Mid-priced hip is the new cheap chic - Editorial

DSN Retailing Today, Oct 13, 2003 by Tony Lisanti

The recent debut of Liz Claiborne's Mexx concept in New York City underscores the continued evolution of apparel retailing. More specifically, it exemplifies the further fragmentation of the consumer as well as the long-term viability and market share of traditional mass retailers and department stores.

Mexx represents the latest entry into the burgeoning mid-priced, hip apparel segment that has been exploited by other international players such as Sweden's H&M, and Spain's Zara. The Mexx concept, (see complete story, page 4), which offers moderately priced European style products, actually replaced the traditional Liz Claiborne store on Fifth Ave. and 52nd St. It poses the interesting question of how many more Liz stores might be supplanted by the more eclectic Mexx brand.

This shift in apparel retailing is also a dilemma for the mass and department stores, which have been searching for years for ways to become trendy and to target younger shoppers. These new concepts have already garnered a strong reaction from the traditional chains. Target, for example, with its joint venture with designer Isaac Mizrahi, recognized this emerging niche and countered with a strong competitive strategy. The discounter opened a boutique last month in Rockefeller Center, featuring the designer's exclusive lines at its typical low to moderate price points.

More importantly, what are the key factors that have contributed to the success and popularity of these concepts and will help drive their growth in the future? Consider the following:

* Exclusivity. What these apparel concepts offer is style that cannot be easily purchased elsewhere, particularly at other department stores that anchor the nation's malls and have been the among the primary destinations among this age group for junior apparel. The department stores continue to suffer from the sameness malaise whether it's reflective in the brands, the selection, the presentation or the price.

* Cachet. The European influence is a major marketing advantage for these formats, as international fashion has become more prominent, if not more mainstream to a certain degree. International fashion trends were once limited to the jet set and the high-end couture brands, but Mexx, H&M, Zara and others have effectively exploited this and have successfully imported this image to Main Street, USA.

* Differentiation. In a marketplace driven by individuality, these concepts have reinforced this image by offering style, substance and selection that the traditional retailers have struggled with over the past several years.

* Affordability. With the target audience of the price-conscious twenty-somethings, these chains have successfully positioned their concepts well below department stores and in some instances, below and certainly competitive with the discount retailers and other specialty retailers such as Old Navy. And these retailers have managed to execute their low-price strategies without sacrificing either the value or the fashion message.

* Merchandising. The in-store experience that these concepts have created is far more appealing, exciting and impactful than the traditional department store. Cross-merchandising of coordinated outfits and accessories is stronger, as is the interest and impulse purchases created by the subtle promotion of ancillary non-apparel products such as candles, stationary and fragrances.

* Loyalty. These retailers have done an exceptional job building loyalty through frequent specials and new merchandise that flows into the stores almost on a weekly basis.

The future for these Euro-trendy apparel concepts is for aggressive growth, particularly considering the fact that H&M has opened 64 units in the United States, in less than three years. Mexx has three more stores in the New York area planned for this year. Meanwhile, the discounters and department stores, which cannot ignore the rapidly changing apparel marketplace, must rethink their strategies or they will continue to lose market share. Perhaps Target's savvy Mizrahi move is a poignant competitive lesson for other retailers who don't want to be left targeting only the mom's of this lucrative and stylish MTV audience that Mexx and company have captured.