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Lucky Seven: El Palacio de Hierro’s Private Brands

Growth will be accomplished organically, by nurturing the seven existing private brands, rather than adding new ones.

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Special Issue
WWD Milestones issue 09/30/2013

Within its buildup of luxury and international labels, El Palacio de Hierro finds room for homegrown private brands.

This story first appeared in the September 30, 2013 issue of WWD.  Subscribe Today.

Private labels account for 5.6 percent of the company’s total volume, yet according to Maria Teresa Ledesma, the divisional merchandise manager supervising the private-brand program, “Our goal is to reach 12 to 15 percent in five years,” more than doubling the current penetration. Private label touches the women’s, men’s, kids, tweens and baby categories. In women’s alone, private label accounts for 9.3 percent of the business.

Though El Palacio does work with Li & Fung in Hong Kong on sourcing, “The big challenge is to find manufacturers willing to work with us. Our volumes are not so big,” Ledesma acknowledged.

The approach to private label is different from other retailers where sometimes on the selling floors there’s a confusing array of labels that mean little or nothing to consumers, or the private-label business banks heavily on celebrity and designer collaborations which come and go. At El Palacio, the program is focused and contained — and devoid of popular music or movie personalities. The store’s private-label development maintains a relatively modest portfolio — just seven labels — and that’s just the way the merchants like it.

Growth, as Ledesma explained, will be accomplished organically, by nurturing the seven existing private brands, rather than adding new ones. The foundation of the business rests on selling lifestyle concepts. It’s not geared to underprice other brands, or to be heavily promotional.

“We try to be aspirational,” Ledesma emphasized.

The company’s largest volume label, and what could be considered the most important, is Chester & Peck, which evokes a neo-traditional, English countryside attitude. The collection revolves around updated classic and basic styles, and has a strong reputation in dress shirts, for men and women, that are made in Mexico with Italian fabrics. Prices are upper moderate, and the target audience would be inclined to shop Lacoste or Polo Ralph Lauren, which are also sold at the store.

On the other side of the private-label fashion spectrum is Wild & Alive, a one-year-old women’s contemporary collection. The look is what Ledesma called “sophisticated edgy” — particularly for Mexico, where many women tend to dress conservatively — with metallics, skintight pants, studded jackets, short cropped tops and mixed media, as well as a range of jeans.

“They like sexy but not too revealing,” Ledesma said, describing how the women dress, while men in Mexico are gravitating toward skinny jeans. “Everything is about proportion in men’s. They are becoming more body-conscious.” Wild & Alive is a most critical label in El Palacio’s strategy to become a bigger player in contemporary sportswear, where officials acknowledge they’re playing catch-up to the competition.

“Many of our customers think Chester & Peck is a British brand and that Wild & Alive is an American brand,” Ledesma said. “That’s exactly what we want — that customers buying these labels don’t realize they are our private brands.”

Epsilon, another contemporary label that does well with jeggings and leggings and other body-conscious, fitted looks, is the second-largest private brand at El Palacio. The label is sold in women’s and men’s, and caters to the type of consumer that would be apt to shop Club Monaco or Zara.

Catamaran, a casual sportswear private label in kids and juniors, appeals to those shopping American Eagle Outfitters and Aéropostale, and is important in jeans, second only to Levi Strauss at El Palacio.

“We want to sell that lifestyle but we don’t want to look like them,” Ledesma stressed.

El Palacio owns two designer labels for the private-brand program: Pertegaz, a Spanish designer known for men’s suits and shirts, a very traditional line, at opening price points in men’s and women’s, and Carlo Demichelis, a contemporary label for women 35 and older. Rounding out the private-brand program is Primmi for newborns, toddlers and kids, emphasizing pima cotton products.

Ledesma said the company takes “two critical paths” in developing and planning the private-brand products — a 10-month process for the longer-lasting trends and traditional styles, or a 10-week process for fast fashion and hot items like printed jeans and cropped tops for Wild & Alive. With the fast-track products, El Palacio buys fabrics and stores them in a warehouse so they are readily available and the production cycle is short.

In any case, private label design and development is a complicated process involving line reviews and analysis on bestsellers; visits to New York to The Doneger Group merchandising and consulting firm for information and advice on trends, demographics and important brands; combing trade shows in different countries such as Première Vision; color reviews, and assortment planning to structure the collections with key categories and items.

Much of the private-brand product is designed and developed in-house, though sometimes suppliers might design product based on what El Palacio is looking for. Samples are developed by suppliers who give price quotes to the store’s seven private-label merchandisers. Also on the team are two graphic designers, as well as those involved in quality control, patternmaking, purchase orders, operations, planning and analysis.

Asked if additional private labels are contemplated, Ledesma replied, “Seven is a good number. We are not going to have more. We have the niches covered.”

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