Are Designer Collaborations Dead?
When Matthew E. Rubel left his post as chairman and chief executive at upscale footwear label Cole Haan in 2005 for the chief executive position at low-end shoe store chain Payless ShoeSource (PSS), he faced the challenge of rejuvenating a company that had seen 10 years of flat sales.
So within the first two months of his new role, he focused on tapping into a trend that's been gaining momentum since early this decade: high-profile, limited-edition collaborations between budget-friendly retailers and ultra-chic fashion designers who typically sell their clothes and accessories at tony department stores such as Neiman Marcus or Saks Fifth Avenue (SKS).
Rather than create lower-priced vinyl and canvas pumps and sandals that resembled trendy designs by hip designers—a tactic that characterized Payless's earlier inventory of knock-off shoe styles—Rubel decided to recruit a designer with street cred. Payless signed Laura Poretzky, the fashionable young designer for the chic, up-and-coming, New York-based fashion label Abaeté, to design limited-edition shoes priced from $20 to $25. The first store to stock the Abaeté for Payless shoes (as they are co-branded) in fall 2006—located in fashion-conscious Manhattan—sold out of the snazzy footwear in 48 hours.
Unique for the Masses
Rubel had taken a page from Target's (TGT) famous "design for all" playbook to draw well-heeled consumers into big-box stores. So far, he's sticking with the strategy: Poretzky's latest collection of sexy, open-toed heels and strappy flats recently hit shelves and the Web site, www.payless.com.
And this month's lineup of limited-edition designer collaborations at other low-price retailers indicates that the trend still continues: Japanese casual-clothing chain Uniqlo is about to offer pieces by ultra-trendy Alice Roi, a darling of fashionistas and magazine editors. And April marks the final month to buy the limited run, but wallet-friendly, $23 tops and $19.99 bags designed by stylish fashion house Proenza Schouler for Target.
"Today's retail landscape is a really cluttered environment. It can help to tag yourself to a brand that's pertinent to the desired audience. One quick way is to leverage a [fashion] designer," says Gloria Park Bartolone, vice-president of the retail group at market researcher Maritz. "In doing so, you create instant brand identity. Designers have such personalities attached to them. They create a distinct emotion and instant synergy." It's a strategy that non-clothing companies, from cell-phone makers to locksmiths to car manufacturers, not to mention shoemakers such as Payless, are increasingly adopting, too.
Getting Them in the Door
Overall, Payless has seen net sales rise since first offering the Abaeté shoes. Total fourth-quarter 2006 sales—when the Abaeté line was first made available to consumers online and in about 400 of the company's 4,500-plus stores—were up 13%, to $693 million, from the same period in 2005. Payless doesn't offer a breakdown of sales per product (see BusinessWeek.com, 3/6/07, "A Shoe-biz Success for Payless").
The designer collaboration strategy can be "…hard to measure in terms of ROI [return on investment]," Rubel writes via e-mail while vacationing with his family in Aspen, Colo. "Once we add up the incremental advertising and sales promotions…the actual brands themselves were marginally profitable," he continues. "But they bring new customers to our stores and these shoppers buy other items as well."
Of course, with so many jumping on the designer collaboration bandwagon, the tactic is starting to become a rather generic and less than remarkable brand-building strategy. Some retailers are even turning away from the concept.
Swedish chain H&M, for instance, recruited Madonna as its latest guest "designer" in late March—after a series of luxe fashion designers (Karl Lagerfeld, Stella McCartney, and Viktor & Rolf) created sell-out clothes for the budget retailer. H&M's move away from fashion toward music indicates that the trend might just be starting to wane.
Who Are You Calling?
As a result, some savvy fashion designers are teaming up with non-clothing and accessories companies to distinguish their own labels' brands with a wide variety of product collaborations. These range from the high end (Versace's limited-edition Lamborghini car) to the low end (Jack Spade's canvas-covered Kryptonite bike chain). Mobile communication devices are an area that has seen a frenzy of designer collaborations lately.
Cell phones increasingly have the same short shelf-life as fashionable clothing and are often seen as trendy personal accessories by consumers hoping to appear hip by carrying the latest gadget. In 2005 Samsung signed the U.S. fashion designers Betsey Johnson and Anna Sui to create stylish clamshell phones. Last year Motorola (MOT) recruited Italian design house Dolce & Gabbana to create a golden RAZR. LG recently collaborated with Milanese fashion label Prada to design a sleek phone (see BusinessWeek.com, 1/29/07, "The Devil Dials Prada on LG's New Phone").
Such collaborations can pay off for both parties. Diane von Furstenberg, a designer known for her sexy wrap-dresses since the 1970s, designed a limited-edition Sidekick for T-Mobile, which went on sale in October, 2006, for an average price of $349, about $100 more than a standard Sidekick. All 15,000 sold out by December, bringing in increased revenue for T-Mobile as well as wider brand recognition for von Furstenberg.
Buying By the Bag
Other designers have taken a slightly different approach. Fashion-world darling Zac Posen, for instance, created a leather camera bag that accompanied a limited number of Nikon's Coolpix devices launched in October, 2006.
Some observers believe it's a smart way to draw non-techie consumers to a brand. "When you walk into an electronics store, you have to be a genius to figure out which camera to buy. There are so many features and functions to choose from. But that's not enough to sell to the end user," observes Patricia Pao, founder of New York-based fashion consultancy The Pao Principle. "The Nikon designer bag helped the brand speak to the end user, to amateurs."
But Pao believes Nikon’s strategy to collaborate with Posen could have been better executed. "The Nikon camera bag may have helped the brand break out. And the limited-edition product offered a sense of discovery and scarcity to attract buyers. But Nikon didn’t carry through," Pao says. Fall 2006 Nikon ads featured supermodel—and more widely recognized celebrity—Kate Moss. "Why didn’t they use Zac Posen in their ads? He’s cute and would attract more consumers to the brand," Pao continues. For its part, Nikon says that Posen was a partner and design collaborator, but not a Nikon spokesperson, and therefore remained behind the scenes.
"A Cautious, Metrics-Based Approach"
Pao advises that companies pursue designer collaborations with specific strategies in mind. "A company needs to find another brand or person who has parallel brand attributes. This means cultivating an awareness of the desired audience," Pao says. "The designer has to be newsworthy. And the company needs to structure a program with a big bang—and continuity for 12 months. Only repetition builds awareness."
These are all tactics that Payless is starting to implement as the company continues to pursue its designer collaborations. The company (which is also set to debut collaborations with another hip designer, Lela Rose, and with stylist Patricia Field, costume designer for Sex and the City) recently renewed its contract with Laura Poretzky for "multiple years," according to Rubel. But only after Payless saw that her designs appealed to their desired consumer base—and beyond—and measured initial sales. It's a cautious, metrics-based approach that other companies would do well to bear in mind as such collaborations are no longer guaranteed headline-grabbers.
"Laura's shoes appealed to a very broad spectrum of our customers. So we decided to continue our arrangement with her," Rubel writes via e-mail. "We'd be nuts not to give our customers access to her talents on a long-term basis." Not to mention the benefit Payless gets from the new audiences brought in by the collaboration.
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