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Interesting article, I thought. I like the main point - designers used to use jeans in order to step down, now jean companies use jeans to step up.
http://www.businessweek.com/innovate...nd+design+lead
Riding Hip Jeans into New Luxury Markets
Denim used to be a way for high-end fashion designers to go mass,
but a new generation of brands is using $150 jeans to launch upscale
lifestyle brands
You might think that for a young brand, netting $100 million in sales
of $100-plus jeans is a sure sign of success. And indeed, labels such
as True Religion (TRLG), Rock & Republic, Citizens of Humanity, and 7 for All Mankind have graced the pages of fashion bibles like Vogue and Elle, and are sold in high-end stores from Saks to Barneys New York.
But for this new generation of fashion startups, "premium"?or
$100-plus?jeans are just the springboard for launching upmarket
lifestyle brands. Many are entering 2007 by offering expanded lines of
clothes, accessories, outerwear, eyewear?even a hotel?that they hope
will boost customer loyalty and fully establish them as multicategory
brands.
Of course, today's designer jeans phenomenon isn't the first wave of
premium denim to hit shelves since the first blue jeans were made,
patented, and sold to laborers by Levi Strauss & Co. in 1873. But
contemporary premium jeans companies are setting their brands apart
from the designer jeans businesses of the 1980s rather than emulating
their models.
Premium denim's first wave was led by fashion designers Gloria
Vanderbilt and Calvin Klein, well-established names who used jeans to
court mass-market audiences. They saw jeans as a less expensive fashion
item that could conspicuously display their name on the back pockets.
Today's denim executives are deploying the opposite strategy: building
high-end brands from the blue jeans up?and using their staggering sales
growth to fund luxury clothing and accessories lines.
A New Status Symbol
The success of these ambitious young jeans makers, who have seen
sales double or triple in the past year, stands in particular contrast
to the fate of the well-known traditional jeans maker, Gap (GAP), which is floundering (see BusinessWeek.com, 1/5/07, "Sales Gap at the Gap")
with falling sales and talk of a buyout. In fewer than 10 years, these
companies have effectively?and collectively?established a new category
that's not quite luxury, and not quite downmarket weekend wear, but
something in between.
"Consumers now see blue jeans as an investment and will pay more for
them. They're a staple in a person's work wardrobe. Steve Jobs of Apple
(AAPL) is always photographed wearing jeans," says James Sullivan, author of Jeans: A Cultural History of an American Icon (Gotham Books, 2006).
Sales of premium denim provide proof of jeans' popularity. True
Religion, for example, saw net sales increase 41.8%, to $109.3 million,
in the nine-month period ending Sept. 30, 2006, up from $77.1 million
in the same period the year before. These are striking figures,
especially compared to those from the company's first year in business.
True Religion brought in $2 million in 2003.
Lifestyle Branding
The company recently announced licensing agreements for scarves,
footwear, and outerwear, making clear its intention to become a global
lifestyle brand. And Rock & Republic, which saw estimated growth of
270% in 2006 from its $100 million sales in 2005, launched an
accessories line of men's and women's shoes, bags, and eyewear at the
end of last year. The company expects to expand into cosmetics and even
a chic Rock &Republic boutique hotel in 2007. (I can just see all the teenyboppers salivating).
"Adding accessories and clothing to build a lifestyle brand can work
for those jeans companies with a strong customer following," observes
Marshal Cohen, a retail analyst with market researcher NPD Group. "To
be a one-trick pony in today's world is risky and limits growth, which
every company in any market is judged on. But the brand has to be
strong, otherwise the expansion is capricious."
NPD Group data indicate that department store sales for women's
premium denim jeans priced at $100 and more grew the most among all
women's denim categories in the year ending November, 2006. Jeans
priced at $100 and above saw a 23% sales increase, from $165 million to
$203 million. Jeans priced $75 to $99.99 grew 16.9%, to $55 million.
Jumping-Off Place
Even denim stalwarts such as Levi Strauss and Guess (GES)
sell premium styles to keep up with consumers' demand for higher-end
jeans. Levi Strauss sells $250 jeans in its Capital E line, launched
last year.
The line is characterized by more elegant craftsmanship and refined
materials?such as 100% organic cotton?than its core line of Red Tab,
lower-priced jeans that sell for around $40. And the average price of
women's jeans at Guess stores in the U.S. (see BusinessWeek.com,
12/18/06, "How Guess Got Its Groove Back")
is now $103, reflective of higher-end cottons and more sophisticated
styling (read: more holes, distressing, and Swarovsky crystals). That's double the average cost of women's Guess jeans a few
years ago.
Although Guess did follow a similar path in the 1980s, starting with
denim and then growing into a larger lifestyle brand offering apparel
and accessories (including a higher-end line, known as Marciano and
named after the company's founding brothers), only recently has it
entered the higher-end market for jeans.
The business strategy behind denim's new use as a brand springboard
is simple: the product doesn't require much risk, in terms of audience
demand, design complexity, or even startup costs.
A Design Yardstick
"The longstanding success of the blue-jeans business is that it's a
relatively easy market to get into," observes James Sullivan. "It's a
proven category. There's low overhead. The design, for example, is a
classic fashion staple. You start with the standard Levi's 501 and add
distinguishing traits, such as back pocket stitching or seams."
Seven for All Mankind jeans, for example, feature characteristic?and
much imitated?swoosh embroidery on back pockets. (The downside is that
such details are easily knocked off by lower-market brands. In
addition, there's intense competition among increasing numbers of
companies with similar products.)
In any case, compared to launching a full clothing line, countless
design hours can be saved. The silhouette and construction of jeans
change slightly, yes, from lower waistbands to skinnier legs, but the
basic construction of pant legs, pockets, belt-loops, and fly generally
stays the same. Not to mention that cotton denim pants are less
expensive for a young brand to produce than, say, a handbag made of
buttery leather. (read: this shit is too easy, any monkey with a good PR firm can cash in).
But not all premium denim labels are moving upmarket as a strategy
for business growth. Paper Denim + Cloth, a maker of exclusive jeans
once in the $100-plus range, is maneuvering in the opposite direction.
In mid-2006 the company began focusing on mass-market sales in the
$80 to $90 range, taking it out of the "premium" category. At first,
says CEO Chris Gilbert, he was interested in developing a low-priced
second line?think Isaac Mizrahi for Target (TGT).
But keeping the Paper Denim + Cloth name "kept us from doubling our
overhead and bringing in a second design team," says Gilbert. "Plus we
realized we'd have instant recognition if we kept the same brand. We
wanted to build on the cachet we've built over six years in business."
Mass-Market Direction
Gilbert says that the high quality of the jeans hasn't changed, the
same premium cottons are used, but that they can offer the lower
price-point by shifting manufacturing from Kentucky to the Dominican
Republic, where all of the company's jeans will be made.
Paper Denim + Cloth now has a distribution deal, which started in June, 2006, with Federated Department Stores (FD),
the largest conglomerate of department stores in the U.S. and operator
of Macy's, Bloomingdale's, and other chains. The move broadens the
range of customers from a boutique audience to a wider demographic.
And although the company is going downmarket, it is also following
the lifestyle trend among its competitors by launching outerwear,
sweaters, shirts, and other items targeted to a more mass-market
audience.
Critics might see lowering price points and a larger distribution as
brand dilution, but Paper Denim + Cloth's strategy reflects one of the
realities of the denim marketplace: Although lower-priced women's jeans
saw dips in department store sales in the year ending in November, 2006
(according to NPD Group), these lower price points still generate more
overall revenue than their higher-end rivals. Jeans selling for $25 to
$49.99, for instance, saw the biggest dip in annual department store
sales, down 22.9% to $283 million, but that's still $80 million more
than the total sales of $100-plus jeans.
The key for Paper Denim + Cloth and the more expensive premium-denim
labels alike as they expand will be to keep their brands consistent and
distinctive. As they translate their casual-chic brand identities into
numerous new products and begin to compete with more established
lifestyle brands such as Polo Ralph Lauren (RL),
these premium-denim companies face a design and marketing challenge
that will require more than just fancy stitching on back pockets.
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