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National Brands Battle Private Label

Executives grappled with the future of their brands and private label businesses in a time of intense retail consolidation.

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NEW YORK — The January and March wholesale selling periods proved to be a challenge for lingerie manufacturers as executives struggled with questions about the future of their brands and private label businesses in a time of retail consolidation.

It appears vendors will have no easy solutions at next week’s market as they discuss marketing campaigns and review orders for fall with retail groups that are getting larger and wielding tremendous power. The main retail players are Federated Department Stores, which is acquiring May Department Stores, and Sears Holdings Corp., a merger of Sears, Roebuck and Co. and Kmart.

A key question is whether the retail giants begin to downsize the number of national lingerie brands in favor of in-house brands. At the same time, the industry is filled with acquisition and licensing opportunities among the vendors, whether it’s a household name, an edgy fashion logo, a celebrity name or a new label.

But in order to compete with a new breed of store names such as Joe Boxer at Kmart, Gilligan & O’Malley at Target, Delicates at J.C. Penney, Cabernet at Dillard’s and Alfani and Charter Club at Federated, manufacturers will need financial support, flexibility and marketing savvy to keep national brands afloat, industry executives said.

Marc Gobé, chairman and chief executive officer of brand-image consultant desgrippes gobé, said national brands will face mounting competition in the next several years from a growing number of store-created brands.

“Private label brands are clearly competing with national brands and retailers have the advantage of a better understanding of their customers, and how to brand their own products,” Gobé said. “Retailers have learned that the private label route, if well executed, will increase traffic and loyalty.

“Consumers are seeing the same national brands everywhere and private labels have the advantage to be a unique signature you can find only at stores that make them, like Alfani, Mossimo and Arizona, and retailers are increasingly going directly to designers for partnerships, as Target has done with Mossimo and Isaac Mizrahi,’’ he said.

Allan Ellinger, senior managing director at MMG, an investment banking and apparel consulting firm, disagreed about the status of national brands.

This story first appeared in the April 25, 2005 issue of WWD.  Subscribe Today.

“I think national brands who have carved a niche for themselves have given the consumer a point of view,” Ellinger said. “A brand of that size has a loyal following because multiple retail stores gives them credibility. But I do think some smaller guys need to be concerned as stores get bigger and apply more pressure on brands to support the stores’ needs.”

Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates, said, “It’s really about private label versus national brands and designer brands. There has to be a proper assortment and mix. Whether good, better or designer, a Warner’s, Maidenform, Natori or Lejaby label, those companies are betting 24/7 on creating fashion and value for the department stores to sell.”

Aronson said positioning a national name as a store brand may be tricky, depending on the brand’s image, integrity and how it’s been marketed. He cited Sara Lee Corp.’s Hanes, Hanes Her Way, Playtex and Champion brands as prime candidates for a licensing partnership with a major retailer.

“There’s nothing to keep Sara Lee from licensing its brands,” he said. “It’s an option they have. But it would have to be in big quantities and there are only a few retailers around who could offer the quantities that would justify such a move. But if a brand still has a lot of juice in it, it would be a question of would a brand want to limit opportunities to one store. There’s also an afterglow period when some brands are not doing as well right now, but still have enough energy left for the mass market. Mossimo had trouble succeeding in the better bridge area, but it’s been a success at Target.”

Paul Cohen, an industry consultant and former president of the licensed Ralph Lauren Intimates at Sara Lee, said, “I could see department stores becoming much more aggressive in acquiring and developing established innerwear brands, either by licensing or simply buying a brand, particularly if the brand is established and [is] a relatively strong brand that consumers know and understand, like Gilligan & O’Malley at Target or Joe Boxer at Kmart.”

Anne DiGiovanna, vice president of marketing at the Warnaco Group, said, “Private label brands bring clear identity to the retailers and help to draw in more consumers, which is good for all brands in the department. The consumer doesn’t know that the private label brands are developed by the retailer. She only knows what she likes and where to find it. When the brand story is right, it can only help the retailer grow its share.”

DiGiovanna added that, for a brand to be popular with consumers, it doesn’t have to be a long-established name.

“There’s a certain cachet to little-known brands with great style,” she said. “If the product is great, consumers will buy it.”

Despite the hunger for fashion and interesting new names, Gobé said retail consolidation will affect the flow of new ideas and product.

“[Commodification] based on performance is hurting most brands today,” he said. “National brands can be the best ambassadors of change and they have to rise up to the challenge. I believe national brands have a great future, but not necessarily the brands we know today.”

John Schulman, senior vice president and general merchandise manager at Frederick’s of Hollywood, said established brands can compete effectively with store-created fashion brands and commodity labels if the marketing is effective.

“It depends on the [established] brand and the marketplace,” Schulman said. “A fashion brand in a high-end environment needs to be known among the fashion crowd that it is appealing through the right marketing and [public relations], and the product has to show up in the right magazines and at the right places. A brand that is defining its niche based on price and selling in a mass market environment is less constricted in those same areas and price becomes the driver of the brand.”

Regarding the production of branded goods and private label on the part of a manufacturer, Howard Radziminsky, senior vice president of sales and merchandising at Movie Star Inc., said: “There has always been a market for [U.S.] manufacturers to design or manufacture private label goods. Many of us have pursued private label, as well as [maintained] a branded presence. The national brands in some cases resisted private label and concentrated on their brands.”

No matter what consumers want — national brands or private brands — Stan Herman, designer of robes bearing his name at the Carole Hochman Group and president of the Council of Fashion Designers of America, summed it up this way: “I still strongly believe the designers are the messenger. Bury their taste and vitality and we are all in trouble. The branding iron has been too hard at work outside the corral. To make this work, the stores need to come back and focus on relevant product that continues to stimulate the consumer.”

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