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Innerwear Makers Look to New Markets for Growth

A number of major brands are chasing business opportunities around the world in the wake of a recession and a lingering sour economy.

Innerwear makers circumnavigate the globe to find new markets and growth.

Going global is the fastest way to grow business and build brand equity for innerwear brands in a shrinking U.S. market.

A number of major brands are chasing business opportunities around the world in the wake of a recession and a lingering sour economy. Whether it’s a bid to garner new consumers in emerging nations or to bolster brand recognition and incremental growth in mature markets, more companies are competing for market share overseas. The strategy can be attributed mainly to retail consolidation and the downsizing of lingerie collections to key item assortments at stores, as well as consumers who remain cautious with apparel purchases.

Key territories in which vendors are expanding their global presence include China, Korea, Thailand, Vietnam, India, Australia, Chile, Brazil, Peru, Mexico, Canada, Germany, Turkey, the Gulf Region (including Dubai and the United Arab Emirates), Russia and a host of breakaway republics from the former Soviet Union, such as Kyrgyzstan and Uzbekistan.

Executives say there’s even room for growth in cash- strapped countries like Greece, Spain, Italy and Ireland that are struggling with inflation and the euro zone crisis. The reasoning is that people still need to buy underwear and basic commodities, and they are also willing to spend on a special item that’s affordable, offers intrinsic value and is regarded as an emotional buy.

But it takes a lot of time, patience, research and creativity to enter foreign markets and build a brand franchise. It also takes a substantial investment that could range from the mid-six-figures to $1 million or more to cover additional costs for travel, sales, marketing, of­fices, showrooms and trade fairs, shipping, technology, partnerships and licensing deals, and a host of legal and regional government fees.
Challenges include:

• Brand recognition.

• Positioning a brand and developing a marketing platform.

• Addressing cultural differences.

• Developing a strong relationship with distributors, agents and retail partners.

Besides partnerships with traditional brick-and-mortar retail franchises, executives say, breaking into an emerging market increasingly demands an e-shop or a Web presence in a regional language. It’s also far easier to market and advertise a brand if consumers in the target country are familiar with the aspirational message of its name, and brand image is a critical factor. A key example is Calvin Klein Underwear, with its hip, sexy image that has fairly universal appeal.

Helen McCluskey, chief executive officer of The Warnaco Group, said she believes Calvin Klein Underwear “has growth potential everywhere.” Latin America is among the brand’s most recent initiatives.

“We entered Chile and Peru at the end of 2011 and had a good start there and have good distribution with Ripley department stores…We expect business in Latin America to double over the next five years. I think [Calvin Klein Underwear and Jeans’] business can definitely double in Brazil and in China,” said McCluskey. “We’re just getting started in India, Thailand and Vietnam.”

The $2.21 billion Warnaco expanded distribution of its international Calvin Klein products primarily through its direct-to-consumer business, which includes “a couple of hundred directly operated and third-party” Calvin Klein jeans and underwear shops in China. Net revenues in the segment increased to $755.3 million in fiscal 2011, from $669.8 million in fiscal 2010 and $580.2 million in fiscal 2009.

(The fiscal 2012 annual report will be released in February.)

“We expect all direct-to-consumer [Calvin Klein jeans and underwear] revenues to grow to 30 to 40 percent of total Warnaco revenues over the next five years,” stated McCluskey.

Maurice Reznik, ceo of Maidenform Brands Inc., a $589 million bra and shapewear specialist, said the Maidenform brand is sold in 62 countries and the company plans to further expand its global footprint this year.

“The Americas are a big part of our growth strategy. Canada is becoming increasingly important as retailers like Target expand there,” Reznik said. “The Maidenform brand is well-known in Canada and in Mexico, which is very important to Maidenform and our licensed Donna Karan Intimates business, mostly DKNY Underwear. The strategy is to leverage the Maidenform brand and DKNY together.

“An interesting aspect of our international business is the ability of the DKNY brand to penetrate a market, and then we piggyback the Maidenform brand into that market like we did in Spain and France,” explained Reznik, noting that the DKI unit accounts for 27 percent of total international business. He singled out Germany as a country in which efforts are being “intensified” this year.

Reznik also cited the Latin American market, including Chile and Mexico, as key.

“Maidenform has been in the Latin American market for some time, and penetration is high. We have brand equity and design intent for the brand because Maidenform is seen as a fashion brand that resonates with fashion-loving Latin customers.”

Reznik noted that the company’s Asia strategy is to grow the brand’s presence where it is already known and to position it as a better brand in Hong Kong, Singapore and Thailand.

“The entire Asian market is underpenetrated, but we have good brand equity,” he said. “One area in which we haven’t yet made inroads is Mainland China, and we are looking at options. We’ve done a lot of exploratory research, but it’s complex — do we go in with a partner? Should we do in-store shops? Maidenform’s growth is really increasing on investment in these countries with marketing, people and systems.”

Reznik added that the company is preparing to enter other markets as well, but he was not ready to talk about those.

At Kenosha, Wisc.-based Jockey International, Tim Wheeler, president of Jockey’s global division and a former director of VF Corp.’s international jeans business, said Jockey pioneered the art of global business when it inked its first license outside the U.S. in 1936. Jockey, which is sold in more than 120 countries, runs an international licensing business model worldwide with the exception of its European operation, which is based in Germany and wholly owned by Jockey.

“Jockey is sold just about everywhere in the world, and we’re heavily represented in Asia and South America,” Wheeler said. “If we find the right partner, we sign a long-term arrangement so they invest heavily. We got into India in 1995, and our partner there is also our partner in the Philippines. India is still one of the fastest-growing markets today.”

The business model for Jockey’s international operation reflects the company’s core values of family and brand loyalty, and it has helped solidify partnerships, said Wheeler.

“Our big challenge is to get the right [sales or distribution] partner who handles a specific market. Most of our business is done with local partner experts….We’re actually growing in Ireland, Greece and Spain. There’s a very big independent Jockey business in Ireland that’s been run by three generations of the same family-operated distributors and agents. With what’s happened with the European [monetary] crisis, we’ve had to partner even closer with them, and it’s been a way to secure our business as well as theirs…Another example is Spain, where our business is run by a guy who works directly at El Corte Inglés [department stores], and even though it’s tough in Greece, our distributor also serves as president of the International Apparel Federation, one of the few people hanging in there. Jockey is selling well in those countries because people still need underwear and need to dress.”

Regarding China, Wheeler noted that Jockey is in the early stages of developing a retail partner business model after converting its operation into a full licensee in 2011.

“Our projections for China are very strong,” he said.

Garry Hogarth, ceo of London-based Agent Provocateur, said a two-pronged strategy is boosting its global presence through the Internet and traditional brick-and-mortar stores. The brand is currently sold in 73 freestanding shops and franchises in 24 countries, and there are plans to add 15 more boutiques this year in three new markets: Mexico, Australia and Mainland China.

“Last year, we launched Russian- and Korean-language [e-commerce] Web sites, said Hogarth, noting that the company is exploring possibilities for a Chinese-language site. He added that international online sales have increased “40 percent in one year and like-to-like store sales have increased 25 percent.”

Agent Provocateur will also be offering a new diffusion label exclusively to global wholesale accounts for next fall called l’Agent by Agent Provocateur.

“It will be the first wholesale range sold to retailers worldwide. It’s a collaboration we’ve done with Penèlope Cruz, her sister Monica Cruz, and Agent Provocateur creative director Sarah Shotton,” said Hogarth.

Bob Vitale, president of Wacoal America, the U.S. unit of the $2.02 billion innerwear giant Wacoal Holdings in Kyoto, Japan, said 2013 is ripe for international expansion.

“We have very high market share in the U.S. and have always been interested in expansion into other countries. It’s a need of our own. The intimate apparel business in department stores is not growing in the U.S., so I’m sure everyone is looking to see where they can get their business going. But the challenge is, how do you do it profitably?” he said.

While Wacoal operates its business through worldwide subsidiaries such as Wacoal U.K. and Wacoal China, Vitale said he sees opportunities to grow a young, contemporary brand called b. Tempted with Wacoal subsidiaries in Asia.

“There’s a big opportunity for b. Tempted because it’s the right type of product for the Asian market with smaller [bra] cup sizes,” said Vitale. The brand is currently sold in Japan, Hong Kong, Malaysia and the Philippines, as well as on the Wacoal.jp site.

In other moves, Wacoal is increasing distribution in the U.K. with new accounts at John Lewis and House of Fraser, as well the De Bijenkorf and Breuninger department stores in the Netherlands and Germany. There will also be a launch in Mexico at El Palacio de Hierro this spring. To extend its reach in Canada, a Wacoal Canada subsidiary was created in 2012.

Laurie Ann Goldman, ceo of Atlanta-based Spanx, said the company is “looking to have in-store shops with complete Spanx collections in different markets.”

“We opened shops in department stores Hyundai in Korea and KaDeWe in Berlin at the end of 2012, and we’re now sold in these cute vending machines at Lane Crawford [Hong Kong]. We’re also looking at China — one of the things we’re working on with Neiman Marcus,” said Goldman.

In the U.K., Spanx is sold at Harrods and Selfridges, and the company plans to enter the Italian market in February at La Rinascente and Excelsior Milano stores, which will feature the brand’s first “Tower of Power” shapewear and legwear display in Europe. Plans are also in the works to open a warehouse in Europe and several “Spanx.com sites in Europe,” she said.

Richard Adjmi, ceo of Age Group, maker of Flora Nikrooz sleepwear, described business in the Mideast as “very robust.”

“Over the past year, we’ve had 10 to 15 percent incremental growth in Dubai, Lebanon, Saudi Arabia, Kuwait, Egypt and the United Arab Emirates,” said Adjmi. “I believe it’s because the Flora Nikrooz product is highly embellished and tastefully sexy without being overtly sexy, and they like that…And ‘Made in the U.S.A.,’ which we do, holds a certain cachet of value in the Mideast, while ‘Made in China’ does not.”

Selling product via the Internet is a big part of the global strategy at Miami-based Cosabella, said Guido Campello, vice president of marketing, innovation and sales.

“We’ll be launching on the Neiman Marcus China and Japan e-com site in February for spring and on the Chinese site Shangpin.com for holiday 2013,” said Campello. “If the dot-com markets can open up business in China, there will be no boundaries.”