FIRMS REACT TO CONSUMER ANGST
Byline: Jennifer Owens
WASHINGTON — With the typical customer for moderate-priced apparel showing less of a tendency to part with her money, makers of that category of clothing say they are under increasing pressure to keep their prices as low as possible. At the same time, of course, they feel the need to catch the latest trends and colors and provide merchandise that can be worn with equal ease at work and play.
Moderate manufacturers are facing a real battle: According to the NPD American Shoppers Panel, spending on women’s apparel fell in the first quarter this year by 3.7 percent in households earning between $15,000 and $25,000. In the same period, spending fell even more precipitously — by 9.3 percent — among households earning between $25,000 and $40,000.
By comparison, first-quarter spending on women’s apparel jumped 15 percent among households earning $60,000 or more.
Economists estimate that anywhere from one-half to two-thirds of the population have not seen their real wages increase in recent years, despite a booming economy. That may help explain why discount store sales continue to rise.
According to the International Mass Retail Association, discount store purchases accounted for two-thirds of all department store sales in the first quarter this year — their biggest chunk ever.
Where does that leave the moderate manufacturer?
In a word: pinched.
“Generally,” said Peter Harding, vice president and worldwide director of marketing for Kurt Salmon Associates in New York, “there is a distribution of wealth taking place, and it’s squeezing the middle into either the upper class or the lower class. It’s been happening for the past 20 years.”
Meanwhile, he said, “we have lots of stores carrying similar merchandise and chasing the same consumer.”
The pressure doesn’t come only from consumers, said Andrew Jassin, a principal at Market Management Group in New York. Among retailers, a proliferation of designer outlet stores, off-price chains, and department store promotions have opened the world of better and bridge apparel to those who were once moderate-only customers.
While that has been happening, many traditional department stores have shrunk their moderate inventory in a grab for higher margins, though there is now a trend toward rebuilding their moderate departments, Jassin said.
“More American customers are moderate consumers, according to the demographics of where they live, how they live, what they earn,” he said.
“And yet, the pressure on the moderate maker is incredible because of the way the stores have positioned themselves.”
Liz Sweney, president of Cricket Lane, a moderate sportswear company based in New York, knows that pressure well.
“The moderate customer is less willing to part with her money, so you have to give her a reason to buy,” she said. “And that reason is the price-value equation.
“You kind of have to jump off the rack at her [with items that say], ‘I’m new, I’m exciting, and you’ll feel good buying it!’ What she’s looking for are items that transcend her wardrobe,” Sweney said.
At Delta Burke, the word these days is casual, said senior vice president Barry Zelman, who noted that prints and soft dressing are both showing a resurgence, while activewear is merging into sportswear.
“We’re also finding that the customer really wants washable,” he added. “I think the moderate customer is looking for things she can wear more than one season. And things they can wear to work. And if they don’t work, then they want something they can just pull on and look good.”
The moderate customer still exists, Zelman said, but she’s now shopping many different distributors, from catalogs to on-line sites to off-price stores.
“I do believe the moderate customer is out there. She’ll buy when the price is right, but it also has to have good design and color,” Zelman said.
It also needs a bright presentation, stressed Martin Coleman, owner and president of Ellen Figg, a specialty store vendor.
“Have you been to the moderate area of a department store lately? It would be more interesting as a parking lot,” he said. “But that’s what merchandising is all about; it’s about creating newness and excitement. Just to hang everything out on a rack, that’s not retailing.”
Positioned at moderate’s top tier, Ellen Figg has not felt the moderate market’s pressure as keenly as low-priced companies, Coleman said, noting that his sales this year are moving about 25 percent faster than last year.
With his dresses incorporating better quality fabrics and priced about $100 each at retail, he said he isn’t getting “that moderate customer who’s going, ‘Price, price, price.”‘
Coleman said, however, that Ellen Figg’s strategy has also pushed the company out of most traditional department stores.
“I have the same fabrics as the expensive brands, with the price of the moderates,” he said, “so I knock off both businesses.”
At moderate’s lower price point, from $40 to $60, Jay Diamond, executive vice president of Halmode Apparel Inc., said he’s found his customers to be “very price-conscious.” “You still have to have the right styles and the right colors, but if you add the right price, then you’ve got a moderate business,” said Diamond.
For Halmode, that business has been boosted by its new Sag Harbor dress line, introduced in January.
Helped by the strength of the existing Sag Harbor sportswear brand. The Sag Harbor dresses are expected to do $40 million this year.
“We’re giving them the same dress that would sell for $89 at a $39.99 price,” said Diamond.
At Sag Harbor, Marty Brody, chief executive officer, said his traditional department store products are competing with his customers’ other financial needs, making price a priority. “She’s spending on her children, on her mortgage, on her cars,” he said.
“Price is a driving factor in our business, and it will continue to be, especially when they have other things to spend their money on.”
While those other factors have resulted in lackluster sales for many moderate department store chains, Brody emphasized that the category continues to be “the market that’s supporting the retailers today — the bread-and-butter business.”
In recent months, Brody and other apparel executives said they have witnessed a new emphasis on their moderate business among their department store customers. Take Hecht’s, a division of the May Co., for example.
“They really show off the moderate merchandise,” Brody said, adding the same is increasingly true at many Federated chains as well. Hecht’s officials declined to comment.
Cricket Lane’s Sweney agreed.
“Department stores, in the last 12 months and going forward, are looking at their moderate business more aggressively,” she said. “It pays a lot of bills. It’s not exciting as Tommy [Hilfiger] or Ralph [Lauren], but it’s where most people buy.”
Marc Abramson, vice president of Requirements, was even more bullish, saying moderate is what’s driving department stores these days. “The best bang for the dollar is in the moderate business,” he said, citing the broad range of age brackets from which the department often draws.
“I think moderate is holding its own right now,” Abramson said.
That doesn’t mean, however, that the pressure will lessen soon.
“I think business is going to remain tough,” said Brody at Sag Harbor. “Complacency will bring you to your knees.”