Angela Chew Increasing Utilization And Strength Of Private Label Brands Ny

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Information about Angela Chew Increasing Utilization And Strength Of Private Label Brands Ny
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Published on October 3, 2008

Author: FNian

Source: slideshare.net

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apparel fashion garments style project

GLGi: Increasing Utilization and Strength of Private Label Brands Tuesday, July 31, 2007 New York

Council Member Biography Angela Chew is a partner at L&M Global Sourcing, a factory group with facilities in New York, China, Bangladesh and Central America. The company is serving Target, Macy's, Wal-Mart, Guess, Michael Kors, Nautica and others. She has 20 years of experience in retail, wholesale, design, merchandising, sales, global production and product development. She has worked with large corporations such as Macy's (Federated) Dept Stores, Saks Fifth Avenue, Ann Taylor, Victoria's Secret, Kohl's and Calvin Klein; as well as small start up fashion brands & design companies and a national food franchise,Domino's Pizza. Her product knowledge includes women's, men's & children's apparel, intimates, activewear, maternity and home goods. She has experience in direct mailing, franchising, licensing, buying and selling small companies.

Council Member Biography

Angela Chew is a partner at L&M Global Sourcing, a factory group with facilities in New York, China, Bangladesh and Central America. The company is serving Target, Macy's, Wal-Mart, Guess, Michael Kors, Nautica and others. She has 20 years of experience in retail, wholesale, design, merchandising, sales, global production and product development. She has worked with large corporations such as Macy's (Federated) Dept Stores, Saks Fifth Avenue, Ann Taylor, Victoria's Secret, Kohl's and Calvin Klein; as well as small start up fashion brands & design companies and a national food franchise,Domino's Pizza. Her product knowledge includes women's, men's & children's apparel, intimates, activewear, maternity and home goods. She has experience in direct mailing, franchising, licensing, buying and selling small companies.

About GLG Institute GLG Institute (GLGi SM ) is a professional organization focused on educating business and investment professionals through in-person meetings. It is designed to revolutionize the professional education market by putting the power of programming into the hands of the GLG community. GLGi hosts hundreds of Seminars worldwide each year. GLGi clients receive two seats to all Seminars in all Practice Areas. GLGi’s website enables clients to: Propose Seminar topics, agenda items and locations View and RSVP to scheduled and proposed Seminars Receive a daily briefing with new posts on your favorite tickers, subject areas and from trusted Council Members Share Seminar details with colleagues or friends

About GLG Institute

GLG Institute (GLGi SM ) is a professional organization focused on educating business and investment professionals through in-person meetings. It is designed to revolutionize the professional education market by putting the power of programming into the hands of the GLG community.

GLGi hosts hundreds of Seminars worldwide each year.

GLGi clients receive two seats to all Seminars in all Practice Areas.

GLGi’s website enables clients to:

Propose Seminar topics, agenda items and locations

View and RSVP to scheduled and proposed Seminars

Receive a daily briefing with new posts on your favorite tickers, subject areas and from trusted Council Members

Share Seminar details with colleagues or friends

Gerson Lehrman Group Contacts Randi Culang Consumer Goods & Services Global Research Head Gerson Lehrman Group 850 Third Avenue, 9th Floor New York, NY 10022 212-750-1229 [email_address] Christine Ruane Senior Product Manager Gerson Lehrman Group 850 Third Avenue, 9th Floor New York, NY 10022 212-984-8505 [email_address]

Gerson Lehrman Group Contacts

Randi Culang

Consumer Goods & Services Global Research Head

Gerson Lehrman Group

850 Third Avenue, 9th Floor

New York, NY 10022

212-750-1229

[email_address]

Christine Ruane

Senior Product Manager

Gerson Lehrman Group

850 Third Avenue, 9th Floor

New York, NY 10022

212-984-8505

[email_address]

IMPORTANT GLG INSTITUTE DISCLAIMER – By making contact with this/these Council Members and participating in this event, you specifically acknowledge, understand and agree that you must not seek out material non-public or confidential information from Council Members. You understand and agree that the information and material provided by Council Members is provided for your own insight and educational purposes and may not be redistributed or displayed in any form without the prior written consent of Gerson Lehrman Group. You agree to keep the material provided by Council Members for this event and the business information of Gerson Lehrman Group, including information about Council Members, confidential until such information becomes known to the public generally and except to the extent that disclosure may be required by law, regulation or legal process. You must respect any agreements they may have and understand the Council Members may be constrained by obligations or agreements in their ability to consult on certain topics and answer certain questions. Please note that Council Members do not provide investment advice, nor do they provide professional opinions. Council Members who are lawyers do not provide legal advice and no attorney-client relationship is established from their participation in this project. You acknowledge and agree that Gerson Lehrman Group does not screen and is not responsible for the content of materials produced by Council Members. You understand and agree that you will not hold Council Members or Gerson Lehrman Group liable for the accuracy or completeness of the information provided to you by the Council Members. You acknowledge and agree that Gerson Lehrman Group shall have no liability whatsoever arising from your attendance at the event or the actions or omissions of Council Members including, but not limited to claims by third parties relating to the actions or omissions of Council Members, and you agree to release Gerson Lehrman Group from any and all claims for lost profits and liabilities that result from your participation in this event or the information provided by Council Members, regardless of whether or not such liability arises is based in tort, contract, strict liability or otherwise. You acknowledge and agree that Gerson Lehrman Group shall not be liable for any incidental, consequential, punitive or special damages, or any other indirect damages, even if advised of the possibility of such damages arising from your attendance at the event or use of the information provided at this event.

IMPORTANT GLG INSTITUTE DISCLAIMER – By making contact with this/these Council Members and participating in this event, you specifically acknowledge, understand and agree that you must not seek out material non-public or confidential information from Council Members. You understand and agree that the information and material provided by Council Members is provided for your own insight and educational purposes and may not be redistributed or displayed in any form without the prior written consent of Gerson Lehrman Group. You agree to keep the material provided by Council Members for this event and the business information of Gerson Lehrman Group, including information about Council Members, confidential until such information becomes known to the public generally and except to the extent that disclosure may be required by law, regulation or legal process. You must respect any agreements they may have and understand the Council Members may be constrained by obligations or agreements in their ability to consult on certain topics and answer certain questions. Please note that Council Members do not provide investment advice, nor do they provide professional opinions. Council Members who are lawyers do not provide legal advice and no attorney-client relationship is established from their participation in this project.

You acknowledge and agree that Gerson Lehrman Group does not screen and is not responsible for the content of materials produced by Council Members. You understand and agree that you will not hold Council Members or Gerson Lehrman Group liable for the accuracy or completeness of the information provided to you by the Council Members. You acknowledge and agree that Gerson Lehrman Group shall have no liability whatsoever arising from your attendance at the event or the actions or omissions of Council Members including, but not limited to claims by third parties relating to the actions or omissions of Council Members, and you agree to release Gerson Lehrman Group from any and all claims for lost profits and liabilities that result from your participation in this event or the information provided by Council Members, regardless of whether or not such liability arises is based in tort, contract, strict liability or otherwise. You acknowledge and agree that Gerson Lehrman Group shall not be liable for any incidental, consequential, punitive or special damages, or any other indirect damages, even if advised of the possibility of such damages arising from your attendance at the event or use of the information provided at this event.

Topics Of Discussion I. The Apparel Private Label Paradigm II. National Apparel Brands Counter Strategy III. The Future of Apparel Private Labels

I. The Apparel Private Label Paradigm

II. National Apparel Brands Counter Strategy

III. The Future of Apparel Private Labels

Private Label Market Share Source: adapted from Cotton Inc.

Overview Worldwide Private Label retail sales have passed US$1 trillion 2006 US apparel & shoes retail sales: $358.6 Billion 2006: 45% apparel sales were private label 2005: 39% apparel sales were private label 2002: 35% apparel sales were private label By 2010, private label merchandise expects to increase by 22% to 55% of total apparel sales Source: US Dept of Commerce, expand on May 2007 Apparel and Textile News

Worldwide Private Label retail sales have passed US$1 trillion

2006 US apparel & shoes retail sales: $358.6 Billion

2006: 45% apparel sales were private label

2005: 39% apparel sales were private label

2002: 35% apparel sales were private label

By 2010, private label merchandise expects to increase by 22% to 55% of total apparel sales

Why The Growth? Consolidation of retailers Brands sell to same retailers and become a commodity Retailers need differentiation and better margin Declining retail prices (women’s apparel prices dropped 2.4% 2007 vs. ‘06) Globalization of Production

Consolidation of retailers

Brands sell to same retailers and become a commodity

Retailers need differentiation and better margin

Declining retail prices (women’s apparel prices dropped 2.4% 2007 vs. ‘06)

Globalization of Production

Decline in Retail Prices From 1996 to 2006, the average retail price declined a minimum of 9% Source: adapted and expanded from Cotton Inc. winter 2003 -6.1 Shirts/Dresses -11.2 Other -16.3 Sweaters -4.2 Off-price -8.1 Shirts -7.5 Mass merchant -12.6 Sweat Apparel -5.8 Specialty -4.9 Shorts -9.0 National Chain -11.7 Slacks -13.7 Department -5.5 Jeans -8.9 Total -8.9 Total % Change Retail Channel % Change Product

Global Sourcing Imitate designer brands to reduce R&D costs Source direct with factories to eliminate middlemen cost Buy in larger volume to receive lower cost Source from low cost, duty and/or quota free countries: China, India, Bangladesh, Vietnam, Pakistan, South & Central America, Africa How do retailers achieve low PL prices?

Imitate designer brands to reduce R&D costs

Source direct with factories to eliminate middlemen cost

Buy in larger volume to receive lower cost

Source from low cost, duty and/or quota free countries: China, India, Bangladesh, Vietnam, Pakistan, South & Central America, Africa

Types of Private Label Generic –very promotional, very low margin, Conway, Walgreen Fast Value Fashion – knock-off brands, Zara and H &M Premium Store Brands – Retailer’s own brand offers same or better quality at better price. The most profitable strategy in private label. Source: The Private Label Strategy, Harvard Business School Press,

Generic –very promotional, very low margin, Conway, Walgreen

Fast Value Fashion – knock-off brands, Zara and H &M

Premium Store Brands – Retailer’s own brand offers same or better quality at better price. The most profitable strategy in private label.

Premium Store Brands Highly competitive - same or better quality at better prices, average 37% less than national brands Higher Gross Margins (est. 58 – 68%) Higher selling price per square foot than other Private label strategies Biggest threat to national brands Brand Loyalty What is the preferred PL strategy? See Appendix 2

Highly competitive - same or better quality at

better prices, average 37% less than national brands

Higher Gross Margins (est. 58 – 68%)

Higher selling price per square foot than other

Private label strategies

Biggest threat to national brands

Brand Loyalty

Key USA Retailers *Sales in billions include all private label & exclusive products Macy’s percentage includes 18% private label and 15% exclusive merchandise Target Macy’s Wal-Mart Kohl’s JC Penney Retailer $59.5 $27 $312.4 $15.5 $19.9 2006 Total Sales 32% 33% 40% 35% 50% Private Label % to total sales $19.4 $ 8.9 $124.96 $5.42 $9.95 Private Label Sales in USD *

Premium Private Label Brands JC Penney’s – a.n.a., Arizona, Ambrielle Macy’s - INC, Alfani, Style & Co Wal-Mart - Faded Glory, George Target - Mossimo, Circo Kohl’s - Urban Pipeline, Sonoma, Apt 9

JC Penney’s – a.n.a., Arizona, Ambrielle

Macy’s - INC, Alfani, Style & Co

Wal-Mart - Faded Glory, George

Target - Mossimo, Circo

Kohl’s - Urban Pipeline, Sonoma, Apt 9

Private Label Trends Combined effort, a win-win strategy: American Living, Simply Vera, Isaac Mizrahi One time exclusive deal – H & M, Target Blending in with Premium brands - INC, Arizona Marriage with a celebrity name – Sarah Jessica Parker, Hilary Duff

Combined effort, a win-win strategy:

American Living, Simply Vera, Isaac Mizrahi

One time exclusive deal – H & M, Target

Blending in with Premium brands - INC, Arizona

Marriage with a celebrity name – Sarah Jessica Parker, Hilary Duff

National Brand Counter Strategies Develop unique products and stay ahead as a trend leader Create own stores Develop a compelling marketing strategy Increase brand loyalty Combine effort by offering exclusive lines. I.e, Simply Vera, American Living, Liz & Co Create one shot exclusive deliveries and SKUS Evaluate sourcing strategy and production cost Maintain net price (minimal promotions & discounts) Improve forecasting and turn around time

Develop unique products and stay ahead as a trend leader

Create own stores

Develop a compelling marketing strategy

Increase brand loyalty

Combine effort by offering exclusive lines. I.e, Simply Vera, American Living, Liz & Co

Create one shot exclusive deliveries and SKUS

Evaluate sourcing strategy and production cost

Maintain net price (minimal promotions & discounts)

Improve forecasting and turn around time

Future of Private Labels Becoming national premium lifestyle brands: INC, Alfani, Arizona Branching out to create specialty chain business: George apparel stores, Wal-Mart, UK Increasing depth of multi dimensional merchandising product mix (Tony Hawk mens, boys, footwear and etc) Spin off PL brands (Aeropostale) Cannibalize weaker PL brands

Becoming national premium lifestyle brands: INC, Alfani, Arizona

Branching out to create specialty chain business: George apparel stores, Wal-Mart, UK

Increasing depth of multi dimensional merchandising product mix (Tony Hawk mens, boys, footwear and etc)

Spin off PL brands (Aeropostale)

Cannibalize weaker PL brands

Private Label Pros & Cons PROS Exclusivity & differentiation Bring customer loyalty Better margin Better control in deliveries Brand equity Freedom in pricing strategy Increase bargaining power with both national brands and PL factories CONS Inventory risk Higher R&D expense Higher marketing expense No markdown or return allowance from branded suppliers If product fails, will create negative image Quality control, complex production & import issues

PROS

Exclusivity & differentiation

Bring customer loyalty

Better margin

Better control in deliveries

Brand equity

Freedom in pricing strategy

Increase bargaining power with both national brands and PL factories

CONS

Inventory risk

Higher R&D expense

Higher marketing expense

No markdown or return allowance from branded suppliers

If product fails, will create negative image

Quality control, complex production & import issues

Private Brands To Watch KOHL’S New Launches– Simply Vera by Vera Wang, Elle Apparel, Food Network Kitchen estimated growth rate 6-7% for 2 nd half of 2007 Tony Hawk, board-sports inspired, a hot category JC PENNEY American Living by Ralph Lauren 2008 C7P – Chip & Pepper Denim 2007 Liz & Co Arizona - $1 billion lifestyle premium brand MACY’S INC, Alfani, Style & Co, Martha Stewart, Field Gear, Epic Threads WAL-MART * George - $3 billion men’s urban fashion Faded Glory - $3 billion lifestyle premium brand *Wal-Mart figures represent worldwide sales

KOHL’S

New Launches– Simply Vera by Vera Wang, Elle Apparel, Food Network Kitchen estimated growth rate 6-7% for 2 nd half of 2007

Tony Hawk, board-sports inspired, a hot category

JC PENNEY

American Living by Ralph Lauren 2008

C7P – Chip & Pepper Denim 2007

Liz & Co

Arizona - $1 billion lifestyle premium brand

MACY’S

INC, Alfani, Style & Co, Martha Stewart, Field Gear, Epic Threads

WAL-MART *

George - $3 billion men’s urban fashion

Faded Glory - $3 billion lifestyle premium brand

What This Means To differentiate To gain and maintain consumer loyalty To achieve higher gross margin To compete with national brands I. Retailers believe private brands are their strategy:

To differentiate

To gain and maintain consumer loyalty

To achieve higher gross margin

To compete with national brands

II. National brands should: What This Means Change mind set and realize that Private Labels are competing brands Innovate and stay as market leaders to beat PL Stay focused on target audience Increase and market brand imagery to gain and maintain customer loyalty Partner with retailers to produce exclusive brands, SKUS, one-time offers or lines Price competitively and streamline expenses

Change mind set and realize that Private Labels are

competing brands

Innovate and stay as market leaders to beat PL

Stay focused on target audience

Increase and market brand imagery to gain and maintain

customer loyalty

Partner with retailers to produce exclusive brands,

SKUS, one-time offers or lines

Price competitively and streamline expenses

III. Future of private labels: Private brands will continue to play an important part of the assortment to their growth strategy Become national lifestyle premium brands Deploy a multi-layer strategy in brand, price and quality Cannibalize weaker private and national brands What This Means

Private brands will continue to play an important part of the assortment to their growth strategy

Become national lifestyle premium brands

Deploy a multi-layer strategy in brand, price and quality

Cannibalize weaker private and national brands

Appendix 1 Retail Price Comparison Average price gap 37% based on quality equivalent categories Average price gap 21% based on national brand’s quality is perceived to be less than private label brands. 30-39% $45-55 GM 50-54% Nautica Men’s Polo $34.50-42.0 GM 58-68% Alfani (Macy’s) Men’s Polo $16 – 40.00 GM 40 – 48% $19.68 GM 45-48% $158-178 GM 48-56% Retail $ Gross Margin 20 –25% 37% 37% Price Difference betw. Brands National Brands Retail $ Gross Margin Private Label Brands Dickie’s, Shady’s & etc $ 16-28.00 GM 60-62% Sonoma (Kohl's) Menswear Levi’s Denim For Wal-Mart $10.77-14.42 GM 38-54% Faded Glory (Wal-Mart) Denim BCBG Dresses $79-129.00 GM 60-69% INC (Macy’s) Dresses

Increasing Utilization and Strength of Private Label Brands New York July 31, 2007 Boston August 1, 2007

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