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Levi’s, retail growth, new styles, and trend awareness

Found in: Retail, Visual Merchandising
Tuesday
May 29, 2007
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San Fransico Business Times, via MSNBC, has an article looking at new strategies being employed by the denim maker, Levi’s (see: Seeking a stylish strategy, Levi’s tries on girls’ jeans). Looking for a way to expand their market share and regain their position as a market leader, Levi’s is better look at styles they offer and rolling our new retail locations:

Opening its own stores is one way Levi’s can counter changes in the wholesale market, analysts say. It has already opened seven of a projected 20 stores in 2007. There are 45 U.S. stores now open.

“If you are an apparel supplier, it is imperative that you develop your own retail stores to protect your business,” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting firm. Though Levi’s still has an 80 percent share in department stores, “You can’t put your faith in department stores, who are pushing brands less and less and private label more and more.”

Retailers, like Kohl’s and JCPenney, have been aggressively pushing their private label brands over the national brands that were the cornerstones of their stores. This is not a trend unique to these mid-tier retailers, as this private label push is seen all throughout the retail spectrum. This doesn’t mean that iconic, national brands like Levi’s are going to disappear from stores anytime soon, but it does mean that they have to adapt to the marketplace and become more self-sufficient.

I’ve been to the Levi’s store in Atlantic City and it’s great. Every style of denim that one would be looking for is there, with great visual merchandising and one of the best denim presentations you will find anywhere. Levi’s knows how to create a destination shopping experience and make themselves look good.

These store fronts work in conjunction with the department stores that already carry Levi product. The department stores will, typically, serve as a means for the masses to pick up the go-to Levi styles, like the 501, 505, and 550. The Levi storefront reenforces the iconic nature of Levi and enhances awareness of the premium offerings that they have, including the $260 Redwire iPod jeans.

While Levi’s still has a good presence in department stores, I wonder how much of the overall denim has shifted away from department stores (and the Levi brand) and towards teen retailers such as Abercrombie & Fitch and American Eagle. I have to imagine that it has been a signifigent share.

The increased retail locations work well for Levi’s. They will increase brand awareness and drive bottom line results. But they still have to stay on top of the game, as far as trend and style, and it appears that they are:

For men, she’s chasing what she calls a “scene stealer,” a college-aged guy who’s fashion aware and spends more on clothing. His female counterpart is another that Levi’s is “aggressively pursuing.”

To reach these consumers, Zakem has overseen the design of a “slouch fit” jean for men that combines skate and urban cultures with a loose fit in the hips and seat but a tight fit at the lower leg. For women there’s a “perfectly slimming” jean that has a girdle-like technology in the waist.

Zakem said she will seed the coasts with these products, and if they succeed, they will work their denimmy way into the heartland and less edgy retailers.

The most important part of that section is how they say that they will seed the market with these new designs. Trends are important in fashion, but will make or break apparel makers depending on how they react to them. I don’t think that denim makers have seen the payoff in the skinny jean trend like they did with the boot cut/destroyed denim look of just a few years ago.

I am most excited about the growth of retail store locations by Levi’s. As I’ve already said, I think they are a great destination shopping experience. Excellent merchandising and visual presentation is something every shopper needs to see more of.

Apparel outsells computer hardware online

Found in: Business, Product Merchandising
Monday
May 14, 2007
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The New York Times is reporting that, today, the trade organization Shop.org will release a report saying that, in 2006, apparel outsold computer hardware online while still offering tremendous room to grow sales:

In 2006, revenue from skirts, suits and shoes reached $18.3 billion, surpassing that from PCs, printers and word-processing programs, which totaled $17.2 billion, according to a report to be released today by a major trade group.

The surging popularity of clothing on the Web defies predictions that fashion — which is hard enough to buy in stores, with the aid of sales clerks and fitting rooms — would be difficult, if not impossible, to translate onto the Internet.

[...]

Consumers are still largely reluctant to buy clothing online, at least compared with products like computers. In 2006, they made only 8 percent of all clothing purchases on the Web, compared with 41 percent of computers, 21 percent of books and 15 percent of baby supplies, according to the Shop.org report, which was prepared by Forrester Research.

This is great news for apparel retailers and very good news for e-tailers (does anyone still use that term?). Since the overall saturation percentage is still low, online, that means retailers still have tons of room to grow their interactive marketing.

With the rise of web sales, I hope that more brick and mortar retailers further their commitment to e-commerce and continue to realize the power of the Internet not only for sales, but also for a means to interact with consumers.

More from the New York Times (see: Less Risk Is Seen in Buying Clothes Online).

Macys.com, and staying on top of tech trends

Found in: Industry News
Wednesday
April 18, 2007
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Federated Department Stores, the parent company of Macy’s and Bloomindales, has announced that they are investing $100 million into their online operations.

Of course, not all of it is going to fancy flash widgets and outsourced Indian php developers:

Most of the $100 million will be spent on a 600,000-square-foot distribution center in Goodyear, Ariz., that will be the main West Coast shipping point for Macys.com. Construction will begin this spring and take a year.

Some will be spent in San Francisco to support technical upgrades and infrastructure improvements. It is on top of $130 million being invested in such improvements in 2006-2007, including a 600,000-square-foot distribution center opening this month in Portland, Tenn.

Over a million square feet of distribution space should help Macys.com very nicely (see: Macy’s to invest $100M to build online store operation). They want to grow their online business to be a billion dollar slice of their overall sales.

I do. I’m expecting huge things from Macy’s online division this year. I think Federated has a chance to lead all retailers into the new social media revolution. Afterall, they did a test run of IconNicholson‘s “Social Retailing” concept at Bloomingdale’s in NYC last month (see: Bloomie’s woos young shoppers with social retailing).

Bloomingdale’s may be known as a fashion destination, but that doesn’t mean it can’t reach out more to teens and young adults. So in a recent test at its flagship 59th Street Store in New York, it offered an interactive sales-floor mirror that let shoppers view themselves in outfits as well as comments—and images of alternate garments—sent to the mirror by their online friends.

If the shopper likes the looks of a dress suggested by a friend, she can touch the mirror to make the image of the dress appear life-size, then stand in front of the of it to virtually try it on.

Voila—social retailing. If web-based social networking can work wonders as a marketing and branding tool, online social retailing just might do the same for in-store retailing, says Tom Nicholson, CEO of IconNicholson, the company behind the “Magic Mirror.”

“We see this is a way of bringing the power of the web into stores to support customer sales,” he says.

Back in January, I got to see this concept first hand at the NRF Expo and let me say, I was floored. I think that IconNicholson has developed a very brilliant concept – a way to bridge the physical shopping experience with an online buddy list. It’s a costly project, but I think that a retailer is going to score a home run with it in 2007.

Macys could get their billion dollars in sales if they keep doing what they are doing. Invest in infrastructure, better order fulfillment, and stay on top of trends in technology.

Where's the Petite Department?

Found in: Retail
Sunday
May 28, 2006
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The New York Times on the demise of the petite department in some department stores:

[...] the love affair with little women appears to be over. Three of the country’s most influential fashion emporiums — Neiman Marcus, Saks Fifth Avenue and Bloomingdale’s — have quietly eliminated or drastically scaled back their petite departments in the past several months, infuriating many longtime customers.

Given that manufacturers produce clothing in only a handful of standard sizes — among them, juniors, misses and plus size — the abandonment of petite sizes at the highest levels of American retailing represents a sea change in fashion, forcing some designers to either stop making special sizes for smaller women or re-evaluate how much to invest in the business.

More in today’s article, “Where’s the Petite Department? Going the Way of the Petticoat”

Is this a shift in trends or is this just a case of these three department stores missing the mark? As the Times points out, this may be a case of these stores missing the mark:

What did change is that petite departments gained a reputation for traditional — some would say frumpy — career-oriented clothing. Chic looks, clothing executives said, never made the leap from regular sizes to petite. So the very word petite became synonymous with many women who shopped there — working women over the age 50.

Over the past few years, other brands like JC Penney, Kohl’s, and Macy’s have upped the fashion offerings in their speciality size departments and have been met with positive trends. Walk into any of these stores today and you will see the traditional petite department, anchored by career-orientated clothing, alongside the more fashionable petite offerings. More so, these stores are also boosting their bottom line by offering this contemporary assortment under their private labels (see JC Penney’s a.n.a, Kohl’s apt. 9 & Sonoma, and Macy’s INC).

I don’t predict the downsizing of the petite department by Neiman Marcus, Sak’s and Bloomingdales is the beginning of a larger trend. JC Penney, Kohl’s, and Macy’s are still doing it right. Just because you are short, doesn’t mean you are also 50.

Besides, if a shorter woman can’t shop in your store – who’s to say she’s going to stick around to pick out clothes for her husband and her kids?

Retail roundup – Q1 results, American Eagle

Found in: Quarterly Results
Tuesday
May 16, 2006
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After fantastic 2005, teen retailer American Eagle is off to a great start to 2006, continuing it’s upward trend, beating Wall Street estimates and putting up some solid numbers for Q1: net sales increase of 14%, comp sales up 9% and net profits up 16%.

CEO Jim O’Donnell attributes the success of the quarter to “successful merchandising and design, as well as the solid execution across our company.” Initiatives undertaken in 2005, such as the AE “All Access Pass” customer loyalty/reward program seem to be paying off in 2006 with AE President Susan McGalla saying that the “new enrollments are exceeding our expectations and the first two redemption periods were encouraging.”

As far as the merchandise itself, McGall goes on to say that for the Women’s end of the spectrum, “comps were best in graphic tees, tanks, shorts, capris, jeans, flip-flops and intimates, while women’s skirts, wovens and accessories were below our expectations.” Adding, “Men’s produced a positive low double digit comp with the strongest results in graphic tees, jeans, shorts, polos, flip-flops and boxers. Within men’s, we continued to see a planned downtrend in woven shirts.”

Accessories will be helped by the future launch of the AE sub-brand, aerie. aerie is the new intimates sub-brand from AE, with all stores having a full aerie store-in-a-store concept, launching in September. Results from the initial “bra test” in 100 stores have been encouraging, with a lot of positive feedback regarding merchandise assortment and trends in this area. McGalla says, “the number one bra that we thought was going to be number one wasn’t number one.”

As a male in his mid-twenties, I do not know much about an intimates department geared towards girls age 15-25. But I do know that AE seems to be swinging for the fences lately and I have no doubt that this launch will prove successful, turning into a gold mine for AE.

More about the aerie brand from this February article in WWD: American Eagle’s Strategy for ‘aerie’ intimates.

The other concept that they are excited about is the Martin + Osa store concept, debuting in four cities this Fall. CEO O’Donell describes it as “a unique, specialty lifestyle brand, targeting 25-40 year olds.” With merchandise that is geared towards an older demographic in style, design and price, I think that this store will wind up doing extremely well for AE. You have an entire generation of shoppers who are growing up and outgrowing AE, now get them to stick with you through the years. At the same time that AE is building/developing a lifestyle brand, they are also branding these customers for life. Smart move and I am excited to see this shop concept.

More information on the Martin + Osa concept from WWD, “Martin + Osa Mall Bound: Signs First Four Leases“.

The last area that AE repeatedly touched on is the improvement in sales in remodel stores. Remodel stores are gaining square footage through re-design and expansion, in some cases they are relocating within the same mall. In this area, AE did this remodel last year and the payoff is huge. The new store layout is larger, spacious, inviting, and fun to shop – it is a complete turnaround from the cramp quarters they once occupied.

To this regard, AE says that the average store profitability jumps 70% in the first year after remodel – 70% ! This is fantastic news for investors, as AE looks to remodel 68 stores this year alone. Retail Design Diva had a fantastic article on this a few months ago: You Know Improved Store Design Helps Increase Sales, But Would You Believe 46%? As the trend over the past few years was to reduce visual merchandising and the importance of store design, it is nice to see a company spend so aggressively in this area and be so vocal about their success. AE has even upped their 2006 capital improvement estimates from $175m to over $215m.

It is a good time to be American Eagle. They are poised for a very good year and will be a mall retailer to look out for going through the rest of 2006. Look for them to lead the way through the mall with their commitments to good design, value and aggressively seeking out opportunities to develop itself as a lifestyle brand.

More information on Q1 results here and here

Full transcript of the conference call here from Seeking Alpha.