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As Better Market Reenergizes, Liz Arrives With New Dimension

The turmoil in the better category is creating a new market reality, and next week, Liz Claiborne, moving to protect its turf, will launch its Realities line.

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Photo By WWD Staff

Sketches of the new Realities better line
NEW YORK — The turmoil in the better category is creating a new market reality — and Liz Claiborne Inc. has its very own version.

Claiborne is moving rapidly to protect its turf in its most important market with the launch next week of Realities, the fourth better line it has added in as many years. The line brings with it a familiar name — Realities was one of the firm’s most successful fragrances. It also heralds a new way for the vendor to conduct business that promises more flexibility and collaboration with retailers at a time when department stores are demanding greater product innovation and are stepping up their own private brand programs to get it.

“The product has to be brilliant,” said Angela Ahrendts, executive vice president of the firm. “That’s the price of entry. It has to fill a niche. It’s going to do that, but the [retail] ceo’s are just as interested in how we’re going to do it differently for them and that’s the new business model.”

Ahrendts and executive vice president Trudy Sullivan discussed Claiborne’s approach to the better market in an interview with WWD at the firm’s headquarters here last week. Together with chairman and chief executive Paul Charron, Sullivan and Ahrendts set the firm’s strategic direction.

While Realities has been in the works for some time, the transition of the Lauren by Ralph Lauren license from Jones Apparel Group to Polo Ralph Lauren Corp. in early June prompted Claiborne to move up the launch date to September from November and to go with a soft launch in the spring to, as Ahrendts noted, “take advantage of the market dynamics.”

The company’s better roots run deep. In addition to starting out in the zone, Claiborne now derives nearly half of its $3.72 billion in annual sales from products sold at better price points. By comparison, Jones derived 37.7 percent of its $4.34 billion in revenues last year from sales in the zone.

Key to the firm’s new approach is its flexibility. Claiborne is looking to work with retailers to make everything as easy as possible and to serve chains’ individual needs.
Realities will be kept simple in everything from pricing to fixturing. Marketing muscle for the brand will be applied locally instead of nationally or globally. That will allow stores to drive traffic by whatever means works best, be it in-store shops, an in-store selling specialist, local advertising or other promotions.

The market schedule will not follow the traditional calendar, but will be adjusted to accommodate retailers’ needs. “We could actually show every other month if we’d like,” noted Ahrendts. “We’re going to start it in spring market, but the spring and summer lines are both done, so we could show summer a month later, two months later.”

Retailers, she noted, are accustomed to this flexibility with their own private label programs.

“Let’s face it, private label is our number one competitor to date and what they don’t have is eight weeks of market and collecting orders that we have,” said Ahrendts.

“We’re trying to get out of our own box,” she added. “We are a big corporation and we have to get out of our way. We have to test and try new things. There are a lot of things that are not working for us and they’re not working for our retail partners.”

Successful elements of the new strategy will be incorporated into existing businesses. Specifically, Claiborne will be looking to apply the line’s smaller management structure to its other lines. Another innovation that could be applied to other brands is Realities’ more focused manufacturing.

The brand will be made in fewer factories, which will be more involved in areas such as color and fabric, as well as product development. The factories have to do more work up front, but are rewarded with greater volume while Claiborne gets a quicker turn, among other benefits.

Situated at the high end of the better zone, Realities is set to bow in 200 to 250 doors in January. It will start out with mostly career offerings and then assume a lifestyle orientation. The hope is to extend the line to 750 doors within three to four years.

While declining to provide revenue estimates for the line, Ahrendts offered, by way of comparison, that a billion-dollar brand historically sells in 2,200 to 2,400 stores. Applying that rate of sales to Realities’ anticipated rollout to 750 doors, which should offer an approximation, leaves the collection with annual sales of up to $340 million.
The firm will introduce women’s for spring and follow that up in the fall with a relaunch of the women’s fragrance and the addition of nonapparel classifications, such as handbags and jewelry, and, potentially, men’s wear. A men’s fragrance is set to launch in 2005. To further the brand’s lifestyle appeal, licenses for categories such as shoes, outerwear and eyewear also may be added.

A $1 billion brand, though, isn’t what Claiborne is shooting for.

Ahrendts and Sullivan said the company would prefer to have three our four midsize brands instead of one larger name so it can better differentiate its offerings for retailers and appeal to a wider swath of customers.

Differentiation has become a touchstone for the department store channel. Stores are looking to set themselves apart not only from the national chains, but increasingly from each other. This has pressured vendors to offer up a more varied product, be it lines with more limited distribution or a broader offering of the larger collections so retailers can pick and choose.

“We look at the better sector differently than anybody else that we are competing against,” said Sullivan. “We don’t look at it one-dimensionally. It’s not just a sector or a customer or a brand. We really look at the better sector in all of its segmentation possibilities.

“Having a portfolio of brands in that better segment allows each individual account to customize what their better offer’s going to be, depending on who their customers are and how they want to play the good, better, best in their stores.

“Our retailers have educated us tremendously on what are the kinds of brand attributes they need in their particular stores,” noted Sullivan. “They increasingly look at their stores as brands and they’re known by the company they keep.”

In addition to a good-better-best pricing strategy within the zone, Claiborne splits up its view of better sportswear into the realms of updated (as seen in Kenneth Cole New York, Reaction Kenneth Cole and City DKNY), classic-traditional (Liz Claiborne Collection and now Realities) and casual (Liz Claiborne Casual).

Claiborne expects to unveil two other new lines for spring. Intuitions, at lower-better price points, will be sold exclusively in Dillard’s Inc. stores. In the moderate realm, Claiborne also will offer Curve, which will include men’s and women’s offerings.
While Realities fills a void for Claiborne — it’s priced the same as the Sigrid Olsen bridge line, but has more tailored looks — it also helps buttress the firm’s better offerings against the upcoming onslaught of new and repositioned lines in the zone.

As reported, spring will see not only a new version of the Lauren by Ralph Lauren better line, but a rival line from Jones, the new Jones New York Signature collection. Also making the scene next spring will be the selective offerings of a Calvin Klein better line from Kellwood Co. and an enhanced positioning in the zone from Tommy Hilfiger Corp. with its expanded H line, among others.

While Ahrendts conceded “everyone’s light bulb went off” after the Lauren transition, she said the rising competitiveness of the more moderate chains has contributed to the sudden interest in better.

“They are so proactive and they have been aggressive on getting a hold of new brands,” she added, citing J.C. Penney’s distribution deal with Bisou Bisou.

Claiborne has steadily been strengthening its position in the better zone over the last several years, with Realities comprising only the latest link in the chain.

“We’re intensely focused on better because it’s our lifeblood,” said Ahrendts. “LVMH [Moët Hennessy Louis Vuitton] does luxury, Liz does better.”