VENDORS SPEAK OUT: BALANCING FASHION WITH PRICE TAGS
Byline: Anne D’Innocenzio
NEW YORK — This is a confusing time for the moderate sportswear market.
Apparel executives say they continue to be caught in a pricing game, noting that they’ve been forced to either maintain or lower their prices to compete with retailers’ offshore programs and to play into consumers’ price-sensitive attitudes.
However, those same executives are now aggressively developing updated and more expensive lines in hopes of adding a new layer of business. For example, Sag Harbor, a division of Kellwood Co., is marketing Bice, to be in stores for February, and Requirements is offering an updated line called Nouveau New York.
“I think there is a real struggle to find out who the moderate customer is,” said Donna Franco, president of Melrose, the Chadsworth, Calif.-based division of Kellwood Co. “Everybody is trying to update their line, but is there a truly updated moderate customer? And if price is such an issue, you find that you are in a box. It is very frustrating.”
Adding to the angst is the unseasonably warm weather this fall, which has put more pressure on apparel firms, executives pointed out.
Here, WWD addresses such issues, along with other topics, with executives from five medium-to-large-size moderate sportswear firms. In addition to Franco, they are: Kurt Erman, chief executive officer at Notations, a blouse resource; Harvey Solomon, president of Sag Harbor, a core department store separates vendor; Marty Axman, president of Requirements, a related separates firm, and Mitchell Herman, senior merchandiser and vice president of sales at By Design, a three-year-old knitwear resource.
What are the strongest pockets in your moderate business for fall? What are your weakest? Why?
Erman: We are definitely into a print blouse cycle, and we are also seeing an increase in layering pieces that work under suits — whether it’s lace blouses or any kind of novelty type of knit tops.
The warm weather has had a negative effect on retailers. That is definitely a problem for coats and suits, though I am not seeing my business negatively affected since I sell blouses.
Solomon: Items that stand on their own, but yet go together have done well. Knitwear has also been very good. Our wool items have been soft because of the warm weather. I think people who are making collections are having a problem. Separates is the name of the game.
Axman: Knitwear is doing very well, especially sweaters. However, there’s a slight downtrend in wool jackets because of the warm weather. Stores have discounted our jackets to $49.99 from $79.99. Our woven shirts are also not selling.
Franco: Corded rayon suits have been performing very strongly. On the other hand, silk has not performed as well as last year. I think there is a saturation of silk in the marketplace. For fall, we did silk bomber jackets and silk knits. They haven’t been doing great.
Herman: Chenille, especially in stripes, and wool blends are doing well. Anything in luxury fabrics is performing well. We are also doing well with V-neck silhouettes, as well as tunics.
Have demands from retailers gotten worse? How?
Franco: The price pressures from retailers are tremendous. To stay on the core matrix of department stores, you have to be so aggressive about pricing. In the last year, stores have become even tougher about it. Even if you fulfill their product needs and your sell-throughs are good, there is a lot of pressure to stay on top and perform to their expectations.
Herman: It’s no tougher than it was last year. However, the weather hasn’t been so great this fall. I am always concerned when you get this kind of weather. Stores will do what they have to do in terms of asking for markdown money. It all depends on how your goods perform.
Erman: There has always been pressure from stores for markdown money. However, I see a healthier attitude from stores — they are more upbeat than they were six months ago. But warm weather this season has been problematic. If everything shakes out, and if business opens up, stores won’t be aggressive about markdowns. But if it doesn’t, they will be asking everyone for help.
Solomon: I don’t have any pressure because my business is going well.
Axman: My goods are selling in the stores, so I don’t have a problem.
What has been your pricing strategy? Have you maintained your prices? Lowered them?
Axman: We haven’t raised our prices in five years. In 1993, we had a [polyester and rayon] jacket that wholesaled for $19.75 — now it sells for $15.95. The average price for our wool jacket is now $32.
Franco: Over the past three years, prices have done nothing but fall. There has been a huge silk price war. The price of sweaters has fallen. For a while, we maintained our prices, but we reduced them 18 months ago. Our wholesale range for our line is now from $15 to $17.50.
Solomon: We have not increased our prices for three years. We are very price oriented. The average retail price for our jackets is $49.99. The consumer wants the right product at the right price.
Erman: The last time we raised our prices was six years ago. Actually, we dropped our prices by 5 percent over the past year.
We are competing against stores’ offshore programs. The way we stay ahead is by doing something novel, like printed blouses.
Herman: We maintained our prices. The range is from $12.50 to $20.
It is hard to increase them. The consumer is price sensitive, and she is looking for a good value.
How have you changed your sourcing strategy?
Axman: Two years ago, we sourced about 50 percent overseas — now, that figure is up to 80 percent. We source in Sri Lanka, China and Russia. You can’t survive unless you develop your overseas sourcing. We recently developed our own sourcing department and have staffed it with three people.
Franco: We source only 10 percent domestically. A couple of years ago, that figure was 60 percent. We are focusing on the Far East and Mexico.
Herman: We source virtually everything overseas, primarily Asia. We also do knit tops in Honduras and Africa. We are also dabbling in the Middle East.
Erman: We source about 60 percent offshore and 40 percent domestic. We are sourcing denim dresses in Bangladesh, and we are in the Middle East for casual denims. Two years ago, we were sourcing about 70 percent overseas. We are doing more domestic because we are chasing trends.
Solomon: We’ve been pretty consistent with our sourcing over the past five years. Fifty percent is sourced overseas in 50 different countries.
Where do you see new opportunities in growth? In the updated zone? In the plus-size area? In petites?
Solomon: We just opened an updated division called Bice, which will officially be launched in February. We had done a test in spring ’96. It is a separates line that is composed of items that go together. It is 20 to 25 percent higher than the regular line. Jackets are more fitted, and we are using more expensive fabrics such as linen rayons and silks. In Sag Harbor, we use polyester rayons, and we offer acrylic sweaters, not silk sweaters.
We want to reach out to a younger woman in her 30s.
Axman: We came out with Nouveau New York. The prices are about 10 percent higher than Requirements. It is doing fairly well, not great. First-year volume was about $10 million. It just takes a while for a new line to get off the ground.
Franco: You have to continue to reevaluate your product lines. In our case, we needed to repair our large-size division. We hired Fern Bratten [as a plus-size spokeswoman] in January and officially launched her signature collection this fall. She’s out on a two-month road show and she is doing well. We are really reaching out to the large-size customer. Fern was the vision of where I saw we ought to be.
We also have developed our knitwear business. It used to be 10 percent of the Melrose line; now it is 25 percent. Within the year, we will add a dress division.
Erman: The plus-size area has been a major growth opportunity for us. We are developing an updated line called Notations Woman’s Sport. It offers casual tops in denims, corduroy and flannels for the plus-size woman. It’s casual Friday wear with a young twist. We decided to go into the updated plus-size market, because the market is wide open. Prices are about 10 percent higher than Notations.
We expect first-year sales [for Notations Woman’s Sport] to be in the range of $3 million to $5 million. We are launching it for fall ’98, though we started testing it two seasons ago. We have already developed a large-size line in career called Notations Women.
We are also offering a woven shirt line called Kenneth Scott, which hit stores in July. We think it is very important to add new labels.
Herman: Three years ago, we started out in sweaters, then expanded it into knit tops and now we are developing a related separates business. We are testing it this fall, and it is doing well.
Juniors is another growth opportunity for us. We are developing this business, starting for spring ’98. It is all about brand extension.
Have you been expanding your marketing beyond co-op advertising?
Erman: We do mostly advertising in catalogs and co-op ads with stores, but for ’98, I am considering a consumer campaign. I think we need to develop more of a brand recognition. I would probably focus on women’s service magazines.
Axman: I am thinking of doing a consumer ad campaign. I would like to get my name out in a bigger way.
Franco: We would like to do an ad campaign for the Fern Bratten line, but we haven’t decided how to do it.
Solomon: No. Stores regularly run ads on our merchandise in the papers.
Herman: We are looking into consumer advertising.
What do you think is plaguing the moderate business?
Erman: I think it is a combination of lack of funding, giving up floor space to other areas and competition from chains such as J.C. Penney and Sears.
Herman: We are overstored, and the consumer is very astute as to what she is buying. She can go to a discount store or a department store for a turtleneck. It is all a question of who offers the best value.
Axman: There is a lot of crying out there, but I believe that if you ship a quality garment, you will succeed. Over the past two years, we have added three designers to our team. We now have a total of four. The moderate area needs to constantly have new products.
Solomon: There are not enough items at a price in moderate.
Franco: It is very hard to sell to the moderate customer. She is somewhere between 35 and 50 years old. She shops for her husband and children first and then herself. She is always looking for the best value for her money.
She wants fashion, but when we elevate it too much, we see a resistance. For fall ’96, we offered a lot of stretch velvet, which was being done in the better market. It did not do so well. We probably should have pushed cheaper velour. We now know how far to push it. For holiday, we are only offering a little stretch velvet.
There has also been a lot of talk about erosion in the moderate market, but I have personally not seen it. I know that stores continue to expand Tommy Hilfiger and Lauren, and so the money has to come from someplace. However, I am not exactly sure that it is all coming from moderate.