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Sun, Dec 01, 2002 - Page 12 News List

Large retail chains seek an edge with private labels

In a bid to win back customers who have been spending their money at specialty retailers, department stores have invested more heavily in their own exclusive brands

By Patricia Winters Lauro  /  NY TIMES NEWS SERVICE , NEW YORK

Department stores are increasingly investing in the design and promotion of their once-shunned private label brands to attract customers who are shopping at specialty and discount stores. JC Penney has begun a print advertising campaign for its Original Arizona Jean Company brand, which had more than US$1 billion in retail sales last year.

PHOTO: NY TIMES

Private-label apparel brands have long been the neglected stepchildren of department stores, receiving minimal ad support or prime floor space.

But the stores -- needing to attract customers who are shunning them for specialty retailers and discount chains like Target -- are increasingly investing in the design and promotion of their once homely brands, giving them the star treatment as if they were designer labels like Liz Claiborne or Jones New York.

And they are turning to Madison Avenue-type marketing techniques to create hip images for their revitalized (and in some cases newly created) brands.

For its Original Arizona Jean Co brand, JC Penney recently began a separate print campaign aimed at a younger audience.It shows beautiful young people romping in the great outdoors.

And Federated Department Stores, owner of stores like Bloomingdale's, Macy's and Burdines, now features Heather Mills McCartney, an amputee, activist and wife of Paul McCartney, to promote one of its big private-label brands, INC International Concepts.

"The whole concept of private label has taken on a new dimension," said Candace Corlett, a partner with WSL Strategic Retail, a consulting firm in New York.

Historically, private labels have been inexpensive knockoffs of designer fashions, albeit often a year behind the runway fashions.

But now private brands are often promoted front and center on the floors of some of the best department stores.

Store catalogs underscore the trend, including the recent fall catalog for Macy's in which its private-label brands like Alfani and Charter Club have layouts alongside big designer names like BCBG Max Azria and Liz Claiborne.

Catering to youth

Standing out from the crowd is one reason for the reassessment. In a world where every top department store has a Jones New York, you can get INC only at Federated stores. And Arizona is only at JC Penney.

"What happens in the marketplace is that eventually the same name brand lines are available in multiple stores," said Dan Butler, vice president at the National Retail Federation in Washington.

"What's going to make you different is any product you can sell that may be unique to your company," Butler said

Kurt Barnard, president of Barnard's Retail Consulting Group, in Upper Montclair, New Jersey, said.

"Department stores are beginning to realize they have a problem -- that they are the favorites of older people who were brought up on the department store habit. There's only one problem: They die, and they are not being replaced by younger people," Barnard said.

Perhaps most important, the private-label brands can also be much more lucrative for the department stores. Brand names like Versace or Liz Claiborne "have to mark up their costs to cover running their entire business. ... Whatever that spread is, the store doesn't have to pay with a private brand. They make all the money," Corlett said.

JC Penney said it had made substantial investments in its private labels in the last 18 months, hiring top new creative talent and combing Europe and other places for inspiration, said Peter M. McGrath, senior vice president and director of JC Penney Private Brands.

The company has six core private-label brands, including Stafford and St. John's Bay, but its big push this fall is on Arizona, which had more than US$1 billion in retail sales last year.

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