BIG NAMES STILL HAVE IT
RETAILERS ARE MULLING NEW IDEAS AND OPTIONS. THEY SAY MEGABRANDS ARE NOT DEAD, AND THERE’S ROOM FOR A WIDE RANGE OF MERCHANDISING NEEDS.
Byline: Karyn Monget
With the decision by Polo Ralph Lauren and Sara Lee Corp. to end their licensing arrangement for Ralph Lauren Intimates, and reports in recent seasons of a waning in demand for megabrand innerwear, the conclusion could be drawn that the big names had reached the end of their hot cycle in the category.
Think again. According to a number of retail executives at major specialty and department stores, who acknowledge retail sales have generally been soft in the apparel sector, consumer demand continues to be strong for the big brands.
It’s no secret that senior retail management is disappointed that such a prestigious name will be leaving innerwear departments at the close of the spring season. However, they note that Sara Lee and Ralph Lauren have implemented a liquidation strategy, including promotions, to encourage sell-throughs of the Ralph Lauren Intimates’ final season this spring.
The remaining big-name players — several of whom are undoubtedly hoping to seize a bigger share of the market, are Calvin Klein Underwear by The Warnaco Group and several licensees — DKNY Underwear and Donna Karan Intimates at Wacoal America, Liz Claiborne Intimates at Jockey International, Tommy Hilfiger Intimates at VF Corp.’s Bestform division and Tommy Hilfiger robes and sleepwear at Cypress Apparel, a unit of Russell-Newman.
The announcement of the Sara Lee-Ralph Lauren split in early January initially rattled the retail and innerwear communities. Sara Lee and Polo Ralph Lauren signed an innerwear pact in February 1996, and the line was launched at 1,000 major specialty and department stores in June 1997 with lots of fanfare.
By mid-July, there were some 1,000 in-store concept shops. Two lines included Ralph Lauren Intimates, a line of daywear, underwear, foundations and sleepwear that was generally distributed to department stores, and a Ralph Lauren Collection of sleepwear, which was sold at upscale stores such as Saks Fifth Avenue.
Now retailers — whether they are major specialty stores such as Saks, Neiman Marcus or Nordstrom, traditional department stores like Carson Pirie Scott, Macy’s East or Bloomingdale’s, and promotional department stores including Kohl’s and Mervyn’s — are currently reassessing a wide range of merchandising needs for fall 2001.
It’s far from being doom and gloom. The forecast appears optimistic for megabrands to grab a bigger piece of the action, and several classifications are being targeted: daywear, underwear and sleepwear and robes.
Some merchants said they expect a smooth reallocation of dollars to a top-performing megabrand or two, while others are looking to beef up moderate-price bra business, which had been pushed out of prime real estate in recent years. Some intend to test and invest in new fashion-forward labels, and private label is expected to eat up a sizable chunk of what was the domain of Ralph Lauren Intimates, particularly at Federated Department Stores.
Discussing the future of megabrands in intimates departments, Michael Gould, chairman and chief executive officer of Bloomingdale’s, said: “There’s no one thing and it’s never one or the other. I’d rather deal with someone who has a very narrow distribution. That’s the best thing for Bloomingdale’s.
“We have an opportunity with the brands and an enormous opportunity with branded business, which we are intensifying throughout the stores. We’ve done very well with the Ralph Lauren [intimates] line.”
Gould further noted that the key to the branded business is the distribution strategy and said: “The two greatest challenges are the need for more unique merchandise and a much harder approach when buying a brand.”
Donna Wolff, divisional merchandise manager of intimate apparel and hosiery at Bloomingdale’s, noted: “We’re in a different predicament than some other [department store] retailers. We don’t want to go moderate.
“When I found out about the Sara Lee-Ralph Lauren announcement, I pulled out our five-year history of that area. The daywear and sleepwear businesses in fall ’97 were just as strong or slightly stronger than before the Ralph launch. Foundations accounted for 45 percent of total business before Ralph and 43 percent during Ralph.”
As for who will pick up the slack, Wolff said, “DKNY has been very strong and we feel there’s lots of opportunity. Calvin Klein foundations has had high-double-digit increases. We’re thinking of Calvin Klein sleepwear, as well.
“For fall, we’ll be testing the new Cruz [sleepwear] line by Natori, as well as Occhi Verdi by La Perla, and we plan to go after better and designer-price sleepwear like Eileen West and Jones New York, which has been very strong. We’ll also be giving more funding to foundations by Chantelle, Lejaby and Le Mystere.”
For spring, Wolff said Bloomingdale’s has already begun testing items by BCBG and Moschino, noting that “if it takes off, we’ll continue with fall.”
Wolff declined to answer which brands will be merchandised in the location where Ralph Lauren Intimates is housed. However, she noted, “Sara Lee has done the right thing with its liquidation strategy. They came up with a plan to promote it and max it to do business for the spring season. Sara Lee is not leaving us high and dry. We also see an opportunity with Sara Lee’s Bali [bra] brand.”
Bob Pawlak, vice president and divisional merchandise manager of intimate apparel and coats at Carson Pirie Scott, agreed that Sara Lee is “using a very good exit strategy so stores will not be burned.”
“Before the announcement that Ralph Lauren Intimates would be discontinued, we had intensification in place with every other Sara Lee division, with the exception of Playtex,” Pawlak said.
Asked if Carson’s will broaden open-to-buy budgets for alternative brands, Pawlak replied: “It’s not like I can take the money and move it to a Champion or Jogbra. For spring, we’ll be okay. But for fall, that money will have to be shifted. There should be a smooth transition of allocation of dollars without having to add another vendor.”
For example, he said he was “very hot for all Maidenform brands, especially Flexees.”
Barbara Lipton, vice president and dmm of intimate apparel and hosiery at Saks Fifth Avenue, said: “The issue is we don’t carry Ralph Lauren [intimates] the megabrand — we carry the high-end Ralph Lauren Collection of sleepwear. We heard they are planning on making the sleepwear in-house. Obviously, we hope so. We are very disappointed and hope they will relaunch the collection.”
Lipton further noted that Saks sells the licensed line of Donna Karan Intimates and said that “they are doing fine. We are pleased with this vendor, and the business continues to go forward.”
Saks prefers to merchandise a homogenized blend of product on the selling floor, Lipton said, noting that Donna Karan bras are merchandised within all foundations and Donna Karan underwear is displayed alongside other underwear and daywear brands.
“Instead of focusing on a specific entity,” explained Lipton, “we want to focus on the best products Saks has to offer. We don’t have vendor-defined hard shops the way other retailers do. I truly believe brands can be successful as long as they offer terrific new product that is quality-driven.”
However, one senior merchandise manager of intimate apparel at another major specialty store who did not want to be named said: “We had been trending down in Ralph Lauren Intimates for the past year. We had already consolidated to only 20 doors. The exit strategy that Ralph Lauren Intimates has proposed is to continue a ‘buy two, get one free’ strategy. We will not participate in this as their proposal is not cost effective, and we will move out of the line as quickly as possible.
“But Calvin Klein Underwear, Donna Karan Intimates and DKNY Underwear continue to be strong for us. We do not carry Tommy Hilfiger [intimates or sleepwear].”
Terri Meichner, vice president of intimate apparel at Federated Merchandising Corp., would not discuss the Sara Lee-Ralph Lauren split, but noted: “We run our vendor business on a core-vendor basis. The best thing we have going in our stores is private label — Charter Club in particular, and Morgan Taylor and INC private label really is a big target for us.”
A spokeswoman for Jacobson Stores said: “Initially, Ralph Lauren Intimates did sell well because it was a cotton and cotton and Lycra collection that offered salable bodies, acceptable quality and fit with a designer name and semilimited distribution. Ralph [intimates] sold well in the Midwest, initially. Jacobson’s discontinued the business due to the sale focus and inconsistency of the product. Somewhere, the identity was lost.”
Regarding megabrands in general, the spokeswoman said: “Brands are very important to Jacobson’s. But as they become mega and focus more on marketing, real estate and promotion — and less on product — they become overdistributed and lose both cachet and credibility as they train their customers to buy only on sale. Jacobson’s continues to focus on providing customers with specialty store merchandise that is unique.”
Asked about expanding assortments of other megabrands such as Calvin Klein Underwear, DKNY Underwear and Tommy Hilfiger intimates and sleepwear, a retail executive from a major buying, group who did not want to be identified, said: “Some of the Ralph [intimates] business will go to Calvin Klein Underwear. We think we can make it up. We’ve already edited down a lot because we don’t want to have every status brand in every division.
“We are thinking there are some programs that can naturally go to some areas. Sixty percent of the [Ralph Lauren Intimates] business was basic bras. We are looking first at Sara Lee for key bras. There also are plenty of places for a seamless panty program to make up for the void left by Ralph Lauren Intimates. Private label in everyday bras will also get a piece of it.”
As for space, the retailer observed: “Status monuments squashed the moderate bra business, and we are now looking to lighten up the space in that line of business.”
She added that the high-end bra business at department stores — bras that retail in the upper $30s to $50s or higher — “is still a challenge” at traditional department stores.
“That better business — the Wacoals, Felinas and Natoris, as well as a lot of the European brands — are still too high priced for us, and it’s still a challenge,” she said. “We are looking to give up some of that better business.”
From a manufacturer’s point of view, John Bowman, president of the licensed Donna Karan Intimates and DKNY Underwear, said: “The announcement that Ralph Lauren [intimates] is going to be sold for spring certainly is an interesting twist. Obviously, an industry as a whole loses something when we lose a brand. From our perspective at Wacoal, there’s definitely an opportunity to increase market share. I guess it remains to be seen how all brands stack up at the end of the market.”
Bowman added that initial bookings for early fall have been positive.
Assessing the pitfalls of licensed megabrands, Richard Leeds, chairman of Richard Leeds International, whose firm specializes in licensed innerwear properties, said: “In all fairness, the difficulties the megabrands have had in intimate apparel are as much the fault of the retailer as the brand. The retailer was too focused on building a credible fashion image to draw more consumers and to drive its own investment in private label products.”
Leeds further noted that national brands through licensing moved immediately to take advantage of this marketing opportunity, to increase brand exposure and short-term revenues.
Leeds said that “the outcome was predictable: oversaturation of national branded products that were undifferentiated retailer to retailer, resulting in a greater focus by the stores on internal product development of fashionable store brands.”
Charles Nesbit, president and chief executive officer of Sara Lee Intimate Apparel, said of the company’s overall branded intimate apparel business: “I am extremely pleased with the December market share data in the NPD department store scanner data. Sara Lee has captured the leading share position for both the rolling 12-month and rolling three-month period in units and dollars.”
Nesbit said Sara Lee’s 12-month bra dollar share is 31.5 percent; in units, 31.7 percent. For the three months ended in December, Sara Lee has a 31.7 dollar share and a 32.7 unit share. This does not reflect volume at discount channel and chains, including Mervyn’s, Kohl’s, J.C. Penney Co. and Sears, Roebuck & Co., he said.
In the mass channel, Nesbit said the NPD mass market data “gave Sara Lee the number one share for the year 2000.” He added that for the 12 months ended in December, Sara Lee’s bra brands at mass merchants “achieved a 42 percent share of bra market dollars.”
“This performance suggests our strategy of building strong brand equity with the consumer and managing a broad portfolio of brands is working,” Nesbit said.