Posted on May - 10 - 2010
Department store chains turn brands into exclusives to gain an edge
Marcio Jose Sanchez/Associated Press
Shoppers’ gripes that department stores are alike no longer applies as the top chains are divvying up brands they all used to carry and making them into exclusives. For example, if you want Tommy Hilfiger or Ellen Tracy, you’ll have to go to Macy’s.
Department stores are evolving again.
In the 1990s, there were dozens of regional chains dotting the four corners of malls, and they were criticized for looking alike and taking the excitement out of shopping.
Then came consolidation, with Macy’s surviving atop a heap of names. Today, the 10 largest department store companies are as diverse in ambience and price as Sears and Neiman Marcus or Kohl’s and Saks.
The few surviving chains are reinventing and divvying up brands they all used to carry, turning them into exclusives.
Tommy Hilfiger and Ellen Tracy are available only at Macy’s. Dana Buchman is only at Kohl’s and, later this fall, Liz Claiborne will be only at J.C. Penney.
Major chains are drafting celebrities such as Madonna, Cindy Crawford and Lauren Conrad to bring them the next hot line that will draw traffic to their stores.
“Every store is now looking for a reason to exist, to have a point of view and to pull away from the pack,” said Mark Mendelson, CEO of Ellen Tracy Inc. The upscale 61-year-old brand has lowered its average prices 70 percent, from $250 to $75. It is following its traditional target customer into her 45-plus years.
Ellen Tracy and other brands are hooking their futures to one chain because the pie isn’t getting bigger, said Marshal Cohen, chief industry analyst at NPD Group.
“By having a bigger slice of one company, you can operate more profitably,” Cohen said. “It’s about selling less to less people, but selling in a more effective way.”
Ellen Tracy no longer needs a huge organization that speaks to multiple company buyers and maintains expensive showrooms.
“I just have to be the best we can be for Macy’s,” Mendelson said.
Is it working?
“It’s too soon to tell yet,” said Cohen, who is privy to the large database of apparel sales information NPD collects from retailers.
But every year, exclusive and private-label apparel brands are eroding the market share of national brands and designer labels. Over the last five years, private and exclusive brands have grown 8 percentage points to 41 percent of apparel sales, he said.
Stores see it as a way to drive profit, he said.
“Stores don’t like to run their business based on what everyone else is doing,” he said.
When stores all carry the same brands, “it causes competition in excess of what they already have,” Cohen said. “J.C. Penney doesn’t want to be like Sears and Kohl’s. They may not want to compete on price. If Kohl’s discounts a brand 25 percent, then they have to.”
Fashion is a risky business, he said. Building a private-label store brand from scratch is expensive, and there is no one to share the cost of mistakes, which is why retailers prefer to partner with exclusive national brands.
Still, there are pitfalls.
Companies “shouldn’t overpay for exclusives,” said Allen Questrom, a private-equity dealmaker who formerly ran several well-known department store chains.
Regardless of the brand name, “it’s always about the product, about the right product at the right price,” Questrom said. “That’s really what the customer cares about.”
WHO HAS WHAT
Dillard’s — National brands: Reba, Cremieux; Store brands: Antonio Melani, Gianni Bini
J.C. Penney — National brands: Nicole by Nicole Miller, Allen B., Liz Claiborne (this fall), Bisou Bisou; Store brands: Arizona, St. John’s Bay, Worthington, Stafford
Kohl’s — National brands: Simply Vera Vera Wang, Dana Buchman, Candie’s; Store brands: Croft & Barrow, Sonoma, Apt. 9
Macy’s — National brands: Ellen Tracy, Tommy Hilfiger, Rachel Rachel Roy; Store brands: INC, Charter Club, Alfani, Style&co.
Sears — National brands: Lands’ End, Cannon, Country Living; Store brands: Canyon River Blues, Apostrophe, Covington
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