BOSTON — On Friday, there will be no mistaking mass market denim’s biggest development.
In a marketing blitzkrieg, Wal-Mart customers at some 3,000 stores nationwide will stride through security detectors that are papered in Levi Strauss Signature brand advertisements. They’ll see Americana TV vignettes celebrating the new brand created by ad firm Foote, Cone & Belding rolling on the Wal-Mart network and hear radio-style spots over Wal-Mart’s public address system.
Everywhere the consumer goes — racks, register and even the dressing room — they’ll see lifestyle shots touting the new product. Lest anyone miss the cues, there will be a floor-sticker trail leading directly to racks of Signature brand.
The fanfare caps Levi’s two-month sprint to ship truckloads of jeans to Wal-Mart stores domestically. They opened a 12-person office in Bentonville, Ark., near Wal-Mart’s headquarters, in order to service the partnership, which is expected to generate hundreds of millions of dollars in revenues and help to turn things around for the San Francisco-based jeans giant.
“As [president and chief executive officer] Phil Marineau has said, in all the history of apparel there hasn’t been a launch of this magnitude,” said a Levi’s spokesman. “We not only had to fill the pipeline to 3,000 Wal-Marts across the country, we had to create the pipeline.” Wal-Mart declined to comment, but its actions speak volumes.
“It is not typical for them to put out so many signs, including on security kiosks,” the Levi’s spokesman noted. “But this is an important launch for them, too.”
Product spans women’s, men’s, girls’, boys’, petites and plus sizes. Designed as a lifestyle collection, Signature will include tops and bottoms, merchandised together on four-way racks. Adult jeans cost $23, which pops the top for Wal-Mart’s pricing. It is, however, in line with Target’s premium-priced Mossimo jeans.
The Levi’s deal, years in the making, is the most high-profile part of Wal-Mart’s efforts to upgrade its apparel department.
Lois Huff, senior vice president of retail consultancy Retail Forward, predicted Signature’s debut is “going to shake up the mass industry and potentially other retail sectors, as well.” In particular, she added, Signature could be “a potential problem for VF brands in the mass markets they’ve dominated for many years. It could also eat into sales for Faded Glory, which is the number-one jeans brand right now.”For their part, executives from Faded Glory and VF Corp. said there is opportunity in this challenge. Tough competition, they said, sharpens everyone’s game.
“We’ve known for several years this was coming and we’ve competed with Levi’s for years anyway,” said Angelo LaGrega, president of mass market jeanswear for Greensboro, N.C.-based VF. “What’s more important to us is the excitement we feel about the mass channel. Only 30 to 40 percent of customers in there are buying apparel, so that’s 60 percent of customers in the box to reach. It’s potentially gigantic for us and for retailers.”
Bill Bradley, vice president of merchandising for Faded Glory, said, “A brand with the visibility of Levi’s will bring more people to the apparel department.” Once there, Bradley believes customers will discover Faded Glory as an attractive value, particularly since the brand encompasses everything from jeans to handbags to shoes, usually tightly merchandised around color stories.
What’s more, most Faded Glory jeans sell for $9 to $12, significantly less than Signature. Exclusively sold to Wal-Mart since 1995, Faded Glory’s growth has outpaced the chain, Bradley contended.
The impact of the Levi’s-Wal Mart partnership is expected to ripple throughout the industry, mostly impacting Levi’s market share and Wal-Mart’s denim business. It’s also expected to affect retailers who carry higher-priced Levi’s products, Gap and other denim-driven specialty chains.
All that will take time to materialize, argues Marshal Cohen, co-president of Port Washington. N.Y.-based market researcher NPD Fashionworld.
“Because there is no national ad campaign planned, it’s going to take a little bit of time for the impact to be recognized,” he said. “It’s not as if the customer will know immediately at back-to-school they can get Levi’s cheaper at Wal-Mart.”
The timing seems right for a mass market launch. The channel is getting better at selling denim and, as it does, customers are becoming more receptive to picking up jeans along with milk and light bulbs. The mass market is the second-fastest growing retail channel in sales, outpaced only by speedier category growth at midtier national chains like J.C. Penney and Kohl’s.According to NPDFashionworld data, the mass channel sold 63.3 million pairs of women’s jeans last year, an 11 percent gain over the previous year. The entire women’s denim market eked out a 1.8 percent gain, largely thanks to the mass market’s strides. In addition, the average price of jeans sold in the mass channel rose 27 cents, to $14.46, for the year ended April 30.
Surprisingly, for all their publicized business struggles, national midtier chains that grew denim sales faster than all others. They did it by offering price breaks on national brands like LEI, Mudd and Bongo. In the process, they squeezed business from department and specialty stores.
Retail executives said they feel confident they can “own” or “win” denim. Yet when pressed for specifics, most plans sounded similar.
All are pushing forward with belted styles and looks that pair more embellishment with cleaner washes. Buyers are hedging denim bets somewhat by upping their mix of alternatives such as twill and ripstop blends. For the midtier players, LEI, Mudd, Glo and Bongo are bread-and-butter resources. The first two hold the most real estate, according to industry sources.
“We feel we are in a position to win denim this back-to-school,” said Mindy Meads, executive vice president of Sears. “We are going with a ‘Declare your Denim’ positioning for owning the denim business for the whole family.”
Among other things, Meads promised a national TV campaign starting in July and supported by store visuals. Faster response on selling trends will also be crucial, she said.
Yet, some observers questioned whether midtier retailers, particularly those that’ve been losing market share, have done enough to differentiate their floors.
“If they are not differentiated on brand, it will come down to convenience of location or lowest price,” observed Retail Forward’s Huff.
Recent weekday visits to Kohl’s and Sears in Eastern Massachusetts showed most racks bearing markdowns of 30 to 50 percent. In the junior department, five-pocket basics, a minority of the offering, were folded, either on a wall fixture or on a low table stand.
Fashion denim is hung, so customers can note embellishments, wash details and belts. But with so much merchandise hanging, particularly with fringed or beaded belts dangling off, the departments appeared cluttered. In the junior department, both stores mixed brands, prices and styles on racks.In the misses’ section, the opposite was true. Kohl’s had a broader brand offering than Sears, including Unionbay, Glo, Bubblegum, Paris Blues, Angels and Rampage’s R Industrial Jeans, notable for a more tailored, trouser-style approach.
A Kohl’s spokeswoman said the company carries more than a dozen junior denim brands and is planning to add more this fall.
In addition, while Sears appeared to be marking down based on style, Kohl’s was more selectively marking down merchandise. Several sales deals, for example, appeared to be for size small only.
Mervyn’s will also be adding brands, but mostly to its nine-month-old junior plus-sized department. The Hayward, Calif.-based retailer carved the new department out of its plus-size woman’s department, rather than in its junior area, because it discovered the young plus-size customer likes to cross-shop dressier styles from the women’s section. The area stocks LEI’s plus-size Femme line, but buyers are actively looking for other resources, said a Mervyn’s spokeswoman.
“Junior plus is a real, emerging guest for us,” she said. “We’re learning more about her and increasing our assortment for her across the board.”
Mudd Inc. president Dick Gilbert said selling to competing midtier retailers like Kohl’s and Mervyn’s is like “trying to navigate a tugboat through a minefield. We do the best we can and try to each give them something different.”
This year, he’s been lobbying retailers to take a strong position in Mudd’s updated basics, which he feels have been underestimated by retailers.
“They have a tendency to look to stronger brands for novelty and give the basics to the weaker brands,” he said. “But we feel strongly about having a position there.”
It’s part of Gilbert’s overall plan to turn Mudd into an “iconic” moderate brand. He’s upped his advertising budget six-fold to $3 million this year. One TV spot, set to break for bts, includes a girl describing a summer trip to China to her class. A friskier one features a boy and girl getting soaked by sprinklers.
With major national brands like Mudd and LEI in every door, retailers continue to tinker with, develop and acquire house brands in order to stand out.Penney’s has invested heavily in its Arizona brand, which leapfrogged to 46 in the WWD 100 most-recognized brands survey. They ranked seven in the top 10 most-recognized denim brands, edging Jordache, Tommy Jeans and Bugle Boy.
In a key measure of the retailer’s confidence in Arizona, it has begun looking for opportunities to wholesale the brand in Europe and Asia, said Arizona corporate product developer Jeff Bergus.
“That’s the future of this brand, to get it in front of a bigger international audience,” said Bergus, who has lead the charge to return the $1 billion brand to its junior fashion heritage.
Unlike other house brands that exist as a value-priced alternative, Arizona reaches $38 a pair, a premium price point. Bergus contends the brand has earned its right to higher pricing by offering truly competitive fashion.
For bts, Penney’s will continue its Arizona branding campaign, featuring colorful lifestyle ads shot in Santa Fe, N.M., a departure from the white backdrop shots of recent years. At the bottom of the new ads, in fine print, reads “Available at J.C. Penney.”
“We’re promoting Arizona, not J.C. Penney,” Bergus said. “We can make Arizona cool to the teen, but it’s a struggle for J.C. Penney.”
Other retailers appear to be using private brands more in the misses’ arena: Kohl’s Sonoma Genuine Jean Co. and Mervyn’s High Sierra target slightly older customers, for example. With Covington and Lands’ End, Sears has exclusive brands now at its opening and premium price points.
While midtier retailers build their own brands, mass stores will be waging campaigns to convince girls and their moms that a pair of Mossimo, No Boundary or Joe Boxer jeans are equally legitimate brands.
Last year, Kmart underscored the price break by offering a two-for-one pricing deal at bts, said a spokeswoman for the Troy, Mich.-based chain. She said the retailer is considering a similar play this year.
At bts, Kmart will have a wall of VF’s national brands, three tables of Route 66 basics and several four-ways of fashion Route 66 and Joe Boxer jeans. Stores with a strong Latina customer base will get a four-way rack of mixed Thalia Sodi merchandise, debuting in August.“That will be fashion denim with all the bells and whistles,” the spokeswoman said. Equally important, she said, is the basics wall, which still has a loyal customer wanting a quick and easy way purchase.
VF’s LaGrega said this customer, generally a woman 25 and older, is now ready to update her denim wardrobe, but doesn’t want junior trendiness.
“A lot of the marketplace went too fashionable,” he said. “We’ve been talking to our customers and find they want a contemporary looking jean.”
That means a visual texture from crosshatch denim, for example. It doesn’t mean “skunky” washes with dramatic light and dark patches, LaGrega said. “They definitely want something darker and they want [the effect] feathered,” he added.
VF has been developing Rider’s and Lee products with a 10-inch rise, which gives the low-rise look without its fit bugaboos.
For its part, Levi’s is going straight with its dozen new vignettes for Wal-Mart TV. Foote, Cone & Belding, which has worked on recent campaigns for Levi’s Dockers brand, created the spots.
A Levi’s spokesman said the 10-second spots include girls doing double-Dutch jump rope, boys skateboarding, an “elderly African-American man playing the blues and a father twirling his son by his jeans’ belt loops.”
The last highlights “the quality of our reinforced belt loops,” the Levi’s spokesman said. Assorted lifestyle photo signs support those spots, showing “customers come in all shapes and sizes,” he added, and underscoring this is a family brand launch, rather than a category focus.
In women’s styles, Levi’s Signature offers a relaxed, a bootcut, an 8 5/8-inch low-rise, an extended-tab waistband, and a plus-size bootcut.
“There are not many nice jeans in the plus business,” the Levi’s spokesman observed. “So we were careful to bring the same attention and finishing details to that category.”
Goods will be hung on four-way racks and stacked, depending whether they fall into the fashion or “core” parts of the assortment. Product featured in vignettes or photos will be racked on the aisles for easy retrieval.The Levi’s spokesman characterized the overall presentation as “totally integrated, with tops and bottoms merchandised together.”
Levi’s will have to share floor space with Faded Glory, Wal-Mart’s long-running family casual brand. Faded Glory has the distinct advantage of a long relationship with Wal-Mart that extends back to the early Nineties, when Faded Glory’s parent company sold Bongo product to Wal-Mart, according to Bradley.
He said Faded Glory’s team presents a line every season to Wal-Mart and then the two companies work to choose styles that can literally sell “truckloads,” he said. Over the years, the two companies have gotten “more and more on the same page,” he noted.
What emerges from collaboration is a mix that’s 15 percent fashion, 40 percent basics and 45 percent updated basics, which Bradley calls the “big and growing middle of our business.”
“For the mass market, that’s the area where you can have an impact, rather than trying to go for the top fashion pieces too much,” he said.
He described Faded Glory’s fit as size 10 median. It’s “not on the skimpy side. Room in the seat and thigh is critical.”
While Wal-Mart is beefing up its denim, Target appears to be taking a momentary breather, perhaps to reassess its offering and plan its next move.
Comparing floor assortments at Wal-Mart, Sears, Kohl’s and Kmart in eastern Massachusetts, Target was light on denim with only 15 percent or so of its floor serving the category. Instead, the retailer appeared to be concentrating on novelty sundresses, skirts and capris.
Various Mossimo denim miniskirts, merchandised with polo shirts on a prominent wall, got the most play of any denim style. If Target was choosing one denim idea, the miniskirt is well chosen for this region, which favors preppy dressing.
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