Market a tight fit for struggling clothing retailers
When Ann Taylor and Banana Republic launched higher-priced clothing lines last fall, the strategy seemed like a winner. The luxury market was booming and specialty apparel chains of all stripes jumped on the new "accessible luxury" bandwagon, rolling out $350 jackets and $200 pants to encourage purchases by higher-income customers.
Their timing couldn't be worse. As retailers across the board struggle with a slowdown in consumer spending, the market for entry-level luxury goods has been hit especially hard. Some chains are delaying or scaling back their high-end plans, or canceling them altogether.
Cache Inc. closed two of its 15 Cache Luxe stores this year and plans to close more. Coldwater Creek Inc. is dropping its higher-priced Spirit line, after testing it in about 50 stores.
At AnnTaylor Stores Corp., which launched its more-expensive Collection line in 24 of its 929 stores in September, the response so far has been tepid. The company recently noted weakness in Collection suit sales and called the line's sales overall "okay."
Gap Inc. won't disclose sales for Banana Republic's BR Monogram line, now in 30 of its 555 stores in North America, though a spokesman said, "We are on track with where we want Monogram to be right now." In April, the chain opened its first store devoted exclusively to the line, but officials stress the Manhattan store is only a test.
Clothing in the retailers' higher-priced lines are generally made of higher-quality fabrics and priced from 10 percent to 40 percent above the chains' core lines.
Targeting middle-class shoppers who aspired to buy ever more upscale products once seemed like a no-brainer. The strategy had been successful for everyone from Starbucks Corp. to Coach Inc., which pioneered the approach in the fashion world by pitching its high-margin $400-and-up handbags as "accessible" luxuries.
"The aspirational buyer is pulling back and not buying, or shopping at the outlet malls to a greater extent," says Craig Johnson, president of Customer Growth Partners LLC. Shoppers with annual incomes of up to $250,000 have trimmed luxury purchases in the past year, he adds.
The higher-priced concepts may work out in the long run, once the economy recovers. And if they are done well, in a limited way, they can create a halo effect for moderately priced brands that can help in the near term, analysts say.
By moving upmarket, the chains hope to boost their profits. But right now, they are having to slash prices to move merchandise. Ann Taylor is offering 20 percent off all new skirts and dresses. At Talbots Inc., 15 of the 34 higher-end items on its Web site are marked down.
Amanda Warren, a 24-year-old employee of a private-equity firm in New York, frequently shops at Banana Republic but has yet to buy from the Monogram line. "When you are in a store and you see an identical item that is more money, why would you buy it?" she says.