Spreading the wealth

Carole Sloan, founding editor-in-chief -- Home Textiles Today, 2/19/2001

The new economy of home textiles and retailing, in general, has changed the way companies look at distribution, especially controlled distribution.

Not a day goes by when there is not talk about what company has lost a program from one retailer or another, and what company has gained the program. That's the easy piece.

Then there's the newer phenomenon where one supplier takes a brand and moves it or pieces of it to a retailer not typically in the brand's distribution channel, such as the Royal Velvet program that was opened to JCPenney, the Springmaid brand to Wal-Mart, and Martex as a subbrand to Target.

The debate still continues about whether these moves "tarnished" those brands for their more conventional distribution channels, and whether those retailers will continue to support the brands.

What it all boils down to is growth. Each of the moves that broadened distribution was in large measure a means to accelerate sales growth.

And each of these brands is part of a publicly held company, and the growth of each of these companies is being pushed by Wall Street investors. As one of the players sagely observed, "We're using other peoples' money to run our business."

Now let's move into an even touchier situation: the controlled distribution of brands like Ralph Lauren, Calvin Klein, Tommy Hilfiger, soon Donna Karan and a potentially rejuvenated Joseph Abboud.

To stimulate growth, there is now Lauren by Ralph Lauren, Khaki from Calvin Klein and DKNY from Donna Karan.

Each of these brands is determined to keep its distribution to department stores.

The question is whether the subbrands will cannibalize their premier labels and whether the pressures from Wall Street will allow the continuation of the controlled distribution.

The lower-priced brands are working, the retailers say, in the apparel world-and should move the top line up enough to help satisfy Wall Street.

But there's just so far that brands can be expanded without throwing out much of what is in other home textiles businesses within the departments.

The suppliers, challenged by financial growth objectives, and the retailers, challenged by the need for differentiation, will obviously be in negotiations for years to come.