Discount Designers

As the economy struggles, high-fashion designers like Vera Wang and Stella McCartney are finding success in selling lower-priced lines

By Pallavi Gogoi

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This week the world's top fashion designers are showcasing their best ideas for spring on the runways of New York's Fashion Week. Featuring Hollywood celebrities sitting in the front row and deep-pocketed buyers from upscale stores like Neiman Marcus, Barneys and Bergdorf Goodman, it is a posh event.

Exclusive as the event is, almost all top designers yearn for ubiquity and wider recognition with the masses. And as the U.S. economy continues to falter with consumer spending in the doldrums, designers are keen to tap into a broader base. It's no wonder then that more and more of them are designing affordable lines. Just last month, Jill Stuart, the designer known for her cutesy clothing line, opened a store in Tokyo that features apparel which is at least 35% less expensive than her regular designer line. Later this fall designer Norma Kamali will launch her new line of affordable clothing at the ultimate discount destination: Wal-Mart (WMT). "Through the Wal-Mart stores and Web site I can reach more people and affect more lives than in any other venue," says Kamali, president and designer of Norma Kamali Inc.

Indeed, the trend, which has been termed "High-Low" for featuring high-end designers at low prices, made its flashiest debut when Isaac Mizrahi launched his line of clothing for Target (TGT) in 2003. Mizrahi's Target line, which featured $13 T-shirts and dresses for $29.99, ended up being one of the most successful partnerships in the business, growing to annual sales of $300 million. "Fashion design is a very competitive and fragmented business, and this kind of a partnership can be extremely rewarding financially," says Patricia Pao, founder of the Pao Principle, a New York retail consultant.

Looking for Exposure

The real surprise was that the discount-store hit revived Mizrahi's haute couture reputation and revived sales of his high-end outfits at Bergdorf Goodman, where the average bill for a Mizrahi made-to-order outfit ran between $12,000 and $15,000. This year, Mizrahi joined Liz Claiborne (LIZ) as a creative director, and his brand will appear at Target stores only through the end of this year.

Mizrahi's success quickly lured other top designers looking for a lucrative deal and exposure. Vera Wang, the doyenne of designer wedding gowns, launched her affordable line of clothing for discount department store Kohl's (KSS) in 2007, while Nicole Miller started designing more affordable clothing for J.C. Penney (JCP) in 2005.

The popularity of fast-fashion stores like Swedish import H&M (HMB.ST) and Zara from Spain, which were quick to emulate designs from the runway into their racks at affordable prices, led to another wave of the hottest fashion designers launching limited-edition affordable lines. Karl Lagerfeld and Stella McCartney, designers on the highest rung of fashion, created clothes for H&M that sold out within hours.

Target continues to rely on new designers to bring some excitement into its stores. On Sept. 12, for instance, the retailer is opening four temporary locations for four days in New York City. The stores, called bodegas, will feature clothes, accessories, and shoes with an average price of $25 from 22 designers. Among them is hot Scottish designer Jonathan Saunders, whose cocktail dresses and gowns are sold at upscale store Jeffrey at prices between $1,500 and $5,000. "We have found it to be an extremely successful formula," says Target spokesman Joshua Thomas. "Our shoppers know that they can get high design without breaking the bank, which is a great lure in today's environment."

Click through BusinessWeek.com's slide show of the most affordable fashion designers.

Business Exchange related topics:
Fashion Industry
Product Design
Recession Spending and Investing
Luxury Retailing

Gogoi is a contributing writer for BusinessWeek.com.