MEGABRANDS LOSE SOME LUSTER
Byline: Karyn Monget
NEW YORK — Department stores are showing some signs of falling out of love with the megabrand licensed intimate apparel labels that have come to dominate retail shelves.
Big names, especially designer licensees that have storewide exposure in everything from accessories and lingerie to jeanswear and fragrances, have made a lot of noise in intimate apparel departments for the past several years.
In the process, the growing list of megabrands — which include Calvin Klein Underwear, Ralph Lauren Intimates, Donna Karan Intimates and DKNY Underwear, Liz Claiborne foundations, Jones New York Intimates and Tommy Hilfiger sleepwear, among a number of junior labels — has pushed out smaller independent brands that once were the lifeblood of innerwear departments.
But they’ve also helped to put innerwear in the spotlight and have been a big part of a boom in the category for the past few years. After ringing up $11.8 billion at retail in 1999 and generating sales of more than $12 billion in the first six months of 2000 at stores nationwide, intimate apparel continues to be a lucrative segment.
There is no question that the prestige-brand presence has lent a certain cachet and glamour to what is a high-margin, volume-driven business, especially with the hoopla and media coverage of the launch of new licensees. The excitement typically reaches its crescendo in the first year, at which point licensors and licensees have hammered out merchandising problems and fine-tuned business plans. Typically, the most successful venues are at flagship stores, as well as at top-producing units in metropolitan areas.
Though endemic to many vendors, the problems — a slowdown in traffic, late deliveries and competing with a rival brand that has just been introduced — begin to pile up after the first year or so, observers noted.
A key complaint among retailers is whether megabrands are sold at full price or on sale, and it’s often a no-win situation. That’s because sell-throughs of one megabrand sold at full price typically suffer when the store promotes another big name at 25 to 30 percent off the suggested retail price.
The lucrative payoff for which department stores have been waiting has been sporadic and generally a huge disappointment, according to a number of merchants and vendors. Many executives admit they went overboard with open-to-buy dollars for megabrands and oversaturated the designer goods in too many doors. Now they generally are reevaluating the merchandise mix and assessing which meganames can be pruned or relocated to smaller areas.
Some vendors already are testing new ideas like “invading additional space with tabletop panty programs that traditionally have been done by companies that specialize in that line of business,” said one retailer, who did not want to be identified.
“It’s been very successful at Victoria’s Secret and at various price points, and the status people see it as a way of clamoring up their business.”
The discontent among department store executives began gaining momentum last year when The Warnaco Group announced it would start selling the premium Calvin Klein Underwear brand to J.C. Penney Co. stores. As reported in these columns, Dillard Department Stores Inc. later dropped Calvin Klein Underwear, and May Co. cut back its orders. Despite the controversial move, some retail executives said Calvin Klein innerwear, particularly daywear and foundations, continues to be a viable business. While some big megabrands — licensed names such as Ralph Lauren Intimates by Sara Lee and proprietary names like Calvin Klein Underwear — continue to pull in a range of consumers at major stores, the number-one gripe from retailers has been the casual sportswear-inspired look of status intimates, most of which are of cotton knit, and all of which are merchandised as collection concepts in sprawling in-store shops.
The shop environments — many of which are done in similar wood and chrome fixturing with oversize posters — generally have the generic look of tract housing in the suburbs.
Beverly Rice, senior vice president of corporate fashion merchandising at Jacobson’s, said, “Megabrands are not as strong as they were last year. At Jacobson’s, they’ve had their ups and downs. Some lines are doing less than a year ago, but Donna Karan Intimates is still one of our best foundations resources.
“Nautica’s classic pajamas continue to perform based on fine quality and the fact that they produce in-house,” Rice said. “We appreciate that they don’t football the prices and distribute to the whole world.”
Regarding the future, Rice said, “We have to wait and see. We are looking for improvement. We want to see how it [the megabrand] fits into our mix.”
Robert Pawlak, vice president and divisional merchandise manager of intimate apparel, coats and furs at Carson Pirie Scott, said, “We did launch Liz Claiborne [foundations] this year. It wasn’t a full-blown launch, just to some limited doors. Liz has actually been turning good — not great — but good. We’ve had uniform selling in all the stores it’s in. Part of that is because it’s a new launch.”
Pawlak added, “We carry Tommy Hilfiger sleepwear and plan to launch Tommy Hilfiger foundations in 13 doors.”
Pawlak would not discuss the current status of other megabrand business in intimates
But earlier this year, he did acknowledge that “retailers had stumbled big time” when it came to investment in status brands, and noted that retailers were generally “worried.”
Another retail executive from a large Midwest buying group said: “We are mulling over what steps to take. So far, we’ve decided to pull back doors with some vendors. Part of the reasoning behind that is there is too much product for the size of the customer base once you get into smaller stores.
“Real estate also is part of the problem and is an issue. The proprietary vendors’ fixtures are obtrusive, and it’s difficult to merchandise your entire floor — particularly smaller items such as daywear — when you use overbearing fixtures.”
Another department store executive said: “I think the status brands will eventually find a way out of the dilemma. But some designer licenses are the wrong kind of business and too small of a business for megacorporations that punch out products as fast as they can. That’s where the creativity gets lost. That’s when consumers lose interest.”
Regarding DKNY Underwear, the merchant noted, “It has been relatively successful for us, but that’s because it’s a controlled business. We haven’t rolled it out to more than our top 30 doors.”
Frieda Oliva, marketing specialist at The Doneger Group, said, “Everyone is reevaluating their megabrand business. The verdict is not completely in on where they are going. I’m sure it is a disappointment to retailers based on their investment of square footage and real estate.
“But you can’t take away the cachet a status brand brings to a department,” said Oliva, who has been working with the intimate apparel industry for more than 20 years. “I am a person who believes in moderation and evaluation of status brands. Each needs to be judged on their own individual merits.”
Oliva acknowledged that an anti-megabrand movement was in progress but noted, “I don’t think it’s a complete backlash. It’s temporary. People go back and don’t want to throw away some businesses. There are some new people coming on board, like Liz Claiborne [sleepwear].”
Regarding licensing ventures, Josie Natori, chief executive officer of Natori Co., said, “Our license for Natori and Josie foundations with Bestform has been successful because we were crystal clear from the very beginning that we wanted to grow the business in a healthy way. We work as partners together overseeing distribution, how the business is growing, and making sure that it is never promoted.”
Looking at retail, Natori said, “Megabrands clearly are not doing what retailers expected, and they do not warrant the real estate they’ve been given.”
Norman Katz, an activewear and intimate apparel consultant, and former president of I. Appel Corp., said, “I think if department store retailers don’t do something about the problem with megabrand business sooner — not later — the national chains and off-price stores will eventually take over that business.”
Meanwhile, Nicholas Graham, founder and ceo of Joe Boxer Corp., was asked about market rumors that he planned to sell the Joe Boxer brand to Penney’s.
“We’ve talked, but there are many options,” said Graham. He would not elaborate.
As reported, a secondary line of men’s boxers called Almost Basic was sold to Penney’s by the Joe Boxer company in 1998, but has since been discontinued.