FEDERATED’S LUNDGREN TO NRF SESSION: DISTINCTIVE PRODUCTS WERE KEY TO SALES
Byline: Jean E. Palmieri
NEW YORK — By offering a product that stands out from the crowd, vendors such as Tommy Hilfiger, Jones New York, Liz Claiborne, Nautica, Waterford, Guess and Levi’s distinguished themselves in an otherwise difficult year, a key retail executive said Tuesday.
Terry Lundgren, chief executive officer of Federated Merchandising, said that although the environment overall was “challenging,” several manufacturers managed to pound out double-digit increases for Federated Department Stores in 1995.
“The list is longer than you might recognize,” he said.
At a session on the future of the apparel industry at the National Retail Federation convention, which ends today, Lundgren said these vendors have benefited by “offering differentiation.” In general, Lundgren said, there has been “an overabundance of nondistinctive merchandise” and “too much sameness.” As a result, unit sales have gone up while total sales have been flat or decreased.
“Customers want unique merchandise which defines their individual personalities,” he said. “It’s our responsibility to deliver that.”
Today’s shopper is “intelligent and sophisticated” and is looking for differentiation, he continued. However, when all the products look alike, “the only differentiator is the price,” a dangerous strategy that has hurt the entire industry.
There is too much merchandise available on sale, Lundgren said.
“We should ask ourselves, ‘What is our objective?”‘ he said. “If it’s pure volume, then this is the proper strategy.”
But if it’s profitability, he added, stores must be more responsive to their customer, edit their assortments and not duplicate merchandise on the floor.
At the same time, Lundgren noted, retailers must continue to invest in the physical presentation in their stores to visually motivate the consumer.
“The customer is still interested in fashion if you can deliver it,” he said.
Michael Weiss, vice chairman of The Limited Inc., agreed that retailers should find ways to “regenerate excitement” within their stores. However, he disagreed with Lundgren’s assessment that stores should offer different products to satisfy different consumer needs.
At the core of selling fashion, Weiss said, is the ability to offer a look that “everyone” wants.
“Our challenge is to find the look of the Nineties,” he said. “There’s an awful lot of recycling of fashion. Retro can generate an item or a look, but any major fashion happening is never a replay.”
For Robert Rockey Jr., president of Levi Strauss North America, that look is casualwear.
According to a study commissioned by Levi’s, the dress-down trend in corporate America is picking up speed. As reported, the study found that 90 percent of office workers in the U.S. now dress down at least occasionally, up from 63 percent in 1992.
In addition, the study found that 42 percent of office workers can dress casually once a week and 33 percent of companies now allow casual businesswear every day of the week.
“We believe that trend is here to stay,” Rockey said.
By the year 2000, he predicted, half of all U.S. companies will allow their employees to dress down every day of the week.
Levi’s is using its Dockers line and its new Slates line of casual dress slacks to capitalize on this opportunity, he said. However, the company also plans to aggressively market its jeans as another alternative for work.
The study found that 92 percent of firms with casual clothing policies accept jeans, compared with 60 percent in 1992.
The trend toward casualization reaches beyond the U.S. as well, Rockey said. He said that when Dockers was introduced in Japan last summer, the results were “startling.” As a result, Levi’s is getting ready to launch a multimedia international marketing program, aimed at such countries as Japan, England and Sweden.
Rockey also agreed with Lundgren that there’s a definite trend toward “mass customization.” In the past, manufacturers and retailers tended to view consumers as one big mass, but Levi’s has begun to take a more individualized approach.
The company recently introduced Personal Pairs, an individual-fit program for women. Initial success is prompting the company to roll it out to all Levi’s stores.
“We find customers don’t object to paying more for custom products,” he said.
The executive also noted the importance of establishing “brand identity.” As a result of extensive advertising and in-store marketing, Levi’s has become number one in jeans for women under 30 and Dockers has catapulted to more than $1 billion in sales since its introduction in 1986.
Rockey attributed this success, in large part, to Levi’s marketing and advertising and said the company is poised to embark on its “most expensive advertising campaign ever for Levi’s.”
Another way to build brand identity is through vigorous enforcement of counterfeiting and trademark infringement. Levi’s has recently formed a “brand protection team” to crack down on counterfeit products.
Paul Charron, president and ceo of Liz Claiborne Inc. and one of the panelists, admitted that apparel manufacturers often “over-assort their lines” in an attempt to fill retailers’ every need. However, this leads to a “diffused” point of view, he said.
“Our eyes are too big for our stomachs,” Charron said, and this frequently leads to markdowns. Living by price alone is a “fatally flawed strategy,” he noted. “We cannot win where price is the only differentiator.”
Unfortunately, promotions also become more intensive as more retailers file for bankruptcy, Charron said. The struggle at retail often leads to a slashing of department store amenities, resulting in fewer special events, the elimination of visual merchandisers and a cut in the number of salespeople.
But consumers still view department stores as the place to go for one-stop shopping, he said. “They cater to the time-scarce, harried consumer.”
As a result, manufacturers and retailers must work more closely to make the department store experience more pleasurable for the customer.
“This is the only way to preserve our future,” he said.
David Cole, chairman of Kurt Salmon Associates and the panel moderator, told attendees that industry consolidation is increasing. “The strong are getting stronger and the weak are disappearing,” he said.