Are Designer Collaborations Dead?

With ever more retailers tapping fashion's biggest names, the once-hip strategy is becoming cliché and savvy designers are focusing on other markets

by Reena Jana

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When Matthew E. Rubel left his post as chairman and chief executive at upscale footwear label Cole Haan in 2005 for the chief executive position at low-end shoe store chain Payless ShoeSource (PSS), he faced the challenge of rejuvenating a company that had seen 10 years of flat sales.

So within the first two months of his new role, he focused on tapping into a trend that's been gaining momentum since early this decade: high-profile, limited-edition collaborations between budget-friendly retailers and ultra-chic fashion designers who typically sell their clothes and accessories at tony department stores such as Neiman Marcus or Saks Fifth Avenue (SKS).

Rather than create lower-priced vinyl and canvas pumps and sandals that resembled trendy designs by hip designers—a tactic that characterized Payless's earlier inventory of knock-off shoe styles—Rubel decided to recruit a designer with street cred. Payless signed Laura Poretzky, the fashionable young designer for the chic, up-and-coming, New York-based fashion label Abaeté, to design limited-edition shoes priced from $20 to $25. The first store to stock the Abaeté for Payless shoes (as they are co-branded) in fall 2006—located in fashion-conscious Manhattan—sold out of the snazzy footwear in 48 hours.

Unique for the Masses

Rubel had taken a page from Target's (TGT) famous "design for all" playbook to draw well-heeled consumers into big-box stores. So far, he's sticking with the strategy: Poretzky's latest collection of sexy, open-toed heels and strappy flats recently hit shelves and the Web site, www.payless.com.

And this month's lineup of limited-edition designer collaborations at other low-price retailers indicates that the trend still continues: Japanese casual-clothing chain Uniqlo is about to offer pieces by ultra-trendy Alice Roi, a darling of fashionistas and magazine editors. And April marks the final month to buy the limited run, but wallet-friendly, $23 tops and $19.99 bags designed by stylish fashion house Proenza Schouler for Target.

"Today's retail landscape is a really cluttered environment. It can help to tag yourself to a brand that's pertinent to the desired audience. One quick way is to leverage a [fashion] designer," says Gloria Park Bartolone, vice-president of the retail group at market researcher Maritz. "In doing so, you create instant brand identity. Designers have such personalities attached to them. They create a distinct emotion and instant synergy." It's a strategy that non-clothing companies, from cell-phone makers to locksmiths to car manufacturers, not to mention shoemakers such as Payless, are increasingly adopting, too.

Getting Them in the Door

Overall, Payless has seen net sales rise since first offering the Abaeté shoes. Total fourth-quarter 2006 sales—when the Abaeté line was first made available to consumers online and in about 400 of the company's 4,500-plus stores—were up 13%, to $693 million, from the same period in 2005. Payless doesn't offer a breakdown of sales per product (see BusinessWeek.com, 3/6/07, "A Shoe-biz Success for Payless").

The designer collaboration strategy can be "…hard to measure in terms of ROI [return on investment]," Rubel writes via e-mail while vacationing with his family in Aspen, Colo. "Once we add up the incremental advertising and sales promotions…the actual brands themselves were marginally profitable," he continues. "But they bring new customers to our stores and these shoppers buy other items as well."

Of course, with so many jumping on the designer collaboration bandwagon, the tactic is starting to become a rather generic and less than remarkable brand-building strategy. Some retailers are even turning away from the concept.