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Price Probe: Getting it Right

NEW YORK -- Price. It's one of the key issues in fashion, and debate over how high is too high has become even more intense in the cautious Nineties.<BR><BR>Here, price is examined in a series of questions put to sellers and makers of fashion....

NEW YORK — Price. It’s one of the key issues in fashion, and debate over how high is too high has become even more intense in the cautious Nineties.

Here, price is examined in a series of questions put to sellers and makers of fashion. Participants included retailers Joseph Cicio, chairman and chief executive officer of I. Magnin; Rose Marie Bravo, president of Saks Fifth Avenue, and Susan Falk, president of Henri Bendel; Stuart Kreisler, consultant to Bidermann Industries for its Ralph Lauren Womenswear business; designers Todd Oldham, Isaac Mizrahi and Adrienne Vittadini; and fiber and fabric company executives Jim Casey, president of the fibers division of Wellman Inc.; Gerald Rodelli, vice president of marketing, Stonecutter Mills, and David Caplan, chief executive officer, Metro Fabrics.

WWD: Is price the dominant factor in fashion?

Cicio of Magnin’s: “The dominant factor in fashion is design. That’s what counts first. After that, it’s the quality of the fabric and the construction. Then it’s the price. I really think price is the last factor for the better customer. Consumers are tuned into price, but if they spend the money, everything else has to be there.”

Bravo of Saks: “First, it’s the look and how emotional or how desirable the look is. Then it’s the quality that counts, and then it’s how does it all relate to the price.

“The price-value relationship is very important. People are asking, ‘What can I get for my dollar?’ They’re sensitive to more elements, such as can I wear this outfit all year-round. Is it a transitional weight or too seasonal? Is it going to last? Is it worth paying any more than I would normally for these components?”

Falk of Bendel’s: “Shoppers go for the fashion first. That’s really number one. There are cases where the label is important, but that’s a different set of issues. Price really comes further on down. It’s fashion, quality and then whether there’s a fair price. Fashion is number one, first and foremost.”

Kreisler of Ralph Lauren: “I think price has become a big issue in the major success of some stores. In low budget stores, they drive that point. What makes big business is buying in programs that make the retailer dominant in those programs, and there’s a price point at which that type of merchandise sells. But, if something is fashion-right, as in a designer collection, it sells regardless of price. When you get to the next generation of leveraging a trend, that’s where prices become an issue.”

Oldham: “At certain levels, yes, it’s the dominant factor. But for what I do, I think value is more important. Is there longevity to the clothing?”

Mizrahi: “No. Well, it kind of depends on the market. In the garment industry, it’s predominant, but in the fashion industry — and there should be a distinction — it’s not the issue.”

Vittadini: “Definitely, with the economy today. Women do comparison shopping and their pocketbooks are leaner than before. Price and value, I would say, are key.”

Casey of Wellman: “Disposable income, despite what some people say, is an important factor to consider before making a fashion purchase. Although it’s maybe not as important in higher-end fashion, it is in everyday apparel. For instance, Penney’s, Sears and Kmart are advertising fashion, but at a value. Those retailers are trading up and want to be recognized as more fashionable.”

Rodelli of Stonecutter Mills: “It’s not a yes or no answer. It really depends upon the purchasing power of that consumer. If the woman doesn’t have a lot of money, her first concern is going to be the price of the garment. If that woman isn’t concerned with cash flow, she’ll look for style, newness and if it’s something different than what she has in her closet.

Caplan of Metro Fabrics: “At the low end, price is the dominant factor, from Liz Claiborne all the way down. From Ellen Tracy on up, price is less dominant.”

WWD: What elements contribute to the high prices of designer collections?

Falk: “Prices have pretty much stabilized. Designers are trying to keep them down and figure out different ways to attract the customer. A Montana label commands a different price than some others. And a customer has a higher price on her mind for fall, rather for spring. If an item has a lot more detail, that affects the price too. Depending on the bridge line, jackets $450 to $800 sell, provided the $800 jacket has a lot of detailing on it.

“Consumers are very, very savvy. They have been for a long time. They know what prices they will pay. They’ll pay $3,000 for a suit, but they won’t overpay for a cotton T-shirt.”

Kreisler: “Designer market prices are at a certain level basically because fewer stores are carrying it, and if there’s less distribution, there’s less manufacturing and therefore no price advantages in the manufacturing. Also, you might be making custom-made fabrics, starting from scratch on development.

“Most designers are not using automated labor, and hand labor costs more. Then there’s marketing and advertising, although a lot of the money that comes in from licensing fees goes toward that because it affects them as well. You know, the advertising is so necessary because it’s the wholesaler who speaks to the consumer today, not the retailer. The stores don’t do that the way they used to, unless it’s through their direct mail, so the designers have picked up the slack.”

Oldham: “First, it starts with fabric. We’re dealing with fabrics that are $50 to $75 a yard. And it costs a lot to make a garment. We do a lot of it by hand. There’s also some advertising money involved for co-op ads. You have to take into consideration your overhead. And for the amount we produce, it’s considerably higher to manufacture than people who are churning out thousands of pieces.”

Mizrahi: “Fabrics and the duties on my fabrics coming from Italy, Switzerland and France kill me. Our clothes are made in the tri-state area, and union fees and things like that don’t help either. There are also fees when we’re not able to meet minimums. And for co-op advertising — I mean, if you don’t do it, then you’re stuck.”

Vittadini: “Raw materials. A wonderful gabardine can be $8 a yard, but there’s a wonderful gabardine for $28 a yard. The key is to shop the market in yarn and piece goods. We spent a lot of time in Italy and working with the domestic mills. It’s a matter of making maximum quality and the least amount of labor. We source from all over the world and try to evaluate where we can get the most economical labor.

“About consumers paying for us to be able to promote the collection through ad campaigns, I don’t know if she thinks like that, but I do. But it is important for her to see look books and catalogs. We’ve cut back on show costs, using 16 models instead of 30. But a show is important also, because it eventually translates to the consumer through the editors and buyers who see the show. Advertising is important for image. But while we all did lavish ad campaigns a few years without even caring if the clothes showed, it’s not like that anymore.”

Casey: “I think it’s equated with how much risk is associated with fashion. Limited runs require more handtooling, which adds to labor costs, and a manufacturer has to look at the risk factor — how much of a writedown do people take on fashion goods versus core merchandise. For the retailer, the more avant-garde something high fashion may be, the more risky it is to sell. However, if it hits, the greater the margins will be.”

Caplan: “The tangibles are good quality in manufacturing and quality in fabric. The intangibles include paying for licensing a name like Ralph Lauren or a big advertising campaign a la Donna Karan. In the lower priced arena, it’s the tangibles, where in the designer and bridge arenas, most of the time it’s the intangibles like fashion shows, advertising and point-of-purchase materials.”

WWD: Is price sensitivity overcoming consumer demand for quality?

Cicio: “Today, customers are much more sophisticated and knowledgeable about prices and values. Customers are not stupid. They shop stores. However, there is absolutely no resistance to price among better customers if the quality is there, not only in the design, but in the fabrics and the construction.

“If you look at a Jil Sander, Chanel or a Giorgio Armani collection, there’s no resistance to price. That means the value is there and that customers seeking quality understand good fabric and construction.”

Falk: “People have started to think about things differently. They’re not willing to pay more just because something has a designer label. In the designer business, more separates are being sold — a jacket for $1,500 or $1,800, as opposed to buying a suit that costs $3,000. But they feel it’s worth it to update what they already have with a skirt or a pant. You do see more of that.

“Sometimes, if they see something they think they can wear for more than a year, that is important. But I don’t think it’s an overriding factor. People want to look current and modern.”

Kreisler: “I don’t think consumers are as educated as they used to be. There isn’t someone taking them through the alterations and tailoring procedure the way there used to be. They buy ready to wear. For the designer customer, though, there is a focus on quality. The visual experience is first, and then the way the fabric feels, the suppleness of it. They do know when they feel a Chanel or Armani or Lauren fabric. But to expand the designer market, there’s concern that if a consumer never gets the chance to know quality, or is never taught about it, how do we sell to her?”

Oldham: “It depends on the type of styling and the clothes you do. In our case, you’re not talking about one trendy item like black bell-bottoms that they can get anywhere, from $12.99 at Conway, to $1,000 at Versace. Our customer notices quality. It was interesting — we didn’t lower our prices this season, but there were some pieces that were lower-priced because of fabrics. All those black evening gowns were $700 to $800 and they blew out. So the price and the quality do matter, in terms of what type of value it is.”

Mizrahi: “No. My prices are very high and we made a concentrated effort at one point to lower them and that didn’t work too well. We compromised some quality in the fabrics one season so jackets were like $700 instead of $900. Then we added very luxe fabrics the next season, and those blew out. What matters is value. The right button, the lining. It really is about cut and fit and putting the absolutely fabulous fabric with the absolutely fabulous body. It’s especially true with my specialty stores.”

Vittadini: “No. Integrity of product is the most important thing. We will never compromise where it will affect the quality. I’d rather not have it on the line. I’ll take off a pocket or change a yarn — instead of using an expensive Italian yarn, we’ll see if our spinners in the Orient can do something that’s very close — or not put as many details on the waist because it’s going to be covered by a tunic anyway. But the customer absolutely knows when you’ve compromised quality.” Casey: “When people get into higher fashion, in most cases it’s an investment purchase.

“You know, if it’s a ball gown it’s a show piece. However, a Chanel suit you are going to keep years and years. Investment dressing is much more palatable in the Nineties than in the Eighties.”

Rodelli: “No. With today’s equipment, a garment doesn’t have to be expensive to be of good quality. In fact, you can have something less expensive being better than a higher priced product.”

Bravo: “I think prices have stabilized. Designers have worked to maintain prices and in some cases lower prices and be more in tune to what consumers are willing to pay. Consumers are very savvy and are very well educated. They shop around. She’s a specialty store shopper, a Wal-Mart shopper, a discount shopper. A lot of shoppers shop in a variety of stores.”

Caplan: “More than ever, everything is very price-driven. The retailer always advertises off-prices, and ‘we have the lowest price.’ Retailers are pushing apparel makers to come out with lower and lower prices.”

WWD: How do you know if the price is too high?

Cicio: “There are always limits as to how much a customer will spend, but they are hard to define. In bridge, you can go so far on a great cotton blazer, roughly $400 to $500. Once you start getting beyond $500, you might be entering rough waters. In designer, I don’t think you can really talk about limits. It’s a whole different thing.”

Bravo: “I don’t know if there are limits. Under $1,000 for a bridge outfit — a blouse, skirt and jacket — is okay, depending on the fabrics and the quality. In designer, it varies so much. Maybe $1,500 to $2,000 again, depending on the fabric. It’s always tricky.”

Kreisler: “Well, in the pure designer business, what are you going to do — say, ‘If this jacket was $800, instead of $1,000, I’d sell more’? If you take away what makes it $1,000, then it becomes bridge. The answer isn’t getting great fabric and then putting in cheap labor, or the other way around. The value comes out in the longevity of the garment. You put in a floating canvas, handstitched, compared to a pressed-in lining, which separates with dry cleaning.

“Even with Ralph [Lauren’s secondary line], you want to maintain who you are, and it’s a challenge to the designers to do good quality at those prices. But you’re not going to get the same thing as with the Collection.”

Oldham: “Well, we’re always as much as thousands lower than other designers who do similar things. The Old Master skirt retailed at $3,000. Had another designer made it, that skirt would’ve been $10,000. We do look at price. It doesn’t make any sense if it’s a big group, for us to mark it down to what we’d like it to be. I mean we’re in this to make a living. But if it’s a specific look that you want a few pieces of to make a statement, then we’ll try to do something.

“Or we may just make them for the show, thinking they’ll be too expensive to produce, and retailers want a few anyway. But really, when you gasp, it’s too high. I gasp at all our prices because I just don’t shop in these places. But when it’s silk lined and handset, then a pant does cost $600. It’s very clear what we do. You’re not creating for America today with designer clothes. In some cases, it’s absurd because a piece of clothing is half a year’s salary for some families. But that’s not who we’re dealing with.” Casey: “That’s difficult to answer. When people started getting into microfibers, it added to the cost of a fabric, and not enough people were confident they could get back the value they put into it. Everyone started taking something out of the fabric to get the cost down and bring it to popular price points. No one ever tested it to see if the price was too high to begin with.”

Vittadini: “We all go to the stores and do comparison shopping. After being in business all these years, there’s an innate sense you get about what something is worth. I know I wouldn’t pay $300 for a weekend wear garment. You have to remember what the end use is. We look at things and decide what a woman would pay for it.”

Mizrahi: “If there’s a fabric that’s just amazing but is so expensive, there’s another one that might do just as well at a lower cost. I do that six months in advance — look at the jacket and say, ‘I just can’t do it at that price.’

“A jacket is too expensive if it’s over $1,500, unless it’s so amazing and you make five of them. Jackets at $1,200 are the top for us, and that’s few and far between. A coat is different because a woman will wear that all the time. There’s an intuition that you get about price — when you know you’ve hit on something and a woman will pay for it.”