NEW YORK — Apparel marketers are facing a consumer climate that’s bleak — but it’s not barren. While improvement is attainable for many in the fashion flock, there’s still stormy weather on the horizon for the weak or complacent players.
Some spark in a business environment that’s been eroding the sector’s share of consumers’ wallets could start flowing from strategic changes the fashion industry itself can make. And beginning early next year, some positive energy may emanate from economic pulses beyond the industry’s control.
Most important for the fashion business in this regard, advise marketing sources, is to begin aiming its appeal at a new, multidimensional consumer. She’s one whose lifestyles and attitudes are evolving as she moves through various life stages — a process whose impact is being intensified by the aging of America’s baby boomers, by far the country’s largest generation, at about 75 million strong. Whatever her generation, this new shopper is one whose way of life has become more harried and demanding in the past 10 years, while her access to product and information about products has grown dramatically.
As a result, fashion retailers, among others, are facing a customer whose purchasing considerations are more complex and whose buying behavior is less predictable. She typically makes distinct value judgments to inform each of her shopping trips, even as merchants themselves have blurred distinctions that once sharply differentiated, say, a department store like Macy’s from a moderate/mass hybrid like Kohl’s, a mass chain like Target or a specialty store such as Gap.
Meanwhile, these new consumers are facing an expanding array of retail formats, including supercenters, warehouse clubs, and Web sites. Paradoxically, though, as the traits of various formats increasingly converge, shoppers’ loyalty to any one store has weakened, creating a more treacherous competitive landscape. At the same time, most full-price department stores have seemingly lost their way, staging unceasing promotions and tapering their mix of brands to cut costs, while discounters and warehouse clubs are going ever-upscale with wider offers of designer-label fashions, prestige beauty products, high-end housewares and fine wines.
It all adds up to a climate in which fashion marketers can no longer count on their brands being seen with consistency by the shoppers they’re targeting — many of whom no longer visit department stores, the mainstay of the megabrands and a growing range of private labels, on a regular basis.
“Some retailers, particularly department stores, continue to ignore changes and live in a world that almost doesn’t exist anymore,” asserted Wendy Liebmann, president of WSL, a marketing and retailing consultant based here. “The competitive environment has expanded dramatically in the past 10 years,” Liebmann added, pointing out that many apparel retailers have been slow to respond. For example, she said: “If I see a great deal on jeans at Costco and buy them, I won’t be buying them at Macy’s or Gap. Shoppers won’t be dominated by what designers or retailers want them to do.
“The only way to get consumers shopping is to develop brands that are intriguing, surprising,” Liebmann counseled. “Instead, the department stores have narrowed their brand matrix and focused more on private labels.”
Yet the array of apparel brands currently available is extensive. In the first quarter of 2002, consumers bought clothing under 759 national brands, 229 in denim jeans alone, according to data from Cotton Inc. and STS Market Research. Plus, private labels accounted for an eye-opening 40 percent of first-quarter apparel sales, up from 28 percent for all of 1992, found market researcher NPDFashionworld. And with diminished equity for many national brands in the eyes of consumers, marketers think it’s a mistake for stores to keep skewing more toward private labels.
“Department stores today have stripped out the benefits of shopping them,” declared C. Britt Beemer, chairman and founder of America’s Research Group, a Charleston, S.C.-based consumer behavior consultant and strategic marketer. “The more affluent the customer, the more this annoys them. They have higher expectations of department stores than a Target or a Kohl’s, but they’re finding more pleasant experiences in other venues,” he continued. “Until department stores rethink what they are, they’re not going to recover.”
According to data from the Commerce Department and Retail Forward, apparel dollar volume is projected to grow just 0.8 percent this year, to $262.4 billion from $260.3 billion in 2001. That would constitute 3.6 percent of consumer spending for 2002, down from 3.7 percent last year and 4.9 percent back in 1980. Apparel sales are expected to start growing more strongly over the next four years, advancing at an average of 4.2 percent annually, to reach $342.3 billion in 2006.
“There is now a multiplex consumer who buys merchandise in more different ways,” observed Diane Hamilton, a partner in Boston-based Retail Value Consultants, a nascent spinoff of PricewaterhouseCoopers. A purchase-motivator model developed by RVC delineates two ranges of considerations that trigger purchases (see chart). One continuum runs from purchases sparked by self-definition, emotions or experiences — ego-intensive buys — to those that are not ego-driven, but instead are spurred by one’s basic requirements, or rational, functional influences. The other axis ranges from buys begat by value prices to those motivated by a search for services in a more holistic shopping atmosphere.
Various combinations of those dynamics are resulting in four fundamental types of spending behavior, according to RVC:
Impulse buys made at off-pricers, warehouse clubs and online auction sites, often inspired by a thrill-of-the-hunt environment, at destinations such as T.J. Maxx, Loehmann’s, Costco and eBay.com.
Transactions triggered by priorities including commodity pricing, one-stop convenience and predictability, such as those made at mass merchants like Wal-Mart, Target and Kohl’s.
Lifestyle-driven shopping in settings tailored to a sharply defined customer target, as exemplified by Chico’s FAS, J. Jill, Ashley Stewart and Talbots.
Service-driven shopping, say, for custom-made apparel, bespoke footwear, or automatic replenishment of prescription drugs and lawn care services. Sears and CVS are among the many providers of such services.
If purchase motivators are becoming multilayered, however, apparel is increasingly offered in some sort of price-driven marketing proposition, with luxury goods a prominent exception. This nearly monolithic pricing approach clearly has been accelerated by the rising eminence of discounters like Wal-Mart and Target, off-pricers such as Marshalls and warehouse clubs like Costco. An ensuing vicious circle, however, has encouraged shoppers to keep spending less of their budget on clothing — as apparel basics fail to inspire them, let alone reflect their individuality — and to allocate more to services and entertainment, from lawn care and travel to movies and restaurants.
With the U.S. economy polarizing at the high and low ends of the consumer markets, observed Hamilton, “it’s the mass and class markets continuing to grow at the expense of core fashion labels, labels that were driven by the middle class, which is shrinking.” Or as Kim Kitchings, director of market research at Cotton Inc., put it: “Labels such as Bobbie Brooks and Villager are now licensed by Wal-Mart. What does that do to consumers’ perception of apparel brands?”
This mass movement, in turn, is making it critical for fashion marketers to recast their strategies.
“Can a department store effectively compete with a Wal-Mart on commodities like hosiery and underwear?” Hamilton queried. “If not, they may need to get out of those categories.”
Instead, fashion marketers better start targeting narrower market segments. “Retailers need to be bold enough to focus on niches,” Liebmann stated. “Everybody keeps talking about addressing the older boomer, but few seem to be doing anything about it. Eileen Fisher does it well, even though they claim not to be addressing that group in particular. There is also a sizing opportunity,” Liebmann noted. “The average American woman is a size 14 or 16. There have been some improvements, but the offer is still very limited.”
One way to frame a niche strategy is to consider that people’s purchases are prompted by a handful of emotional needs. According to Christine Beauchamp, a senior manager in the consumer goods and retail practice at The Boston Consulting Group, they include: items and services consumers buy for themselves, such as personal care products and fitness club memberships; purchases they make for their home and family, like housing and education, and things they acquire to reflect their own identities, notably apparel.
“People still want to project an image to the rest of the world,” Beauchamp contended. “The issue is the mass sector has caught up,” she said of the quality and style people have come to routinely expect at low prices. As a result, added Beauchamp, better fashion brands and middle-market department stores “need to differentiate from the mass market,” in order to win back purchases of items like jeans, chinos and swimsuits they’ve lost to mass merchants. Among the ways they can do so, observers counseled, are improving a garment’s materials; heightening its performance capabilities, and raising its emotional benefits, by more effectively projecting an aesthetically desirable image. Adding to the challenge, said Marshal Cohen, president of NPDFashionworld, is that “priorities differ among various age segments and expressing one’s image has dropped down a lot on people’s list of priorities, in all but the younger segments.” Even among teens and tweens, a group in which apparel used to compete primarily with itself for wallet share, fashion increasingly is vying with a host of other things, from DVDs and cell phones to movies and outdoor recreation.
Among the biggest beneficiaries of consumers who want to satisfy various needs under one roof are warehouse clubs, where better-to-designer apparel is a burgeoning part of the appeal. “As they get better in apparel, it’s turning out to be fun to shop a warehouse club and wind up discovering a [fashion] treasure,” RVC’s Hamilton remarked. An indication of the trend, she said, can be found in Costco’s average ticket, which is approximately $250 — more than double the $100 average checkout at a grocery store, despite the prevalence of food purchases at the warehouse clubs themselves.
On the high end, NPDFashionworld’s Cohen expects fashion retailers to differentiate by offering more full-priced designer names and national brands on an exclusive basis. “This tactic would establish a store’s identity in the consumer’s mind,” Cohen said. “People used to shop particular stores that they thought matched their personal style, much more so than they do today.”
Some economists anticipate a pickup in the nation’s economy by yearend, which they say could shift some apparel spending away from value retailers and back to mall-based specialty stores or still higher-end merchants. The phenomenon could be led by a surge some anticipate in smart-casual career dressing, and by the potential for Gen Y to buy fashion with more gusto, as they keep moving from their tweens and teens into young adulthood, when they need to build wardrobes for work and have more money to do so.
Although no one’s predicting apparel deflation will end anytime soon, Frank Badillo, Retail Forward’s senior retail economist, anticipates a further weakening of the dollar in the next six months and some moderation in clothing’s downward pricing spiral to follow from it. “As the economy firms and consumers gain more confidence, it will alleviate some of the shift toward value retailers,” Badillo projected. “Still, 2002 will be a weak year for the apparel business. Spending won’t be a lot stronger; it will gradually improve.”
The economist further cautioned: “To the extent that apparel supply remains larger than demand, we should still see some shakeout — more store closings and bankruptcies.”
THE SPENDING SKINNY
SHARE OF U.S. CONSUMERS WHO:
Like to receive clothing as a gift, versus choosing it themselves: 20 percent.
Wait until they have the cash to buy an apparel item: 64 percent.
Put a clothing purchase on a credit card if they can’t otherwise afford it: 26 percent.
Lay away apparel they don’t have enough money to buy: 10 percent.
Prefer to buy apparel separates at different stores, versus buying one outfit at one store: 51 percent.
Source: Cotton Inc.’s Lifestyle Monitor”