Posted: May 25th, 2022

Internationalization of Branding in the Retail Industry

Internationalization of Branding in the Retail Industry

In the past few decades, issues surrounding branding in the retail industry have emerged as a significant concern for retailers, consumers, and the fashion industry alike. Organizations are using branding as a strategy tool in today’s business environment with increasing regularity. Although brands and branding are not new ideas, retailers are applying them to more diverse settings where the role of branding is becoming increasingly important (Wentz & Suchard, 1993). The traditional role for brands has recently reemerged as a topic of interest, as retailers are increasingly turning toward the internationalization of brands to survive in the highly competitive industry. With the growing realization that brands are one of a retailer’s most valuable intangible assets, branding has emerged as a top management priority in the last decade. As a result of its highly competitive nature, branding carries a significant effect in the retailing industry as one of the main drivers influencing customer perceptions, store choice and loyalty. Thus, as an attempt to offer more to the consumer than just low prices, retailers are developing marketing strategies that build store equity and differentiate their brand.

A brand’s most valuable asset is usually the name itself, as a name can have inherent selling power when the word or words stand for explaining the uniqueness of the product or service. However, this name value is not as important as the enormous power of those brands that have built equity after decades of consistent brand-building activities. Research involving the practical limits of line extensions leads to a contrast between those new product efforts that re-invest brand equity and those that dilute it. Furthermore, promotions can both build and destroy brand equity. Promotions can be used to build brand equity if the promotional activities enhance and reinforce the basic brand image.

A review of the related literature reveals that there are two kinds of consistency that are both important for brands, consistency from year to year, and consistency across all communications. For example, if a brand changes its personality every few years, it runs the risk of having no image at all.

Additionally, certain user groups and market segments carry more significance and impact than others. Consumers with developing or changeable brand images are highly important. This translates in many cases into pursuit of the young, in hopes of securing a long-term predisposition toward a brand, which if successful, can remain successful for many years. Often overlooked is the fact that brand owners should be loyal to their customers, because consumers will buy and re-buy only those brands that continue to live up to their value perceptions. One of the most highly competitive and dynamic marketing environments today is the retail industry. The historic retail world that previously consisted of the traditional central shopping district of most American cities has been replaced by mega malls. The competition has increased as many once profitable retailers are now facing bankruptcy. For example, Wal-Mart is the world’s largest retailer that is making significant strides to move into global markets.

Other retailers have moved into global markets, as the internationalization of brands has become a promising new trend. As a result, in order to succeed, survive, and generate high revenues, retailers today need a solid strategic plan, a competitive advantage, and a unique product assortment. This paper will examine all aspects of branding in the retail industry, and will examine the companies of Perry Ellis International and Levi Strauss as leaders in the retail industry and the internationalization of brands. Retail branding has received a significant amount of new attention since the late 1990s. A number of leading retailers have embraced branding, however there are various issues that have arisen, such as the internationalization of brands. Internationalization has for many retailers been a key strategy of recent years. This paper closely examines branding, retailing and internationalization, raising issues concerning the interaction of these interlinked areas and future research in this area.

Introduction

In the past few decades, issues surrounding branding in the retail industry have emerged as a significant concern for retailers, consumers, and the fashion industry alike. Organizations are using branding as a strategy tool in today’s business environment with increasing regularity. Although brands and branding are not new ideas, retailers are applying them to more diverse settings where the role of branding is becoming increasingly important (Wentz & Suchard, 1993). The traditional role for brands has recently reemerged as a topic of interest, as retailers are increasingly turning toward the internationalization of brands to survive in the highly competitive industry. With the growing realization that brands are one of a retailer’s most valuable intangible assets, branding has emerged as a top management priority in the last decade. As a result of its highly competitive nature, branding carries a significant effect in the retailing industry as one of the main drivers influencing customer perceptions, store choice and loyalty. Thus, as an attempt to offer more to the consumer than just low prices, retailers are developing marketing strategies that build store equity and differentiate their brand.

A brand is usually defined as a name, symbol, design, or some combination that identifies the product of a particular organization as having a substantial, differentiated advantage (O’Malley, 1991). Research studies reveal that a brand often suggests the best choice, while others view a brand as something the customer knows and will react to (Ginden, 1993). A brand’s purpose is to build the product’s image, which will in turn influence the perceived worth of the product and will increase the brand’s value to the customer, resulting in the desired brand loyalty. In the retail industry, brands are developed to attract and keep customers by promoting value, image, prestige, or lifestyle. By using a particular brand, a consumer can cement a positive image (Ginden, 1993). Brands additionally function to reduce the risk consumers face when buying an unfamiliar product.

Since branding is a technique to build a sustainable, differential advantage by playing on the nature of human beings, it remains in the retailers’ best interest to generate a successful brand. A good brand will give the customer value for the dollar and give employees the satisfaction and confidence in their products (O’Malley, 1991). Strong branding also accelerates market awareness and acceptance of new products entering the market. A retail brand identifies the goods and services of a retailer and differentiates them from those of competitors. A retailer’s brand equity is exhibited in consumers responding more favorably to its marketing actions than they do to competing retailers (Keller 2003). As a result, the image of the retailer in the minds of consumers is the basis of this brand equity.

Consumer products companies also currently face several challenges involving sales, as major retail accounts are consolidating and continue to exercise their increasing buying power. All accounts seem to be more demanding, and are actively working with everything from shopper cards to high-quality captive label products to shift the consumer’s loyalty from manufacturer brands to theirs (Booz Allen Marketing, 2005). Perhaps more significantly, acquisitions and expansion no longer stop at country borders; large retailers have become more sophisticated. In response, many consumer product companies have reorganized their sales forces and introduced customer teams (Booz Allen Marketing, 2005). To date, these retailers have continued to buy locally, but it likely will not belong before they figure out how to leverage their global scale with suppliers (Booz Allen Marketing, 2005).

Some retailers have found that the transition away from a purely regional sales structure was simply harder than expected. However, a review of the related literature reveals that even companies who began the transition several years ago usually cannot point to the specific benefits they receive from their customer team structures (Booz Allen Marketing, 2005). Frequently they have adjusted their organizational models over time, but are left with a sense that each problem they solved created another problem somewhere else (Booz Allen Marketing, 2005). As a result, multiple conflicts arise between brands and channels that cannot be resolved without senior management intervention. According to a recent marketing analysis, the all-powerful brand structure favored by many consumer goods companies may be guilty as well. In today’s environment of powerful retail partners, the role, focus and capabilities of the sales force need to be upgraded in order to allow sales management to interact with marketing on a more level playing field (Booz Allen Marketing, 2005).

Background of Retail Branding

Historical research indicates that branding is over 100 years old, as the majority of countries had enacted trademark laws to establish the legality of a protected asset by 1890 (The Economist, 1988). Historians note the period from 1800 through 1925 as the richest period of name-giving (Hambleton, 1987). From these beginnings, branding has evolved as a major component of marketing strategy, with uses and applications that continue to grow and diversify. Although the focus of branding has shifted over the last two decades, its importance to the business community and the consumer has not diminished (Cleary, 1981). The main focus of the 1980s regarding brands focused on a trend in takeovers, enabling successful brands to become extremely valuable on the open market. Even very early on, a value associated with a brand large was viewed in part as more important than the product itself. Early research indicates that many thought the only way to have a successful brand was to buy one. Many felt that the development of new megabrands would be impossible in the future and money would be better spent on acquisitions than on research and development. The fact that 90-95% of all new products failed strengthened the argument that takeovers made more sense than trying to develop new successful brands (The Economist, 1988).

As a result of the heightened number of acquisitions and takeovers, many brands suffered irreparable harm. With the changing management associated with takeovers and acquisitions, brands failed to maintain a clear image in the consumer’s mind as consumer confusion regarding what a brand represented deepened. The high turnover of brand managers coupled with a preoccupation with short-term earnings led to inconsistencies with brand equity (Baum, 1990). Other causes of lowered brand equity were attributed to years of inconsistent advertising and agency management, generic marketing, look-alike advertisements, undistinctive products, and the proliferation of promotions (Wentz, 1993). The strategy of the 1980s influenced the strategy for the 1990s, as retailers began to realize the shortcomings of the previous decade. In the 1990s, the importance of the product itself received more emphasis than ever before.

Other researchers have suggested that brands are not static and need to change with their environment (Berry, 1993). In the 1990s, retailers turned away from creating new brands and focused on strengthening and expanding those already in existence. The new focus of branding was the creation of mutually beneficial situations. Finding the right brand mix for the consumer while generating adequate sales became a great challenge for retailers and marketers in the 1990s. As consumers became more price sensitive, the brands themselves lost some importance (Allen, 1993). In the 1990s, retailers became concerned primarily with financial considerations, as they desired brands that would increase their business value.

In the early 2000s, the issues became more practical, such as a focus on sales and profits. Research indicates that present-day retailers are concerned with what the customer is willing to pay for their product (Berry, 1993). Currently, branding faces three challenges; branders must understand the price elasticity for their product, adequate price controls must be in place, and retailers must have effective and efficient brand building activities that focus on current and new products (Berry, 1993). According to a recent survey, the number one brand in a line enjoys a 20% return while the number two brand earns a 5% return and all the rest lose money (Berry, 1993). In 2005 and onward, large retailers will continue trying to expand into markets abroad, resulting in an internationalization of brands in the retail industry. One study notes that retailers will continue trying to enhance their brand’s relevance to their customers and focus on the brand’s personality to build an emotional bond between the brand and its consumer (Baum, 1990). As a result, with branding entering new diverse areas, the future of branding appears bright. As American brands begin to fade as a result of cheaper, more competitive foreign manufactured products, building greater brand identity will be a major factor in the rebuilding of America.

Building a Brand

Most major retailers follow the same patterns in brand creation and positioning. To create or position a brand in the marketplace, a retailer must start with the culture of the whole company. He should first figure out how he wants the brand to interface with the public. A review of the related literature reveals that when a host of products or services fall under one brand, successful positioning demands strong definition. Brands can be multi-level, but it remains the duty of the retailer to define the brand. Once defined, communication to the public becomes paramount. Thus, the branding process affects all forms of communications, from advertising to public relations to product packaging. A retailer must make sure that the public understands their brand immediately; when one confuses brand positioning, one does not have the brand. A strong brand takes time to build, but only an instant to kill.

Consumer choice affects branding because the strategy of pulling products through the marketing channel encourages retailers to carry branded products in reaction to consumer demands. Some manufacturers also go in or brand extension, a scheme that requires adding related products to an existing stream of branded products, or developing a new line with the same brand identity. In doing so the manufacturers capitalize on the brand’s reputation and identity, and consumer’s choice is based upon brand preferences. Brands that attract the consumer more are termed as brand-driven purchases. Consumers also tend to purchase a particular brand, called brand loyalty. It is also important for retailers to note that a branded retail store should offer a uniform consumer experience and a wider choice under one roof.

Presently, Internet marketing is a strategic tool, as online marketing, if properly developed and implemented, has tremendous potential as a strategy to build brand image, collect information from highly motivated and targeted consumers and provide an avenue for selling products worldwide. Many web site visitors may be reluctant to purchase online due to unresolved concerns about the online shopping experience or may choose to purchase online due to perceived benefits. Thus, actions to reduce barriers by effectively addressing visitor concerns in these areas can lead to increased confidence in the online purchase process; whereas, actions that increase perceived benefits to purchase may lead to a greater motivation to purchase.

The Role of a Retail Brand

The role of a retail brand in the retail industry is a significant one. One of the first steps in maintaining customer loyalty and earning profits is to build and sustain a positive brand image. The image is based on a total product concept that includes colors, symbols, words and slogans, with a clear consistent message and not simply a name (Berry, 1988). Research studies indicate that once a retailer establishes this image through a brand name, it should remain consistent (The Economist, 1988). Creating a brand image involves getting customers to know that the brand exists. Once a brand has been separated from the crowd, it is easier to develop its image, and the branding process itself may be the starting point for product differentiation (Allen, 1992). Many retail brands are similar, and brand leaders are often close to being identical. The image a top brand develops may be the only way for the consumers to tell the difference (Carey, 1991).

The consumer will perceive one brand as more desirable than its competitor’s and purchase it based on those perceptions. Research indicates that brand identity is created based on how well the brand has been differentiated from other competitors. Each retailer must decide how branding fits into its general strategy because one strategy does not work for all, and some brand managers agree that the most effective way to use branding is by matching specialized products with specialized markets (Carey, 1991). Thus, choosing the right name, using the right advertising, applying the best strategy, and using the most relevant application techniques are necessary elements to make a branding effort successful. Brand owners, retailers and marketers must deal with the changing nature of society and other factors that affect their ability to be effective.

Branding Problems in the Retail Industry

In the past few decades, issues surrounding branding in the retail industry have emerged as a significant concern for retailers, consumers, and the fashion industry alike. The growth of promotions and private labels has been viewed by many as an indication of a new growth of retailer power, however, this very growth of discounters and warehouse clubs has put immense pressure on traditional retailers and significantly increased retail competition both within and between retail formats. Since a large portion of most retailers’ revenue and profit comes from selling manufacturer brands, which many of their competitors also offer, building their own equity is a particularly challenging problem, but one with big potential rewards (Ailawadi, 2004). Such equity insulates them from competing retailers, which has the direct impact of increasing revenue and profitability, and the indirect impact of decreasing costs as their leverage with brand manufacturers also increases (Ailawadi, 2004).

Research indicates that consumers play a major role in either building or eliminating brand equity. Retailers create brand images by attaching unique associations to the quality of their service, their product assortment and merchandising, pricing and credit policy. In most consumer industries, the image and equity of retailer brands also depends on the manufacturer brands they carry and the equity of those brands (Ailawadi, 2004). Retailers use manufacturer brands to generate consumer interest, patronage, and loyalty in a store. In retail, manufacturer brands operate as a basic brand that often generates the most consumer revenue, usually more than the retailer brand generates. Thus, manufacturer brands help to create an image and establish a positioning for the retail store. Retailers also compete with manufacturers for consumer pull to increase their relative market power and their share of the total channel profit pie (Steiner 1993). In doing so, they may sell some of their own brands; for example, retailers who carry only their own private label products such as GAP and Brooks Brothers. Private label products may have their own unique brand names or be branded under the name of the retailer. Private label products allow the retailer to differentiate its offerings from competing retailers, and some retailers manage their brands more effectively than others, as is evident in their performance.

Current Branding Trends

Current branding trends have greatly evolved since their origin in the 1960s. Marketing used to be a lot simpler; in the mid-1960s, the three major television networks could still be counted on to deliver messages to the vast majority of consumers on a regular basis. Media strategy was as elemental as advertising, and years before the invention of remote control people sat, watched and listened to each message (Kimball, 2005). When they weren’t watching TV, consumers turned to a handful of broadly-targeted magazines that boasted huge circulations and delivered eyeballs in bulk to their advertisers (Kimball, 2005). A largely uniform American population with limited media choices meant that a single campaign could serve a national brand from coast to coast. This steady, homogeneous media environment made it relatively easy for a product to gain attention, especially with a limited number of competing consumer brands (Kimball, 2005). Product launches had long lead times, reflecting painstaking mechanical production processes; in the pre-digital era, the race to market was a marathon, not a sprint (Kimball, 2005).

However, in recent decades, the American market has undergone a profound transformation on several levels. Rising ethnic diversity and non-traditional households have fueled a proliferation of demographic profiles, each with distinct viewpoints, interests and priorities (Kimball, 2005). The media channels that serve this population have proliferated as well; consumers now spend more hours online than reading print media, while the video game industry rivals Hollywood in economic activity. As a result, this hotly competitive, short-attention-span marketplace calls for increasingly sophisticated marketing strategies and methods, as marketers can no longer expect a single medium to deliver the vast majority of consumers (Kimball, 2005). As companies strive to reach and address each of the constituencies they target, new priorities emerge. To get the right message to the right person at the right time, marketing organizations must achieve new levels of flexibility and responsiveness (Kimball, 2005).

These events have heightened the importance of brand control. With so many new companies and products coming to market every day, consumers turn instinctively to strong brands they know and trust. For established brands, this makes it essential to maintain consistency across an ever-widening spectrum of marketing activities worldwide, and a damaged or fragmented brand can compromise the company’s most important competitive asset (Kimball, 2005). For new entrants, the challenge is even greater: to speak with a single, clearly identifiable voice, even in addressing a diverse range of audiences, in hopes of building the next great brand (Kimball, 2005).

Branding trends presently lean toward more descriptive titles than in the 1980s or 1990s (Hambleton, 1987). Research by Shipley and Howard (1993) suggests a six-step method for naming industrial products that branders can use for other products as well. It starts with setting the brand objective followed by specifying branding criteria, generating name ideas, selecting name ideas, and finally, selecting a name. Other research studies set criteria for formulating service brand names that can also be adopted for naming other types of products. They suggest a name should have four characteristics, including distinctiveness, relevance, memorability, and flexibility. According to the research, names should be simple, brief, and easy to pronounce and read. However, as applied to the retail industry, these brands can also rely on cuteness or gimmicks and should be broad enough to change over time.

In the retail industry, descriptive terms are not recommended, however effective graphics and logos are recommended to support the name. Brand advertising has also been identified as a key factor, as after spending resources on naming a product, it is imperative to support it through advertising and communication (Berry, 1988). For a product to succeed, the brand owner must dedicate more resources to promoting it through advertising (O’Malley, 1991). Advertising is a key to sustaining appeal of brands, as well as a key to developing that appeal in the first place. Through advertising, retailers and marketers expose the potential consumer to the brand and give them the opportunity to accept it. Just as a company would invest in technology and innovation, it must also invest in advertising and promotion if it is to succeed (Wentz, 1993).

Research conducted by Gregory (1993) suggests there is a correlation between the level of advertising investment and the level of brand awareness achieved. In the increasingly competitive marketplace, advertising, marketing, and promotion may be the only aspects on which to differentiate extremely similar products (Coonan, 1993). Once a brand has successfully entered the marketplace and has achieved status as a leading brand, retailers and marketers must be concerned with maintenance. In order to maintain strength in a brand, brand owners constantly review the appeal of their brands to ensure that they remain contemporary and relevant. Retailers that neglect their brands increase the risk that their brand value may become diminished. Researchers suggest that market research must be used to monitor consumers, competition, and changes in the environment that may affect a company’s brand (O’Malley, 1991). This gives the retailer an advantage by knowing how its brand compares with the brands of its competitors.

Berry (1993) recommends a formal tracking method be in place to monitor the value of a company’s brands. Many retailers protect their brands by invoking legal protections, such as obtaining a registered trademark in the brand name or logo. A trademark is a word, name, symbol, or device that is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others. A service mark is the same as a trademark except that it identifies and distinguishes the source of a service rather than a product. Trademark rights may be used to prevent others from using a confusingly similar mark, but not to prevent others from making the same goods or from selling the same goods or services under a clearly different mark. Trademarks that are used in interstate or foreign commerce may be registered with the United States Patent and Trademark Office (USPTO). Trademarks are also an important asset for retailers because the public comes to associate a trademark with the retailer who owns it. This helps build a company’s brand recognition. Trademark rights are also vigorously protected by owners.

The USPTO is an agency of the U.S. Department of Commerce, whose role is to grant trademarks for the protection of owners. The USPTO serves the interest of retailers and businesses with respect to their products and advises and assists the President of the United States, the Secretary of Commerce, the bureaus and offices of the Department of Commerce and other agencies of the government in matters involving all domestic and global aspects of “intellectual property.” Through the preservation, classification, and dissemination of trademarked information, the Office promotes the industrial and technological progress of the United States and strengthens the economy. The next sections will discuss more current trends in branding and related issues.

Prior to the 1970’s, the majority of retail organizations had focused their activities mainly in their own local, regional or national markets as these markets were exhibiting attractive growth, market expansion opportunities.

There were also some important overseas retail and manufacturing networks established by manufacturers such as Bata Shoe Corporation of Canada and Singer Company of USA, having set up hundreds of company owned or franchised outlets across the world in 50’s, 60’s and 70’s (Sanghavi, 2004). Today it is clear that for an increasing number of these businesses, national boundaries have ceased to be a constraint to their activities and ambitions. They are becoming more outward looking in seeking opportunities beyond their local, regional and national markets for sustaining company sales and profit growth

One of the features of retailing, across the world, has been its strong domestic operational orientation compared with the manufacturing sector and some other service sectors. In sourcing activity, however, retailing has had a strong international presence for many centuries. In retail operations although the history is extensive the number of firms involved has been small until the last decade or so of the twentieth century. Not only has there been extensive cross border movement within Europe, since the early 1980s, but also an increasing number of retailers are moving inter-continentally.

Furthermore, the convergence of information and communication technologies has had a big impact on almost all the processes involved in retailing. The management of information has enabled new relationships to be developed by retailers both with their customers and with their suppliers. Effective management of the information has also enabled the more efficient execution of processes involved with the internal functioning of retailing. Thus retailers are able to customize relationships and processes at the front of the shop while standardizing processes at the back of the shop. This progression of customization and standardization has facilitated the development of e-retailing, using individualized communication with customers supported by highly effective standardized logistics and buying.

Extending a Retail Brand: Internationalization retail brand can be extended as a means of extending a popular, successful brand into a new market, termed the “internationalization” of a brand. Although other trends in branding exist, brand extensions represent the most enduring and popular trend in today’s market. Brand extensions are one of the oldest branding application techniques used because many retailers are tempted to extend a popular, successful brand into new markets. In some cases, this has been very effective, while in others it has been disastrous. According to the research, a retailer that desires to extend a brand into new markets must ensure the link is obvious; consumers must easily identify why a retailer is using the brand name on a new product. As a result, it is dangerous to use a name where it simply does not fit (The Economist, 1988). If the product and the brand do not mesh, customers will not buy the product, and the previous products of the same brand may become diminished. There are many examples of retailers that have overextended their brands, some at the expense of the core brand. Others have extended their lines in a way that has radically altered the personality of the core brand (Dagnoli, 1990).

However, a review of the literature indicates that there are some very good reasons to extend a brand that leads to increased profits and success. This is because it is much harder to build new successful brands than it is to defend old ones (The Economist, 1988). There are also many failures associated with new brand introductions. On the other hand, when a retailer uses a brand name that has already been established, a few risks usually associated with new brands may be eliminated. The idea of using an established name to promote a new line or merge successful lines together is attractive. It was suggested earlier that poor brand management was a key element that had negatively affected brands in the 1980s. However, many retailers that have internationalized their brands are indicators that this method may very well prove to be a successful maneuver for the 2000s.

Hassler (20030 concludes that to own and maintain brands within changing market environments demands highly sophisticated entrepreneurial skills. Initially, the increasing labor costs and the consequent increase in disposable incomes and national buying power created a market framework of growth for several successive years (Hassler, 2003). A market of great expectations has transformed into one of strong decline as concentration on a single geographical market has proved to have very critical consequences for most brand owners (Hassler, 2003). The economic crisis pushed many firms to develop export-marketing networks in an attempt to compensate for losses of sales (Hassler, 2003). As a result, many companies have turned to a strategy of internationalization of brands. One noted downside of internationalization is that it may result in a basic distribution of cheap, ready-made garments. However, Hassler (2003) notes that this has the potential for future economic growth. In this respect, agents could fulfill a crucial role in the search for new overseas customers and export-marketing networks (Hassler, 2003).

Indonesian brand-owners have been the focus of many internationalization brand studies. Researchers note that Indonesian brand-owners could initiate the diversification of the geographical target markets towards other developing countries or emerging markets. Hassler (2003) notes that foreign agents currently operating in Indonesia usually belong to larger business networks with external headquarters, and have never reached a status beyond the role of mere representation to control the product quality and to follow up orders. All financial transfers and transactions between manufacturers and buyers must be conducted at the agent’s headquarters, outside Indonesia. Therefore, the business of independent traders and agents is still a domain of native Indonesian firms (Hassler, 2003). The following section will examine two case studies: one company that has successfully applied an internationalization strategy, and one that has failed in maintaining a once extremely popular brand.

Case Study: Perry Ellis International

An example of a successful internationalization of a brand and its ensuing strategy is that of Perry Ellis International, Inc. Established over 100 years ago, Perry Ellis International, Inc. is an apparel company in the United States, whose portfolio includes men’s and women’s brands. It designs, sources, markets and licenses its products nationally and internationally at multiple price points, and across all major levels of retail distribution at more than 20,000 doors. During the fiscal year ended January 31, 2004, approximately 91% of the Company’s net sales were from branded products. This percentage of sales illustrates the effectiveness of Perry Ellis International’s branding strategy.

The Company owns 13 and licenses five brands, which are sourced and sold through many levels of retail distribution. Company-owned brands include Perry Ellis, Perry Ellis America, Axis, Tricots St. Raphael, Jantzen, John Henry, Cubavera, the Havanera Co., Natural Issue, Munsingwear, Grand Slam, Original Penguin and Manhattan. The company-owned brands are the staple of the company’s revenue. The Company has developed over 42 sub-brands, including Perry Ellis Portfolio, Southpoint, Penguin Sport and Axist. These sub-brands are an example of taking a well-known brand and extending it into a new line of merchandise. As illustrated above, Perry Ellis International has been very successful in this method. The Perry Ellis Portfolio brand is a brand extension of the Perry Ellis brand, and Penguin Sport is a brand extension of Original Penguin. Perry Ellis International has successfully been able to take a good brand and extend it into a sporting line or another type of clothing genre.

It also distributes the PING, Nike, Tommy Hilfiger, NAUTICA and Ocean Pacific brands under license arrangements. These license agreements enable Perry Ellis International to strengthen their name in retail by selling other well-known strong brands under their clothing label. Perry Ellis is currently the licensor for over 140 license agreements in over 30 countries. This multinational presence also assists the company in sales. As soon as a retailer is able to determine in which countries their brand would perform well in, internationalization of the brand or brands immediately is effective. One reason that Perry Ellis International has been so successful in its internationalization of brands is that the company originally began its operations in other countries, so the following in other countries was already there. Perry Ellis has an advantage over other retailers in this aspect because consumers in these countries are more likely to buy a product under a name that they are already familiar with, and a brand that already has done well in the industry.

A concrete example of this theory is the fact that Perry Ellis began operations in 1967 as Supreme International Corporation and initially focused efforts on marketing guayabera shirts and other men’s apparel products targeted to the Hispanic market in Florida and Puerto Rico. Over time the product line was expanded to offer a variety of men’s shirts. In 1988 the Natural Issue brand was developed and in 1996 the Company began as expansion strategy through the acquisition of several brands including Manhattan and Perry Ellis. Following the Perry Ellis acquisition in 1996, the name was from Supreme International Corporation to Perry Ellis International, Inc. To better reflect the popularity and brand recognition and strength in the Perry Ellis name.

In 2002 the Jantzen brand was acquired, and in 2003, Salant, a leading designer, marketer and distributor of brand name and private label menswear products. The Salant acquisition added significant earnings and revenues, further diversified product offerings and consumer base, and added operation of 29 retail stores.

Perry Ellis products have been historically geared towards lighter weight apparel generally worn during the spring and summer months. In recent years the seasonality has been reduced by the introduction of fall, winter and holiday merchandise. This is another way that Perry Ellis has capitalized the market – by its introduction of seasonal merchandise. In this way the company not only appeals to the general public, but intensifies these efforts when the consuming public is seeking a certain type of apparel.

In the past few years, the general decline in the United States economy has resulted in lower consumer spending. This weak economy has affected retailers in the delayment of placing orders, reducing orders, and the overall aggressive price discounting and promotional activities. Many retail companies have been forced into bankruptcies, liquidations and reorganizations due to the declining United States economy. The economic decline and the geopolitical situation have negatively affected Perry Ellis, however predictions for an overall economic improval are in the retail forecast. If a company has an international presence of one or more of its brands, that company is more likely to do better than others because there exist more than one market to compete in. Thus, if the retail market in the United States is weakening for a time period, another country may be in a better financial state, and the brand may make up for its losses resulted in the United States. It appears that an internationalization strategy reduces the amount of overall risks a brand can generate or be subject to. Additionally, if the consuming public in a leading country such as the United States determines that a fashion or certain style is “out of style,” the retailer may still generate enormous sales in another country that may be a little behind in this aspect. Thus, the retailer does not stand to lose revenue at all; the retailer just changes its markets with the normal flow or fluctuation of the marketplace.

Perry Ellis reported total revenue for the third quarter ending October 31, 2004 of $160.7 million, compared to $159.5 million reported for the same period last year. For the nine months ended October 31, 2004, total revenue was $484.5 million, an increase of $124.0 million, or 34.4%, over the same period last year. The year to date results reported include the addition of net sales and reduction in royalty income from the June 2003 acquisition of Salant Corporation. This is an important fact to note because the Salant acquisition brought new brands under the Perry Ellis International label. Net income for the third quarter of 2004 was $7.2 million, or $0.72 per fully diluted share, up from $1.7 million, or $0.18 per fully diluted share, from the same period last year. The fully diluted earnings per share for 2003 include a charge of $0.51 per fully diluted share for certain note refinancing expenses. For the nine-month period ending October 31, 2004, net income was $12.7 million, or $1.32 per fully diluted share, compared to $4.7 million or $0.58 per fully diluted share, for the same period in 2003. The company reported that the 2004 earnings this quarter were negatively impacted by approximately $0.10 per share from its swimwear business. This was due to lower than anticipated margins associated with the final resolution of markdown support and inventory disposition for the 2004 line year.

Perry Ellis’ total revenues have increased over the past few years, largely due to its internationalization strategy. In 2004, Perry Ellis’ total revenues were $505.9 million, an increase of $200.1 million, or 65.4% from $305.8 for 2003. The increase was mainly due to an increase of approximately $164.8 million in net sales generated by the Salant acquisition, an increase of 38.9 million in net sales generated by the swimwear line and a $3.5 million increase in net sales of the men’s sportswear’s business. In 2003 the total revenues were $305, 841, with a net sales of $277,028, 90.6%, of the total revenue. The 2003 revenues rose a fraction over the 2002 net sales of $251.3 million, or 90.4%. The increase in net sales from 2002 to 2003 was attributable to the net sales of the Jantzen swimwear line, again another example of an increase in brands. In 2001 Perry Ellis’ total revenues were $284, 678, with a net sales of $258,888.

In February 2000, Perry Ellis announced a 25% increase in their fourth quarter wholesale revenue to $58 million. This was an impressive number given the wholesale rates among its’ competitors. The wholesale growth in 2000 was a result of several factors during the first three quarters. Those include the closure of a number of department stores, weakness in the golf apparel market and the Company’s exit from the boys business. This provides a further example of how even though the company suffered some losses and experienced changes, the company was still able to increase revenues by one fourth. The licensing revenue during 2000 was an increase $6.5 million over 1999, due to the acquisition of the Perry Ellis brand. After acquiring the brand, Perry Ellis renegotiated higher royalty rates from a number of its licensees, some of which were immediately implemented.

Perry Ellis’ total revenues, which consist of net sales and royalty income, for 2004 were $505.9 million, an increase of $200.1 or 65.4%, from $305.8 for 2003. This increase was due to the Salant acquisition, which generated approximately $164.8 million in net sales, an increase of $38.9 million in net sales generated by the swimwear line, and a $3.5 million increase in the area of men’s sportswear. In 2002 the total revenue were %278.0 million. The increase from 2002 to 2003 was due to an increase of $25.3 million in net sales related to the Jantzen swimwear business and an increased royalty income of $2.1 million. The total revenues for 2000 were $250,572, with $227,732 accounting for net sales in 2000.

Perry Ellis’ royalty income in 2004 was $21.7 million, a decrease of $7.1 million, or 24.6% from 28.8 million in 2003. This decease in royalty income was attributed to the loss of a $3.5 million royalty previously received from Salant, one of the former largest licensees. The decrease in royalty income in 2004 was also attributable to the decreases from other licensees of Perry Ellis. In 2002 the royalty income was just slightly higher than in 2003, at 9.6%, or 26.7 million. The increase in royalty income between 2002 and 2003 was due to increases in royalty income in excess of guaranteed amounts for licenses such as Salant. These guaranteed amounts also assisted the company in its sales revenues. The decreases in guaranteed amounts from 2002 to 2003 were due to increases in royalty income in excess of guarantees for certain licenses of the Perry Ellis and Jantzen brands. For the year, licensing revenue was $22.8M, up from the $3.1M the previous year. Licensing revenue from the Perry Ellis brand under the previous owners was approximately $16 million for the year ending December 1998.

Licensing revenue from the Perry Ellis brand increased by 20% for the 10-month period ending in January of 2000. In 2000 Perry Ellis signed approximately 28 new licensing agreements including active wear, jeans wear and women’s wear. In 2000 the John Henry brand also increased 138% and 158% respectively, at retail over the amount for 1999.

The cost of sales in 2004 was $336.4, an increase of $131.4 million, or 64.1% from $205.0 million in 2003. The cost of sales has steadily decreased, from 68.9% in 2002, to 67.0% in 2003, and 66.5% in 2004. The cost of sales decreased as a result of the high margin of sales from the Salant acquisition. In 2001, the cost of sales was $200,884 and $171,413 in 2000. Gross profit was %169.5 million in 2004, an increase of $68.1% of the 2003 $100.8 million. The increase in gross profit in 2004 was attributed to the Salant acquisition and the growth in profit on other wholesale businesses. The wholesale gross profit margin percent improved in 2004 to 30.5% as compared to 26% in 2003, due to the Salant acquisition and from the success in higher margin branded business. Perry Ellis’ branded sales accounted for 91% of net sales in 2004, and 75% in 2003. Perry Ellis’ gross profit percentage for branded label sales usually remains at 3% to 5% higher than private label sales. The gross profit in 2002 $86,390, for 2001, $83,794, and $79,159 in 2000.

Selling, general and administrative expenses in 2004 were $119.7 million, an increase of $55.8 million or 87.4% from 63.9 million in 2003. As a percentage of total revenues, selling, general, and administrative expenses were 23.7% in 2004 and 20.9% in 2003. The increase in selling, general and administrative expenses were attributable to the additional $37.2 million in expenses incurred by Salant and an additional %10.9 million from the Perry Ellis swimwear business. The increase is also due in part to the increase in advertising, marketing and design necessary to support existing brands. This is a fact that is also extremely important to the maintenance of a brand’s strength. Selling, general and administrative expenses for 2002 were $55.4 million. The increase in selling, general and administrative costs form 2002 to 2003 were due to the Jantzen expenses in operation, of $10.4 million.

This increase in 2002 to 2003 was offset by a decease of $2.0 million in expenses incurred by Perry Ellis’ European Operations will the selling, general and administrative costs in the other areas remained unchanged. The selling, general and administrative costs for 2001 were $49,408 and $42,663 in 2000.

Some factors that could cause or contribute to such differences in the future earnings of Perry Ellis include, but are not limited to general economic conditions, a decrease in business from or loss of an important customer, changes in fashion trends, risks relating to the retail industry, use of contract manufacturing and foreign sourcing, integration of acquisitions, import restrictions, competition, and seasonal changes. Perry Ellis believes that their future growth will come as a result of continued empahsis on existing brands, new and expanded product lines, increases in sales of sweaters, swimwear and accessories and international licensing.

Other factors could be the effectiveness of Perry Ellis’ planned advertising, marketing and promotional campaigns, the ability of Perry Ellis to contain costs, disruption in the supply chain, general economic conditions, Perry Ellis’ future capital needs and ability to obtain financing, changes in fashion trends and consumer acceptance of both new designs and newly introduced products, ability to predict consumer preferences, anticipated trends and conditions in Perry Ellis’ industry, including future consolidation, termination or non-renewal of any material license agreements to which Perry Ellis is a party, ability to integrate businesses, trademarks, trade names and licenses, including Salant.

Another future goal is multi-brand development for the Hispanic market and selective acquisitions and opportunities that fit in with Perry Ellis’ business model.

Such an internationalization would assist the company in extending its retail businesses into other cultures, an effort that if successful, could mean huge revenue generating capabilites for the company. Perry Ellis also plans to take a number of steps that will position their swimwear line to be a positive contributor to earnings in the next fiscal year.

For 2005, Perry Ellis expects to report record revenue and net income. Earnings per fully diluted share are projected in the $2.10-$2.20 per fully diluted share range, below our previous guidance of $2.35. This shortfall is primarily due to lower than anticipated swimwear earnings, as well as higher than anticipated fourth quarter logistics costs due to the end of apparel import quotas on January 1, 2005. Perry Ellis’ President acknowledged disappointment in the swimwear business for 2004, but plans to take actions such as a rationalization of product offering, changes in sourcing and overhead expense structure and a significant reduction in inventory levels. Perry Ellis intends that those measures will position the company for a profitable swimwear line in fiscal 2006. Perry Ellis predicts that the menswear brands, especially Perry Ellis, Original Penguin, Cubavera, PING, and PGA Tour will achieve record sales with a continuing momentum to continue into next year.

Thus, a case study analysis of Perry Ellis International reveals that the company has very successfully implemented an internationalization strategy in its retail and apparel lines. Another fact worth noting is the predicted cultural expansion of the clothing line. This strategy of Perry Ellis International reflects a general trend in the retail industry overall. For example, despite the fact that most Indonesian brand-owners continue to emphasize their marketing activities in the domestic market, several brand-owners have started to export clothing under their own label. This has been particularly the result of the economic crisis in the late 1990s, which affected companies serving the domestic market. Companies were trying to compensate for the loss of sales on the domestic market by redirecting their marketing activities to foreign countries. This export strategy has been driven largely by the sole aim to survive. However, in addition to these export activities, some companies have rather sophisticated, long-standing business relations to their distributors in overseas markets.

Maturing domestic retail markets, emerging international population growth and increasing global consumer demand illuminates the need to address consumer cultures abroad. Young consumers’ attributes such as demographic characteristics, shopping behaviors and brand attributions represent an opportunity to cultivate brand loyalty and patronage behaviors across retail market settings. A recent study noted that among the top 100 global retailers, more than 70% have operations in more than one country and 40% are U.S.-based retailers. Additionally, of the top 100 global retailers, Pricewaterhouse Coopers Retail Intelligence reports that the average retailer operates in over seven countries, a significant rise from previous years. S a result, companies such as Perry Ellis International can capitalize on market opportunities in transitional, emerging, newly industrialized, and developed economies. Finally, by understanding how certain consumer attributes or marketing efforts contribute to or hurt brand equity, marketing managers can develop effective marketing plans.

Other examples of this trend have been examined by other research studies as well. According to the projections for Apparel Consumption in India 2001-2002, it is very evident that the branded western wear has a bigger share in comparison to the branded Indian ethnic wear in the total women’s wear market in India. This projection has a clear indication that the brands in the western wear market have a greater prospect for a lucrative growth. Even though the Indian Ethnic wear has more shares in terms of value and quantity but as far as branding is concerned, it is more popular among the western apparel segments. Even for the Ready Made garments the share for Branded western wear is much more than he branded Indian ethnic wear. About 42% of the tops and t-shirts are branded in the total ready-made garments, which means it has come almost half way on its way to victory over the unbranded. Researchers note that the way the retail industry is tapping all opportunities to get branded in all aspects it will not be long before the branded take over the unbranded.

Despite the difficult environment, major European clothing retailers, and particularly multi-national specialty chains, are succeeding by taking market share through innovative, fast-changing product offers and lower cost, more efficient business models. Retail branding in Europe is currently undergoing several changes, such as a weakening demand (Forsythe, 1998). While apparel spending in Western Europe grew at an annual rate of 3.8% from 1997 to 2000, the industry’s share of total consumer spending is declining as the economy decelerates and consumer confidence slips (Forsythe, 1998).

Although apparel distribution channels and the concentration of apparel sales are still quite different across Europe, rapid consolidation reflects growing market maturity. Multi-national retailers like H&M, Zara, and Mango, have moved toward greater internationalization of styles and more disposable fashion through low prices and fast rotation of inventory (Forsythe, 1998). Faster and more flexible supply chains are the principal drivers of the retail apparel industry in Europe, and are key to the success of specialty apparel chains (Forsythe, 1998). Research indicates that the ability of specialty chains to implement fast response is placing pressure on traditional retailers, including independents and department stores. Their explosive growth is shifting apparel market share and is changing the structure of apparel distribution across Europe.

Recent tough market conditions have favored those retailers who can respond to consumer demand more quickly and at lower cost. A handful of specialty retailers such as Sweden’s H&M and Spain’s Zara, continue to defy the global economic downturn (Forsythe, 1998). The explosive growth of these chains also is driven by diversification and international expansion. As a growth strategy, they are capitalizing on the heightened interest in their brands by extending them into new product areas, new customer segments, and new formats (Forsythe, 1998). A great deal of research has cited the market as the cause of these reactions. For example, Verhagen and Hezik (1997) state that many firms apply an internationalization strategy to aim and emphasize the realization of added value. Enterprises with a strong position in brands, realizing a high added value on their products, only internationalize when there is a high potential market abroad (Verhagen & Hezik, 1997). First a local brand is bought, next local production is considered vs. production in other facilities. According to Verhagen and Hezik (1997), most other firms, however, base their international strategy mainly on their home market activities.

Cultural Brands

The culture of branding is a topic that is included within the context of internationalization of branding. Successful cultural icons exemplify the cultural connection between the brand and the consumer world. Today’s cultural brands have learned they are not merely selling products, they are creating lifestyle worlds around their products and brands (Hartman, 2004). The thought process behind cultural branding is the theory that the more is known about the world in which the product plays, the more successful the brand will be. Marketers can utilize distinct components of a cultural brand to create an emotional appeal with consumers. Harman (2004) discusses five steps that operate in tandem to build a cultural brand. These steps are creating brand experience, building community, selling to cultural occasions, learning the language and creating the culture of the product. According to Hartman (1997), compared to a cultural brand, a plain ordinary brand may be very strong on community building or may be a product of exceptional quality but it may lose out on the other essential components.

While one cultural brand element may entice a consumer to enter a brand world it is typically true that all five components of a cultural brand play a role in making that consumer want to return (Hartman, 2004). Hartman’s research has also focused on the fact that one of the keys to building a cultural brand is to identify and truly understand that consumers are constantly changing. Since consumers are changing the way they live, where and how they shop and what they buy, consumers purchase brands that reflect the values they hold and the values they are developing. Therefore, a cultural brand encompasses and represents these changing values; it represents this changing experience people are longing for and participating in; and it represents the community that’s a part of this shifting culture (Hartman, 2004). In order to provide a context for a brand’s customers, an experience must be created that draws customers closer to the brand. An example of this is to share or at least empathize with the lifestyle interests of the segment of consumers that is being targeted.

Hartman (1997) discusses another aspect of creating brand experience not mentioned in other research. The aspect he discusses is the fact that creating brand experience centers on an ability to build ambiance into the brand by facilitating key events for the customer such as discovery, surprise and delight. He uses as support for this theory the segment of grab-and-go shoppers, who can always be surprised by a comment from a cashier or a message on a register screen which tells them about a special deal being offered on Saturday, or after a certain dollar purchase is made. According to Hartman (1997), rituals and interactions, in-store or virtual, should facilitate consumers’ ability to build up their knowledge of culturally salient product worlds. Some clothing retailers create an ambiance around a specific product by telling a real and enticing story about the origin, history or potential use of the item. Consumer knowledge of a product leads to brand evangelism and can provide powerful connections to the experience of the overall brand (Hartman, 2004).

Additionally, stores and virtual communities need to be harnessed as interactive gathering spaces for consumers with similar lifestyles and consumption habits. Research indicates that customers can and will sort themselves by similar interests and behaviors. Hartman (2004) indicates that while this is challenging in terms of retail execution, the task here is to infuse sensory components and human interaction to engage the consumer in their store-flow routines. In order to sell to cultural occasions, such as holiday or sports apparel, a brand manager must insert themselves into the social rituals of everyday life by being relevant to the consumer, not through intrusive tactics. Hartman (1997) cites that band The Grateful Dead as the most extreme example of having created a cultural brand by selling to the cultural occasion with very little intrusion. The message of the music and the event itself fit with fans selling brand-related t-shirts and other clothing products which in turn were a part of an inspired loyalty to the purchase of such items over long periods of time.

While it remains primarily the job of the advertising agency to present the language of how brands are experienced, it is never-the-less the task of everyone involved with the production and marketing of a product to at least understand the way that the company’s consumers think and the way that these consumers see and talk about themselves (Hartman, 2004). Brand packaging and messaging as well as in-store communications must use the colloquial language of consumers. This is because in order to create the setting for an authentic brand experience with a real sense of community, the physical symbols and markers presented to the consumer need to be in their own language. This concept as applied to retail branding, has not been widely researched, as it applies mainly to food product branding. In all cases, however, language used to sell products should be playful, fun and evocative not dry, formal and terse. Using market research techniques such as language analysis, whether analytical, where common key words are “filtered” out of thousands of surrounding words, or observational, where interviewers look for over-lapping themes, can spell out entirely new and effective ways of presenting a brand (Hartman, 2004).

Building cultural brands can be intentional or frequently they occur by accident because consumers themselves create them. Research by Hartman (1997) states that the characteristics of a cultural brand fit much more successfully with smaller companies. Hartman states the reason for this is that bigger companies have traditions in how they look at branding scenarios. They have a built, set infrastructure in how they market and develop new brands. On the other hand, smaller companies are not tied to their own infrastructure and the way they have operated, and they are much more nimble and can move when or even before the consumer moves. Therefore, creating a cultural brand is much more of a process of looking at the consumer and the market differently, with a new eye, because the consumer is looking to the brands they use and buy differently.

Finally, because consumers are constantly changing the way they live, shop and buy, the number of cultural brands will continue to grow. As consumers shift culturally, they are resonating to products and services that are more soulful in nature which express touch points in their lives that are important to them (Hartman, 2004). Based on these changes we can expect to see companies and brands connecting with consumers in a more soulful way. Thus, creating culture by building community and experience is not only profitable for companies and brands but it also represents an opportunity to provide consumers with a sense of place. Cultural brands can be used to bring people together in a way that can be good for society as well as consumers and the retail industry.

Case Study: Levi Strauss

In 1873 the dry goods merchant, Levi Strauss, sold the first pair of canvas waist-high work pants to miners working the California gold rush. The tough, durable, handmade work pants quickly became the standard dress for miners, railroad workers, cowboys and laborers in the western frontier (Gehlar et.al., 2005). Later, Levi Strauss replaced canvas with blue denim and reinforced the seams with copper rivets, focusing on making only rugged work pants and eventually built a very successful and focused business. From the late 1940’s through the early 1960’s, Levi Strauss had no direct competitors for his product. The Levi brand jeans eventually became recognized as the post-war standard dress for the rebellious, non-conformist American youth movement (Gehlar, et.al., 2005). In the mid-1960’s, privately held Levi Strauss became a blue jean marketing company, expanding distribution internationally. They launched their first growth beyond their core category of blue denim and ventured into women’s fashion (Gehlar et.al., 2005).

In the early 1970’s, Levi Strauss became a broad-based apparel company and purchased established brands such as Perry Ellis and Oxford men’s fashions and additional women’s brands. However, Levi’s was not structured to compete in the fast-paced apparel business, and its business became unprofitable. At the same time, the North American blue jeans business was showing consistent growth, with international sales were increasing at 11%. In the early 1980’s, the heirs of the Levi Strauss family bought back the company stock and the company operated again under private ownership. Under that ownership, the company flourished, focusing on core competency of pants and a limited line of work shirts. In the late 1980’s, Levi’s identified an emerging fashion trend of casual dress beyond blue jeans. The company introduced the wildly successful Dockers brand and established a leadership position in casual fashion (Gehlar et.al., 2005).

The brand name Levi’s became one of the most widely recognized brands, and is considered a generic descriptor for blue jeans. This brand was so strong that Levi’s did not have too many competitors at all. With the strength of the brand, Levi’s made a business decision to limited distribution to finer department stores and specialty shops (Gehlar et.al., 2005). In the early 1990’s, however, competition attacked the jeans market share, and low price imitations undersold at 30% – 40% less. Furthermore, under numerous private label brand names, competition flooded the market at the value price position. At the premium end, expensive designer fashion brand names sold at $150 and higher (Gehlar, et.al., 2005). Unfortunately, Levi’s management was unprepared for competitive threats, and the company’s high cost structure prohibited them from making pricing concessions. Additionally, Levi’s restricted distribution policy further eliminated market share opportunities. Explosive growth of discount mass-merchants Wal-Mart and Target, as well as specialty retailers like The Gap, further eroded business opportunity and future profits (Gehlar, et.al., 2005).

As a direct result of the competition, Levi’s market share in 1990 was 48.2%, and sunk to 23.3% in 1999. In 2003, the Levi Strauss Company tried to recover and announced a new value-priced blue jean called Levi’s Signature. The new Levi’s Signature would be introduced in Wal-Mart and would be available at other discount retailers within the first quarter of 2003 (Gehlar, et.al., 2005). The goal of the value priced Signature line was to use the equity of the Levi’s brand to compete with national brands and private label pricing (Gehlar, et.al., 2005). Research indicates that a qualitative survey of the Levi’s Signature brand was conducted with 150 consumers of varying demographics. Five interviews were conducted with retail trade channel merchandising buyers regarding Levi’s Signature strategy, and the conclusions were unpredicted. For example, 72% of consumers surveyed stated, “I did not know that I could not buy Levi’s at Wal-Mart or other discount mass-merchants. “So, where can I buy Levi’s? (Gehlar, et.al., 2005).

Another unpredictable finding was the conclusion that due to years of other brand choices, the younger the consumers are, the less likely they were to have a relationship with the Levi’s brand. As a result, it appeared that the transfer of brand equity associations was minimal regarding the Levi brand. Consumers knew the brand name but did not have a perception that determines value perception, product quality or brand expatiation. Levi’s Signature was not their first choice for purchase unless choice was based on a low price deal. One option for the Levi Strauss company would be to use the Levi’s Signature brand to sell against., however, this strategy may lead to another price war and lowered price points in the blue jeans category. Other retailers have gained a significant amount of knowledge from the experience of the Levi Strauss company. For example, the Levi’s case study notes that once business or a brand is lost, it is virtually impossible to reclaim it.

The Levi’s case study also indicates that leadership pre-sells the brand; once leadership is established, companies should focus on keeping it because it is fairly easy to take for granted. Once leadership credentials are established, they are a barrier to competitive threats (Gehlar et.al., 2005). Retailers have also come away with the knowledge that the competition must never be given an advantage to attack their market share, customer base and pricing strategy. To counteract competitive attacks, product offerings cold be created. Additionally, companies who practice inside thinking are thus predicted to fail because they lost touch with the core of the industry. Other retailers would be well-advised to recognize the branding errors made by Levi Strauss and follow in the footsteps of the Perry Ellis International company instead.

The Overall Effect of Retailer Attributes review of the literature reveals that various retailer attributes such as those that influence overall image; the variety and quality of products, services, and brands sold, the physical store appearance, the appearance, behavior and service quality of employees, the price levels, and the depth and frequency of promotions have a great effect on the success or failure of a retailer. Various retailer attributes and their related importance in the industry will be discussed in the sections that follow. Strong brands should provide a value proposition to customers, and the goal for any retailer is to build a strong brand-customer relationship. Therefore, a retailer that desires long-term revenue generating capabilities must include customer service, distribution and supply chain performance as part of its value proposition. Marketers generate demand and drive sales through a host of brand promises, however, if the product cannot be delivered at the right time for the right price, then the effort will not be successful.

Retailer Access

The location of a store and the distance that the consumer must travel to shop there are basic criteria in their store choice decisions. Retailer research in the 1980s focused on store choice and the optimization of retail site location (Achabal, Gorr, and Mahajan 1982). In present times, greater driving distances, the appearance of new warehouse retail formats that are often located in large spaces away from residential areas, and online retailing have made location somewhat less central as a store choice criterion. Research in this area indicates that location no longer explains most of the variance in store choice decisions. Instead, store choice decisions appear consistent with a model where consumers’ optimize their total shopping costs, effort to access the store location being one component of their fixed cost of shopping (Ailawadi, 2004). Consumers’ store choice may be based on different criteria depending upon the nature of the trip. Although location no longer explains a major portion of the variance in consumers’ choice of stores, it is a key component in consumer’s assessment of total shopping costs and is still important for retailers who wish to get a substantial share of wallet from fill-in trips and small basket shoppers (Ailawadi, 2004).

Store Atmosphere

Mehrabian and Russell (1974) note that the response that atmosphere elicits from consumers varies along three main dimensions of pleasantness, arousal, and dominance. This response, in turn, influences behavior, with greater likelihood of purchase in more pleasant settings and in settings of intermediate arousal level. Thus, different elements of a retailer’s in-store environment, such as color, music, and crowding, can influence consumers’ perceptions of a store’s atmosphere, whether or not they visit a store, how much time they spend in it, and how much money they spend there (Ailawadi, 2004). Research by Baker et al. (2002) notes that atmosphere can affect consumers’ perceptions of the economic and psychological costs of shopping in a store and find that pleasing physical design lowers both economic and psychological costs while music lowers the latter. Store atmosphere also mediates consumer perceptions of other dimensions of store image.

Other research by Richardson, Jain, and Dick (1996) concluded that consumers’ ratings of the private label’s quality are higher when the store is aesthetically pleasing than when it is less attractive, although there is no significant difference in their ratings of national brands’ quality. Thus, a pleasing in-store atmosphere provides substantial hedonic utility to consumers and encourages them to visit more often, stay longer, and buy more. From a branding perspective, an appealing in-store atmosphere offers much potential in terms of crafting a unique store image and establishing differentiation (Ailawadi, 2004). Increasingly, brands are being positioned on the basis of their intangibles and attributes and benefits that transcend product or service performance (Ailawadi, 2004). Even if the products and brands stocked by a retailer are similar to others, the ability to create a strong in-store personality and rich experiences can play a crucial role in building retailer brand equity (Ailawadi, 2004).

Retailer Price Promotions

Other research studies have focused on whether retailer price promotions result in store switching by consumers. Kumar and Leone (1988) examined the impact of promotions on store switching and store traffic. Bucklin and Lattin (1992) show that retail promotions in any one category do not directly influence a consumer’s store choice decision, but they indirectly affect where the category is purchased. This is because consumers typically shop in more than one store, and they may purchase a promoted product in the store they happen to be visiting whereas they would otherwise have purchased it in another store (Ailawadi, 2004). The impact of promotions will be higher in a pleasant atmosphere because the longer consumers stay in a store, the more likely they are to notice promotions and buy more than originally planned during the shopping trip.

Other consumer studies reveal that if a retailer attempts to sell a new line of products or offer a new service that fails to connect with consumers, there may be little long-term harm as long as the new line is not too closely connected to the retailer’s signature categories or its own brand name (Ailawadi, 2004). Research on brand equity dilution has found that parent brands generally are not particularly vulnerable to failed brand extensions (Ailawadi, 2004). Under this theory, the retailer’s image and reputation would be more vulnerable if the expanded product assortment is a private label branded under the store’s own name. Successfully introduced brand extensions can lead to enhanced perceptions of corporate credibility and improved evaluations of even more dissimilar brand extensions that are introduced later. Retailers are most likely to be successful if they expand their meaning and assortment in gradual stages, because a broad assortment can create customer value by offering shopping convenience.

One specific aspect of the retailer’s assortment strategy, brand assortment, has become particularly important in the last decade as a tool for retailers to influence their image and develop their own brand name (Ailawadi, 2004). According to Ailawadi (2004), most retailers carry manufacturer brands, but, increasingly, they also offer private label products. One motivation for offering private labels is the higher percent margins that they provide to retailers along with the negotiating leverage they provide over manufacturers. Another important motivation is that providing a private label brand engenders loyalty to the retailer. According to Ailawadi (2004), the growth in private labels has spawned much research on who buys private label products, whether and how private labels provide leverage to retailers, and the category and market determinants of private label share.

Although the growth of private labels has been interpreted by some as a sign of the brand decline, other researchers argue that private label growth could be seen in some ways as a consequence of cleverly designed branding strategies. Analytical models in this area indicate that private labels give retailers negotiating leverage over national brand manufacturers. Ailawadi’s (2004) empirical analysis supports the hypothesis that retailers are able to earn high margins on national brands in categories where their private label has a high share. The most important driver of private label share is its perceived quality (Ailawadi, 2004). Studies have found that when private labels target a particular national brand, they tend to target the leading brand. Private label users span a wide array of demographic and psychographic characteristics, so retailers who use a strong private label strategy are not limiting themselves to only a narrow section of the market (Ailawadi, 2004). The negotiating leverage provided by a successful private label can make it easier for a retailer to strengthen some of the other levers of brand image (Ailawadi, 2004).

Researchers have applied a number of branding principles and concepts to retailer brands, such as brand personality. A great majority of the theory and practice of branding deals with intangibles, or how marketers can transcend their physical products or service specifications to create more value. Brand personality is the human characteristics or traits that can be attributed to a brand. Aaker (1996) has generated a widely accepted brand personality scale comprised of the following factors: sincerity, excitement, competence, sophistication, and rugged appeal. An important trend in marketing is experiential marketing, or company-sponsored activities and programs designed to create daily or special brand-related interactions (Ailawadi, 2004). Although researchers have discussed optimal private label introduction, quality, pricing, and positioning strategies from the perspective of private label sales or category profit maximization, there is little work, either normative or descriptive, that links these strategic decisions to building the retailer’s brand equity (Ailawadi, 2004).

An examination of the retail industry indicates that there are at least four tiers of private label products, ranging from low quality, no-name generics to cheap, medium quality own labels to somewhat less expensive, comparable quality private labels, to premium quality, high value added private labels that are not priced lower than national brands (Laaksonen and Reynolds 1994). In the United States, brands such as GAP, Tiffany, Brooks Brothers, and Talbots have established strong, premium private labels. However, more retailers are attempting to create a line of private labels that spans these tiers. One of the major benefits of brand equity is the option it provides for extending the brand name to other market segments within the category or to other product categories. In terms of building brand equity, the key point of difference to consumers for private labels has generally been good value, a desirable and transferable association across many product categories (Ailawadi, 2004). As a result, private labels can be extremely broad, and their name can be applied across many different products.

The measurement of brand equity has been one of the most challenging and important issues for retail managers. Brand equity is defined as the marketing effects or outcomes that accrue to the product or service with its brand name as compared to the outcomes if that same product or service did not have the brand name. Even though there has not been much academic research on retail branding, a lot of work has been done on retailer actions and consumer perceptions of retailer image that has direct relevance to branding. Consumer perceptions of dimensions of retailer image can help develop strong and unique retail brand associations in the minds of consumers.

Through influencing consumer preferences and shopping behavior, retailers’ image becomes an important base for their retail brand equity.

Future Research in Branding review of the research indicates that more research in needed in this area. One possibility for a research study is to develop and test artificial neural network simulation models that may be used by retail marketers to forecast the effectiveness of selected brand image strategies in targeted markets worldwide. In such a study, the potential effectiveness of the Internet as a strategic tool to enhance global brand images could be examined. Such a study would be effective as a means by which to collect consumer information to guide product and image strategies. The study conclusions could be disseminated to apparel marketers to support their efforts to develop more effective brand image strategies and enhance their competitiveness in targeted international markets.

A research project of this nature would enhance industry responsiveness to consumer demand in international markets by providing a framework that may be used to create more powerful global brands, thereby facilitating cross-national acceptance of American textile and apparel products. The Internet could also be applicable as an effective means of delivering a brand strategy to targeted consumers in a cost-effective manner. More effective brand image strategies, efficiently delivered to global markets via the Internet, could result in the creation of powerful brands, providing a sustainable non-price advantage to American retailers. Since research shows that many shoppers expect to pay a higher price for more favorable brands, it appears that brand name contributes to the value of the product through intangible, subjective product characteristics. An effective brand translates into consumer loyalty and willingness to pay a premium price for the brand, providing marketers with a powerful competitive advantage.

As a result, the Internet has demonstrated great potential as a marketing tool, due largely to its rapidly growing access to consumers worldwide and low barriers for online marketing. A model of cross-national product acceptance shows how consumers manage product information, including brand name, during their purchase decision. The Internet has provided a whole new platform to strengthen and build brands, and allows users to have a relationship with the brands they choose on a never-experienced level. Future research studies involving branding could examine the potential of the Internet as an efficient and appropriate medium for collecting consumer data and selling products. These studies could also evaluate retail and apparel company web sites to examine the current use of the Internet to build global brand images for American brands. The shopping behavior of online shoppers could also be categorized based on shopping attitudes and behavior. Finally, future studies could develop recommendations for domestic Web sites to enhance delivery of brand image strategies to global markets.

Additionally, research indicates that a more thorough and strategic view of brand building integrates brand characteristics that fall beyond marketing. Elements not traditionally considered branding initiatives differentiate a brand identity. The key to building strong brands is to broaden the brand concept to include non-traditional components of an organization into the company’s branding philosophy. Thus, marketing effectiveness remains a big source of gain for the retail industry. Although almost all consumer goods companies are active in countries such as Brazil, China, and India, few take advantage of their full potential (Gehlar et.al., 2005). The error that these retailers make is that many concentrate on the minority of the population that can afford expensive, Western-style goods, leaving local competitors to target the overwhelming majority of consumers with modest means. It is in this manner that the locals have the edge in supplying neighborhood stores, which global companies find harder to reach, and have held off the big players by selling some products at very low prices while nonetheless generating profits (Gehlar et.al., 2005).

Furthermore, the growth of discounters has enabled a definite trend toward private-label goods, and many other manufacturers supply retailers with private-label products, at least in some categories and countries. For example, a number of department stores have developed a sizable private-label business outside their home markets while retaining a strong branded domestic business. As a result, retailers must weigh their strengths and weaknesses. Retailers whose brands are below second or third place in market share and do not occupy a clearly defined niche might find making private-label goods the most attractive option (Gehlar et.al., 2005). Traditionally, consumer goods companies have been vertically integrated: they design, make, market, and sell their products (Gehlar et.al., 2005). Contract manufacturers that make but don’t brand products, will coexist with pure branding companies that do not manufacture products.

As a result, American apparel retailers are seeking ways in which they may develop a powerful, non-price competitive tool that will provide a sustainable advantage in targeted global markets. Cross-national research has shown that consumers rely heavily on brand name when making purchase decisions (Forsythe, 1998). Brand name has been identified as the most important cue used by consumers in forming product evaluations and purchase decisions. Apparel marketers spend millions of dollars each year attempting to build brand name recognition and establish a favorable brand image. Research has shown that many shoppers expect to pay a higher price for some brands, even when they are aware that quality among competing brands does not differ, suggesting that brand name contributes to the value of the product through intangible, subjective product characteristics.

An effective brand image translates into consumer loyalty and willingness to pay a premium price for the brand, thereby providing marketers with a sustainable competitive advantage (Forsythe, 1998). However, marketers must understand how brand name influences consumer decisions in each market to effectively use brand name to favorably impact consumers’ attitudes and purchase intentions (Forsythe, 1998).

Conclusion

Given the chaotic and fragmented nature of American consumer markets, it’s an uphill battle for a new brand to make an impact and grow, however, retailers continue in their effort to produce new successful brands. For example, in 2003 more than 30,000 new consumer brands were launched in North America (Hartman, 2004). As the defining moment for a new product, these are high-profile, high-budget events, with costs for most launches and related promotions ranging from $10 million to upwards of $300 million (Hartman, 2004). Failure can spell doom for the brand, and enormous financial losses attributed to the marketing and advertising efforts related to promote the brand. As a review of the relevant literature indicates, good creativity only the beginning. Also equally important is the way the message is delivered, as today’s consumers have a higher expectation of relevance, having grown accustomed to pinpoint marketing that speaks directly to them. For example, where one ad might have served the broad audiences of the past, now multiple versions must be developed to account for regional and demographic variations. Similarly, the massive blocks of customers once available through network TV and mass-circulation magazines have splintered and scattered, forcing marketers to work harder to track down prospects through multi-channel programs (Hartman, 2004). Marketers now need to think of new and inventive methods of reaching their audience such as online and in-game advertising, co-branding deals, closed-circuit and private-label video, street teams, mobile devices, custom publishing, and more (Hartman, 2004).

As the research indicates, even with the best strategy, planning and creative, a brand campaign cannot succeed unless it can be executed with greater speed, flexibility and efficiency than the competition. According to Hartman (2004), time is of the essence, with new trends and tastes constantly reshaping the market, and first-to-market advantage nearly impossible to overcome. The American marketplace remains as unforgiving as ever, as 80% of new product launches fail to capture enough sales and market share to be considered a success and the poor performance of one product can do devastating harm to the core brand image. The difference between success and failure comes down to the processes and systems through which a brand campaign is executed. Companies that fail to recognize the new reality and adjust their methods accordingly face an overwhelming disadvantage (Hartman, 2004). Global 1000 companies spend more than $1.2 trillion per year on marketing. Of this, 22% goes to the production, management and distribution of marketing content (Hartman, 2004).

Retailers must strive to maintain effective control over their marketing content, including the preservation of brand consistency across all activities. Retailers and distributors throughout complex direct and multi-tiered sales channels have a constant need for marketing materials, and if they can’t get their hands on the latest version, they’ll turn to whatever’s left over from the last campaign (Hartman, 2004). Multiply this scenario by the different customer segments, products, brands and regions served by a business unit, and the difficulty of orchestrating an effective campaign increases exponentially. Thus, the task of managing a marketing content supply chain may seem very difficult. A marketing content management system enables an organization to control and facilitate the entire process around managing and distributing marketing content. By bringing new structure and order to the complex interconnections among the parties involved in a campaign, it transforms the marketing content supply chain into a streamlined, centralized system that provides greater control, accountability, flexibility and speed (Hartman, 2004).

Success in marketing will always depend on the quality of the brand campaign and the attractiveness of the brand in question. As a leader in the fad-influenced athletic gear market, Reebok understands the importance of an agile, responsive marketing organization; the field is littered with former competitors whose brands have lost their luster. The seasonal product lines of the apparel industry call for huge launches several times per year, each bringing new variations in theme and content while building on the brand’s established strengths (Hartman, 2004). But as Reebok indicates, strict brand control is easy with the right system in place. Reebok’s information technology and marketing personnel work hand in hand to keep the marketing content management system in high gear, even with more than 1,000 congruent users hitting the system at any given time (Hartman, 2004).

Finally, the trends currently reshaping consumer markets in the United States and internationally as well, show no signs of slowing. For brand managers, the question is not whether to adapt, but how and how quickly it can be done. Although the fast pace and complexity of today’s marketplace pose huge challenges to traditional marketing methods, they also present powerful opportunities for companies that successfully embrace new ways of doing business (Hartman, 2004). As slower, less efficient campaigns fall short of achieving their targets, those executed more crisply and flexibly will stand an even better chance of cutting through the clutter to reach customers where they are now, not where they were three months ago.

Conventional wisdom holds that a great retail brand must present one face to the world, a consistent image that defines the product wherever consumers find it. But retail chains have found that although they can hang out their signs anywhere, consumers respond differently in every country, and understanding those differences is the key to building a successful retail brand across borders. A thorough analysis along with an understanding of what drives customer loyalty in each geographic market can have enormous financial benefits. Customers in a survey performed by McKinsey spent twice as much at their stores providing the benefits they sought as they spent at stores emphasizing other benefits. As a result, if retail chains attempt to go global and internationalize their brands, they will have to pay greater attention to market nuances.

Finally, the retail industry has increasingly become international, especially over the last sixteen years. The situation will change even more dramatically into the millennium, as the retail industry in developed countries becomes more outward-looking in seeking opportunities beyond their local, regional and national markets in the emerging markets of developing economies such as Thailand, India, and China in order to sustain future company sales and profit growth. Many emerging organizations from developing countries may seek niche opportunities in mature markets. According to Sanghavi (2004), this new wave of internationalization will be unique in its scale, geographical orientation and motivation underpinned by new developments in communication networks and technology, and the global customer and supply chain, making it possible for retail companies control their businesses as well as localize them in far flung locations.

Research by Sanghavi (2004), as well as others, indicates that it is critical for retail businesses wanting to internationalize their operations to understand how key economic, political, legal, social, cultural and technological environments impact on resource, competition and distribution dimensions, leading to the establishment of main drivers for international expansion. The combination of these drivers will lead to the formation of appropriate entry strategies for the internationalization of operations. Retailers wishing to turn toward internationalization have to choose from a wide range of market entry strategies in order to expand their operations internationally. In the past, many organizations adopted mainly acquisition of a local business where they were unsure of successfully transplanting their offer into the host country. However, where they were reasonably certain of success, where they had a distinctive offer which could appeal to similar target markets across a variety of nations and which could be readily transported or adapted to the host countries’ markets, concepts which required tight control of image, they chose organic growth and franchising strategies (Sanghavi, 2004).

One of the important market entry strategies in recent years has been that of strategic alliances. These alliances are either development-led, purchasing-led, skills-based or multi-functional; Perry Ellis International is an example of a retail company that has successfully implemented this concept. Another form of the internationalization process is management know-how transfer, whilst many businesses, especially when establishing their operations in developing economies, follow the concept of limited-term management contracts whereby a company may provide business know-how in specific areas without making any capital investment and gaining valuable knowledge about the partner country’s business and consumer markets, competitive environment and trends (Sanghavi, 2004). Again, this technique is also demonstrated by Perry Ellis International’s process of licensing its own brands and products as well as maintaining licenses with other retail companies, as discussed in the case study.

In their early phase of internationalization, several companies made their first moves into overseas markets by establishing subsidiaries as a high control mode of entry, for example, Gap and Perry Ellis International. For many retail companies with more experience of trading in overseas markets or for whom operating transnationally is a part of the company culture rather than primarily a response to a tough climate at home, the preferred route is usually for a lower or medium control strategy that would be less costly in terms of company resources (Sanghavi, 2004). The pace of change in the internationalization of retail companies has produced very diverse styles of operation, ranging from global to multinational organizations. Global organizations such as Perry Ellis International vary their format very little across national boundaries, achieving the highest economies of scale but showing the least local responsiveness.

In many developing countries, there is a growing demand for modern and sophisticated retailing of goods and services, and a developing distribution infrastructure. Researchers predict that in the long run, these markets will represent very significant business opportunities indeed which, in turn, will attract large number of American, European and Japanese goods and service retailers in some form of involvement to take advantage of that substantial growth. However, at times other retail companies shy away because they feel the customers, customs and ways of doing business are too different to justify the risk of doing business in a foreign country. This is the case of what occurred within the Levi Strauss company. The Levi Strauss case study provides an example of a retail company that once was successful, but could not internationalize its business, and in the end suffered as a result of high competition.

Finally, a review of the case studies and relevant literature reveals that the key principles of doing business are usually the same in overseas countries as they are in the home country. The differences between operating in a foreign market and the home market are largely of degree, not always of fundamentals. Research suggests that, for these successful companies, profits do not take a long time to materialize, for many, it is within three years (Sanghavi, 2004). A retail company may try a variety of entry strategies in different markets or different strategies in the same market at different times. If handled correctly, internationalization of goods and services retailing activities could provide greater strength to the business through know-how transfer, improved access to international sourcing and an increased ability to attract and develop high caliber management (Sanghavi, 2004).

A review of the literature reveals that the path to brand internationalization is never easy. It requires long-term time horizons and a careful step-by-step approach; it must also be understood that the home market strength is critical and must take priority (Sanghavi, 2004). Transplanting a concept or a format is not enough, even in the age of global village and world citizen (Sanghavi, 2004). The complexities of local customs, tastes, preferences and culture must also be considered and addressed. Whether the internationalization of branding for a retail company is successful or not depends on the retailers ability to globalize the marketplace. Such retailers must take into consideration the fact that competitors who have never been recognized before will emerge. There will also be a desire to reach different and distant markets, and retailers will also have to learn how to erect barriers by creating compelling competitive advantage. Additionally, they will have to develop rapid reaction to changing markets, and will have to learn to re-deploy resources quickly and efficiently in response to these changes in the marketplace.

In conclusion, the question of whether the growing power of retailers means the demise for branded clothing products is one that deserves much future attention. Branded manufacturers can be a major source of innovation in the retail industry as they have the potential for earning superior returns. Leadership is maintained when firms are able to differentiate their product offerings from competitors, however, maintaining leadership position requires not only branding power but also innovative products or lines. An area of future research is how policy might open doors to other forms of retail branding beyond the traditional role of retail manufacturers. The future of branding internationalization appears bright for the retail industry as a whole.

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