These Ads Have Windows And Walls

The new OshKosh B'Gosh Inc. store on Manhattan's Fifth Avenue has plenty of the tyke-size blue-and-white-striped overalls the company is famous for. But it also has lavish displays of OshKosh shoes, underwear, and even toy bears, items you're not likely to find in even the largest department stores.

And that's the idea. OshKosh is just one of a raft of manufacturers that are opening their own flagship stores. Powerhouse brands such as Nike, Speedo, and Levi's, widely carried by retailers large and small, now have entire stores devoted to their labels. Department and specialty stores typically carry just 60% of a line--and sometimes much less--but these captive stores have it all.

Why this new breed of company store? The consolidation of department-store chains has left manufacturers with fewer stores to sell to. And profit-starved retailers have been pushing their own competing private-label brands. Above all, though, these new stores are a kind of life-size, interactive ad, meant to boost brand awareness for the makers of everything from apparel to electronics. "For manufacturers, it used to be `should I open a retail store?' Now, it's `how many should I open?"' says Kate A. Murphy, a retail consultant with Fitch Inc., an Ohio-based business consultancy.

THEATRICS. The single-label stores give consumers a chance to see the entire line arrayed the way the designers intended. Although most make a little money and a few are solidly profitable, the goal here is marketing and old-fashioned brand-building, not establishing a new profit center. "It's a showcase store," says Paul Lowry, vice-president for retailing at OshKosh. "We expect it will make a profit, but that was not the object."

The idea isn't completely new. Clothing designers have long operated image-building shops on Manhattan's Madison Avenue, and Sony Corp. opened a Chicago store in 1991. But the captive stores are now spreading quickly (table). Most are glitzy, theatrical showcases designed to play off of a brand's image. The New York OshKosh store features a giant wooden train station meant to evoke the brand's roots in making overalls for engineers. Nathalie Berger, visiting from Paris, stopped in the store recently as she strolled down Fifth Avenue. "It's wonderful, very different from Paris," she says.

Nike Inc. has sprinted full speed ahead with Nike Town, now in four U.S. locations, including a 68,000-square-foot behemoth in Chicago. Part high-tech sports museum, part fitness theme park, the Chicago store includes a basketball court and video theater. Nike cares more that visitors to Nike Town carry away fond memories of the brand than a new pair of sneakers.

Authentic Fitness Corp.'s Speedo stores sport mannequins that appear to be diving from swimming-pool-tiled ceilings. The 48 Speedo stores average sales of $450 a square foot, above management's initial target of $425. "We're in business to make money," says Linda J. Wachner, the chief executive of Warnaco Inc. who also heads Authentic. "But this is also the best advertising we can have."

The target of that advertising is the consumer, of course, but it's also the retailer. Manufacturers figure that if the flagship stores boost brand awareness, retailers will give more space to their wares. The stores also give them a way to stay in direct touch with customers. Based on requests from store customers, for example, OshKosh may revive the little-girl sizes that it dropped a few years ago after its retailers insisted that shoppers thought of OshKosh as only for toddlers.

Big retailers seem resigned to the competition so far. Levi Strauss opened a 6,000-square-foot Original Levi's Store directly across the street from Bloomingdale's in Manhattan, but Bloomie's says the store attracts a different kind of shopper and has had no impact on its sales. Another thing that helps pacify retailers: The flagships sell at full list price--no end-of-season sales and no markdowns.

Flagship stores are just one of the channels manufacturers are experimenting with to sell goods directly to their consumers. Whether they ring up any more in sales than home-shopping TV shows or online shopping services may not matter as long as they make a strong impression. If the 1980s gave us stores as theater, the 1990s have given us stores as infomercial.