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Denim on a Budget

European shoppers purchase most of their denim from cheaper sources.

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Special Issue
WWD Denim In Depth issue 11/06/2008

Can a pair of boot-cut jeans for 3 pounds, or about $5 at current exchange, ward off gloomy-economy blues?

This story first appeared in the November 6, 2008 issue of WWD.  Subscribe Today.

As recessions roll across Europe, fast-fashion and mass market retailers are hoping a dose of fashion-forward jeans at bargain-basement prices will continue to lure shoppers to the checkout.

With jeans selling for less than 40 euros, or $50, on average in Germany and most women in neighboring France spending no more than 75 euros, or $94, a pair, European consumers are investing less in denim than ever before — a trend that’s likely to continue, given the current economic climate.

“If people are really looking for low prices, they don’t go to brands,” said Helene Follot, denim buyer at Paris urban and sportswear emporium Citadium. “They’ll go to Zara or to H&M.”

“Historically, H&M has done well during economic downturns,” said a spokeswoman for the Swedish fashion giant. “For example, in Germany we have succeeded in taking market share during a low economic period.”

The Swedish chain is extending its denim offer for spring to include more length varieties, plus new washes, including the “damaged” look, featuring patches, holes, mends and frays, in jeans, denim skirts, shorts and dresses. Prices for jeans, in styles including loose fit, boot cuts and flared legs, start at 19.90 euros, or $24.90, and go up to 49.90 euros, or $62.30.

At Spanish fast-fashion chain Mango, denim generates some 8 percent of sales and even more buzz.

“We get a lot of feedback from people on the high street and from our sales [teams] that denim is one of the things that people talk about,” said Mango’s fashion design director Judith Ventura.

Tapping into its customers’ polarized desires for basic jeans and innovative styling, Mango is producing a range of styles that include both. This spring, for instance, the chain will introduce a line of cigarette pants with washes ranging from torn effects to bleached. New styles also include an extraskinny flare.

Fast fashion’s increasingly large share of the denim pie is evident in the order books of leading stretch denim supplier Bossa Denim and Sportswear. The Turkish mill’s sales to clients such as H&M, the Arcadia Group, Inditex Group and Promod have risen by 40 percent in five years. They now represent 60 percent of business, said marketing director Gülperi Erkanli.

While budget lines are gaining ground, industry experts say prestige lines won’t necessarily lose out.

“There is certainly stronger polarization in the market now, compared with this time a year ago,” said Mintel analyst Katrin Magnussen, adding that consumers are increasingly trading out of the middle market, and are either opting to go upmarket or down from branded jeans to the value market.

“It’s too easy to say that, in a recession, everyone will simply switch down to economy or private label denim,” said Nick Chiarelli, director of consumer trends for GfK Roper Consulting. “Those who are motivated by fashion and having the right label on their denim are unlikely to even countenance trading down.”

Label-conscious consumers likely will wear their existing denim for longer rather than don what they would regard as an inferior brand, Chiarelli added. For consumers who aren’t driven by the name on the label, however, there could be a real incentive to trade down.

Indeed, a GfK Roper study in July found that the number of luxury clothing consumers in the U.S. who were cutting back outnumbered those who weren’t by four to one, with the morose economy and outrageous prices cited as main reasons.

Following is a roundup of how retailers in various European countries are reacting to the downturn and local market trends.

— Ellen Groves

FRANCE

French women are spending less on their jeans.

Some 72 percent of women bought jeans for less than 75 euros, or $94, in the past 12 months, according to a TGI Europa study in July, a significant increase compared with the 63 percent who spent less than 75 euros in 2003.

The same survey found that value brands women had purchased the previous year included Complices, which had around 3 percent market share, Rica Lewis and Pantashop, which both enjoyed a 2 percent market share.

Eleven percent of French women ages 18 to 60 had bought a pair of supermarket private label jeans, a figure the tracking firm expects
will rise.

“The crisis will have an effect on the middle class, who will either defer purchases unless necessary or redirect their choice towards cheaper brands,” said Martine Rebours, director of TGI France.

That bodes well for Mim, a French low-cost fashion chain that targets 18- to 25-year-olds.

“When people are spending less money, we have the advantage of low prices — we don’t need to lower our prices and so can keep the same margins,” said Dennis Mok, France and Belgium director for the 300-door chain, which plans to open its first Spanish unit next year.

Denim represents 50 percent of sales in bottoms at Mim, and thanks to a wide variety of trends, such as midlength shorts, Mok is confident the category will continue to grow. Novelties for spring include very bleached fabrics and dark colors, large cuts and flares, plus the skinny silhouettes. Prices range from 14 euros, or $17.50, with the average pair weighing in at 19.90 euros, or $24.90. “Thirty-nine euros [or $48.70] for us is high end,” said Mok.

Meanwhile, E. Leclerc, the leading supermarket in France, is relaunching its women’s, men’s and children’s textiles offer for summer 2009. The collections, under the retailer’s Tissaia brand, will be split into three key directions, sport casual, fashion-forward and urban chic, with color-coded merchandising to match. “When the customer comes into the store, they’ll be able to find the section they want straight away,” said Muriel Bigard, head of textiles at E. Leclerc. New denim styles will be introduced under all three categories. “Jeans can be very dressed down and very fashionable,” said Bigard who named a wide-leg, raw denim style as one of the trend-driven looks. Prices for jeans will start at 10 euros, or $12.50, and go up to 30 euros, or $37.50.

— E.G.

GERMANY

With the average price of women’s jeans below 40 euros, or $50, budget jeans in Germany make up the largest chunk of the denim market by far. The cheapest women’s brand on the German market is Kik, which retails at 7.99 euros, or $9.98. Less than 5 percent of jeans sold in Germany, meanwhile, cost more than 150 euros, or $192.

“The vast majority of German consumers shop for jeans in discount stores and cheaper department stores, such as C&A,” said Petra Dillemuth, retail analyst at the German research institute GfK. “Premium jeans make up a tiny fraction of the market. Certainly  much less than you would think, given the amount of attention these brands get in the media.”

According to GfK’s research, in the first half of 2008, the denim market in general fared better than other segments, and Dillemuth believes cheaper jeans brands made significant gains in sales.

Sales figures for September indicate that the financial crisis so far has had no significant impact on retail sales, which were already low. But analysts expect the run-up to Christmas to be poor, especially since last year’s performance was disappointing. Dillemuth predicts that consumers, faced with rising fuel and food costs, will start cutting back more on clothing.

“The main problem for the jeans market,” she said, “is the surplus of retail space, which is much higher per head in Germany than in other countries.” Jeans brands won’t necessarily drop prices, she asserted, noting that some labels are indeed moving up a price level. Still, faced with overcapacity, some doors certainly will close.

Although many assumed that German consumer confidence, which for years has been at rock bottom, could scarcely get any weaker, new figures released at the end of this month revealed that even tougher times are to come. According to the German research institute Forsa, 49 percent of women in Germany say they will be cutting back on buying clothing further still, with 52 percent intending to spend less on designer names, a trend that will undoubtedly affect the premium jeans market. Young, cheaper fashion — and along with it, the budget jeans market — will be less affected by the downturn, with between 26 and 29 percent of women saying they would buy less in low-cost chain stores.

One of the biggest retailers of young-budget street fashion is the Braunschweig-based brand New Yorker, which has 660 branches across Europe, employs 11,000 people and posted sales of 1.2 billion euros, or $1.5 billion, last year.

Low-priced jeans form a core part of its product offer with prices ranging from 29.95 euros, or $37.40, to 49.95 euros, or $62.39. Officially, the company aims to bring in consumers ages 12 to 39, but older teenagers form by far the most important consumer group. According to a New Yorker spokeswoman, every price category of jeans sells well, mainly because of the moderate cost. The key thing, she said, is that the jeans must be fashionable enough to appeal to young, trend-focused consumers.

Unwilling to give sales figures for denim, the company maintains, however, that there has been no drop in jeans sales over the last few months as a result of the financial crisis. “We go down very well with our young target group,” said the spokeswoman, “because of the  good price-quality ratio our jeans offer and because we always stay on-trend.”

— Damien McGuinness

ITALY

In Italy, 87 percent of 14- to 34-year-olds bought jeans in the last 12 months, compared with 49 percent of 35- to 54-year-olds, according to TGI Europa. Here, appealing to the younger, trend-conscious segment is key.

Among the leading players in Italy is the 37-door Il Gigante hypermarket chain, where denim makes up about 35 percent of clothing sales.

“The budget denim market is definitely growing, and we expect to see growth in the coming season,” said Lionel Vaturi, Il Gigante’s apparel buyer. The hypermarket’s principle women’s denim line, D.E. Girl, ranges in price from 9.90 euros, or $12.39, to 29.90 euros, or $37.43. Budget retailer OVS Industry, meanwhile, which will have 40 international stores by year-end, including 19 in Eastern Europe and eight in the Middle East, revamped its 300 Italian stores last year, and now features dedicated denim areas.

“Denim has now become a ‘must’ for all seasons and for all occasions,” said a spokesman for the retailer, whose collections range from classic five-pocket jeans to innovative washes and patterns.

One in five Italians make an OVS Industry purchase at least once a year, according to the company. “It is in the very DNA of the company to always seek to offer the best product at the lowest price possible,” the spokesman said.

To boost its fashion credentials, OVS Industry works with designer consultants to create collections, including Baby Angel, a clothing and accessories line for juniors, created in 2006 in collaboration with Elio Fiorucci of Love Therapy. Jeans prices start at 13.90 euros, or $17.40, and go up to 44.90 euros, or $56.21.

The spring denim offering at 350-door fashion, home and beauty chain Upim will include new white and colored jeans. Denim, including two women’s lines — Oops, a fashion-forward collection targeting 20- to 25-year-olds, and Project Donna, a simpler, functional line for 35- to 50-year-olds — generates 8 percent of clothing sales, which come in at an estimated 336 million euros, or $419.68 million. Both lines trumpet their wearability and the ability to stand up to frequent washing.

“Our customers on average are over 30 years of age, and so they are particularly attentive to wearability, fabric quality and practicality,”  said a spokeswoman, adding that Upim keeps careful track of competitors’ prices to offer the best quality-price ratio for its customers. Jeans range from 24.90 euros, or $31.10, to 39.90 euros, or $49.84.

— Rachel Mascetta

U.K.

The U.K.’s supermarkets long have offered budget denim lines, and sales are getting stronger now that consumers are increasingly counting their pennies.

ASDA, Primark and Sainsbury’s are three of the leading labels in the market and offer boot-cut jeans at entry price points of 3 pounds, or $4.90; 6 pounds, or $9.80, and 10 pounds, or $16.40, respectively.

“Our best-selling style is the boot cut — a very versatile jean that suits everyone,” said a spokeswoman for George at ASDA. “We don’t plan to launch jeans at a lower price point, as we believe our 3 pound jeans already offer the best value in the market.” None of the other retailers said they would lower price points in light of the economic doom and gloom.

The George spokeswoman added that there has been a “significant growth” in sales this year. Meanwhile, Sainsbury’s value denim Tu line has reported a 60 percent rise in sales this year.

Sainsbury’s marketing manager, Josie Cartridge, said she could not pinpoint from where the store’s new denim customers are coming. “We are certainly attracting more customers who appreciate value for money. We are having a very good season, which is driven by new as well as existing customers,” she said. “I believe that women are becoming less and less brand conscious over the past few years and are increasingly happy to mix and match their wardrobes.”

Most British value retailers such as George at ASDA are offering fashion-forward styles, including boyfriend, skinny and high-waist jeans, in order to tap into this new consumer who would normally have purchased branded jeans. “Our range offers customers a great choice, whether they are looking for fashion fits, embellishment or stretch,” said the George spokeswoman, adding that the store pays close attention to detailing, trims, stitching and pockets.

Asos.com, an online retailer that boasts 18,000 products similar to those worn by celebrities on-screen and launches 1,000 new products every week, is an emerging player in the value denim market, although its own label’s prices are higher than the supermarket brands. “Our jegging (a superskinny legging style jean) starts at 25 pounds [or $41], and we will be offering jeans with different treatments and prints for spring,” said a spokeswoman for Asos, which plans to launch a more comprehensive private label denim collection for spring that will include jackets and other categories besides jeans.

— Louise Bartlett

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