The [high end designer + retail giant] flop

So, I haven’t written in here for almost a year. Having one class left to take is finally freeing up some time for me to read and write what I want! The Strategic Management class I just finished required us to analyze the strategies of companies in different industries. A heavy amount of subjectivity and critical thinking was required. A few questions we pondered: Why does focus differentiated strategy work for Apple? Is Wal-Mart’s competitive advantage sustainable? And to top off every class meeting: So what? What do we take away from this case? What could we apply from this case to not just this class, but to our everyday understanding of strategy?

Exploring firms across all different types of industries moved me to think about a particular topic that has interested me since the day I saw my bright green Prabal Gurung for Target heels on sale for $9.99: Why don’t high end designer and retail giant collaborations work anymore? Why is this stuff in the clearance section and not on eBay selling for triple? The number of budget conscious “fashionistas” in Southern California alone is enough to garner enough buzz for these projects. So, why is the excitement dying down?

The honeymoon phase

0116_mizrahiRetail giants H&M and Target have participated in designer collaborations since the early 2000s. Partnering with coveted fashion houses such as Stella McCartney and Maison Martin Margiela seemed to create competitive advantage over competitors. In early 2002, Isaac Mizrahi created a product line for Target. Sales volume tripled from 2002-2007 branding the partnership as an innovative paveway for retail firms. In November 2004, H&M released a Karl Lagerfeld collection exclusive to select stores in the United States. The collection completely sold out within one hour. A buzz was created: Clothing that was once unattainable to the everyday shopper is now hanging on Target’s racks. Savvy online merchants scrambled stores with the intent to resell at higher price points.

Fast forward

target-reveals-2-reasons-why-its-collaboration-with-neiman-marcus-failedIn 2012, Target unveiled their largest collaboration to date: a fifty product collection of “giftables” by 24 top designers. A $99.99 Derek Lam skateboard and $400 Alice + Olivia bicycle were among the items sold. H&M almost simultaneously released a collaborated collection with Belgian designer Maison Martin Margiela. Initial excitement was there– a huge social media campaign was launched, bloggers were counting down the days, and I was already bookmarking what I was going to buy.

Balling on a budget

148437_516196111738511_1789243387_nI woke up early, called my equally obsessed cousin and sleepy boyfriend to check out the Neiman Marcus trinkets that were now available to our small suburb town. I filled my cart with everything: the Band of Outsiders cookie cutters, a little girls’ size 4 Marchesa dress, the Derek Lam skateboard. Two hours later, I walked out of Target with a set of $19.99 shot glasses. My cousin bought two items out of the twenty she had in her cart. The glitz of “Neiman Marcus and Target” was short-lived: The wide eyed girls making minimum wage, wanting to tote around YSL, who first knew about the collaboration… still couldn’t afford it. CBS reports that the average income of the Target consumer is $64,000 while its main competitor Walmart caters to a customer with incomes that range from $30,000 to $60,000. The point that Target seemed to miss was thatĀ allĀ consumers of discount retail chains are looking to save a buck despite subtle lifestyle differences. Target’s early Isaac Mizrahi line included sensible pieces such as $39 blazers that appealed to several markets.

H&M shoppers enjoy an average price range of $42 while the Margiela clothing and accessories were priced from $200-$400. The company relied on too small of a niche market to drive Margiela sales.

Brand dilution

One of the poster children for dipping into a lower end market and suffering brand dilution is Tiffany & Co. Tiffany & Co. created a line of affordable silver jewelry now seen on every other fifteen year old girl’s neck. Silver sales slumped and shareholders grew nervous. Neiman Marcus’ core competency is selling exclusive, luxury goods while providing exceptional customer service. The partnership with a discount retail chain cheapens the Neiman Marcus brand. It becomes mass produced and a little too accessible.

“Seriously, though… When am I going to use this?”

$T2eC16R,!)0E9s37F0(!BQ4LPhpwww~~60_3Some of the products didn’t make sense: What would the target market do with a designer skateboard? Generation Y kids who skateboard were not likely to spend $100 on a board that would sit and look pretty. Why would the coupon clipping mom purchase a $70 Marc Jacobs scarf from the same place she buys her frozen pizza? One of comparable quality sits just across the aisle.

The Margiela for H&M collection included oversized harem pants, a cape dress, and a purse with gloves as the handle. The clothing and accessories were simply too avant garde for H&M’s everyday shopper. The fashion house stayed true to its aesthetic, but isolated those looking for office friendly pieces.

Oh, another collaboration.

The scarcity of high end clothing is part of the industry’s mystique and part of the reason why there are $8000 price tags on purses. Target and H&M slowly entered the realm of retail partnerships by carefully selecting exclusive designers. Collaborations were also far and few between. H&M started out by releasing designer collaborations every two years. Two collections were released each year in 2011 and 2012. The magic of anticipation sort of disappears when the wait time between releases is short.

Well… So what?

Companies can’t just slap a huge name on the label of a dress and expect it to bring in the masses. Target’s conquest to become a multichannel retailer will provide it the competitive edge it needs to rank with rivals such as Walmart. H&M can attribute its success by providing something for everyone. H&M’s Isabel Marant collection is expected to launch in just a few months. I’ve got an alert set on my calendar and have an eye out for sneak peaks. But… unless there’s a wide enough array of products for consumers of all ages, lifestyles, sizes, and shapes, the future of these collaborations looks pretty bleak.

…that or a pair of really awesome stilettos that I and my next door neighbor mom of four can rock.