NPD Reports Private Label Apparel Sales Up in A Down Market

PORT WASHINGTON, NEW YORK, July 21, 2003 – While overall apparel sales have been down for the last four years, private label sales have increased five percent over the last five years, according to leading market information company The NPD Group, Inc. A key reason for this growth is that retailers are now using private branding to increase sales of their private label merchandise.

Private label is generally exclusive to a parent company or individual company offering unique products and designs. Examples of private labels include Stafford at J.C. Penney and Sonoma at Kohl’s. Private branding utilizes the marketing familiar to national brands, including designer names and celebrity endorsements. Examples of private brands include Mossimo at Target and Jaclyn Smith at Kmart.

"The industry is putting a new face on private label and that face is private brand," said Marshal Cohen, senior industry analyst, The NPD Group. "The biggest difference between private label and private brand is that private brand offers the ability to establish a personality behind the product, to give the consumer the ability to be more loyal and aware of the exclusivity factor. J.C. Penney is an example of a retailer that has done a great job for many years in developing ‘Arizona’ into a brand that consumers believe has its own product integrity and identity."

Private label and private brand merchandise represent 36 percent of the total apparel market, taking in almost $60 billion in the 12 months ending April 2003. National brands represent 34 percent of the apparel market and designer brands account for 7 percent*. Mass merchant retailers are posting the strongest gains in private label apparel sales, with a six-percent increase over the past three years. Annual private label sales now represent 51 percent of total apparel sales in the mass merchant channel, up from 45 percent in 2001.

"The success of the private programs is based on their perceived value and the consumer’s perception that these products are worth investing in," said Cohen. He also said that private labels enable retailers to distinguish themselves from competitors. "Introduction of a private label gives the consumer a reason to favor one retailer over another."

In apparel, private label was first introduced as a generic product that offered the lowest prices. This quickly transitioned into department stores using private label to create basic programs offering their very own basics at lower costs and, in turn, at slightly lower retail prices. These private label items soon were the focus of promotions, offering savings and incentives to stimulate sales during key promotional periods.

Today, private label takes on new meaning and importance. Many retailers have invested in merchandising teams to develop private label programs throughout their corporations, big and small. Stores are marketing homegrown private labels and brands as if they were national brands.

For a retailer to be successful with private label merchandise, it must find the right balance between its private labels and its national brands and designer merchandise. "Retailers must continue to control the amount of private label available in their stores in relation to their other branded and designer offerings. When utilizing private label or private brands, there is nowhere else to go for support if the product doesn’t sell. With the national brands and designers, there is always the option of help from them, but with private label, you [the retailer] own it, from start to finish. You may have the best mark-up, but when it has to be marked down to $9.99 to get rid of it because it won’t sell . . . ouch, that really hurts the margin," continued Cohen.

Consumers will be seeing even more private brands from retailers. Retailers will continue on an aggressive track to increase private label offerings not only for apparel but for many other markets, as well. "There’s not a category out there that won’t have private label. I wouldn’t be surprised to see a private label automobile," said Cohen.

* The remaining 23 percent represents an "other" category. Other includes non-reported brand preference information.

About NPD Fashionworld®
NPD Fashionworld, the fashion-tracking division of The NPD Group, provides sales and marketing information for manufacturers, retailers and related services in the apparel and footwear industries. NPD Fashionworld provides the most accurate market intelligence available, including what is selling, where, to whom and why. Information is delivered online in a secure, Web-based environment via interactive delivery tools that make information accessible and actionable to a wide range of users – from executives to sales and marketing to research. Today more than 100 market-leading companies in the industry rely on NPD Fashionworld for the knowledge they need to drive better, fact-based decision making.

About The NPD Group, Inc.
Since 1967, The NPD Group has provided reliable and comprehensive sales and marketing information for a wide range of industries. NPD provides critical knowledge on what is selling, where, to whom and why to help our clients make more successful, fact-based business decisions. Today more than 1,300 manufacturers and retailers rely on NPD to help them better understand their customers, product categories, distribution channels and competition in order to help guide their business and positively impact sales and revenues. Information from The NPD Group is available for the following major vertical sectors: apparel, appliances, automotive, beauty, cellular, consumer electronics, food and beverage, foodservice, footwear, home improvement, housewares, imaging, information technology, music, software, travel, toys and video games.

For more information:
Dora Radwick
Dora_Radwick@npd.com
516-625-6190

Sean P. Dolan
Sean_Dolan@npd.com
516-625-2288