CHAPTER 6

Managing Channels of Distribution and Enhancing Fashion’s Impact

Making fashion apparel available to shoppers can be achieved through different channels of distribution. Depending on their image, positioning, retail strategy, and core customers, fashion brands and their managers should develop one or more channels of distribution.

Traditional Channels of Distribution

Because different distribution formats exist, a company has multiple means to make its fashion items available to customers; identifying one or more formats requires the company to know who its customers are and which market it targets. An upscale fashion brand targets a specific shopper category, consistent with its own brand image, so it would not allow its products to be sold in supermarket, for example. A low price brand has no reason to display its products in an upscale store on Fifth Avenue in New York or Rue Montaigne in Paris. Several variables can help marketers determine which channels of distribution are most suitable for their fashion products and for their target markets.

For example, knowledge of customer demographics and lifestyles enables fashion companies to better grasp their target market and adapt their assortments and offers. As Enric Casi, Mango’s chief executive explains, “We have a very focused strategy, we target women who want the latest in fashion trends. If we were aiming at the entire public, we would not be loyal to our true customers. 30 percent of the people who pass by our shops; we could not try to attract all 100 percent because we would lose our identity.” Hence, gender, age, average income, occupation, household size, and place of residence represent measurable, easily identifiable elements that help companies describe and define their core customers.

With such information, fashion managers might also adapt their high-end strategy to present more upscale products in wealthier areas.

In addition to target shoppers, fashion companies use their locations and competitors as input to ascertain their retail strategy and assortment. Fashion assortment width and depth vary according to the target market.

Assortment width refers to the number of different product categories (e.g., jacket, shirts, pants), whereas assortment depth is the number of varieties of any particular product (e.g., a wool jacket in three different colors, a silk jacket with four different button shapes, a velvet jacket with two sleeve lengths).

A brand’s assortment also might differ according to store locations and local customer characteristics. For a store located near a seaside resort, for example, fashion managers likely offer a wider, deeper swimsuit assortment than in another store located in an urban center.

Location is crucial; it can determine the success or the failure of a retailer. Opening a Chanel boutique in a low-income suburban town makes no sense.

Moreover, location defines the competition for fashion companies. From shoppers’ perspectives, the co-location of many brands’ stores in the same area is convenient, in that it allows them to compare assortments, products, and prices more easily. But for retailers, such proximity can be challenging, because it requires each store to establish a strong, consistent image and positioning to attract shoppers’ notice. Fashion companies study each location carefully, including the nearby competitors and, potential vehicular and pedestrian traffic, before deciding to open a new store.

Beyond locations, distribution format choices are a critical strategic element. Fashion products can be bought in different types of stores; to explicate fashion managers’ distribution choices, we examine the following distribution channels: independent, supermarket, fast fashion, boutique, and department stores.

Independent Stores

These retailers are characterized by a single owner who manages every step of the business, from buying apparel to final sales to customers. Independents offer multiple brands to a very targeted customer base. They have generally just one or a few locations and are responsible for all costs (e.g., personnel, fixtures, rent). Today, these types of retailers are fading though, due to the aggressive competition produced with the growth of chains and franchises. The small volume of sales achieved by independent stores means they suffer from low bargaining power and often must pay high prices. Moreover, turnover in independent stores tends to be relatively slow, which does not appeal to fashion shoppers who are eager to find the latest apparel before others and therefore look for it where they are sure to find it. Nor can the independent stores offer a very wide assortment, because such vast choices would be too expensive to manage, and the small stores must clear their stock before they can introduce new apparel or accessories.

Supermarkets

Many supermarkets and combination stores offer both grocery items and apparel, along with shoes, small appliances, and so on. Stores such as Target offer a wide variety of fashion items at reasonable prices. This shift in business going from just food to large fashion assortments in supermarkets can be explained readily by the higher profit margin earned on apparel, compared with food. Moreover, these large stores attract shoppers with the possibility of multipurpose shopping: Get their grocery shopping done while discovering fashion trends. The associated convenience is a strong reason for their expansion. Many of these stores offer a wide assortment of fashion apparel, with a few brands names in play. Target strongly develops its own private labels, with brands such as Mossino, Merona, Xhilaration, and Cherokee. Kohl’s has collaborated on brands with the actor and singer Jennifer Lopez, the fashion designer Dana Buchman, and the reality television personality Lauren Conrad. These fashionable offers grant shoppers more access to fashion apparel at low prices, compared with those charged by national or international brands; at the same time, the private labels benefit supermarkets with higher margins and the attraction of many customers. This distribution format allows a wider target market of consumers to discover new fashion trends and purchase them. Wal-Mart also offers fashion items at a low price and develop the cheap chic through its private label George; in France, the fashion assortments available at retailers, such as Auchan and Carrefour, follow same strategies: seasonal trends and affordable price ranges.1 In fact, their strategies are focused not on brands but rather on the must have items for a specific season, all at an attractive price. Shoppers buying such fashion apparel generally are not looking for long-lasting products or good quality. As Marshal Cohen, chief analyst of the NPD Group, notes, “Sure, they know they are getting one that may break down in a few years, but they will be able to keep getting the latest.” Such customers want regular access to fashion, without spending beyond their means. Thus, the modern profile of fashion shoppers has changed, in parallel with retailers’ expanded offers. They might purchase a low-priced fashionable top at Target and chino pants at Gap, which they accessorize with a Chanel scarf.

Fast Fashion

Fast-fashion retailers also benefit from this new profile of customers. By offering low-priced fashion items, they attract significant numbers of shoppers, such that they become a natural destination for someone on a fashion quest. These retailers satisfy consumers’ needs to transform their self-image by combining various, temporary fashion items. The low prices for these fashionable offers enable shoppers to make choices without worrying too much about the consequences, whether in terms of prices or self-identification. Rather, the varied possibilities available through fast fashion help shoppers change easily and at little cost, because it requires limited investments, in both monetary and identity terms. Thus, fast fashion has changed not only retailers’ habits but also fashion shoppers’. These customers seek variety in products that provide good value for the money, such that they can access trends quickly and at lower costs than they previously could, enabling them to maintain fashionable looks every day.

Fast fashion runs in parallel to traditional fashion and ready-to-wear industries, but it is not tied to six-month cycles or seasonal calendars. Rather, this sector develops continually changing fashion assortments throughout the year, such that retailers benefit from shorter fashion product life cycles. The traditional seasonal path with two collections Spring-Summer and Fall-Winter is not followed here. Fast-fashion managers do not assume that a single season equals a collection because they think instead in terms of multiple trends that they need to follow. Doing so means that fast-fashion companies may easily offer more than 40 collections each year to their passionate fashionable customers. As they introduce new products two to three times each week, rather than the 10–12 annual introductions undertaken by traditional fashion stores, fast-fashion retailers have revamped the fashion supply chain, shortening the time between production and distribution, offering a wider assortment of fashion apparel and accessories that changes constantly while still staying affordable.

Today, fast-fashion retailers are becoming important actors in the world of fashion. In Europe, they are expanding in sales and profits by over 20 percent per year.2 H&M, Zara, and Mango are the well-known leaders of the fast-fashion world. H&M claims to offer fashion products to everyone at the best price. Zara seeks to position itself as offering medium-quality fashion clothing at affordable prices. The Mango chain sells fashion items at reasonable prices and also tries to provide the feeling of a boutique. They all focus on fashion trends and affordable prices. New entrants into this growing fast-fashion market include Uniqlo, a Japanese casual wear label that continues to expand into new markets, from China to France, England, and the United States. Forever21 is also a fast-fashion place to go. When this retailer first started, its founders sought to import fashion designs from their native Korea and to sell them to teens in the Los Angeles Korean American community. It has grown to become today a competitive force in the fast-fashion market, spanning women’s, men’s, and children’s departments.

With their multiple choices and affordable price ranges, fast-fashion retailers have contributed to the popularization of fashion. They make fashion accessible to everyone at various price ranges. Moreover, fast-fashion companies have helped create new shopping behaviors, which can be characterized as buy it now. Consumers are willing to buy more frequently because they know that next week the beautiful blue shirt they are considering will have been replaced by something else, and a new trend will be dominating the displays. Fast-fashion managers induce consumer desires to encourage purchases, which in turn leads to their unique sales results. Fast-fashion retailers sell almost 85 percent of their collections at full price in a few weeks, compared with 60 percent for traditional stores.3 Their inventory turnovers are higher, and they base their profitability on a greater volume of sales at lower prices. Zara, for example, turns over its stock 17 times each year.4 This speed and constancy of change is closely related to inventory management: Fast-fashion retailers can respond to customers’ desires to access new trends at a reasonable price as soon as they arise. They manage closely their collection launch, delivery, and inventory to keep their leadership among fashion competitors.

In this sense, fast fashion involves a new perspective on fashion, in that shoppers’ attention centers more on the experience and emotional benefit of the products than on the intrinsic quality of the apparel. Fast fashion has changed fashion retailer business and shoppers’ expectations. These customers seek variety and value for money products and have now access to trends quicker and cheaper than before.

As an influential retail business strategy, fast fashion includes powerful actors that cannot be ignored by other retailers. Rather, the retail field in general must adapt its offerings, taking into account the appeal of these new competitors.

Boutiques

A contrasting channel of distribution is boutiques, which offer a specific kind of upscale assortment to a particular, narrow set of customers. These retailers select their shoppers through their selection of fashion products, their location, and their price range. The Chanel and Yves Saint Laurent boutiques on Avenue Montaigne in Paris are good illustrations of the general traits of a boutique: large stores, few items, high prices, upscale atmospheres, and sophisticated salespersons. Wealthy customers visit boutiques to enjoy their selective or exclusive distribution and customers services. In direct contrast with fast fashion, boutiques focus on shallow assortments with high prices. The profit per unit thus is much higher than other retailers, and their overall profitability is based on a few customers’ high-priced purchases.

Department Stores

Between fast-fashion retailers and boutiques, department stores try to develop strategies to establish their own positions. The large retail units host extensive assortments of fashion items that are both wide and deep. Several floors of offerings generally separate into departments, such as women’s, men’s, and children’s. The large selections of fashion apparel and accessories feature average or slightly above-average retail prices, contained within special atmospheres that reflect the department store’s brand positioning. National and international brands might maintain their own furniture, displays, and salespeople, to ensure consistency with their dedicated boutiques and stores.

Within this format though, department stores pursue widely varying positioning options. Harrods in London is a very upscale department store, as reinforced by its displays, atmosphere, and choice of brands to sell. Its website announces that its mission is “To be the number one department store in the world for luxury branded merchandise, maintaining an unprecedented level of retail standards, expertise, and profitability. Through a combination of product, innovation and eccentricity, we aim to provide every customer with a truly unforgettable experience in our quintessentially British environment.”

Founded in 1834, Harrods has only one store, yet its rich history and heritage grants it an international image, as the largest, most luxurious department store in Europe, with great brand awareness for shoppers worldwide.

Other department stores make different choices in term of positioning, such as JCPenney’s focus on promotion. This traditional department store has had a long history of pursuing a low-price strategy, based on marked-up products and frequent promotions. In 2012, new CEO Ron Johnson decided to change the approach significantly, by eliminating all coupons, promotions, and discounts and simply promising everyday low prices. However, JCPenney customers did not understand or appreciate these changes because they had grown accustomed to promotions and liked the feeling of getting a good deal. The no-promotion strategy had drastic, negative effects on the retailer’s sales volume and store traffic, leading the company to return to its familiar promotion-based pricing strategy. The reintroduction of markdowns did not lead to an immediate increase in sales though. As this case illustrates, the different strategies chosen by department stores and fashion managers offer lessons for others to consider—mainly, that it is important for fashion firms to remain consistent in their strategy and not force customers to change their habits abruptly, especially with regard to prices and promotion.

Harrods and JCPenney offer examples of two opposite strategies; other department stores choose from different alternatives too. Macy’s in the United States, Galeries Lafayette in France, and Isetan in Japan all follow similar distribution strategies: multiple stores that offer wide, trendy assortments of fashion apparel and accessories. They provide customers with national and international brands, and their prices are average for similar items in the fashion market.

Another option is multichannel distribution, such that brands might appear in department stores, their own stores, and sometimes offer a line of products in some combination stores. For example, Converse maintains its own stores in several malls, leases dedicated areas in some department stores, and offers some models of its apparel and shoe collections in Target.

As we have noted, fashion changes constantly, and so do its channels of distribution. Inspired by the success of food trucks throughout the United States, some small firms have introduced the idea of fashion trucks, and the new method for fashion distribution has raised increasing interest and curiosity from fashion shoppers and designers. To present and sell fashion items, fashion trucks travel to big towns in the United States, Canada, and France. They usually offer a narrow assortment, because of the small amount of space available, often featuring vintage apparel and accessories or new designers’ creations. This new retail concept has the advantage of easy access to fashion items for customers. Busy people under strict time pressures can find the trucks nearby and purchase fashion products without having to travel to stores—the fashion comes to them. In this sense, it suggests a new means for fashion retailers to target customers who do not enjoy spending hours shopping in stores. For retailers, the stores on wheels also promise the ability to change locations depending on store traffic, competitors, and special events. Finally, new designers use the fashion trucks to present their collections and attract the attention of fashion customers, without having to pay expensive rents for store space or high lease prices in a department store.

These trucks, thus, present advantages for customers, fashion companies, and designers, increasing the chances that they will become a prominent part of fashion companies’ retailing plans, together with more traditional channel choices.

Many fashion brands rely on multichannel distribution, including store-based and nonstore-based strategies, as manifested in the development of online shopping. Fashion companies emphasize their presence on the web through different sites, including social networks, to ensure widespread familiarity with their collections. As more and more brands develop their own websites or sell their collections through retailers’ existing websites, online distribution grows every day, though room to grow even further still remains.

A New Means for Fashion Diffusion: Online Sales

In the United States, online sales represented only 7 percent of total retail sales in 2012; online customers are projected to spend $327 billion in 2016 and €191 billion in Europe, according to Forrester Research.5 The portion of this total related to fashion apparel and accessories should reach $40 billion followed by consumer electronics and computer hardware. Martin Gill, an analyst at Forrester Research, sees some changes in e-business already visible. He says:

We predict a subtle segmentation in the markets across Europe. We will see: Southern European countries experiencing the fastest growth rates. As online shopping becomes a mainstream activity in Spain, and Italy over the next five years, e-Business executives must focus on driving web growth by securing the keystones of e-Commerce: convenience, value, and (most importantly) choice . . .

Northern Europe entering a new phase of competitive expansion. Online shopping is the norm in Northern Europe and increasingly encompasses multiple touch-points. Most retailers now sell online, giving shoppers unprecedented choice. e-Business executives must follow a path of optimization and innovation as they fight to remain competitive.

Modern customers are more informed about and familiar with digital technologies than ever before, and they use their acquired information and easy online access to seek better deals and find original fashion items. For retailers, e-commerce offers a new route to profits but also new competitive threats. Online shoppers seek good deals, wide assortments, and differentiation from others. In turn, the main factors contributing to the growth of e-commerce for fashion apparel and accessories are as follows:

1. Online deals

2. Loyalty programs that offer benefits, such as free shipping

3. The increasing popularity and use of smartphones and tablet computers, which enable shoppers to spend more time online, including for shopping and ease their purchase process

The last factor has a particularly notable impact, in that “The tablet shopping experience also likely encourages shoppers to purchase more products in an impulse fashion,” according to Forrester Research.

In addition, many modern customers face challenging time pressures, which can be resolved with online shopping because they do not need to waste time travelling to the store, waiting in line to pay for items, and so on. On average, consumers spend 14.3 percent of their weekend leisure time shopping online and 11.8 percent of their time during weekdays, according to the Bureau of Labor Statistics’ 2012 American Time Use Survey. Such shoppers spend less time in stores and devote their time instead to pursuing good opportunities online.

Retailers use various strategies to attract such customers and enhance this new source of profit, in close competition with other companies that might have initiated their e-commerce earlier. As we previously noted, many fashion companies develop a strong presence through social media to reach and capture more customers, especially those consumers who are comfortable with new technologies and willing to buy online.

For Macy’s, online sales increased dramatically when it undertook an expensive integration of its inventory systems. Good inventory management underlies the ability to offer and deliver the newest fashion apparel to eager fashion shoppers, efficiently and on time. JCPenney relied on the professional expertise of Michael Rodgers, previously an executive for Saks department store, to help it integrate the retailer’s e-commerce with its physical stores. Doing so moved the department store to a number 34 ranking in the Internet retailers Top 500 Guide for 2013.

Inventory management is closely related to another method e-tailers use to attract online shoppers, namely merchandising strategies that demand constant adjustment and improvement. Flourishing fashion websites promise various benefits to customers, beyond online purchases or pick-up in stores. A new service from Gap allows customers in Chicago and San Francisco since June 2013 to reserve in store: Shoppers choose products online, identify which stores have them available, then tag those choices to be set aside, and await their arrival. When the customer visits the store, he or she can proceed directly to the dressing room or checkout. This service forces Gap to manage its inventory more closely, such that it updates availability information every 20 to 30 minutes to ensure that the online assortment is relevant and accurate.

The Tie Bar uses another tactic to attract customers to its website. To make the choice of ties easier, the site matches each available option with appropriate colors and patterns of shirts and suits. Because each tie coordinates perfectly with a selection of shirts, customers merely need to click a few times to put together a fashionable, matching outfit.

These services reflect the strong influence that fashion apparel and accessories have on people’s self-image and social judgments, through its consumer-oriented approach, and the benefits retailers and brands can retrieve from e-commerce by offering new services and attracting more customers.

Website design also is very important because fashion apparel purchases are often driven by emotions rather than needs, linked to the creation of an image in customers’ minds. By offering an emotional atmosphere throughout their websites, from browsing to payment, fashion firms comfort their customers and enable them to search for novelty, pleasure, and a nice appearance. The store-based assortment and the web assortment both must be presented in a way that indulges potential shoppers, revealing all the possibilities linked to the latest fashion. For example, the photography, descriptions, and site navigation should create a pleasurable atmosphere. Websites that only offer a picture of an item on a plain background are less appealing to customers than pictures of models wearing the same item, which help shoppers view themselves wearing and enjoying the fashion apparel. To make web shoppers comfortable with browsing the site, they should be able to select fashionable accessories that match their newly purchased shirt or pant and identify with the models wearing these items, which should encourage them to spend more time on the site and perhaps purchase more items.

As online consumers cannot touch the fabric or observe the details of the finish, photographs of the items online must be very clear and detailed. The site also should allow shoppers to zoom in and, rotate the picture of the product to determine and appreciate its quality, and fit. In addition, a detailed description of the product and its different options (e.g., colors, fabrics, sizes) can reduce an online shopper’s purchase risk, increase involvement, and facilitate the purchase decision process. However, fashion companies face a trade-off between presenting a complete and objective description of fashion apparel, emphasizing its technical quality, and offering a more emotional description. Furthermore, misleading descriptions or overblown promises create the risk of disappointing customers who ultimately will fail to find all these qualities and thus will return items. There is little chance that these disappointed shoppers will go back to this website. Offering a product that did not meet customers’ expectations may mislead them once but rarely twice.

Fashion companies need to gain people’s trust if they hope to transform them into regular customers. Thus, all descriptions of fashion apparel online, whether pictorial or textual, must be accurate, relevant, and consistent with the product. Reliable websites achieve profitability because they lower shoppers’ perceived risks, leaving them unafraid to buy a fashion product because they can anticipate the quality and fit announced on the website and trust the brand. Some of this trust also depends on logistics management; for example, expected delivery times must be met diligently. Online fashion shoppers also expect packaging of the same quality they would find in stores.

All these aspects must be addressed carefully by fashion firms to encourage consumers’ trust, enhance their market opportunities, and boost their online sales.

Finally, websites are a powerful means of communication for fashion brands and retailers. Many companies introduce their new collections, must haves, and best deals online. For a fashion brand, online channels represent an additional presence in their potential customers’ minds during decision-making processes. Some customers browse websites only for information regarding assortment, price because they prefer to purchase items in person. However, regardless of the reason for their visit to the website, fashion companies’ websites can encourage the development of customers’ knowledge about the latest fashion apparel and thus increase the chances that they will become customers eventually, if not immediately. This method of communication can present many more products at a time, less expensively than an advertising campaign posted in magazines or on television.

Fashion companies’ and retailers’ websites are a prominent source of information for shoppers eager to discover the latest fashion apparel at a good price; they also are an excellent means of communication, enabling firms to develop their business and increase their sales and profits. Websites offer developing business opportunities for both sides of the market: easing the purchase process and creating access to good deals for fashion shoppers, while increasing sales and profitability for fashion companies. Websites lead to more opportunities to generate and maintain long-lasting relationships in a very competitive market.