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Wearables Business

Brands: Getting a tiger by the tail

Brands: Getting a tiger by the tail – brand marketing is big business

Byline: JEFF RUNDLES

Brand-name apparel – names just about anyone who had stepped into a department store or perused the pages of a consumer magazine would immediately recognize – have always been a part of the promotional apparel marketplace. They just got here in some other fashion than retail. The major basics-apparel mills in the 1970s recognized a significant sales opportunity with the screenprinting and embroidery trades for good quantities of inexpensive T-shirts and sweatshirts, and they created divisions specifically geared toward the trades.

Through this model, the advertising specialty companies, bringing their end-user customers all manner of printed hard goods, got into imprinted apparel almost as a side line. The brand didn’t matter; low price and quick turnaround were the hallmarks of the business, trumping quality every time. If you were going to give away a T-shirt, no one much cared what it said on the label.

Things began to change on the retail side in the 1980s as brand-name apparel, beginning with designer jeans and sport-specific athletic shoes, began garnering larger and larger sales.

But it took the identity movement of the 1990s – an era where “branding” went beyond the back of blue jeans and off the soda-pop can and became an important element to even the smallest service company – to bring branding to the wearables marketplace. Nearly overnight, having your own name on a cheap T-shirt might mean that you too were cheap. In their promotions, companies began to realize that an effective way of enhancing their own name, their own brand, was to associate it with the name of a well-respected, recognized brand.

Wearables suppliers, and their life’s blood, the promotional products distributors, suddenly had a Tiger by the tail. The explosion in the wearables marketplace in the last 10 years has been driven in large measure by a demand for brand-name quality and even the brands themselves. However, this remains a different business than retail and not every brand understands how to maximize the niche opportunities.

WEARABLES EXPLODE IN BOOM OF ’90S

Over the last 10 years, as wearables have come to be the defining segment of the promotional products business, the strength in our sector has come from the stalwarts: Russell Corp., Hanes, Lee, Fruit of the Loom. Their power derived from two key elements: First, that they were part of larger companies deeply imbedded in the retail apparel business and, as such, they were known entities with a given set of expectations, a perceived value going in; and, second, that they had early on created divisions specifically catering to supplying blanks to wholesalers in the imprinted apparel industry, a business with its own set of quirks and rotations quite different than retail.

Having the brand-name appeal actually meant less 10 years ago than it does today, and this is borne out by the fact that the rest of the imprinted apparel industry was defined by non-retail names, such “industry brands” as Outer Banks, Vantage and King Louie. These were names known only to the screenprinters, embroiderers and promotional products distributors who bought their blank goods from the likes of wholesalers like SanMar, Broder Bros., Alpha Shirt Co., Bodek and Rhodes, and Staton Wholesale, to name only a few. These “industry brands” were successful, along with their wholesale distributor partners, because they understood the decorator and promotional marketplaces, maintained deep inventories, and kept styles from year to year for the kind of program business that supported most of the industry.

The apparel side of industry, however, was easy then. No one really cared about what was going on at retail in apparel, because promotional apparel was just that, promotional. It was very basic stuff used for giveaways or company picnics. It was T-shirts, sweatshirts, hats and a few other basic polos and turtlenecks, all unisex – and for the most part, end-users were buying apparel in much smaller numbers than they were buying pens, coffee mugs and calendars. Indeed, at the time the term “promotional apparel” pretty much meant “cheap T-shirt” and hardly anyone, including the suppliers, did much to change the image.

That began to change in the early to mid-1990s, tied to two key factors: the explosion in popularity of golf and, of course, golf apparel, and the introduction into the workplace of corporate casual dress codes. Suddenly, people – particularly men – wanted to wear golf shirts to work, and the growing desire in the go-go, entrepreneurial ’90s to add a company logo to those shirts opened up a wealth of opportunities to the promotional products industry.

The largest business expansion in the history of the country, as the 1990s came to encompass, was a boon to the entire promotional products industry, to be sure. Over the course of the last decade, promotional products distributors in the U.S. saw their collective sales to end-users grow from something on the order of $3 billion a year in the early 1990s, to something approaching $18 billion annually as the new century dawned.

More impressive, perhaps, was the growth of one key category of sales: wearables. In the early 1990s, apparel accounted for roughly 10 percent of overall PPD sales, which put the category on a par with a couple of other key sales categories, writing instruments and desk accessories. By the mid 1990s, the industry had grown to nearly $6 billion, but wearables had taken over clear sales leadership with overall sales accounting for up to 22 percent of sales. By the time the 1990s ended and the whole industry was approaching $18 billion, wearables had leapt in popularity so much that sales in the category were topping 30 percent, three times as much as the next sales category. It should be noted that in just five years, from 1995 to 2000, the wearables sector alone had grown larger than the entire industry had been when the surge began.

With these kinds of numbers and this record of growth, it’s no wonder that industry outsiders, retail brands, came calling on the promotional marketplace.

BRANDS ARE HERE TO STAY

One of the first truly fashion retail brand names to appear in the promotional marketplace was Bill Blass Premium, making its debut to promotional products distributors at the Dallas PPAI show in January 1998. Fashion impresario Bill Blass, who passed away last year, himself came to the press conference in Dallas announcing the launch.

The Bill Blass Premium line is made by the Capital Mercury Apparel Co. of New York, a shirt-making firm with a long history of supplying product for a number of industry suppliers to market under their own private-label brand names. David Bebon, vice president of Capital Mercury and director of special markets that covers the promotional industry, says recognizable retail brand names in this industry continue to tighten their grip on the industry consciousness, while at the same time creating a stronger market for industry-specific brands.

“We’re entering our sixth year in the industry with Bill Blass, and we have discovered that there is a true niche here for branded products,” says Bebon, “especially names that the end-user recognizes from mid-tier retail distribution in the country. It’s very clear when we look at what has happened in the past few years that brands are here, and they are here to stay.”

But brands, he adds, have created even more opportunity for existing industry brands by being the catalyst for defining a “good, better, best” merchandising strategy for PPDs to take to their end-user customers.

“The brand phenomenon has literally brought more credence to the private label brands,” Bebon notes, “because with a recognizable brand you create a Halo Effect. The Halo creates room for a good, better, best merchandising strategy. With the Halo brands – Bill Blass, Izod, Nike, etc. – they have more ‘make:’ higher quality, higher price. The private labels come in at a more moderate price level. It means more to your customer because the Halo brand holds the market up, leaving room underneath to fulfill a variety of needs. This is a traditional retail strategy – everything with its own price point.”

Capital Mercury extended its brand-name reach three years ago with the introduction of the Arnold Palmer line of golf inspired wearables to the promotional marketplace.

“What makes this a little bit different is that Arnold Palmer is possibly the most recognizable name in sports in the world,” says Bebon. “He’s different because he’s a legend, an icon, and he has aligned himself with the best companies in America.

“It (the line) has worked well for us (in the wearables marketplace) because golf happens to be growing every day,” adds Bebon. “One of the big corporate events is the golf outing, so you’re selling a product that is associated with the biggest corporate outing. Muhammad Ali is also a great name, but he doesn’t golf.”

LIMITED BRAND APPEAL?

Not everyone is convinced that brand-name apparel holds as much sway in the promotional marketplace, particularly these days as the national business climate has cooled off from its go-go-days.

Chris Young, executive vice president of Orioxi International, of Shanghai, China and Los Angeles, recently teamed with industry entrepreneur Larry Crabb to re-launch the popular Boulder Apparel Co. name back into the promotional marketplace after a two-year absence. The pair say the new BAC, to be marketed through Imprints Wholesale and TSC Apparel, is a “better basic” line.

Young, however, is a former senior executive with the famous Reebok line of apparel and footwear, where he served for many years as a global merchandising manager. Reebok recently announced its own debut in the promotional products marketplace, bringing in a few styles just this last fall through Cincinnati-based TSC Apparel. Young believes that Reebok, as well as other well-known retail brands coming into the promotional arena, may have “priced themselves into very low volumes.

“The Nike and Reebok brands have become window-dressing brands,” Young argues. “They bring credibility to the PPD, but they are fixed on price on the wholesale side. They bring cache, but it doesn’t mean that it’s going to replace the industry brands.”

Young explains that such retail brands are no longer manufacturers who can cater their products to different niches. They are rather, he argues, marketing entities who market their wares to retailers; they are, in effect, wholesalers. In the promotional marketplace, the product has to go through another layer of wholesaler, then to the PPD before going to the end-user, Young says, adding too many levels to the selling pyramid and adding too much markup.

“I don’t think the brands have really grasped what it means to be in this market,” says Young. “Russell, Lee, they understand how to develop commodity pricing to reach the business-to-business market. But retail brands like Reebok and Nike are so set on SMUs (Special Make-Ups) – onetime product development to meet the needs of one channel – they are less able to meet the demands in the promotional arena.”

DIRECT-SELLER COMPETITION

Young may be on to something.

Over the last few years, Philadelphia-based wholesaler Alpha Shirt Co. has become an industry leader in bringing brand names to the promotional marketplace, offering styles from such well-known names as Columbia Sportswear, Champion and Perry Ellis. Mark Barrocas, Alpha Shirt’s vice president of marketing came to the company from the company that markets the Perry Ellis brand, as well as Ping and Nautica apparel, so he is steeped in brand recognition. What’s new on the brand front for 2003? Lower prices.

“We started looking in 2001 at how do we make these brands a meaningful part of our business, and also a meaningful part of their (the brand’s) business,” Barrocas says. “It was critical that we could go to these brands and say, ‘These are the opportunities, these are the price points we need, this is the product we need.”

Barrocas explains that PPDs face considerable competition in the marketplace these days, most notably from such direct merchants as Lands’ End and LL Bean, well-known catalogers who have recently beefed up their efforts catering to the corporate market.

“They (end-users) see they can get the Lands’ End basic pique at $19.95, and there’s real value,” says Barrocas.

He continues by explaining that the Cross Creek basic pique, or any of a number of similar industry styles, wholesale for around $10, so a typical markup to the end-user would bring the price in around $20, competitive with Lands’ End, however without the Lands’ End brand appeal. Retail brand names in the promotional industry are wholesaling a basic pique for around $14, so the PPD either has to price the shirt too high or take less margin – a price-point pressure that squeezes the brand.

“In retail, you ask ‘what do I want the product to retail for, and work backwards,'” says Barrocas. “We are taking that same principle and applying it to this industry.”

Working with the knowledge that the final price on basic pique should be around $20, Alpha, working with Perry Ellis, has taken that line’s basic pique from a previous $14.25 wholesale price, and “repositioned it” for 2003 at $10.99.

“It allows our customer to talk (to the end-user) about Port Authority, Cross Creek, etc., in the same breath as Perry Ellis. I’m giving my customer great value, I’m exceeding their expectation (with a Perry Ellis product), and I’m able to let them keep their margin.

“Our philosophy for 2003 was going back to the brands in positioning and saying ‘These are the sales prices our customers need to make value,” he adds.

This same strategy is being utilized on Alpha’s Columbia Sportswear offerings.

“We sell the Falmouth Jacket (from Columbia) at $42.81, and everyone and their mother has knocked off this jacket,” says Barrocas. “All you have to do is put on this jacket and know it is the original and not one developed for this industry, but still the competition was selling theirs for $28. We told Columbia we were never going to do any volume at this price, so for 2003 the Falmouth is $32. Now, the ASI guy has the choice to say, ‘Look, customer, I can give you an industry jacket for $28 or you can get the real thing for $4 more.

“The value that the ASI guy brings to the customer is the ability to stretch their budget,” he adds. “This year they can get a Perry Ellis shirt or a Columbia jacket instead of an industry brand and bring real value to the customer. Same price, better brand. Last year it would have cost more.”

Barrocas says that successfully marketing a brand name takes three key elements: 1) the right brand; a name that brings value; 2), the right product; not a bastardized product, but one with the same quality as in retail; and, 3) the right price; to position the price point so everyone in the chain makes money.

“The combination makes you successful,” says Barrocas. “Missing any one element means that you won’t be successful.”

THE LAST FRONTIER

Not all brands in the marketplace are taking the “repositioning” approach, and many are finding that brand appeal sells well.

Kellie Claudio, national sales manager for the Ashworth and Callaway lines of golf apparel in the promotional channel, says sales for 2002 ended up 23 percent, a pleasant surprise given a tough market.

“The ASI market is the last frontier for many of the golf brands because (golf) retail is horrible,” says Claudio. “We do well because we are a golf brand. We don’t have a guy on a horse with a polo stick, we don’t have a swoosh, a pennant or a sailboat. We have a Golf Man. We’re the only one who is an authentic golf logo, recognized globally. And who doesn’t recognize Callaway? I’m not worried about these other people coming into the mix. There’s plenty of pie for everyone.”

Claudio acknowledges that there is a price war of sorts out in the promotional marketplace, but she argues that the winners in the end will be the brands because they bring a known value equity.

“They (PPDs) look at the end user and say, ‘For a few dollars more you can have Ashworth, or Nike or Cutter & Buck. These are aspirational names,” she says. “I think the cycle from private label to brands is turning towards brands. We’re right in the middle of it.

“We’re seeing that at retail,” she adds. “That’s why people like Target are going after it; they have to have a brand. They have Mossimo; they bought the rights exclusively. Mervyn’s has Sideout. Sears has teamed up with Lands’ End. It’s just a matter of time before Wal-Mart and J.C. Penney do the same thing.”

TIGER AND TECHNOLOGY

One of the newest, and most recognizable brands to make an appearance in the promotional market is Nike, which is bringing several of its Nike Golf styles to the industry through Detroit-based wholesaler Broder Bros. The greatest brand asset for Nike Golf may be that it has a living golf man, Tiger Woods, as its main icon.

While Nike is a famous shoe an apparel line closely associated with any number of sports and activities, the Nike Golf line is a relatively new focus.

Chris Zimmerman, general manager of Nike Golf, explains that the golf business was re-launched just four years ago.

“Our strategy in golf was that in 1999 we re-launched our golf business,” he says. “We set up a different business entity. The fundamental objective was to create a group to work over time to become the best golf brand

in the world. We wanted to focus on competing against the best golf companies, and part of that was creating our own identity as a golf company. On many of our products we still use the (Nike) ‘swoosh,’ but we also created our own identity, the Nike Golf Shield.”

Zimmerman says that part of branding “is about a badge – about an identity that people want to be a part of.” He notes that what Tiger Woods brings to the brand – besides being a person with global appeal – is an image of “competitiveness, excellence and attention to detail.

“Those things end up being the personification of our brand,” he says. “And, obviously, the awareness, the exposure (through Woods) is very unique.”

Nike Golf has two main lines: the Tiger Woods line, which is its high-end offerings with a very limited distribution through Nordstrom, better green-grass and off-course golf retail shops, and high-end resorts; and, the Tour Line, which is sold at green grass and sporting goods outlets. The Broder Bros. Nike Golf product for the promotional trade is drawn primarily from the Tour Line, and for 2003 will include 27 styles.

Beyond the image, however, Zimmerman wants to position Nike Golf as a technological innovator.

“I think one of the most exciting things is that we have brought technology to apparel,” he says. “Mositure wicking, with our Dri-FIT fabrication, and our completely waterproof fabrication with Storm-FIT, and warmth with our stretch fleece product called Therma-FIT. Yes, we have a certain percentage of our product that are about fashion and design, but we also have brought technology which is a part of the (brand) differentiation.”

Bringing the brand to the promotional channel, he adds, was a conscious decision made in large part because it is an arena where the value of one’s brand is already recognized.

“We were aware that with Nike Golf and the promotional channel we would have dual branding, and we had some concerns,” he says. “We’ve put some limitations on who and where they can purchase the product. But we also understand the landscape.”

Scotland Thede, the business development manager for Nike Golf, explains further that this means there is an agreement with Broder Bros. to steer clear of end-uses that would involve co-branding with tobacco and firearm companies, and also from any professional and college sports logos (these are handled through a licensing division). In addition, Nike Golf wants to stay away from gift-for-purchase programs directed toward consumers, and Thede says “Broder is very good at that.”

Thede reports that last year, Nike’s first year in the corporate market offering product through Broder Bros., proved that there is a place in this industry for Nike.

“We have exceeded projections,” he said. “The corporate market has been responding particularly well to golf brands, and Nike Golf is able to appeal to a broader audience because we have a greater brand recognition to a wider audience outside of the golf market.”

Thede says Nike Golf sales reps have been accompanying Broder reps on sales calls to PPDs to tell the brand message.

“We’re trying to sell our brand to the best corporations in America,” he notes. “It’s an education process for the PPDs on how to sell brands in the marketplace. They (the PPDs) are concerned about their own brand with their customers, so we tell them not to be afraid to sell a brand. It’s about image, perceived value, not price. It’s about how their customer values their own brand.”

In support of these efforts, Nike Golf, working with Broder, is developing such tools for PPDs as a Nike Golf page ready for inclusion on a PPD website or a specific Nike Golf page that can be inserted into a corporate catalog developed by a PPD.

“It’s a win for Nike,” says Thede, “but it also creates a better brand identity for that corporation. We can provide the branding for the (web page and/or corporate catalog page), and the imagery for those products as well.”

PRODUCT EDUCATION

Not everyone feels that PPDs need so much brand education. Rick Mouty, CEO of wholesale supplier TSC Apparel, based out of Cincinnati, reported last fall that he was launching the famous Reebok line of wearables into the promotional market, and his timing couldn’t have been better. Just this year Reebok signed a deal with the NFL where all the apparel – uniforms, coaches attire, sideline apparel – will be Reebok for the next 10 years.

Launching the line in a limited run in October, and expanding it for 2003, Mouty reports he has had a tremendous response from the PPD community. His challenge, he says, is not selling the brand itself to PPDs, but rather teaching them about the finer points of the product.

“We have found so far that the ASI distributor is well educated on brands,” says Mouty. “We don’t need to train them. They know where (a brand) is positioned and what end-users to target. Brands aren’t new in this space.

“We’ll educate them on the value of the product more than on the value of the brand,” he adds. “With Reebok, not only do you get the brand, you get an exceptional product with every bit of detail. When you put it side by side with Nike and Cutter & Buck, it blows them away.”

Jeff Rundles is Editor of Wearables Business.

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