September 12, 2006
Store Brands and Exclusive Labels Make or Break the Retailer
Retailers in all trade channels, the possible exceptions being Trader Joe’s and Aldi, have to be concerned with finding the right mix of store brand/exclusive label products and those falling under the national brand and designer label categories.
Many, if not most, stores are placing an increased emphasis on their own items with the picture of higher margin dollar signs dancing in front of their eyes. Whether this will ultimately prove successful, however, remains to be seen.
The newly national Macy’s chain is a prime example of a retailer focused on driving the top and bottom lines through the sales of its own brands.
According to a report in the Chicago Tribune, the retailer has jettisoned designer labels such as Prada, Miu Miu and Jimmy Choo, while others such as the Yves St. Laurent handbag collection have been seriously cutback.
Instead, the company has brought in its own brands in apparel, accessories, home goods and furniture.
Macy’s, not counting stores just converted, gets about 18 percent of its total sales from its own brands with many outperforming designer labels. In women’s clothing, for example, the department store’s Charter Club line outsells Ralph Lauren.
“It’s very clear that Macy’s private label will be given a lot more prominence,” said Donald Soares, principal of Capgemini’s Midwest consumer products and retail practice. “The very high-end brands that don’t fit with the Macy’s profile are probably going to be replaced.”
The retailer is also counting on exclusive label items to attract shoppers while keeping more of its profits in-house.
Martha Stewart will begin selling her home collection in Macy’s next year. The chain is also selling T Tahari, “a hip women’s clothing line” from the designer Elie Tahari. It will also rollout O Oscarm, an affordable line of clothes from Oscar de la Renta, early next year.
Macy’s retailer brand strategy is intended to help it overcome the perception that all department stores are alike. The company is putting its own product front and center with key displays near entryways and power aisles.
Amira Krvarac, a Chicago area resident who shopped at the one of the converted Marshall Field’s locations at the Old Orchard shopping center in Skokie, Ill., told the Trib, “I think it’s better. There’s more to choose from and the prices are better. If I had more time, I’d shop more.”
Frank Guzetta, chairman of Macy’s North, believes consumers in the areas where Macy’s has replaced regional department store banners will find the same things to appreciate as Ms. Krvarac.
“I’d like to see how they feel two months from now,” he said.
Discussion Questions: What added pressures are placed
on merchants looking to their own brands to generate consumer traffic along
with top and bottom line results? Are retailers at risk because of the emphasis
and/or execution of their own brand business?
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It’s my understanding that it was Prada, et al who did the “jettisoning”: i.e., they refused to be carried in what they considered a downmarket store. And certainly this aspect of macy*sization gives critics of the imbroglio the most potent ammunition. It’s not “just” a name that’s being thrown out; it’s an entire market niche (unfortunately the growth niche, as well.) However well-designed and -made house brands may be, I don’t see them becoming fashion items unless the store is seen as a fashion leader as well…..and macy*s’ 800+ locations just ain’t gonna do that!
Retailers who publicly are moving ahead with aggressive store brand and exclusive designer agreements are often on the right track strategically but that does not always lead to a change in consumers’ perceptions.
A case in point is Wal-Mart. The company has focused efforts on getting consumers to go from grocery to higher margin departments such as apparel. A Cox News Service story questions how successful this strategy has been.
As one shopper, Angela Maher, 24, put it, “If I’m there, I’m grocery shopping. I’m not there for my weekend outfit. They have to change the overall image of the store, because when you go there, you think cheap.”
In my opinion, house brands are great at stores such as Nordstrom, Saks Fifth Avenue or Neiman Marcus, which have a high reputation nationally with their name, but in the case of Macy’s, creating names that imitate or sound like top end brand names, ie. Alfani = Armani or Club Room = Polo Ralph Lauren, the end result can be tragic.
This is especially evident in the case of Marshall Field’s in Chicago. Chicagoans are very “brand orientated” shoppers who take great pride in their city. The ties, shoes, and dress shirts that had the name Marshall Field’s labeled on them held just as much cache as Polo, Kenneth Cole or Joseph Abboud. Completely eliminating a highly regarded brand name and replacing it with brand names that Chicagoans have never heard of is disastrous, especially when most of you have already mentioned the Dominick’s/Safeway debacle in the past few years. For those of you that are not familiar, Safeway replaced many of Dominick’s brand name local Chicago favorites with Safeway Select products and market share plunged. I am afraid that this will be the same case with Macy’s in the greater Chicago area. It will work for Macy’s in other areas where brand names are not held up to the pedestal as in Chicago.
Solution: Macy’s needs to bring back Marshall Field’s dress shirts and designer ties….they need to play on a great house name that has worldwide recognition.
I see (3) very compelling reasons for retailers to support a strong P/L position…#1 is differentiation from your competition, #2 is margin expansion, and #3 is national brand leverage. The note of caution needs to stay focused on #3. Retailer brands that build share will drive national brands to reposition, which in turn drives down total retail sales. Margin expansion is great, but if profit dollars decline due to total category sales declines with expanded unit sales and operational costs increases, you have to wonder about the longer term implications to a retailer’s balance sheet.
National suppliers also cut advertising and R&D budgets when they reposition their retail prices to compare more favorably to P/L.
This also can have a negative impact on long term price expansion needed by both suppliers and retailers. The key is an inclusive, collaborative strategy between suppliers and retailers to make sure all variables are being fully analyzed.
It’s a two-edged sword, as we’ve seen. Be the customer advocate, and you win.
First of all, Frank’s point is on target. Comparing Macy’s the supermarket to Macy’s the department store is a big mistake. Food private label (correctly executed to Al’s point) is an easy way for a retailer to differentiate themselves from their competition. Poorly done, it’s just a fast way to grab margin and a slow way to drive out customers. It’s all about execution, as Aldi, Trader Joe’s and Loblaw have demonstrated.
Assortment execution using brands has inherent safeguards that private label does not. A merchant assembling a brand assortment attempts to recognize trend interpretation appropriate for his or her customer. Failing this, they can rely on the history or track record of a brand in hitting the needs and desires of specific customer groups. Further, the financial safety net of gross margin guarantees, markdown support, or merchandise replacements can and does exist.
Private label requires that the organization have the skills to identify trends before their customer is ready, interpret those trends for their customer, and bring them to market in time and at the right price. Additionally, the organization absorbs the entire financial risk of the assortment, elevating the requirement for a flexible and efficient supply chain to the same importance as the trend management capability.
Federated has invested an enormous amount of time and money to develop, enhance and sustain these skills. Both in terms of flexible supply and trend management, the organization has technology, processes and people dedicated to being excellent in these mission critical capabilities.
These are the key issues when reviewing a major expansion of private label. And while 3rd party outsourcing of both style and production can be a temporary bridge, the litmus test will in the end be the ability of the organization to now be a three competency player: customer experience merchandising, trend management, and supply chain execution. Very hard.
This is the continued evolution of private label. Very few retail segments are not feeling the squeeze in margins, and this is THE biggest opportunity out there (as well as the riskiest). Take it from someone who has been there. If you do it, make sure you do it right. Don’t cut corners or underestimate the supply chain (costs, time, effort) and you cannot survive solely on “me too” or copy cats.
There is a significant difference in Private Label risk between apparel/fashion and staples/food. Fashion must match the style of the season. Branded or Private Label that is out of sync will fail. History has shown us too much poor quality Private Label (Ann Page) will kill sales. The balance must be driven by the target consumer’s perception and acceptance.
If you have a strong CPG background, as many marketers of today do, you tend to forget that the strongest brands often ARE the retailer’s brand. Land’s End (pre-Lampert of course), Cabela’s, Whole Foods, Nordstrom’s, GAP, Limited, Victoria’s Secret, Godiva, Starbucks, Omaha Steaks… you get the idea. The common thread to all of these successes is focus. Focus on a single consumer need, a single image and message in filling that need and, as others have pointed out, above all a focus on distinctive, high quality products to meet that need. Pulling this off is the difference between a merchant and a distributor.
“Fast fashion” translates to “expendable fashion” and that one factor is a huge driver for the recent rush in private label apparel (along with the ongoing margin and differentiation benefits). Blame H&M, Zara (and Limited before them). As vertical players’ product development cycle and trend interpretation timelines accelerate to head-spinning speed (how about 2 WEEKS in the case of Zara), new standards are set for the big guys . . . standards that make the efficiencies of do-it-yourself brand-building more attractive than ever.
Zara, Federated, Target, Wal-Mart, Penney’s . . . all have invested major bucks to hone their private label and product development prowess. This trend shows no sign of abating. After all, build it and you’re gonna wanna work it!
Store Brands will be successful only if they are backed by unquestionable quality of design and performance as well as advertising. J. C. Penney’s “Arizona” jeans is a perfect example.
It is about consistency of quality and branding that quality. Does “Armani” sound like the finest fashion? But people know what it stands for. Coach doesn’t sound like a fashion tag line but you know you are getting – quality purses. I think, in food, you create premium product lines not for velocity but to shout “we make quality products.” When Cadillac or Lincoln could not match the quality of Lexus, it affected the entire line of products. Is Toyota that good? It becomes validated when you associate it with Lexus. Tell the story and keep the trust. A great American retail entrepreneur said, “The bitter taste of poor quality remains long after the taste of a sweet price.”
It depends. I did my grad school dissertation on private labels when I was with ADG. We generally had three: Our best was labeled uniquely to the regional chain with prestigious local connotations (Camargo for women and Rookwood for men at Pogue’s/Cincinnati) and a store brand for middle of the road, and then we had an even lower quality line that was used nationwide with the exception of L&T.
All did well and all were profitable for us.
Macy’s problem, in my view, is that some of the store brands sound cheap and smack of a rip-off (“Alfani” is shameless) and the store name and logo themselves look, and sound, childish and low-end (would “RH Macy” or “Rowland H Macy & Company” be better for men’s clothing/coats/for example?).
As above, “Marshall Field’s” would have been a tremendous private label line of merchandise and kept alive a brand with incredible equity amongst Midwestern shoppers, in particular. The brutal obliteration of the Marshall Field’s name is beyond me, I can’t recall anything quite like it in retail history.
Where does fashion come from? What is its genesis? Does it ever come from the top (yes, of course, with Nike), or is it more likely to come from the drift, splif, talk, rep, or “jah”? The lat-lat-lat-latter of course. FUBU. Plus, fashion must never be represented inanely, as exampled by Donna Karan’s recent awards show appearances. DKNY forever. Donna Karan, quoth the raven, nevermore.
Fashion is rebellion. Fashion is being different. Fashion is about leading and sometimes being chastised for it. Eww! You look so weird! How can “fashion” be chain-stored?
Trader Joe’s has many private labels on their various products but the products that I have tried are all great. The public doesn’t feel that they are trading down by buying the house brand. Same with Safeway Select. The products that I have tried were great.
Barney’s has a private label with their name on it. It’s also great merchandise. A store like Barney’s can get away with it because Barney’s has such a sterling reputation; they have credibility in the retail industry. Also Barney’s carries only the very best. If a store carries first rate name brands, it gives their private brands credibility. I own a lot of Barney’s private label and it’s very well made. Also, it has the cachet of being made in Italy.
There was a time just a few years ago when Macy’s carried a lot of premium brands and designer labels. Then, I believed it helped sell the private label stuff. No one expects to make millions off a limited selection of Prada and Armani but it gives the store fashion credibility to sell their less expensive private lines. Field’s knew this well.
IMO Macy’s private merchandise is nothing special and it’s not exactly affordable. People by me always mocked Macy’s and their ‘Alfani” line. A cheaply made impostor of Armani. It reminded me of those ads for ‘Impostor’ fragrances I would see in print. But Macy’s tag line would be: “If you love Armani, you’ll love Alfani”. Too funny.
Omni, above makes a fascinating suggestion worthy of amplification.
Why, indeed, wouldn’t Macy’s retain the old Marshall Field’s house brand as a premium own label? It may have re-bannered the old retail locations, but the brand has legs for many Chicagoans and others around the country who appreciate its long-standing reputation.
Dear friends at Federated: Did you consider this option in your store brand planning? If not, it may not be too late to retain a valuable piece of brand equity under your strategic umbrella.
Even Trader Joe’s needs to be concerned about the use of private labels. If consumers don’t find value in the private label products at Trader Joe’s, they won’t keep coming back. The quality of those private label products has to be very high. Every other retailer needs to know what its particular consumers want and provide that with private label or lose. In fashion that will mean an extremely quick turn-around time from concept to the shelf. Private label fashion will have to compete with Zara’s three-week turn around time to be successful. Just stocking private label products is not a solution in and of itself.
One of the dangers is that, as retailers become more and more reliant on private label, there are inevitably temptations to cut back on quality to save a few bucks when results are not what they’d like, hoping consumers won’t notice. But, they inevitably do, and retailers that cave in to this temptation devalue their own brands, along with the private labels of other retailers.
Gap compared to J.C. Penney: Gap started with 100% brand name jeans (Levi’s), and went to 100% private label. J.C. Penney struggled for years (5? 10? 15?) to get acceptance for its 100% private label jeans assortment and finally adopted brand names while keeping its private labels, too. Macy’s private label work goes back at least 50 years (“Supremacy”) and maybe much longer than that.
In apparel, private label markdown risk is critical. As long as private label is expanding, true markdown costs aren’t known unless merchandise aging is critically applied. Translation: watch out for unsold dregs building up 2 years after the rollout is finished. The private label initial high markup is exciting, but the markdowns can feel like the hangover after the party.
Fashion is different than selling – some items are standards and may not be “trend setting” but will always be appropriate and can be reliable as movable merchandise. These items, only, will result in a store failure just as pure trend and fashion would never be able to sustain a large store organization. There is requirement of a merchandise mix that when taken as a whole is enticing, complete and dependable and Marshall Field’s did this expertly.
In-house brands can and are an incredible resource for a merchant if done correctly and with attention — as mentioned — if skimped on — they will not pass mustard with the consumer.
A customer who wants a $1000 Armani suit – period – likely does NOT want an Alfani suit at any cost. Playing the middle market customer is SO difficult and attention MUST be paid to detail – size – fit – and VALUE so that the customer perceives VALUE in trading DOWN to the in house brand from the “true” designer label.
And at the other end — the guy who would NEVER pay for an Armani suit either because he can’t or doesn’t care — likely will also NOT pay $500 for an Alfani suit EITHER. so with the middle market attention MUST be paid to the pieces so there is perceived and real value in giving up the cache of the true designer label – either top line or bridge.
It just seems to me that the Macy’s in-house brands are terribly expensive — I worry that savvy shoppers will simply trade up to the real thing and thrifty shoppers will look elsewhere for a less expensive alternative (Kohl’s and Penney’s in-house, H&M).
Finally — a balanced mix should be present. To rely on in-house brands to be all things to all customers is hazardous. The in-house labels SHOULD NOT BE in the position to Make OR Break the retailer.
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It’s my understanding that it was Prada, et al who did the “jettisoning”: i.e., they refused to be carried in what they considered a downmarket store. And certainly this aspect of macy*sization gives critics of the imbroglio the most potent ammunition. It’s not “just” a name that’s being thrown out; it’s an entire market niche (unfortunately the growth niche, as well.) However well-designed and -made house brands may be, I don’t see them becoming fashion items unless the store is seen as a fashion leader as well…..and macy*s’ 800+ locations just ain’t gonna do that!
Retailers who publicly are moving ahead with aggressive store brand and exclusive designer agreements are often on the right track strategically but that does not always lead to a change in consumers’ perceptions.
A case in point is Wal-Mart. The company has focused efforts on getting consumers to go from grocery to higher margin departments such as apparel. A Cox News Service story questions how successful this strategy has been.
As one shopper, Angela Maher, 24, put it, “If I’m there, I’m grocery shopping. I’m not there for my weekend outfit. They have to change the overall image of the store, because when you go there, you think cheap.”
In my opinion, house brands are great at stores such as Nordstrom, Saks Fifth Avenue or Neiman Marcus, which have a high reputation nationally with their name, but in the case of Macy’s, creating names that imitate or sound like top end brand names, ie. Alfani = Armani or Club Room = Polo Ralph Lauren, the end result can be tragic.
This is especially evident in the case of Marshall Field’s in Chicago. Chicagoans are very “brand orientated” shoppers who take great pride in their city. The ties, shoes, and dress shirts that had the name Marshall Field’s labeled on them held just as much cache as Polo, Kenneth Cole or Joseph Abboud. Completely eliminating a highly regarded brand name and replacing it with brand names that Chicagoans have never heard of is disastrous, especially when most of you have already mentioned the Dominick’s/Safeway debacle in the past few years. For those of you that are not familiar, Safeway replaced many of Dominick’s brand name local Chicago favorites with Safeway Select products and market share plunged. I am afraid that this will be the same case with Macy’s in the greater Chicago area. It will work for Macy’s in other areas where brand names are not held up to the pedestal as in Chicago.
Solution: Macy’s needs to bring back Marshall Field’s dress shirts and designer ties….they need to play on a great house name that has worldwide recognition.
I see (3) very compelling reasons for retailers to support a strong P/L position…#1 is differentiation from your competition, #2 is margin expansion, and #3 is national brand leverage. The note of caution needs to stay focused on #3. Retailer brands that build share will drive national brands to reposition, which in turn drives down total retail sales. Margin expansion is great, but if profit dollars decline due to total category sales declines with expanded unit sales and operational costs increases, you have to wonder about the longer term implications to a retailer’s balance sheet.
National suppliers also cut advertising and R&D budgets when they reposition their retail prices to compare more favorably to P/L.
This also can have a negative impact on long term price expansion needed by both suppliers and retailers. The key is an inclusive, collaborative strategy between suppliers and retailers to make sure all variables are being fully analyzed.
It’s a two-edged sword, as we’ve seen. Be the customer advocate, and you win.
First of all, Frank’s point is on target. Comparing Macy’s the supermarket to Macy’s the department store is a big mistake. Food private label (correctly executed to Al’s point) is an easy way for a retailer to differentiate themselves from their competition. Poorly done, it’s just a fast way to grab margin and a slow way to drive out customers. It’s all about execution, as Aldi, Trader Joe’s and Loblaw have demonstrated.
Assortment execution using brands has inherent safeguards that private label does not. A merchant assembling a brand assortment attempts to recognize trend interpretation appropriate for his or her customer. Failing this, they can rely on the history or track record of a brand in hitting the needs and desires of specific customer groups. Further, the financial safety net of gross margin guarantees, markdown support, or merchandise replacements can and does exist.
Private label requires that the organization have the skills to identify trends before their customer is ready, interpret those trends for their customer, and bring them to market in time and at the right price. Additionally, the organization absorbs the entire financial risk of the assortment, elevating the requirement for a flexible and efficient supply chain to the same importance as the trend management capability.
Federated has invested an enormous amount of time and money to develop, enhance and sustain these skills. Both in terms of flexible supply and trend management, the organization has technology, processes and people dedicated to being excellent in these mission critical capabilities.
These are the key issues when reviewing a major expansion of private label. And while 3rd party outsourcing of both style and production can be a temporary bridge, the litmus test will in the end be the ability of the organization to now be a three competency player: customer experience merchandising, trend management, and supply chain execution. Very hard.
This is the continued evolution of private label. Very few retail segments are not feeling the squeeze in margins, and this is THE biggest opportunity out there (as well as the riskiest). Take it from someone who has been there. If you do it, make sure you do it right. Don’t cut corners or underestimate the supply chain (costs, time, effort) and you cannot survive solely on “me too” or copy cats.
There is a significant difference in Private Label risk between apparel/fashion and staples/food. Fashion must match the style of the season. Branded or Private Label that is out of sync will fail. History has shown us too much poor quality Private Label (Ann Page) will kill sales. The balance must be driven by the target consumer’s perception and acceptance.
If you have a strong CPG background, as many marketers of today do, you tend to forget that the strongest brands often ARE the retailer’s brand. Land’s End (pre-Lampert of course), Cabela’s, Whole Foods, Nordstrom’s, GAP, Limited, Victoria’s Secret, Godiva, Starbucks, Omaha Steaks… you get the idea. The common thread to all of these successes is focus. Focus on a single consumer need, a single image and message in filling that need and, as others have pointed out, above all a focus on distinctive, high quality products to meet that need. Pulling this off is the difference between a merchant and a distributor.
“Fast fashion” translates to “expendable fashion” and that one factor is a huge driver for the recent rush in private label apparel (along with the ongoing margin and differentiation benefits). Blame H&M, Zara (and Limited before them). As vertical players’ product development cycle and trend interpretation timelines accelerate to head-spinning speed (how about 2 WEEKS in the case of Zara), new standards are set for the big guys . . . standards that make the efficiencies of do-it-yourself brand-building more attractive than ever.
Zara, Federated, Target, Wal-Mart, Penney’s . . . all have invested major bucks to hone their private label and product development prowess. This trend shows no sign of abating. After all, build it and you’re gonna wanna work it!
Store Brands will be successful only if they are backed by unquestionable quality of design and performance as well as advertising. J. C. Penney’s “Arizona” jeans is a perfect example.
It is about consistency of quality and branding that quality. Does “Armani” sound like the finest fashion? But people know what it stands for. Coach doesn’t sound like a fashion tag line but you know you are getting – quality purses. I think, in food, you create premium product lines not for velocity but to shout “we make quality products.” When Cadillac or Lincoln could not match the quality of Lexus, it affected the entire line of products. Is Toyota that good? It becomes validated when you associate it with Lexus. Tell the story and keep the trust. A great American retail entrepreneur said, “The bitter taste of poor quality remains long after the taste of a sweet price.”
It depends. I did my grad school dissertation on private labels when I was with ADG. We generally had three: Our best was labeled uniquely to the regional chain with prestigious local connotations (Camargo for women and Rookwood for men at Pogue’s/Cincinnati) and a store brand for middle of the road, and then we had an even lower quality line that was used nationwide with the exception of L&T.
All did well and all were profitable for us.
Macy’s problem, in my view, is that some of the store brands sound cheap and smack of a rip-off (“Alfani” is shameless) and the store name and logo themselves look, and sound, childish and low-end (would “RH Macy” or “Rowland H Macy & Company” be better for men’s clothing/coats/for example?).
As above, “Marshall Field’s” would have been a tremendous private label line of merchandise and kept alive a brand with incredible equity amongst Midwestern shoppers, in particular. The brutal obliteration of the Marshall Field’s name is beyond me, I can’t recall anything quite like it in retail history.
Where does fashion come from? What is its genesis? Does it ever come from the top (yes, of course, with Nike), or is it more likely to come from the drift, splif, talk, rep, or “jah”? The lat-lat-lat-latter of course. FUBU. Plus, fashion must never be represented inanely, as exampled by Donna Karan’s recent awards show appearances. DKNY forever. Donna Karan, quoth the raven, nevermore.
Fashion is rebellion. Fashion is being different. Fashion is about leading and sometimes being chastised for it. Eww! You look so weird! How can “fashion” be chain-stored?
Trader Joe’s has many private labels on their various products but the products that I have tried are all great. The public doesn’t feel that they are trading down by buying the house brand. Same with Safeway Select. The products that I have tried were great.
Barney’s has a private label with their name on it. It’s also great merchandise. A store like Barney’s can get away with it because Barney’s has such a sterling reputation; they have credibility in the retail industry. Also Barney’s carries only the very best. If a store carries first rate name brands, it gives their private brands credibility. I own a lot of Barney’s private label and it’s very well made. Also, it has the cachet of being made in Italy.
There was a time just a few years ago when Macy’s carried a lot of premium brands and designer labels. Then, I believed it helped sell the private label stuff. No one expects to make millions off a limited selection of Prada and Armani but it gives the store fashion credibility to sell their less expensive private lines. Field’s knew this well.
IMO Macy’s private merchandise is nothing special and it’s not exactly affordable. People by me always mocked Macy’s and their ‘Alfani” line. A cheaply made impostor of Armani. It reminded me of those ads for ‘Impostor’ fragrances I would see in print. But Macy’s tag line would be: “If you love Armani, you’ll love Alfani”. Too funny.
Omni, above makes a fascinating suggestion worthy of amplification.
Why, indeed, wouldn’t Macy’s retain the old Marshall Field’s house brand as a premium own label? It may have re-bannered the old retail locations, but the brand has legs for many Chicagoans and others around the country who appreciate its long-standing reputation.
Dear friends at Federated: Did you consider this option in your store brand planning? If not, it may not be too late to retain a valuable piece of brand equity under your strategic umbrella.
Even Trader Joe’s needs to be concerned about the use of private labels. If consumers don’t find value in the private label products at Trader Joe’s, they won’t keep coming back. The quality of those private label products has to be very high. Every other retailer needs to know what its particular consumers want and provide that with private label or lose. In fashion that will mean an extremely quick turn-around time from concept to the shelf. Private label fashion will have to compete with Zara’s three-week turn around time to be successful. Just stocking private label products is not a solution in and of itself.
One of the dangers is that, as retailers become more and more reliant on private label, there are inevitably temptations to cut back on quality to save a few bucks when results are not what they’d like, hoping consumers won’t notice. But, they inevitably do, and retailers that cave in to this temptation devalue their own brands, along with the private labels of other retailers.
Gap compared to J.C. Penney: Gap started with 100% brand name jeans (Levi’s), and went to 100% private label. J.C. Penney struggled for years (5? 10? 15?) to get acceptance for its 100% private label jeans assortment and finally adopted brand names while keeping its private labels, too. Macy’s private label work goes back at least 50 years (“Supremacy”) and maybe much longer than that.
In apparel, private label markdown risk is critical. As long as private label is expanding, true markdown costs aren’t known unless merchandise aging is critically applied. Translation: watch out for unsold dregs building up 2 years after the rollout is finished. The private label initial high markup is exciting, but the markdowns can feel like the hangover after the party.
Fashion is different than selling – some items are standards and may not be “trend setting” but will always be appropriate and can be reliable as movable merchandise. These items, only, will result in a store failure just as pure trend and fashion would never be able to sustain a large store organization. There is requirement of a merchandise mix that when taken as a whole is enticing, complete and dependable and Marshall Field’s did this expertly.
In-house brands can and are an incredible resource for a merchant if done correctly and with attention — as mentioned — if skimped on — they will not pass mustard with the consumer.
A customer who wants a $1000 Armani suit – period – likely does NOT want an Alfani suit at any cost. Playing the middle market customer is SO difficult and attention MUST be paid to detail – size – fit – and VALUE so that the customer perceives VALUE in trading DOWN to the in house brand from the “true” designer label.
And at the other end — the guy who would NEVER pay for an Armani suit either because he can’t or doesn’t care — likely will also NOT pay $500 for an Alfani suit EITHER. so with the middle market attention MUST be paid to the pieces so there is perceived and real value in giving up the cache of the true designer label – either top line or bridge.
It just seems to me that the Macy’s in-house brands are terribly expensive — I worry that savvy shoppers will simply trade up to the real thing and thrifty shoppers will look elsewhere for a less expensive alternative (Kohl’s and Penney’s in-house, H&M).
Finally — a balanced mix should be present. To rely on in-house brands to be all things to all customers is hazardous. The in-house labels SHOULD NOT BE in the position to Make OR Break the retailer.