Payless Shoesource might not be the first place you think of for lipstick, and J Crew doesn’t exactly summon visions of wedding dresses.
But that could soon change.
It is a sign of the times. A host of retailers are stretching their brands into uncharted product categories and into new lines of business.
Collective Brands' bargain shoe emporium Payless will launch a beauty department in the fall.
J. Crew said, “I do,” to the wedding business last month with the launch of its first bridal boutique on Madison Avenue in Manhattan, and hipster merchant Urban Outfitters is also courting the bride.
Meanwhile, luxury retailer and wholesaler Coachopened its first men’s-only store this spring, and tony menswear merchant Brooks Brother’s will spread its highbrow aesthetic into the home furnishings space later this year.
With store expansion on the back burner, retailers are turning to fresh avenues for growth, betting that their brand equity will carry over to new product categories.
“Clearly, unit growth is off the table” for many retailers, as some merchants even contend with over-expansion, says Neely Tamminga, managing director and senior research analyst, consumer, atPiper Jaffray. “The natural thing to do is to look inside one's brand portfolio [for growth].”
Gussying Up Sales
Collective Brands started building up its accessories business last year by adding in categories such as jewelry, handbags, belts and scarves.
This fall, the retailer will take another step away from its discount shoe business, by adding beauty and body care products to 1,500 stores as part of an alliance with Maesa Group. The products in the two lines, Zoe & Zac and Unforgettable Moments, are keeping with its reputation for value by being priced between $2.99 and $24.99.
CEO Mathew Rubel says he sees Payless' accessories business as offering “significant opportunity for growth” and he's equally bullish about beauty care.
Patrick McKeever, a senior equity analyst at MKM Partners, says accessories has been a home run, and beauty, an impulse purchase that yields high margins, “is a natural extension."
But he said the move is an attempt to recapture some lost sales.
“Their (domestic) store base is shrinking,” he says. About 20 Payless stores will close by year-end.
And the company's core footwear business has been stagnant.
The beauty line also presents Payless with an opportunity to tap an “underserved” ethnic beauty market, as the retailer's core shoppers are largely twenty-something and thirty-something-year-old African Americans and Hispanics, McKeever says.
J. Crew opened the doors of its first bridal store on Madison Avenue in Manhattan last month, pitching it as wedding apparel with a J. Crew sensibility.
Brides will not only find dresses with elegant, clean designs, priced between $229 and $3,500 to try on, but also makeup, perfume, headpieces, and sweaters, jackets and pants for pre- and post-wedding events.
Urban Outfitters also is trying to sell brides on the convenience and style of its bridal offerings as it aims for its own piece of the $65 billion bridal business.
“It’s a huge market,” says John Kyees, outgoing chief financial officer of Urban Outfitters.
The retailer sees an opportunity to bring its distinct brand proposition—from the upscale-bohemian feel of its Anthropologie chain to the youthful, hipster vibe of Urban Outfitters—to the bridal arena.
The mix at the still-unnamed bridal business will include wedding gowns designed by the Anthropologie team, as well as jewelry and a bridal registry with gifts.
To test these unchartered waters, the retailer will launch a wedding Web site in time for Valentine’s Day next year, Kyees says.
“Nobody is playing in the full-line wedding store business. And we do experiential retailing better than most,” Kyees says.
With the move into bridal, Urban Outfitters, with its edgier brand aesthetic, has an opportunity to market an entire lifestyle—from wedding dresses to home goods—to new brides, many of whom “don’t want their weddings to be cookie-cutter and look like everybody else’s,” says Christine Chen, senior retail apparel analyst for Needham.
But there are risks associated with moving beyond one's core competency.
RememberMcDonald’s McKids line of clothing? Probably not.
Just because a retailer has the financial, production and distribution wherewithal to branch out into a new business, doesn’t mean they necessarily should, said Robert Passikoff, president of Brand Keys, a brand and loyalty research consultancy.
Retailers would be wise to make sure their move into uncharted territory reflects their brand essence, he says. For example, “It’s believable to buy tools and batteries at Sears , but at Bloomingdale’s , not so much.”
Before making the leap, Passikoff says, retailers need to ask themselves: 'Do we reasonably fall within the consideration set for these products among consumers? Are they going to believe that we can reasonably provide something that is going to meet or exceed their expectations?’”
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