Shares of companies like Coach (NYSE: COH) were flying high when more people than ever were flocking to waste their money on stuff they couldn't afford.Right at the top of the market, predictably, all the lower-end retailers thought they'd get into the act. Gap (NYSE: GPS)'s Banana Republic introduced a high-end line, and so did Coldwater Creek (NASDAQ: CWTR), Cache (NASDAQ: CACH) and AnnTaylor (NYSE: ANN). According to the Wall Street Journal (subscription required), the economic downturn gave the companies a strong rebuke. Cache is closing some of its Cache Luxe stores and Coldwater Creek is giving up on its high-end aspirations.
But I don't think it's the economic downturn that doomed these product launches. Luxury clothing is in a tough spot, but it's certainly fared a lot better than upper-middle market companies like Liz Claiborne (NYSE: LIZ) and Coldwater Creek. Rather, I think companies are using a pretty familiar tactic: blame failed strategies on the economy and minimize the impact of tactical errors made by seven-figure executives.
Here's why the strategy failed: taking a brand and raising the quality/price-point is extremely difficult. The reverse is easy, but trying to convince people to pay Coach-like prices for Banana Republic clothing -- even if it's of similar quality -- is a strategy that's destined to fail. Banana Republic has established itself at a certain price point and while people would be thrilled to get the brand at a lower price, most people willing to pay more will want a bona fide luxury label.
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Reader Comments (Page 2 of 2)
5-20-2008 @ 6:37PM
M said...
Even in my late teens, twenties and thirties I would have choked before wearing Gap or Bananna Republic. I am 46 and I am not wearing that crap now either.
5-20-2008 @ 6:47PM
deb said...
hey, mom worked in the white front snack bar!!!!!
5-20-2008 @ 6:50PM
judithgrayson said...
The old Banana Republic had great stuff. I still have mid length shorts in green khaki (with pleats). The T-shirts last forever, you have to throw them out they never wear out. Also, beautiful pants. Retail merchandise has turned to crap and there's no fashion, even though its promoted as if there is. (another media lie). I wear stuff I wore ten years ago or more, if it still looks good. The thing is clothes are the last thing anyone is buying. Moreover, and its the truth, I can buy great tops, pants, skirts, jackets for $5. and I am not kidding. There's no reason to pay $40, $75 or $110, it's the same merchandise that's all made in south asia and I am even beginning to recognize the brands and know which one's are well made. We're talking $5. folks. Gorgeus handbags are $39. They only last two seasons but so what. Way back in my closet are the $400 and $600 (and more) one's I used to buy. It's manhattan, so I don't know if this is happening anywhere else but it sure is happening here. I haven't been in a department store in years. Sad, but true.
5-20-2008 @ 6:56PM
Javah said...
if you complain about everything, then don't shop there!!!
5-20-2008 @ 6:57PM
J.A.L. said...
Couldn't have anything to do with the fashions being so damn ugly that most people won't buy 'em, could it?
5-20-2008 @ 9:19PM
Tmag said...
I love Banana Republic. It's the only place in the mall where I can find work clothes that actually fit me. Everytime I wear a suit or dress from there, one of my customers makes a comment about how they like it. I like the Gap, also, but wind up wearing a smaller size there and have trouble finding something that doesn't look like the casual clothing I already have. At Banana I did not buy the new higher end though, I'd rather actually go to Coach and get the real deal, but everything else has been good for me and I can usually find something great on the sale rack.
5-20-2008 @ 7:15PM
Annette said...
I managed stores for the Gap and Banana Republic back in the early 90's. With Mickey at the helm, Gap stores were THE place to buy just about anything...remember the great white shirt that was a staple of your waredrobe? BR was meant to be an upscale alternative to the Gap. It was supposed to maintain style and function while being "fashion forward". Unfortunately, as of late, BR has taken the idea of fashion forward to the extreme. Instead of offering a place where one can buy the basics of good style at a higher price point (JCrew), it has become a place where you need to be a little more edgy to be comfortable. While that idea is fine, the current market is certainly not going to support that kind of purchasing. I would be disappointed if BR doesnt make it.
5-20-2008 @ 7:18PM
Nancy Terjesen said...
Coldwater Creek seemed to excel at marketing via magazine photos. Those photos make their merchandise look so tasteful and luxurious. But when you go in their stores, the stuff looks cheap. I think CC might consider THIS advice if it wants to succeed: either increase the quality of your products or go back to the deceptive catalog presentations.
5-20-2008 @ 7:24PM
al sanchez said...
I REMEMBER BACK IN 1981 ON POLK STREET IN SAN FRANCISCO -- THAT OLD STORE CALLED BANANA REPUBLIC. IT SOLD KHAKIS AND JUNGLE-LIKE STUFF. I BELIEVE THAT WAS AN ORIGINAL BANANA REPUBLIC. USED TO SHOP THERE. IT WAS A HOLE IN THE WALL, ALMOST. LONG GONE.
AL IN LA
5-20-2008 @ 7:34PM
Jackie said...
While Coldwater Creek has beautiful clothing, it is way too expensive for the average woman. Your money is strained at the grocery store and the gas pumps, and it will not stretch at those prices.
5-20-2008 @ 7:40PM
sjp said...
CurlyZ:
I remember White Front, Two Guys, The Treasury, Fedco, and the original Best Buy. How 'bout S&H Greenstamps and Blue Chip Stamps?
5-20-2008 @ 7:56PM
clotheshore said...
Remember Forenza, Au gaton(don't know how to spell it) and Express(which was high end in the 90's, had great lambskin jackets) The Gap had great , big thick cable knit and mohair sweaters. Not anymore. You get what u pay for
5-20-2008 @ 7:56PM
LOT said...
American clothing Mgr will NEVER get it.
The age group 40 and up has the money but not the shape like some 20 year old.
When they learn to give the 40 plus age group the sizes and styles these women want than bussiness will increase.
I am lucky to shop in Europe on my bussines trip 's and see the difference.
All stuff made for the 20 year old's go up to size (48) a 18 .
These sizes cost 5 bucks more and the Europeans women gladly pay it for fashionable stuff.
America will never learn that the age group 40 and up has all the money and wold love to buy, but the crap and sizes hold's them back.
Europe, you never looked better to me, thanks.
5-20-2008 @ 8:00PM
bridget said...
Hello I am 15 and I am by all means not a metralistic person I love to bagan shop at Target and TJ Maxx and in the long run I can splurge more and get better quality clothing. Mind you I do love to shop at Old Navy and The Gap only once to treat myself to something a little finer and ritzy. I also love to shop at Charlotte Russe if anyones familiar with it I can find nice piteit jeans for my short stature and they last like forever. They carry the brand called Refuge jeans and they are awesome try them out for all you ladys with problems with finding stylish jeans that flatter their short legs like I do.
5-20-2008 @ 8:05PM
BOBS said...
TO LOT
You are so right
H&M makes clothing in different qualities for Europe and the USA. Made in china, different quality. Guess who get's the better quality and same prices? YES, EUROPE.
Once you seen the Europeans quality on a visit you realize that american's are beein gripped off, big time, in quality and money.
we are a fat nation and the better the quality , the better the fit. Cheap looks cheap and does NOT fit.
5-20-2008 @ 8:09PM
LOTTERW said...
Women are tired of frumpy , outdated crap this country offer's. So what do they do? they do not buy.
I also agree with the Europe statement's and know all about the two quality tear system in H&M.
5-20-2008 @ 8:18PM
uderman said...
quality is needed for the fatter american person and that is something this country does not give the average joe, Unless you pay big money and buy, Ralph lauren, Jones, there is NO quality in anything else.
Sizes are another factor. In the end of the season when sales are here all I see left over is:
S and XS the anorexia size.
American manufacturer have not caught up with the fatter public out there and sizes.
I do know that most designer's are homosexual and do not relate to any women's problem.