NEW YORK — Paper Denim & Cloth is going where no premium denim brand has gone before.
The New York-based brand is strategically changing its position in the denim market and, beginning with its fall collection, will lower its price points in an effort to increase distribution and sales. The women’s and men’s collection of denim and non-denim pieces will retail between $100 and $160, compared with its current retail price range of $150 to $240.
“We’re entering a territory that we can take full ownership of and at the same time grow business considerably,” said Chris Gilbert, president of Paper Denim & Cloth. “I’m not sure there’s a name for this category, but there is a big hole in the market at that price point and we feel like it’s untapped.”
Gilbert anticipates a 25 to 35 percent growth in wholesale volume in the first season. The retail volume for the brand topped $30 million last year.
“I’d rather own the market than be one of a number of players,” he said.
By lowering the price point, the brand, in effect, hopes to increase its level of distribution, though Gilbert said a few existing accounts have already voiced concern over the repositioning.
“They’re concerned about the quality of the product, but I am absolutely positive we will be able to maintain quality,” he said, noting that he has also been in talks with Federated about carrying the brand. However, Gilbert said, “no actual orders have been taken.”
His hope is to open accounts that previously were not an option because of the brand’s elevated prices. Paper Denim & Cloth is sold at Bloomingdale’s, Barneys New York, Saks Fifth Avenue, Nordstrom, Fred Segal, Scoop and Selfridges in London, among other stores.
“It will have to land itself where it does,” Gilbert said. “For the most part, the reaction has been positive. By lowering the prices, everyone wins because the volume is sure to go up. [The store’s] volume will increase and in the end, no one loses. There’s no question that by lowering the price point we’ll be able to get the product into more people’s hands and grow the business considerably while maintaining the accounts we’ve had for five or six years.”
Related Articles
You May Also Like
Gilbert insisted that the quality of the collection will not suffer. The denim collection will still be made from Japanese and Italian denim and the entire collection of denim and nondenim pieces will be overseen by Kimberly Ketch, design director, formerly of Abercrombie & Fitch, who will employ the same design philosophy the brand has instilled since its inception in 1999. The difference, Gilbert said, lies in the location of its manufacturing facilities. The lower-priced collection will be made at laundering plants in Mexico and the Dominican Republic instead of in Los Angeles. These facilities are affiliates of the laundries the brand has used since 1999.
“The consumer is intelligent,” Gilbert said. “If you try to ship a poor product, they’ll know it immediately.”
Skepticism is sure to follow. Paper Denim competitor Michael Silver, president of Silver Jeans, questioned how consumers and store buyers will respond.
“The curiosity is how is it possible to sell a jean one week at $180 and then the next at $100,” said Silver. “Something removes itself from the product and there’s the challenge. Can you offer value at $100 that embodies everything you had at $150 to $200.”
Silver is confident that Paper will have company on its journey downstream to more department store friendly waters.
“We hear the rumblings from the multitude of others who are going to be making their way down,” he said.
However, many companies have failed to achieve a level of recognition that would make their move to lower prices significant. Paper Denim will have the advantage of its name, leaving only the execution of the new products in question.
“If they can give the consumer a great jean at $100, then it could be fantastic,” Silver said.
Financial sources and denim industry experts agreed that the move would allow an established brand like Paper Denim to exploit a soft spot in the denim market. There is ample room at the $100 price point for denim brands, particularly at department stores.
“It’s a pretty big challenge to come up with other brands at that price point,” Silver said. “One that comes to mind would be Lucky Brands. Beyond that you can count on one hand the brands living in that price zone. It might be a sweet spot.”
Eric Beder, an analyst with Brean Murray Carret, said that while department stores have plenty of big-name designers to fill their floors, those brands are not considered the fashion leaders when it comes to denim.
“You don’t have the premium denim designers at Macy’s,” Beder said. “You’ve got the older guys, like Calvin Klein and Polo. That’s no longer what [the consumers] consider the designer brand. True Religion and those guys are setting the trends.”
Beder said many other denim brands were looking to enter the $100 range, but have concerns about losing their premium cachet with a downward move. As a result, denim brands have launched separate lower-priced lines or are on the hunt to acquire a brand.
“Now that Federated has bought up May, they’re much more fashion-forward. To me, it’s a great opportunity,” Beder said. “Someone’s going to do it, they’re going to do it right and they’re going to do well with it.”
Three years ago, Gilbert noted, this transition would have been nearly impossible due to the inefficiencies at manufacturing facilities outside of the U.S. Today, however, these facilities are coming out with comparable merchandise, a notion other premium denim brands have already picked up on.
“The only difference is,” Gilbert said, “we’re going to offer the product at a lower price point. If you walk into a premium denim store, you’d be surprised to see where everything is being made, everywhere from Macao to Mexico. Those companies just pocket the difference and increase their margins.”
Gilbert thinks Paper Denim’s shift could signal an end to the swelling premium denim market where prices seem to have no ceiling.
“Within a year and a half, the premium denim market will implode,” Gilbert said, adding that he’s seen a gradual slowdown in the market over the last six to eight months on a national and international scale.
Thomas George, owner of Chicago’s E Street Denim, also views the move as symbolic of what’s to come in the broader denim market this year.
“I’m surprised it’s taken somebody this long to do this,” George said. “We’ve pushed the American consumer pretty far on this basis that you’ve got to have it all. I applaud them for having the guts to be the first one in the pool.”
George said he wouldn’t have any reservations about continuing to buy Paper.
“I’ll look for how pure they stay to what Paper Denim was,” said George, who added that he expects the next 12 to 18 months to be a “little adjustment period” for the denim market.
For Gilbert, this repositioning has allowed him to set a new foundation. In the near future, he said, he has plans to open freestanding stores and is now considering licensing opportunities.
“So much is possible once we set this expansion in motion,” he said. “You’ll see a lot of other brands following us into a slightly lower market.”