AAFA to Retailers: Know Your Customers, Market Creatively

TUCSON, Ariz.—With the economy down in the dumps and customers watching their pocketbooks, apparel makers and retailers have to tap into better marketing skills and offer innovative products to entice people into their stores.

With gasoline prices topping off at more than $3.40 a gallon and food prices growing nearly 6 percent last year, consumers plan to spend less on dining out, apparel and home entertainment, according to Marshal Cohen, a leading retail and apparel analyst with The NPD Group in Port Washington, N.Y.

In 2007, women’s apparel sales were up only 2.7 percent, menswear sales dropped 0.3 percent and childrenswear sales inched up 3.3 percent. But growth was particularly brisk among 13- to 17-year-old consumers.

So the question is this: What can executives do to loosen consumers’ purse strings and attract more teens to their products while keeping that core customer?

That was the question posed to more than 200 people who gathered at the American Apparel & Footwear Association’s annual Executive Summit, held March 5–7at the Loews Ventana Canyon Resort. Attending were several industry leaders such as Neil Cole, chairman, president and chief executive of Iconix Brand Group Inc., whose brands include Mossimo, Candie’s, London Fog, Badgley Mischka, Rampage and OP; Robert Skinner, chairman, president and chief executive officer of Kellwood Co., a major marketer of brands such as Vince, Sag Harbor, Phat Farm, Koret and XOXO; Wesley Card, president and chief executive of Jones Apparel Group Inc. ; William McComb, chief executive of Liz Claiborne Inc.; and Fred Jackson, president of American & Efird Inc., which makes sewing thread.

Robert Mettler, formerly chairman and chief executive of Macy’s West in San Francisco and recently named presidentof special projects at Macy’s Inc., said stores need to truly understand and connect with their customers. That includes figuring out how those shoppers spend their time and money, using technology to reach consumers, getting fresh product to market quickly and not overburdening stores with stale merchandise.

He noted that Macy’s has spent a lot of time trying to connect with the 80 million millennial consumers in this country. Millennials—people born between 1980 and 2000—have a tremendous amount of buying power.

For example, to attract the 14- to 25-year-old consumer, Macy’s decided to go after the action-sportswear customer. “This is an amazing generation,” Mettler said. “This group has been brought up with the ultimate level of choice, from customized coffee to how they listen to music. They expect this level of customization in any product or service they buy. They have access to vast amounts of information online and on TV. They have been marketed to since they were born.”

To appeal to this young person with plenty of disposable income to burn, Macy’s sends podcasts and text messages to market to them. It also did the unconventional for Macy’s, sponsoring two outdoor sporting events frequented by the action-sports crowd. One was a surfing competition in Oahu, Hawaii; the other was the California Trifecta series in Huntington Beach, Calif. “On the last day in Huntington Beach, 300,000 people came to see the surf,” Mettler said. “There was only one retailer there with a tent, and it had the name ’Macy’s’ on it.”

Mettler noted that 45 percent of the U.S. population under the age of 5 is a minority. That is definitely going to shape the way the mammoth department-store chain attracts consumers. With this in mind, Macy’s recently reorganized its retail strategy, giving individual stores the opportunity to stock goods geared for their niche market and consumer, appealing to specific age groups, minorities and interests that vary by neighborhood.

Online marketing

The Internet is playing an increasingly powerful role in apparel and retail marketing. Last year, online apparel sales grew robustly by 16 percent.

Web sites are a great place to test market products. It’s a store that never closes.

Online success can be seen at Zappos.com, a 9-year-old company headquartered outside of Las Vegas that sells shoes, clothing, handbags and eyewear.

In 2000, sales totaled a mere $1.6 million. This year, the company hopes to break the $1 billion sales mark. Keys to the company’s success have been operating its warehouse and call center around the clock and shipping goods overnight to make sure they arrive on customers’ doorsteps as quickly as possible, said Tony Hsieh, the company’s chief executive.

Zappos.com expanded its return policy so that customers have up to one year to return goods if they are unhappy with their purchases. “Seventy-five percent of our purchases are from returning customers,” said Hsieh, who studied computer science at Harvard University.

Quiksilver Inc., the Huntington Beach, Calif., company that makes surf-, skate- and ski-oriented apparel, footwear, accessories and equipment, has created an online store that carries a lot more gear and apparel than the company’s stores. “Our retail stores are a subset of our online stores,” said Nick Nathanson, Quiksilver’s senior vice president for direct.

To drive traffic, the company is working on a program where consumers can order online and pick up their purchases inside a Quiksilver store. Quiksilver also allows consumers to place an online order from the company’s stores if a product isn’t on the shelf.

It’s the economy, stupid

Several industry leaders were worried about the economy but also tried to find the silver lining in that financial cloud.

Neil Cole of Iconix noted there are a host of opportunities around the world, particularly with an emerging middle class in India and China that easily totals 1 billion people. “There is tremendous opportunity there with a consumer base that is five times our own,” he said. To tap into that market, he recommended apparel and retail companies form joint-venture deals in those countries to maximize opportunities and better understand the customer.

Kurt Cavano, chairman and chief executive of TradeCard Inc., a New York technology and service firm, sees all sorts of innovation bubbling up during these tough times. People are looking at their supply chains and figuring out how they can get better returns on their money. “They are shrinking time [in production and delivery] and maximizing their credit,” he said. “That is something people are just starting to focus on.”