you’re branded or private label, you ultimately have to have the right product.
“I think stores went after private label because they thought it gave them a different point of view, a reason to be different with oversaturation of malls, and also because of margins. But I challenge those margins because you can’t make them until you mark it down.”
Sheila Solomon, a vice president of the Underfashion Club, said: “I don’t see the sense in private label because the retailer doesn’t have the design talent. In my mind, it’s a price thing and it looks it. I never thought private label was a good thing. If a retailer doesn’t have a manufacturer to come back to if the products don’t sell, they have to foot the bill for everything.”
Dale Darmante, president of the Biflex division of Kellwood Co., said: “While price may be the main initial motivation for making private label, I think differentiation is the most important factor for the retailer and the consumer.”
Addressing the sameness of generic products, one retail executive who did not want to be named, said: “It’s definitely a problem, but it pumps up the margins. Private label generally looks alike, but that’s because it’s made by the same five companies: Sara Lee, VF, Maidenform, Warnaco and Kellwood. We all shop the same stores in Europe, go to the same mills and use the same trend services. But at the end of the day, we have to know how to interpret it individually to make it work.”
David Komar, executive vice president of marketing at Charles Komar & Sons, said: “Private label is always being given more floor space. The better a buyer does with private label, the faster he or she will get a feather in their cap from management.”
One former merchandiser at Federated Merchandising Corp. who did not want to be identified said: “Federated has always gone after the Charter Club [private label sleepwear] business. They’ve done such an extensive profile on the Charter Club consumer that they know exactly who that customer is and how many kids she has.”
As for the recognition of a brand versus private label
by consumers, Howard Radziminsky, senior vice presi-dent of sales at Movie Star Inc., said: “Most consumers are not walking in and saying this is a proprietary brand of Macy’s or Filene’s. If retailers are smart, they’ll build a private label brand across a store so there’s a consistency.”
Norman Katz, a longtime veteran of the innerwear industry, said: “I think retailers can fool the public very easily with private label. I don’t think the consumer knows what private label means. A store like Macy’’s does huge ads repeating a name day-in and day-out. The consumer ends up not knowing between a brand and a nonbrand.”
Looking at the branded designer business, Victoria Vandegriff, vice president of sales for Carole Hochman and the licensed Oscar de la Renta sleepwear, said: “Let’s be realistic. In the designer market, there’s a known person behind the label. I do think customers identify with that and I think department stores are searching for newness right now. You are getting it in the high end.”