U.K. FOOD CHAIN TO DISCOUNT CALVIN
Byline: James Fallon
LONDON — Britain’s largest food retailer Tesco PLC said it is heightening the battle against selective distribution of major apparel and fragrance brands with plans to offer CK Calvin Klein and Calvin Klein Cosmetics products at up to 50 percent off usual retail prices.
The food retailer also said it plans to lodge a formal complaint with the U.K. government’s Office of Fair Trading against Calvin Klein and Calvin Klein Cosmetics for their selective distribution policies. It said it would include in the complaint Levi Strauss Co. U.K., which in the past has refused to supply the retailer with its jeans.
A spokesman at the Office of Fair Trading said late last week that the agency had not yet received a complaint from Tesco. He said the office’s procedure would be to consider the anticompetitive implications of the complaint before deciding whether to launch a formal investigation.
Tesco said it plans to sell CK Calvin Klein women’s and men’s underwear at almost all its 400 stores, jeans and tops at its top 200 stores and CK One at all its stores that have pharmacies. Prices will be roughly 20 to 50 percent below the average retail.
Women’s CK Calvin Klein jeans, for example, will retail for $52.25 (32 pounds) at current exchange, compared with the average of $91.43 (56 pounds) in the U.K. and $45 in the U.S. A 100-ml. bottle of CK One will retail for $38.78 (23.75 pounds), compared with the average of $46.94 (28.75 pounds) in Britain.
Tesco said it spent $8.2 million (5 million pounds) buying genuine CK products from suppliers in Europe. John Gildersleeve, a Tesco director, said the company is concerned that its customers are being denied “a range of branded products at fair prices. Why should they pay almost twice as much for clothes like Levi’s, Adidas and Calvin Klein as shoppers in the U.S. and elsewhere in the world?”
Nigel Griffiths, the government’s consumer affairs minister, supported Tesco’s move. “I applaud this U.K. retailer taking on foreign suppliers who are overcharging British consumers. I am working with retailers to bring prices down before Christmas.”
A spokesman for Calvin Klein Inc. in New York said its products are sold to “retail outlets with trained staff to deal with issues such as fit and fabrication and that have store environments designed to present the products in the best way for consumers.”
“The products currently being offered for sale in the supermarkets may have been sold by middlemen at cut prices to clear excess or obsolete stock. Also, there is the risk that some of the goods may be counterfeit when they reach retail outlets through unauthorized middlemen.”
A spokeswoman for Calvin Klein Cosmetics said the company believes selling its products through retailers such as Tesco “is detrimental to our image and would devalue it.”
Sources indicated the fragrance companies are in a stronger position if Tesco complains to the OFT because all their contracts now have selective distribution clauses that enable them to limit their products to retailers that meet specific criteria. The clauses were an outgrowth of complaints by the British discount drugstore chain Superdrug about five years ago that it could not get legitimate supplies of prestige fragrances.
The industry executives said Levi’s, CK Calvin Klein and Adidas might be in a tougher position because their contracts with retailers generally do not include such selective distribution clauses.
Tesco sold Levi’s at similar cut-rate prices this spring. The retailer obtained 45,000 pairs of Levi’s 501s from an authorized Levi’s dealer in Mexico. Tesco sold the Levi’s at $48.98 (30 pounds) a pair, compared with the average retail price in Britain of $81.63 (50 pounds).
Tesco followed this up by selling Adidas activewear and footwear at prices up to 50 percent below the average retail. Adidas complained that stores such as Tesco could not provide the expert service of its authorized retailers.
Another British food retailer, Safeway PLC, recently offered limited supplies of CK Calvin Klein children’s wear at prices up to 50 percent below the average retail.