For most of the past decade, apparel executives have regarded deflation as being as certain as death and taxes.
In the jeans world, that’s starting to change.
Consumers have opted to spend more of their disposable income on electronic items such as cell phones and digital cameras throughout the Nineties, and into the new millennium, and spending on apparel has slipped to a lower priority. Retailers and wholesalers responded by cutting prices and beefing up promotions. A strong deflationary trend set in throughout the apparel industry, with sourcing executives seeking out lower-cost nations for production.
But during the past year, jeans brands across many price tiers have begun to include some higher-priced styles in their lines, or have launched pricier spin-off subbrands. Two factors are driving this trend: the rising prominence of the premium and superpremium jeans business, where $100 is the opening price point, and the realization that designing products with the goal of cutting retail prices doesn’t create consumer demand.
Mudd USA helped build the moderate branded jeans category in the Nineties, with styles typically running from $30 to $40 retail, into a booming business by undercutting the status category, where jeans sold for $50 to $60. For spring retailing, the firm is introducing Mudd Couture, an updated line with target retail prices of $50 to $60.
Dick Gilbert, chief executive officer of the New York-based firm, said the higher price points “give us an opportunity to put out a better product with more details.”
During the last few years, the price ceiling for the moderate category was pushed lower as department stores found themselves competing more directly with value-priced national chains such as Kohl’s Corp. That meant more goods sold for less than $30.
“When you are restricted to $29 retail, it’s tough to have a hot product,” Gilbert said.
One of Mudd’s competitors, L.E.I. jeans, which is owned by Jones Apparel Group, took a similar approach in rolling out two lines: E Denim, which began arriving at retailers this summer with suggested price points of about $48, and L.E.I. Premium, which shipped in late September with targeted prices around $39.
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It’s not just the moderate brands taking this approach. Status brands, including Tommy Jeans, Polo Jeans Co. and the CK 39 Calvin Klein line, have all introduced higher-priced products in 2004, with the goal of winning back some customers from the premium and superpremium markets.
Heather Pech, president of Polo Jeans, which is also part of Jones, said the trend toward higher-priced products is “being driven by better department stores.”
“They realize that to maintain and drive market share, they have to drive their average unit retail [sale] up,” Pech said.
The Polo Jeans line now retails from $59 to $79, up about $10 in the past year. The change has allowed the line to significantly upgrade its fabric selection, introducing high-end U.S., Japanese and Italian denim.
In moving their prices upward, jeans brands are swimming against the tide of consumer demand. The $5.6 billion women’s jeans market has not been immune to the deflationary forces affecting the apparel industry as a whole. Last year, the average price paid by women for a pair of jeans was $22.51, down 3.6 percent from the 2002 level of $23.35, according to STS Market Research of Cambridge, Mass. STS reported that 52.6 percent of all pairs of women’s jeans purchased in the U.S. last year sold for less than $20.
While high-end jeans have attracted a lot of attention, they remain a sliver of the overall market. Jeans priced $50 or more last year represented 2.6 percent of the total market, down from 3 percent a year earlier, with jeans priced from $40 to $49.99 coming in at 3.7 percent of the total, down from 5.5 percent, according to STS.
The market for jeans priced $100 or more is so small that STS and other major research groups don’t measure it. Still, executives said the higher-priced, often higher-margin business remains appealing.
“You have so many people battling at the $30 jeans price point that the business is just dead in the water,” said Howard Jacobs, president of moderate junior brand Blue Taboo.
Jacobs also is launching a line of CBGB brand jeans retailing for holiday at $60 to $120. “What else can you do,” he said, “but find an area where you can grow a business?”
He believes the $50-to-$100 price band has attracted more attention lately because it hasn’t been as swamped with new lines as either the premium or moderate tiers.
“Those markets are just less crowded; there’s not as many people battling for the same piece of pie,” he said, but added, “higher price means lower volume.”
Not all jeans brands are looking only to push their prices upward. In one of its more controversial moves, Levi Strauss & Co. over the past year rolled out the Levi Strauss Signature brand across the mass channel. Executives with the San Francisco company have repeatedly cited a simple reason for the move: Wal-Mart sells 10 percent of the jeans sold in the U.S.