STORES DEVELOPING THE BIG BRANDS
Byline: Sharon Edelson
NEW YORK — Small department store chains are trying to take a lesson from successful chain-store brands such as Wal-Mart’s Kathie Lee Collection, J.C. Penney’s Arizona Jean Co., Sears’ Canyon River Blues and Kmart’s Jaclyn Smith by creating what they hope will be their own private label blockbusters.
“Private label is going to be increasingly important this year and in the years to come,” said Kurt Barnard, president of Barnard’s Retail Consulting Group. “Retailers today are recognizing that there is a certain panache to a designer name, but nothing can beat a private label that will compel a customer to go back to a store again and again.”
While the big national chains have the clout to quickly turn a private label into a major brand through marketing and advertising, smaller regional stores with limited advertising budgets must depend on promoting through in-store displays and catalogs.
Nonetheless, several department stores said they are on the way to turning private labels into bona fide brands.
“We’ve certainly made some inroads, especially with names like Great Lakes Recreation and Hastings & Smith,” said Ed Carroll, executive vice president of Carson Pirie Scott, a 53-unit department store based in Milwaukee. “Those are the brands that have started to gain some recognition in the customer’s perception as branded merchandise.
“There’s always more that you can do to establish a brand, and it takes a long time before it starts to catch on,” Carroll said. “Eventually, the customer starts to realize the intrinsic quality and price relationship.”
Carroll said the process starts with the product, and when the customer starts to recognize the value, stores need to concentrate on consumer awareness.
“The advantage that Sears and Penney’s have is that they’re national retailers,” Carroll added. “When they roll out a program like [Canyon River Blues or Arizona] there’s almost national recognition. They can amortize their advertising costs over a larger sales base.”
John Freudenthal, executive vice president of merchandising at Carson’s, said, “Private label has been, is, and will continue to be part of our overall merchandising strategy.”
Freudenthal said private label is a much smaller percentage of Carson’s total sales than branded merchandise, but he still feels there is potential in the store-label concept.
“We plan to continue to grow the private labels,” he said. “We have to make them more important.”
In order to get a leg up on its competition, Tim Grumbacher, chief executive officer of Bon-Ton Stores, a 71-store chain based in York, Pa., said the regional department store chain has initiated several strategies, including slashing the number of vendors, focusing on key items, identifying more merchandise under its “certified value” program — an everyday low-pricing policy — and expanding private label.
Grumbacher spoke about the potential of private label merchandise at a recent investment seminar held by Robertson Stephens.
Private label, which was 6 percent of Bon-Ton’s business last year, will represent 11 percent of the chain’s sales this year. “And we’re heading toward 20 percent at a rapid rate,” Grumbacher said.
Bon-Ton has also cut the number of vendors by 22 percent over the last year, Grumbacher said, dropping to 1,669 from 2,136 store-wide. This allows the company to become more important to its remaining vendors, while making “a stronger statement” to customers, he noted.
High-end specialty stores are also trying to make the most of their private labels. While Barneys New York doesn’t lack for exclusive merchandise, the 14-unit chain, which filed Chapter 11 last week, is bullish on its private label collection and is using it to give its stores more of a distinctive edge.
Barneys plans to expand its private label bridge collection, which now accounts for about 25 percent of women’s sales. The long-term goal is for it to reach 40 percent.
“Designer now represents more than 50 percent of our women’s business,” said Charles Bunstine, president of Barneys. “The growth of the private label business will grow as the designer business grows. However, the potential for growth is bigger in the private label area. We’re able to get more turns in the season with private label.”
He said store brands can often be reordered two or three times in a season, whereas designer labels usually only reorder once.
Bloomingdale’s continues to mine its Only at Bloomingdale’s program, which includes private label collections and designer exclusives. Bloomingdale’s currently has 16 stores and will open its first four California units this year.
“We’re certainly doing everything we can, particularly with our Only at Bloomingdale’s, which we feel is a brand and the most important brand out there,” said chairman and ceo Michael Gould.
The chain’s most successful private labels are Metropolitan View and East Island, which mostly consist of men’s wear, although East Island has branched into the children’s area.
“If you walk through our store, you can see the impact of Met View and East Island,” Gould said. “People are now coming in and asking for it. In women’s, we’re continuing to push the Bloomingdale’s name. We buy from wonderful designers and great companies, but there is no more important name than Bloomingdale’s.”
While private label was often considered to be bland and basic, stores are working to bring more style and distinction to their collections. Barnard believes this will be key to the future success of private label lines.
“It doesn’t have to be a bland, no-risk kind of thing,” Barnard said. “It’s all in the execution.”