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With economic turbulence far from over, lingerie executives are bracing for how buying patterns and traditional marketing rules will be affected.
This story first appeared in the December 1, 2008 issue of WWD. Subscribe Today.
For now, executives believe practicality will prevail.
The immediate concern of manufacturers and retailers is fundamental: getting consumers to spend as job losses, unemployment and home foreclosures mount. The response has been to tighten inventory, cut operating costs, create must-have items and focus on value by offering discounts and promotions. Despite huge government bailouts to help banks, consumers and businesses, the forecasts for the holiday season and into next year are negative.
The good news is the demand for basic necessities isn’t expected to wane. Top bread-and-butter categories include underwear, socks, T-shirts and fleece separates for men, women and children by brands such as Fruit of the Loom, Hanes and Jockey, as well as classic bras and undies by major players like Maidenform, Playtex, Bali and Warner’s.
“There is a distinct possibility that people will be spending more time at home and turn to comfortwear and basics,” said Ed Emma, president and chief executive officer of Jockey International. “This category is currently outperforming other categories like sportswear. Consumers do tend to go back to basics in times like these, but that doesn’t mean they won’t buy some fashion in the men’s and women’s underwear category if the product is right. They may spend a bit more, in fact, because it’s not a big-ticket item, as opposed to electronics.”
Emma said consumer trust in a brand is all-important during tough times.
“I think Americans will absolutely look to brands they know and trust, and history demonstrates this,” he said. “When I was a merchandise manager at department stores buying men’s basics and Jockey was one of my brands, Jockey always did better than most in harder economic times. People buy brands they know and trust, brands with demonstrated quality and value. Brands must deliver quality, be transparent and market themselves in alignment with their brand’s values, focusing on the consumer and telling them your story is important. Now is not the time to play with consumers’ trust.”
Kevin Hall, executive vice president and chief marketing officer of Hanesbrands Inc., said, “Consumers are clearly looking for quality at a value and are shifting to mass and off-price channels at the expense of specialty stores. We expect this trend will continue well into 2009. The online channel continues to grow, despite the tough economy. According to recent Hanesbrands consumer data, eight of 10 consumers are not likely to trade down to cheaper goods if it means compromising on quality. If savings are necessary, they are more likely to buy less rather than compromise quality.”
Hall said the financial crisis is “causing most people to reexamine their spending and their priorities.”
“While overall apparel volume has softened considerably in the most recent three months, the categories we compete in [innerwear, basic T-shirts and fleece] are relatively stable,” said Hall. “But results for the more immediate time period remain the same. I believe that brands are a major influence on consumer purchase intent in any economic climate and can play an even greater role during uncertain economic times. We’re seeing evidence of that now. Results from another recent Hanesbrands survey indicate that what brands a store carries play a big role in deciding where to shop, and three-fourths of consumers rated a ‘well-known brand’ as being an important influence on their innerwear purchase decision. When dollars are tight, consumers don’t want to make a mistake.”
Hall said many consumers are indicating they plan to focus on practical purchases for the holidays and skip the excessive gift-giving they may have indulged in during previous years.
“Basics like socks, T-shirts and underwear have always been good stocking stuffers, but they’ll probably be more important this year,” he said. “We actually see this reflected in the stability of core underwear sales leading into the holidays.”
Marc Gobé, president of Emotional Branding, a consumer research and trend forecasting firm, said, “We have known our ‘Great Gatsby’ years, and it’s over.
“There is no way we will know the wealth we have known. It will be at least three years of a slow, uphill recovery,” Gobé said. “The confidence and management skills of new President-elect Barack Obama, could give confidence again to consumers and investors. In a nutshell, from a retail perspective, prices are going to be the issue at the low end and at the top end, and only the great and true luxury brands will prosper. Unless you are a Wal-Mart or a Louis Vuitton, everyone else should run for cover.”
Marshal Cohen, chief industry analyst for consumer research firm The NPD Group, said commodities have a big advantage even in challenging times because they have replacement and replenishment as the primary reason for purchases.
“While it is true consumers can prolong purchases of necessity items, at some point that necessity will become extremely necessary,” Cohen said. “We feel more vulnerable, less wealthy, and while our natural tendency is not toward frugality, particularly to the degree we should in proportion to our decreased wealth, this is one of those times the American consumer has cut back.”
Mark Sandler, senior vice president of O’Bryan Bros., said he believes spending will favor items that are needed versus those that are wanted.
“Marketing will rely heavily on price promotion and perceived value,” Sandler said. “Even those consumers who were normally in the luxe market will have feelings of guilt if they spend as they did before. There is no evidence that 2009 will bring any change to the current difficult environment. The macroeconomic forces at play will require more than one year to recover. I believe the average American will get better at dealing with adverse conditions and to some extent will get used to it. This may result in the loosening up of purse strings and a satisfaction of some pent-up shopping demand.”