dillards polo sale LUXURY BRANDS FLEE DEPARTMENT STORES
Leave Nordstrom’s, however, and just three stores over Coach bags priced over $400 are displayed like museum pieces. It’s a world where a friendly and immaculately dressed sales staff always greets you, the music is always just right and absolutely nothing ever goes on sale.
The contrast explains, in part, why in a little less than five years, Coach has cut its dependence on the department store channel down today to 11% of its $1.6 billion in sales from 15% in 2000 to build its own veritable retail empire, outlining ambitious plans to reach more than 350 stores over the next few years.
The strategy is much the same at other fashion megabrands like Polo Ralph Lauren, Guess and Liz Claiborne. Frustrated by an inability to control pricing and brand display and tired of competing with retailers’ proliferating private label lineup, such brands are aiming to reduce their co dependency on department stores.
“Great brands see they have to protect themselves and can no longer depend on department stores,” said Howard Davidowitz, chairman of Davidowitz and Associates.
The shift comes as luxury brands increasingly compete with their distributors. Just 10 years ago, only 25% of apparel sales were private label, according to market research firm NPD Group. Today private label penetration tops 37%. Indeed, Mike Tucci, president of Coach’s North American Retail Stores, said it “allows us to interact directly with our customer and to capture market share on a broad level.”
Polo Ralph Lauren’s fastest growing segment over the last two years is by far retail. Although wholesale garnered $1.2 billion in sales in fiscal 2004, sales have increased only 1% since fiscal 2002. The brand’s retail segment, meanwhile, jumped almost 27%, from $924 million to $1.1 billion. In the company’s 2004 annual report, CEO Ralph Lauren outlined plans to open 70 to 85 stores annually over the next five years.
In 2004, comparative store sales at Guess rose almost 10% and the $730 million brand plans to open 24 new stores in 2005, while continuing to decrease shipments to department stores, according to Securities Exchange Commission filings.