Fodder /ˈfɒdə/ noun: inferior or readily available feed or material used to supply a heavy demand.
This is the most accurate way to describe most private label product in the Australian fashion market – product that’s conceived and presented with the stingiest levels of creativity, churned out in volume to fill gaps in an inventory plan and disdainfully inconsiderate of evolving consumers. Often, it’s planned by buyers for promotional events, with little expectation of any full-price sell-through during the mandatory four- to six-week price establishment period (hello, ACCC, we’re so glad you’re watching). It is de-spec’d within an inch of its life to deliver a decent margin at 30 per cent, 40 per cent and even 50 per cent off its disingenuous “RRP”. With trite brand names like Basque and Lily Loves, it sits crammed onto rails and shelves crowned with bright red signage. It’s unloved by both merchants and customers – and altogether unremarkable except in its ubiquity.
But it wasn’t always like this. There was a time when private label offered tangible value to all its stakeholders, from its creators through to the end customer. But somewhere along the way, that value model broke down. Caught up in the relentless churn of the fast fashion system, even premium retailers and department stores allowed its original qualities to be diluted. But a revitalised version of private label is emerging. Progressive retailers are rediscovering these attributes, using private label to bolster business strategy.
The dirty secret of most Australian private label collections is that they are mostly devoid of any real design – they aren’t designed by actual designers. Instead, the ranges are assembled by trend-savvy product developers who fly around the globe in packs buying “inspiration samples”. Four to eight times a year, they hit New York, Paris, Milan and London, filling suitcases with items purchased from other retailers. When they return to head office, they hang the samples on grid walls, pinning fabric swatches and colour chips to the garments to indicate how they will get modified to form the next collection. Nothing is sketched for range approvals – there’s no time. They must rush back to Guangzhou to approve their versions of those items. It’s no surprise when you walk into two retailers and see a nearly identical embroidered blouse in each. Their “designers” both bought that same Isabel Marant “sample”.
The best private labels look like real brands, with their own distinct positioning and signature design aesthetic. Some inspiration will be drawn from other labels. No designer can operate in a total vacuum (except perhaps Phoebe Philo who famously eschews magazines and social media to avoid external influence). But the ranges must have a high originality quotient.
An example of this is Matches’ Raey label, which has created its own cult following since launching in 2015. When Matches founder Ruth Chapman committed to launching a house label, she didn’t appoint a buyer or developer to lead. She hired designer Rachel Proud, who had cut her teeth at Christopher Kane. The bestselling range of luxury basics consistently carries Proud’s distinctive design handwriting.
Key takeaway: To create a private label with a loyal following, it must have unique design elements and a recognisable signature. It is time for retailers to invest in real designers. They must stop turning newly hired design graduates into globe-trotting plagiarists. Instead, they must leverage their skills and unique point of view to create distinctive commercial products. They also need to nurture enduring relationships with their design talent. One reason Raey is going from strength to strength is because Proud has been helming it for five years. Australian retailers must stop their deplorable habit of chewing up and spitting out talent remorselessly. They must start to hire, develop and retain strategically.
A brand is not a logo. Nor is it something captured in a brand book, with a set of brand values and packaging guidelines. A brand is a feeling, it’s a promise and it’s an exchange of value. The most aspirational brands in the world balance rational and emotional drivers flawlessly. This is the single biggest difference between designers and fast fashion, of which most private label has become a subset. Brands have tight guardrails for how they will look, feel, sound, smell and behave. Fast fashion is about being faithful to no specific identity, but rather chasing the trend of the moment, oscillating so wildly from season to season as to create no lasting impression.
But a new breed of private labels is embracing brand as a tool for driving business resilience. Multi-brand online retailer Revolve has built a portfolio of 19 owned brands that represent eight out of their top 10 brands and 27 per cent of sales. The strongest evidence that they are established as real brands in the mind of the consumer is the fact that they made up three out the top five brand search terms on external engines that led to a product sale. The Raey brand is similarly strongly positioned, with its own Instagram account and a standalone store in Notting Hill, Victoria.
When Amazon launched its men’s activewear label Peak Velocity, one of over 80 private labels in their portfolio, the consideration that went into the name, logo and product design demonstrated their resolve to seriously take on brands like Under Armour, Adidas and Nike.
Key takeaway: Retailers must begin to see brand as a business asset. Their labels’ names and designs must reflect the personality of the retailer. If that personality is not aspirational, they must focus on evolving the master brand. The “ragtrader” short-term, opportunistic mentality must be replaced by a more strategic approach – one where the entire brand experience is fully curated, just as it is by the brands that are their drawcard. This is especially true for department stores. They must recruit merchants and brand marketers with experience in world-class branded businesses. Retailers who adopt this approach will find themselves with more valuable assets – brands that can be spun off as separate businesses or become growth vehicles in new channels.
The problem with private labels created with fast fashion values is that they will suffer fast fashion’s same decline. Millennials and Gen Z have been moving away from fast fashion. A recent study of buying behaviours during Covid-19 lockdown showed an acceleration of this trend. During lockdown, H&M’s market cap declined by US$5.3 billion ($7.8 billion) and Inditex’s by US$17.9 billion ($25.8 billion). They also both declined in brand value in the last 12 months. This principled generation is looking to form relationships with brands they can trust – not only from a social impact standpoint, but also from a quality standpoint. A study in 2019 showed that 40 per cent of millennials consider the resale value of a fashion item before buying it. They are looking for quality, longevity and brand cachet.
When Mr Porter launched their house label, Mr P, the collection was made up entirely of premium items, sourced from the best global makers. But price positioning sits just below the major brands. The label features $1400 Italian-crafted suede jackets through to $38 Japanese-made cotton socks. All products mix seamlessly among the better-known labels, creating a slightly more accessible price point. This enables cross-selling and a higher average order value. The strategy is working. Three years after launch, Mr P is now in the top 20 of 450 brands offered on the site.
Key takeaway: Retailers must ensure the value offered, from a price and quality standpoint, is as close to their core branded value as possible. Prices must sit only slightly below the rest of their offering. Premium department stores must stop using private label to stretch their pricing down to compete with discount department stores (DDS). This ultimately dilutes their entire business positioning. It makes it difficult for customers to have a clear understanding of their true value offer. The same is true for the DDS channel – stretching up with designer collaborations or limited-edition ranges where pricing is well outside out the core business positioning creates short-term hype versus enduring value positioning. Better-positioned private labels are also more impervious to markdowns, presenting higher margin upside.
Getting private label right used to be as simple as tapping into the insights from big-brand bestsellers and replicating those formulas at sharper price points. Today, there is a growing divide between online retailers that actively mine sophisticated real-time data and traditional retailers whose scantily resourced brand and private label teams are so siloed that they struggle to leverage each other’s insights.
Data is the space where the battle is being won by online players, to the point where it can be leveraged to become the designer. San Francisco-based Stitch Fix is taking this idea to the extreme. They have developed an algorithm that accesses multiple data points to predict and produce future bestsellers for their private label range.
Key takeaway: Traditional retailers’ ability to combine data and personalised marketing is limited compared with pure-play businesses that are born data-centric. To fully optimise their private label efforts, they must become more adept at utilising data to meet and exceed customer needs. Richer insights, combined with go-to-market agility, create even greater advantage. Labels like Raey can turn insights into new product in as little as four to six weeks. As Australian retailers consider on-shoring a portion of production post-pandemic (to create greater supply-chain resilience), they can also reap the benefits of rapid turnaround on insights to boost private label performance.
In conclusion, what is most apparent is that many local retailers are exploiting only some of the advantages that private label offers, like bigger margins than branded ranges and plugging gaps in assortments. But they are failing to fully leverage its other benefits, and are being beaten at this game by more progressive online players. The world’s cleverest e-commerce retailers are building even stronger moats around their businesses using private label.
Their digital access to consumers at scale enables them to powerfully combine insights and personalised communications. They have also understood the power of building brands as assets that can stand alone and also have a brand-building effect on the parent retailer brand. They are winning at creating clear value for the customer through the right price/quality balance and by using scarcity and exclusivity to lessen their reliance on promotions and markdowns. And they are using unique design and positioning to set themselves apart and create customer loyalty.
As more leading brands, from Nike to Gucci, move more towards direct-to-consumer, traditional retailers need to go on the offence to strengthen their position. Retailers like ASOS have intentionally invested in strong private labels to build them to 50 per cent of total sales. In doing so, they have lessened their reliance on big brands with their own agendas and broken their dependence on a promotional cycle they can’t control. Post-Covid-19, the temptation might be to make house brands all about price to meet the needs of a more frugal consumer. Instead, retailers must consider how to fully leverage the broader attributes of private label to make their businesses more resilient.
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