TIME: Almanac 1993/TIME Almanac 1993.iso/time/111191/1111200.000

Text File | 1992-09-23 | 8.3 KB | 170 lines

                                                                                BUSINESS, Page 68

FASHION

Why Chic Is Now Cheaper


Big-name clothing designers are moving down-market to court
price-conscious customers. But not everyone wins.

By BARBARA RUDOLPH -- With reporting by June Hager/Rome and
Farah Nayeri/Paris


    Giorgio Armani. The name defines chic. Luxurious fabrics,
exquisite craftsmanship, elegant design -- that's the Armani
that customers love and competitors fear. So what is this
upscale Italian designer doing peddling cotton T-shirts and blue
jeans? Quite simply, he is trying to make money like everybody
else -- by reaching the millions of American men who cannot
afford his $1,875 suits and the women who can only admire his
$1,800 dresses on department-store racks. In December the
designer will market a line of casual clothes bearing an Armani
Jeans label -- chambray shirts, denim jackets, linen blouses.
Nothing fancy. More than three-quarters of the items will cost
less than $100.

    Armani is only the latest designer to enter a clothing
market that is rapidly coming to realize that nobody wants to
spend real money on clothes these days. U.S. retail sales are
depressed, and Christmas sales will probably be flat -- at best.
The picture looks no prettier in Europe. In fashion-conscious
Italy, for example, apparel sales are expected to decline 12%
in 1991. The one striking exception seems to prove the rule: in
the U.S., sales at the Gap, purveyor of $19 cotton turtlenecks
and $28.50 sweat pants, are running 30% above last year's.

    "Everyone is thinking about less expensive clothes," says
Calvin Klein. "We're all doing it." While the designer-
collection business is ailing, if not dying, moderately priced
second collections, known in the trade as bridge lines and
costing about half as much as top-of-line labels, still sell.
Armani is betting that a whole chain of boutiques -- to be
called A/X Armani Exchange -- can capture $60 million in sales
next year from this miniboom in cheap chic. A/X units will open
in department and specialty stores across the U.S. in March.

    It was the surprise success of Donna Karan's DKNY that
inspired the industry. Selling such staples as $90 cotton poplin
blouses and $365 navy wool blazers, DKNY last year hit $100
million in sales and should reach $140 million this year.
Launched less than three years ago, the company is proving to
be the salvation of Seventh Avenue. Clothing designers, like
businessmen everywhere, tend to fall all over a winning formula,
and store racks are groaning with DKNY wannabes. "I call our
rivals the Pac-Men," says DKNY's president, Denise Seegal.
"They're all coming after us." This fall saw the launch of
Company, a division of Ellen Tracy, whose best sellers include
$145 velour tunics and $255 stirrup pants, and of Anne Klein's
A Line, which sold a passel of Lycra-blend stretch pants ($215)
and double-breasted blazers ($365).

    Other recent entries in the category include KORS from
Michael Kors, which markets $185 sarong skirts and $105 chambray
shirts. Kors anticipates that sales this year will reach $15
million. Ungaro's Emanuel line includes a $360 houndstooth dress
and a $195 gabardine skirt. Declares Ungaro: "A woman doesn't
need a lot of money to be elegant. She can be chic with clothes
bought from a supermarket chain." In the men's market, where the
move toward lower-priced lines is less pronounced, second
collections include Versace's V2 and Armani's Mani.

    The bridge market in womens wear alone totals about $1
billion at retail, more than twice what it was just three years
ago. Predictably, department stores are devoting more space to
second collections. At the new Manhattan outpost of Galeries
Lafayette, the French department-store chain, the shelves are
stocked with French designers' second collections as well as
more moderately priced labels such as Chantal Thomass and Lolita
Lempicka. Bloomingdale's senior vice president Kal Ruttenstein
reports that sales of the store's bridge lines are running 28%
ahead of last year. Debt-laden retailers keenly appreciate that
markdowns on bridge clothes typically run around 30%, according
to retailing consultant Howard Davidowitz, while designer
markdowns often hit 70%.

    "In the late 1980s, women were into designer labels.
That's not where it's at now, and we may never get back there,"
says Frank Mori, president of Takiyho, which owns Anne Klein
and has a 50% stake in Donna Karan. "The days of selling
clothes on the basis of brand name alone are over," says Ralph
Toledano, president of Karl Lagerfeld.

    Though the bridge market existed on a small scale during
the 1970s, it really took root in the early 1980s with the
launch of the Anne Klein II line, designed by a young Donna
Karan and Louis Dell'Olio. Anne Klein II, which found its niche
selling career clothes just as professional women were entering
the work force in large numbers, shared the spotlight with
Ellen Tracy, an established line that was spruced up by designer
Linda Allard.

    The market hummed along at moderate speed until early
1989, when Donna Karan rewrote the rules by tapping into a
powerful consumer demand that others had somehow failed to
satisfy. DKNY offered stylish, sporty clothes at decent (though
hardly bargain-basement) prices. It is now running neck and neck
with Ellen Tracy, though DKNY is sold in 450 stores in the U.S.,
compared with 1,000 for Tracy. And DKNY has probably cut into
the market share of Anne Klein II, whose sales have slipped from
$130 million in 1989 to an estimated $110 million this year.

    By all rights, Calvin Klein, one of the patron saints of
American sportswear, should be cleaning up in this market. He
was one of the first to launch a lower-priced collection:
Classifications, first sold in 1983, was discontinued in 1988.
These days, though, his lower-priced Calvin Klein Sport
division, which last year accounted for nearly 80% of all
business at Calvin Klein, Inc., has been floundering. Company
sales in 1990 fell to $197 million, down from $225 million in
1989. Even worse, the firm lost more than $4 million and carries
long-term debt of close to $68 million.

    The problem, competitors say, is that Calvin Klein Sport
is known for jeans but little else. Klein hopes to change that.
"What I'm doing now," he says, "is refocusing the line to sell
in the bridge market." Says DKNY's Seegal: "It's the
repositioning of the repositioning of the reposi tioning." Adds
a competitor: "Calvin Klein is not a happy camper."

    After Klein's launching a $10 million ad campaign featuring
model-actress Carre Otis, half-naked men and women, and lots of
leather, business is picking up. At Bloomingdale's, for instance,
Calvin Klein Sport sales are running 30% ahead of last year's.
Whether Klein can keep up the momentum remains to be seen.

    Bridge lines are clearly the right response to the
recession, but more than economic factors explain their success.
The second collections, speculates Vogue editor in chief Anna
Wintour, are in synch with the "breaking up of fashion," in her
words. "Women are looking for things that are more their own,"
she says, "and less of a designer statement." In other words,
fewer women feel the need to wear Armani or Karan or any label
head to toe. They'll happily pair a Chanel jacket, say, with a
DKNY skirt and not worry about getting reported to the fashion
police.

    In the apparel business, though, no trend lasts forever.
"The bridge market has already got crowded," says Peter Brown,
a vice president at Kurt Salmon Associates, a New York
consulting firm. A shakeout is probably coming, and soon.

    Though many industry observers pronounce the high-priced-
designer business dead and buried, others hold out hope that when
the economy finally improves, the sector may get a new lease on
life. "There will always be designer customers," says DKNY's
Seegal, who has been wearing designer labels since she first
splurged on Betsey Johnson as a high school student. "They're
basically snobs. The feeling is, `If I can afford a $3,000 Chanel
suit, it makes me stand out.' Are we going to do away with
status? No." For now, however, those status seekers are playing
it very close to the vest.