Denim Resilient But Pressure Grows on Premium

As economic conditions worsen, consumer price sensitivity rises.

The denim industry is proving its resiliency in a period of economic turmoil, but worsening conditions are challenging the premium end of the spectrum as price sensitivity among consumers grows.

This story first appeared in the December 4, 2008 issue of WWD.  Subscribe Today.

Customers have continued to purchase denim as financial conditions have deteriorated, finding value in items they perceive to have a long life span that can be worn for a wide range of occasions. According to the November edition of Cotton Inc.’s Lifestyle Monitor, denim’s place as a consumer staple has only increased as a result. Cotton Inc.’s survey of about 1,000 people found that U.S. consumers own an average of 15 denim garments, seven of which are jeans. Consumers planning to make apparel purchases in the near future ranked buying denim second on their priority list, 37 percent of consumers said they had purchased jeans in the past month and 35 percent said they intended to buy jeans in the coming month.

Import figures show no signs of a slowdown in the overall category. The Department of Commerce’s Office of Textiles and Apparel said imports of women’s denim bottoms increased 4.5 percent to 13.5 million dozen for the year through September, compared with 12.9 million during the same period in 2007.

While the denim appetite hasn’t waned, there has been a marked change in attitude when it comes to price.

“The average price consumers said they would pay for a good-fitting pair of denim jeans fell from $36.10 in January 2008 to $32.13 in October, reaching a low for the year,” the Cotton Inc. report said.

Pricing pressure may result in an erosion of brand loyalty, particularly in the higher end of the market.

“Consumers who considered brand to be an important factor in their apparel purchases were willing to pay an average of $42.28,” said the report, a far cry from what is considered the $100 premium denim threshold.

Andreas Kurz, former head of Diesel USA and Seven For All Mankind and now president and owner of fashion consultancy Akari Enterprises, said until two months ago he would not have bought into the idea of premium consumers trading down. Consumers who moved into premium labels haven’t been willing to trade down, opting rather to wait until their preferred label goes on sale or only buy one pair instead of two. That mind-set has changed.

“The times are so tough now that people would jump the barrier and go for a lower price,” said Kurz.

This spells opportunity for a new label to lay claim to an area of the market that Kurz believes may be where consumers are looking.

“There is a void in the market for the $100 to $150 jean because there is really no one strongly there,” said Kurz. “I would not be surprised if some of the market went there.”

The winners in the premium category have turned out to be a select handful of labels that were established performers before global stock markets plummeted this fall. Department stores and denim boutiques have increasingly retreated to top brands like Seven For All Mankind, Citizens of Humanity, True Religion and Joe’s Jeans. As conditions worsen, these brands have been able to tighten their already commanding grip on the premium segment as store buyers become more conservative.

Eric Beder, retail analyst at Brean Murray, Carret & Co., believes True Religion is poised to excel in what is expected to be a dismal holiday season.

“It has become increasingly obvious to us that True Religion has remained extremely strong in the department store channel,” Beder wrote in a research note released Dec. 1. “We think it is one of the few winners for the holiday season.”

Sheryl Blit, co-owner and buyer for Havana Jeans, which has stores in Rye and Scarsdale, N.Y., and Stamford, Conn., also characterized denim as a “staple” and one of the strongest-performing categories in her business.

“I’ve been more affected [by the economy] with fashion than denim,” said Blit.

But Blit has recognized that her customers are reluctant to consider any label selling for more than $200. Blit, who has been in business for 14 years, said current economic conditions put more pressure on brands to excel at providing consumers with basic styles that are consistent in fit, quality and price.

“A fashion girl will be looking for something new and trendy, but consistently my same [labels] are working over and over for me,” she said.

Blit said she is always searching for new lines to introduce to her store shelves. However, fit and price point are increasingly scrutinized, and Blit is looking to build deeper relationships.

“In this economy, I’m looking for a real partnership with the denim company,” she added.