NEW YORK — The sweet spots in the apparel business are growing fewer and farther between.
It’s a tough environment fostered by a consumer whose spending priorities are shifting and segmenting faster than ever; a dearth of fashion brands making the kinds of emotional connections needed to trigger many of today’s apparel purchases, and an expanding range of products — from iPods to Ralph Lauren chairs — with which to express one’s personal style.
And while the fashion world’s focus is on the runways at Bryant Park, the broader consumers’ interests lie far, far away at a specialty store in most of the shopping malls across North America — the 850 stores of Old Navy, which surprisingly has emerged as the country’s top-selling brand of apparel among female buyers.
In addition, Old Navy was the most often-purchased label by two of the three generations that together account for about 80 percent of apparel spending by women and girls: the Millennials, ages 10-27, and Generation Xers, ages 28-38, according to NPD Fashionworld. Women and girls spent roughly $6 billion on Old Navy apparel in the 12 months ended in November, or 3.5 percent of the $171.3 billion they expended on apparel overall. The Millennials accounted for around $3.1 billion of that spending; the Xers, about $974 million. Perhaps that is why Old Navy has been on a roll lately, with sales rising 36.5 percent overall in the years from 2000 to 2003.
Old Navy has achieved its top rank, observers said, by combining timely styling, value pricing, easy-care fabrics and a playful spirit — all effectively conveyed in its retro-style marketing, from a seductive Morgan Fairchild to shopping bags that proclaim “Where Shopping Is Fun Again” — and sizes cut more generously for Americans’ expanding waistlines, a growing concern of the country’s fashion denizens.
Nearly one-fifth of the company’s stores, or 150 locations, are offering women’s sizes 16-26. “Old Navy is all about having the color and look of the minute — and it lasts just a few minutes,” said Candace Corlett, principal partner at WSL Strategic Retail. “The concept is fashion fever. You can have a whole new wardrobe every few weeks.”
In contrast, Old Navy didn’t even rank among the top five brands that Baby Boomers consumed with the most gusto last year, a list led by Liz Claiborne, which has shown staying power with a customer it lured more than two decades ago. The brand commanded approximately $1.4 billion of Boomers’ apparel budgets in the 12 months ended in November, NPD found, or 3.1 percent of the cohort’s clothing expenditures in the period.
But the ranking of women’s favorite apparel brands reveals another problem for fashion: Unlike sectors such as electronics and large appliances, in which a handful of top brands account for a dominant share of business, the women’s apparel business has grown ever more fragmented.
For instance, there are approximately 4,000 brands of women’s and girls’ apparel in the U.S., according to NPD Fashionworld. The top five — Old Navy, Gap, Hanes/Hanes Her Way, Polo/Ralph Lauren and Victoria’s Secret — accounted for only 12.4 percent of the women’s and girls’ business, or about $21.2 billion, in the year ended in November, NPD Fashionworld found. And that’s nearly flat with the $20.9 billion those labels produced a year earlier.
“The pendulum to and from spending on fashion used to swing more slowly,” observed Marshal Cohen, chief industry analyst of The NPD Group. “Now it has been accelerated. The home-spending burst is over. Now it’s electronics. Soon it will be spending on kids,” he projected. “It all will have eaten into apparel’s wallet share.”
In the past three years, electronics has gained 4 percent of consumers’ spending, and apparel has lost 4 percent, Cohen said.
Design is to blame. From electronics to home goods, beauty aids to food packaging, products are better looking than ever these days and consumers have noticed — and are voicing their opinions with their wallets. “Design makes great ideas tangible and brings them to life,” Kevin Roberts, chief executive officer worldwide, Saatchi & Saatchi noted in a teleconference with business guru Tom Peters in December. “It has entered the mainstream and everyone assumes it’s going to be their differentiator. The way to think about it is that form follows feelings.”
In this climate, electronics continues to steal apparel’s thunder as a growing number of women buzz about their iPods, cell phones or digital cameras rather than their clothing. Just look at the frenzy the iPod continued to create at Christmas, usurping many apparel products as a must-give gift.
“It’s almost cooler to dress down today and be more electronically savvy,” Cohen opined. Asked in October of their chief spending interests, 75 percent of women polled by NPD Fashionworld listed health and fitness; 71 percent named electronics and computers; 68 percent, home furnishings; 49 percent, fashion, and 48 percent, cars and car care.
It turns out the primary reasons women decide to buy apparel these days are practical, left-brain considerations, rather than emotion-driven inspirations: a change in clothing size, a decline in the condition of an apparel item in their closet, a need for workwear and an increase in income are the four leading purchase triggers, in order of importance, based on Retail Forward’s ShopperScape survey of about 2,700 women and 1,300 men conducted in November. Purchases of apparel because of a change in size — a significantly stronger stimulus than the other three catalysts — were most prevalent among leading-edge Baby Boomers and their predecessors, ages 55-64, followed by Gen-Xers and the trailing edge of Millennials, ages 25-34. More than one-third, or 35 percent, of the 55- to 64-year-olds cited it as the most important reason they buy clothing, while 32 percent of the 25- to 34-year-olds saw it as such.
Beyond those factors, there are dynamics that vary with age and life stage, altering the apparel purchasing sweet spot from generation to generation, said fashion observers who noted:
- Millennials are most often drawn to styles that will attract dating partners and to those connected to a favored musician.
- Generation Xers are pulled between a desire for fresh items — some of them to build work wardrobes — and a growing priority on value as the need to spend on family and home looms larger than in their teen and younger adult years.
- Boomers, whose wardrobes are more diversified and dressy than those of Xers and Millennials and whose interests are varied and sophisticated, may be best wooed by clothing designed for specific activities.
“We can so clearly define the incentives,” Corlett contended. “Millennials always want to have something new and fun to wear. It’s all about dating, mating, being attractive. Gen-Xers have taken on some grown-up expenses, so getting a great find at a terrific price takes on new meaning,” she continued. “The difference between Millennials and Xers isn’t age — it’s responsibilities. Xers are at a career-wardrobe-building stage.”
When it comes to the Boomers, significantly different dynamics are at work. “Baby Boomers have a lot of interests, so competing for a share of attention is one of the challenges,” J. Walker Smith, president of Yankelovich Inc., advised, pointing out that the offer of products designed for specific activities is one way to do so. “The way in which [those items] are marketed is key,” Smith said. “It has to fit the Boomers’ sense of self: Youthful, active, vigorous, cutting edge.”
More broadly, despite growing competition from other products and activities, the lure of a new piece of apparel is tough to top among the ways people most like to relieve the stresses and demands of everyday life. When asked about things they do when they really want to treat themselves, 42 percent of people ages 16 and older, responding to a 2004 Yankelovich General Lifestyle Study, named buying themselves some new clothing — although this was the same share as those who named taking a nap. Those activities were followed by sleeping late, listed by 41 percent; watching one’s favorite TV show, 37 percent, and going out to an expensive restaurant or spending some quality time alone, each cited by 33 percent.
The favorite activity of parents polled by Yankelovich was doing something fun with their kids, named by 58 percent of that group.
“We have seen a greater interest in the past decade in small rewards, so it’s no surprise fashion would show up on that list,” Smith said of a sector that has given people a considerably wider selection of value-driven apparel over that period, from designer brands such as Isaac Mizrahi at Target and Karl Lagerfeld at H&M to fast-fashions at Zara and Old Navy.
Too, observed Marian Salzman, a consumer insights specialist at J. Walter Thompson, “fashion, music and sports have comingled more than ever in the past 15 years.” As a result, people’s awareness of fashion has grown to the point where it has become what Salzman described as “a billboard of sorts, a means of personal identification.”
For example, said Marc Gobé, chairman and ceo at brand-image consultant desgrippes/gobe, in a town such as Greenwich, Conn., one might find a traditional Baby Boomer sporting a hip-hop jacket because she wants to communicate something different.
In fact, buying apparel for one’s self was one of only three choices among the top 15 stress-relieving treats people give themselves, along with ordering out for food and buying something for one’s home, according to Yankelovich. By comparison, there were four services or experiences listed, like getting a massage or going out to a live performance, and eight personal experiences, including reading a book and taking a bubble bath.
With the explosion of apparel brands, including the growing number of store labels, the most heavily purchased names tend to be those with an aura of value and the broadest retail presence — often those of a vertically integrated retailer. For example, following Old Navy, the leading brands bought by Millennials in the 12 months ended in November were Gap, representing $3.1 billion in purchases, or 4.9 percent of the cohort’s apparel spending of about $63 billion; Victoria’s Secret, $1.6 billion, or 3.3 percent; Abercrombie & Fitch, $1.3 billion, or 2.1 percent, and American Eagle Outfitters, $1.3 billion, or 2.1 percent, NPD Fashionworld found.
As with the Millennials, Gap and Victoria’s Secret were the Xers second- and third-favorite brands to buy after Old Navy last year, representing spending of $906 million, or 3.3 percent of the group’s apparel outlays, and $707 million, or 2.5 percent, respectively. They were followed by Polo/Ralph Lauren, which commanded $650 million from Xers, or 2.3 percent of the cohort’s consumption, and Hanes/Hanes Her Way, which garnered spending of $614 million, or 2.2 percent. Overall, Xers spent roughly $28 billion on clothing in the 12-month period.
Hanes/Hanes Her Way was the second most frequently purchased brand among Boomers, after Liz Claiborne, and was followed by Polo/Ralph Lauren, Jones New York and Talbots. Boomers purchased $1.3 billion worth of Hanes/Hanes Her Way, which accounted for 3.1 percent of their $45 billion in apparel consumption in the year ended in November; $975 million on Polo/Ralph Lauren, or 2.2 percent of their expenditures; $865 million on Jones New York, or 1.9 percent, and $860 million on Talbots, or 1.9 percent.
Polo/Ralph Lauren’s presence as the one designer label to rank among women’s five favorites in the NPD Fashionworld research can be chalked up, in large part, to its broad distribution and wide range of prices, from those found at closeout at an off-pricer like Marshalls and discounted at big-box retailers such as Costco, to those bearing fuller prices at traditional department stores like Macy’s and high-end players such as Neiman Marcus. Then there are Lauren’s own boutiques, which showcase the label’s classic design.
It all adds up to an appeal that is universal rather than exclusive said branding executives, including d/g’s Gobé. “Most designers are about status and are exclusive; Ralph Lauren is outside this group,” Gobé offered. “I’m not surprised Karl Lagerfeld designed for H&M. It made [the brand] more vital, more liberated.”
Or as WSL’s Corlett put it, “The shopper doesn’t differentiate where they’re buying [Polo/Ralph Lauren] — they just know they have a piece of Ralph. It looks good at every price point.”
Indeed, Lauren also was the leading designer brand purchased in August through October by the biggest share of affluent Americans with a median age of 51, average annual household income of $329,000, and average net worth of $2.7 million, or 18 percent of the group, based on a fall 2004 study by The American Affluence Research Center. Thus, the brand’s wide availability did not dilute its appeal among the nation’s wealthiest 10 percent of households, based on net worth.
In fact, among the leading 13 labels designated by those affluent consumers as the designer brands they’d last purchased in the August through October period, three nondesigner brands were cited: Tommy Bahama, which ranked second, mentioned by 7 percent; Ann Taylor, fourth, named by 4 percent, and Jones New York, which tied with several designer names for fifth, cited by 3 percent. “The power of the [biggest brands] along with the power of the retailer has increased, compared with the Seventies and Eighties,” said NPD’s Cohen. “Store brands like Ann Taylor are perceived as designer.” Meanwhile, designer brands themselves produce less than 10 percent of the money spent on women’s apparel, Cohen pointed out.
Because of such fragmentation, trying to be a brand for everyone has become a recipe for disaster, and unlike many other businesses, apparel’s future is said to lie in more narrowly targeted niches — which might explain the plethora of concepts being launched recently, from A&F’s Ruehl to Ralph Lauren’s Rugby. “Apparel is unique in the world of retail — it’s the one sector that calls for more niche concepts, trying to link products with more specific shoppers” advised Lois Huff, senior vice president specializing in consumer behavior at Retail Forward. “In apparel’s fragmented environment, you need to stand for something.”
It’s also advisable, marketing executives said, because people are becoming more responsive to brands based on their emotions, attitudes, life stages and personal style sensibilities, rather than on their ages or the price of an item per se. Old Navy, Lucy, and Janeville were cited by industry watchers as examples of apparel brands effectively positioning themselves in that manner.
“The store is no longer about location, location, location, but experience, experience, experience,” said Tom Julian, a trend analyst at Fallon Worldwide. The country home atmosphere in the fledgling 14-unit Janeville chain, with its porch-like wicker furniture, Julian said, offers the chance for a refreshing break while its target customer, in her mid-30s and older, shops for clothing.
In the ongoing yin and yang between consumers’ choices to shop both discount and specialty stores, 14 percent more money was spent on women’s and girls’ apparel in specialty stores last year than in discounters and off-pricers combined, or about $51 billion versus around $44.6 billion, with $28.6 billion of that spent in discounters and $16 billion in off-pricers, according to NPD Fashionworld. That specialty store volume represented approximately 30 percent of apparel spending that reached $171 billion in the 12 months ended in November, compared with the 16.8 percent share owned by discounters and the 9.3 percent piece won by off-pricers.
Department stores, by comparison, won 18.3 percent of the spending on women’s and girls’ apparel, or $31.4 billion.
“Department store sales have been eroding,” Cohen said. “Specialty stores are marketing and intriguing the customer at the department stores’ expense.”
Specialty stores captured the largest share of apparel spending by Millennials and Xers last year, or about 41 percent and 31 percent of their purchases, respectively, while ranking a close second to department stores among Baby Boomers, who spent roughly 21 percent of their clothing budgets in specialty stores, versus 23 percent in department stores.
Asked about the likelihood of success for emerging stores targeting the 35-and-up shopper such as Janeville, or a new concept such as Gap’s 10-store play due to premiere this year, Cohen said: “There will be one or two specialty retailers who make a hit with the 35-and-up customer. It could be Ann Taylor, if it retrenches; Talbots, if it extends its appeal, possibly under a different nameplate, or Gap.
“There’s always room for 2 or 3 percent more business if you execute right; 4 or 5 percent if you do a really good job,” Cohen projected. “One of the toughest challenges is marketing to a generation rather than an age segment,” he added in referring to such a group’s various and evolving mind-sets, life stages and style sensibilities.
Top Brands by Generation: Women’s and Girls’ Apparel Purchases
|RANK/BRAND||12 MONTHS ENDED 11/03||12 MONTHS ENDED 11/04||% CHANGE ’04 vs. ’03|
|(Millennials, Ages 10-27)|
|1. Old Navy||$3.088 billion||$3.075 billion||-0.40%|
|2. Gap||$2.34 billion||$2.15 billion||-8.10%|
|3. Victoria’s Secret||$1.49 billion||$1.6 billion||7.40%|
|4. Abercrombie & Fitch||$1.45 billion||$1.33 billion||-8.30%|
|5. American Eagle Outfitters||$1.11 billion||$1.29 billion||16.20%|
|Top Five Share of Millennials’ Apparel Spending:||15.70%||15%|
|Total Apparel Spending by Millennials:||$60.48 billion||$62.8 billion||3.80%|
|(Generation X, Ages 28-38)|
|1. Old Navy||$818 million||$974 million||19.10%|
|2. Gap||$722 million||$906 million||25.50%|
|3. Victoria’s Secret||$639 million||$707 million||10.60%|
|4. Polo/Ralph Lauren||$738 million||$650 million||-12.00%|
|5. Hanes/Hanes Her Way||$594 million||$614 million||3.30%|
|Top Five Share of Generation X’s Apparel Spending:||13.40%||13.80%|
|Total Apparel Spending by Generation X||$26.1 billion||$27.8 billion||6.50%|
|(Baby Boomers, Ages 39-59)|
|1. Liz Claiborne||$1.48 billion||$1.4 billion||-5.60%|
|2. Hanes/Hanes Her Way||$1.26 billion||$1.25 billion||-0.70%|
|3. Polo/Ralph Lauren||$1.11 billion||$975 million||-11.90%|
|4. Jones New York||$771 million||$865 million||12.20%|
|5. Talbots||$935 million||$860 million||-8.10%|
|Top Five Share of Baby Boomers’ Apparel Spending:||12.70%||12%|
|Total Apparel Spending by Baby Boomers:||$43.9 billion||$45.1 billion||2.70%|
|Total Apparel Spending by Women and Girls:||$166.4 billion||$171.3 billion||2.90%|
Source: NPD Fashionworld Consumer Panel Estimates
Trading on timely styling, value pricing and a playful spirit, Old Navy has become the best-selling brand of apparel among Millennials and Generation Xers.