Fashion Targets The Masses

Who says you can't afford high fashion? Nowadays, you can get a Diane von Furstenberg Jeanne wrap dress at Costco or an Oscar de la Renta jacket at Macy's for $200.

With New York Fashion Week underway, healthier runway models won't be the only models designers are focusing on. They're looking to creative business models to generate buzz, build their brands and ultimately get their clothes on the American public.

Oliver Quillia / cnbc.com NEW YORK CITY - The price is right for the stylish and budget conscious at the Proenza Schouler for Target event at Manhattan's Opening Ceremony

"You can't make money in couture. You just can't," said Michael Vollbracht, the designer and creative mind behind Bill Blass, whose designer suits start at $6,000. "We dress one-tenth of one percent of the women in America. All the money comes from men's underpants and our licensing business."

The runway is there to get you on the cover of Vogue magazine so people know who you are, associate you with being cool and then want to buy your clothes, added Vollbracht, who scored last month's cover of Vogue, partly because Angelina Jolie donned a Bill Blass evening gown.

With about $10 million a year coming from Bill Blass couture, Vollbracht smells profit in perfume. The Bill Blass fragrance is launching exclusively at Saks Fifth Avenue Tuesday. Vollbracht also plans to expand the brand to offer collections at lower price points, a business model the global fashion community is widely adopting.

"The industry has to address fashion at all levels," said Fern Mallis, vice president of IMG Fashion and the veteran organizer of New York Fashion Week. “It used to be very snobby, now we're seeing it move away from that."

Celebrities and media hype aside, New York Fashion Week is the first big show of the year and sets a $157 billion industry in motion. Retail buyers attend, looking for must-have items that will fill their stores and shape advertising and marketing budgets. Other retailers are looking for trends so they can develop knock-off versions.

Turning Heads In 2004

In 2004, German fashion guru Karl Lagerfeld of Chanel and Fendi fame created a stir when he agreed to create a collection for Swedish retailer H&M.

AMSTERDAM - Fashion forward retail buyers await Karl Lagerfeld H&M collection

Since then, many high-end designers from Oscar de la Renta to Vera Wang began looking to profit from their brand strength and the public's appetite for fashion.

And discount retailers and department stores are eager to pony up royalties, hoping to cash in on cheap chic. Neither Target nor Kohl's disclosed terms of their deals.

What you’re seeing is a melding of luxury and mass, says Billy Susman, president of Financo, an investment-banking firm that specializes in the retail and apparel industry. “These retailers are using other brands to drive traffic into the stores,” he said. “And it’s very powerful. It’s a smart strategy.”

Target At The Center

And no one does it better than Target. The discount retailer teamed with hip designers Lazaro Hernandez and Jack McCollough, the chic team behind the Proenza Schouler label, to launch a new collection this month. And because Manhattan does not have a Target store, the retailer chose trendy Soho boutique Opening Ceremony to sell the collection during Fashion Week. The move follows the success of Isaac Mizrahi, who revived sales of his business through his partnership with the big box retailer. Luella Bartley, Tara Jarmon, Sophie Albou and Behnaz Sarafpour have also designed collections for Target.

Oliver Quillia / cnbc.com NEW YORK CITY - Proenza Schouler for Target at downtown fashion mecca Opening Ceremony from February 2-5, 2007

Retailers hope the strategy will reenergize sales of adult apparel, which rose 4.4% in 2006.

But does a big designer really bring in the big bucks? Not necessarily, Susman said, but it does make a big impact, even if it doesn’t translate directly into same-store sales, a key industry metric.

"This is a differentiation point for these retailers,” said Nautica founder David Chu, who has worked with many retailers to build the successful Nautica brand.

And department stores are looking for names to stand out in an ultra-competitive field.

Oscar de la Renta will debut his new O Oscar sportswear collection at Macy's Wednesday, with the tagline "Oscar For Every Woman." Vera Wang, known for her $10,000 wedding gowns, is partnering with Kohl's to offer "Very Vera" this fall.

Likewise, the funky designers behind Heatherette, Richie Rich and Traver Rains, garnered praise last fall when they introduced their branded tween clothing line for Macy's. They're back Tuesday with a star-studded show.

Vollbracht points to Ralph Lauren's success in branding and merchandising as the inspiring business model for designers like himself.

The Wrong Fit For Wal-Mart

But not all forays into high-end fashion succeed. Wal-Mart, for instance, is ducking out of Fashion Week this time around and has not yet decided about future participation. The retail giant has been showing collections from guest designers and its Metro 7 clothing line at the event since September 2005, when it held a fashion show in Times Square and took out an eight-page advertising spread in Vogue. But as the company struggles with lagging sales, the strategy doesn't seem to be helping.

Part of the reason, Susman says, is that Wal-Mart does not want to pay for a brand and instead is focusing on private labels and direct sourcing, a strategy that hasn’t been as successful.

However you look at it, the cheap chic trend is a win-win for the fashion industry and consumers.

“We’re trying to make fashion accessible to everybody,” says Fashion Week organizer Mallis. “When it comes down to it, it’s about selling clothing, not parading around designs no one wants to buy. The whole point is to generate business for designers and retailers.”

© 2009 CNBC, Inc. All Rights Reserved