Bracing for a comeback
By Brent Felgner -- Home Textiles Today, 3/26/2004 12:00:00 AM
NEW YORK —
As Royal Velvet takes its first tentative steps back into the market — with high hopes by its owners that Fieldcrest, Cannon and Charisma are close behind — key challenges remain that will undoubtedly test the brands' mettle, determining whether they can meaningfully be revived, simply survive or perhaps even thrive in their new incarnations.
The brand managers — Group 3 Designs and Earthbound — are absolutely passionate that the labels have dynamic and successful futures ahead of them. At the same time, the caretakers largely acknowledge that they must overcome a still somewhat skeptical trade that continues to raise irksome questions.
Have the brands been gone for too many months? Can they win back the real estate at retail? Are the licensing deals too expensive or too restrictive? Was the auction price — placed by some at $80 million to $85 million — too high? Can the investors' return-on-investment requirements leave enough margin to make the business viable?
Yet, nowhere within any of the conversations does anyone question the brands' place among consumers. Quite the opposite, even the most skeptical concede that significant brand equity remains among shoppers, many of whom, they believe, probably haven't even noticed the products among the missing.
But clearly, time is critical.
"In my opinion, all four brands share a very strong equity," said Jack Moore, executive vice president, home, for Kohl's Department Stores. "The issue in my mind is not the equity of the brands, but the vision of the owners going forward and which retailers they want to position the brands with. Time is their enemy, but brands have a way of diminishing in the retailers' minds much more quickly than they do in the consumers' minds. Depending on which brands are positioned with which retailers, they have some great opportunities."
Moore included Kohl's among those retails. It has retained prominent Fieldcrest and Cannon signing high on some store walls. Noting that other retailers might still be interested, he declined to specifically state whether Kohl's was in the talks.
Moreover, Federated's Macy's Home Store division will be further reviewing the issues in April, according to newly appointed senior vice president of home, Steve Vernon.
"It's almost like it's out of sight, out of mind," he said. "They've certainly lost a lot of floor space. I don't know that they've lost a lot of equity with consumers, but with retailers, equity has been lost simply because they've been forced to bring in other lines and sources of distribution of the product to fill (the void)."
Vernon said Macy's Home Store's determinations will be made in conjunction with broader assortment strategies, particularly in light of Federated's focus on private label and direct programs.
According to Jeffrey Cohen, co-chairman of Earthbound — the branding company handling Fieldcrest and Charisma — the process is speeding forward out of concerns that that brands can't be allowed to remain dormant.
"The consumer can't be allowed to forget them," he said. "So we have to be back in the market certainly by next spring, and if we can get back in sooner, certainly we would want to do that. I think it's a reasonable. I don't know if they'll be as fully fleshed out or as deep as we'd want it to be, but our plan is to push as hard as we can to do that."
Earthbound came onto the scene in January at the behest of owners GGST to assist in the marketing, splitting the responsibilities with Group 3.
"Consumer awareness is just the price of entry into the categories," offered Robert Passikoff, president of Brand Keys, a New York consultancy. And once out of the marketplace for any significant period or time, re-entry can be expensive.
"Can it be done?" he asks. "Sure it can be done. It's just not easy anymore. When an established brand fades for whatever the reason, coming back isn't easy."
For her part, Group 3 President Mary Gleason is no stranger to such skepticism. From the time she joined with Pillowtex and GGST last April to assess the brands' strength and endurance, she has faced down the skeptics with a belief that the brands could be brought back to a stronger position than they've ever enjoyed.
"No one in the market would talk to me," she recalled of her early investigation. "A lot of vendors said, 'Who's Mary Gleason? Who's Group 3?' so I stopped calling them and started calling all the retailers."
Those conversations convinced her of the brands' viability and the opportunities to create "consumer pull" into the retail outlets. In the home textiles industry, the concept is almost unheard of, perhaps with the notable exceptions of Ralph Lauren and Martha Stewart. Gleason seems unfazed that the shelf space has been eaten up.
"Most of the retailers went to private label, which I think, in the end, is really going to help us," she argued. "Retailers need a balance between real brands and private label."
Yet, to date, most home retailers have demanded that marketing resources be paid directly to them, as opposed to consumer advertising and other traditional marketing efforts. It's been a common practice among home textiles suppliers and their retailers for years, and Gleason will need to change that mindset quickly, even as some suppliers grumble that the deal isn't right for them.
"I'm not treating Cannon and Royal Velvet any differently than I treated Starter (the athletic brand). It's marketing brands to the consumer," Gleason said, adding, "I love my licensees, but they don't drive my business. I drive my business."
That marketing has resulted in the Royal Velvet plan being present at this year's New York Home Textiles Market with Li & Fung as the primary licensee and others to follow.
Those consumer marketing dollars will come from up-front payments against the advance from the licensee, Gleason said. The funds — 8 percent royalties with a 2 percent marketing fee from the vendor licensees — will more than adequately pay for the programs, she said. There's a three-and-a-half-year marketing commitment with the licensee, she added.
"Over time, there is a specific allocation we spend contractually … So as our volume goes up, our marketing expenditures go up," Gleason said.
Substantially the same plans will go forward with the Cannon and Cannon Royal Family brands, with perhaps some special considerations made for their mass merchant positioning within the marketplace — hinting that exclusives might be in their planning.
Group 3 has also recently hired Donna Karan's Amy Rosenblatt as vice president of Cannon brand development, the counterpart position to John Hall's at Royal Velvet.
"These are valuable properties, and it's important to do it right," offered Kohl's Moore.
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