- The Washington Times - Monday, May 27, 2002

Only three years ago, Finity Apparel Group, a trendy $200 million clothing company, did most of its business under its own labels, including Finity and Finity Studio. Now, the majority of its sales comes from making fashions for big stores that want to put their own names on the garments.
"Stores are demanding it, and you have to be there for them," says Jason Tynan, CEO of the New York-based clothing maker, which now does as much as 70 percent of its business for store labels like Federated Department Stores Inc.'s fast-growing INC.
Finity Apparel isn't the only fashion company finding that major department stores want their own labels at the expense of less well-known brands. Those manufacturers that don't have a compelling name or style like Ralph Lauren or that don't support stores' efforts in developing private labels face a sudden drop in business.
"Every retailer is developing an exclusive brand in hopes to stimulate sales," says Walter Loeb, president of Loeb Associates, a retail consulting firm. "Ultimately, there will be a deceleration of brand labels except for the designer names and signature labels like Liz Claiborne."
The latest retailer to focus on its own label is Sears, Roebuck and Co., which announced last week it is acquiring catalog retailer Lands' End Inc. and will sell Lands' End clothing in its stores. The label is expected to account for 15 percent to 20 percent of apparel in Sears stores by fall 2003.
"We're taking away the less profitable merchandise," to make room for Lands' End, says Peggy Palter, a Sears spokeswoman. The retailer is expected to cut the number of brands it carries by 20 percent in favor of certain store labels, such as Covington, which will appear in stores this fall.
Meanwhile, J.C. Penney Co. Inc. has pegged its turnaround in part to sprucing up its private label business under such names as Worthington, while Federated wants to further increase its private labels to account for 20 percent of overall sales, up from the current 16 percent.
Discounters are also joining the trend. Target Corp. has developed relationships with designers like Mossimo Giannulli and Wal-Mart Stores Inc. has signed teen-age TV stars Mary-Kate and Ashley Olsen to lend their names to clothing and cosmetics lines.
Philip H. Kowalczyk, managing director at Kurt Salmon Associates, a retail consulting firm, predicts the trend will only grow.
Department stores, on average, devote about 20 percent of their business to their own store labels, up from about 12 percent three to five years ago. That number, Mr. Kowalczyk estimates, will reach 35 percent within the next three years.
Discounters on average have about 10 percent of their business under their own store labels, but Mr. Kowalzcyk estimates that figure will double over the next few years.
Most stores depend largely on importers to supply the clothing for their private label programs, although they also work with branded suppliers like Finity Apparel. Executives at Finity and other companies concede that developing store label programs for retailers, while it boosts sales, is challenging.
"Stores need great price and a great product," Mr. Tynan says. He adds that the private label business no longer focuses on selling basics, as it did in the past, but is now offering much more fashionable items.
Alan Madoff, executive vice president of Versaille Inc., which has reduced its own brand business to work with stores like J.C. Penney on private label goods, says there is so much "sampling and testing with the retailers."
"You really need to be dedicated to it in all areas, from sourcing to design," Mr. Madoff said.
Other manufacturers, such as Kenny Z., which markets labels like Emma Black, and Zola Ice, are using a totally different strategy. The company has focused on selling upscale novelty clothes under its own brands to small stores and a handful of fine department stores like Neiman Marcus.
"I've turned down a lot of the private label business. It requires too much overhead. You are not building a business, because there is no loyalty," says Kenny Zimmerman, chief executive.
Meanwhile, industry observers say they are waiting to see how Sears' use of Lands' End will affect its remaining apparel suppliers. Some wonder whether Lands' End's visibility and brand appeal will overshadow the rest of the apparel assortment, and believe manufacturers could be under more pressure to perform and meet profit goals.
Sears' Miss Palter responds that the retailer's remaining suppliers shouldn't feel second-best.
"Overall, we are simplifying the mix. We will have more marketing resources to put behind fewer brands," she says. "Lands' End really complements our national brand assortment."

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