What is a ‘private label’ in the jeans business today? Gap, Ann Taylor, Arizona, Jaclyn Smith, and soon-to-be jeans player Kathie Lee Gifford are technically defined as private labels, as are a host of other retail-owned brands. And they’re gobbling up a much larger share of the market than their nationally ‘branded’ competitors, according to an analysis by The NPD Group, Inc.
Between 1989 and 1994, the top five national brands’ share of market (SOM) declined from 43.3 percent to 32.7 percent, while private label’s share increased from 14.9 percent to 25.6 percent. The specialty store and discount channels mirrored those results, with a whopping 117 percent increase in private label’s share of the specialty segment, from 21.7 percent to 47.1 percent, while the top brands’ share decreased from 29.3 percent to 18.9 percent. In the discount tier, private label had an enormous six-fold increase in share from 3.2 percent to 18 percent, while the top five’s share eroded from 63.5 percent to 54 percent.
These huge shifts confirm past reports of the commitment major discounters have made to their own store brands, and the continued focus of specialty retailers on cementing store-brand loyalty among their customers. This strategic trend is also fueled by the larger margins retailers are able to achieve with their own brands, as well as continued improvements in sourcing.
The elimination of the wholesaler’s markup also provides these retailers with greater pricing flexibility, which further adds to the big brands’ difficulties in holding onto their positions. In fact, in the discount segment over the past four years, the average price differential between brands and private label was large enough for retailers to increase the price of their own brands. These moves put additional pressure on the top national brands to lower prices to compete, which in turn squeezes margins, forces cost reductions, and further erodes their competitive strength.
While the average price spread in the specialty arena has been much tighter, it’s apparent that specialty stores have been exercising their pricing flexibility as another weapon forcing brand share erosion. Of note is the fact that the average price of brands decreased in 1994, suggesting an attempt by national vendors to hold onto their turf.
Another anomaly in the jeans wars has been the incredibly rapid growth of J.C. Penney’s Arizona brand, which arguably occupies a channel of distribution all its own. NPD numbers indicate a 25 percent increase in Penney’s share of the total jeans market, from 7.9 percent in 1993 to 11.1 percent in 1994, with an enormous 51.1 percent increase in dollar volume. With its estimated $500 million in sales, Arizona must be considered a leading brand. The department store trend line shows the top five brands increasing share from 48.1 percent in 1989 to 57.6 percent in 1994, with a flat private label comparison. Of interest are the average price point trends as they relate to the brands’ activity in this channel. The designer and better-priced jeans brands have been suffering under consumer price rejection, which is substantiated by the reduction in share of jeans priced at $25 and over. Concurrently, there has been a corresponding increase in the moderate-priced category in the $15 to $25 segment. It is likely that the Lee brand’s repositioning efforts and Levi’s continuing penetration in the department store tier have had major impact on these averages.

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