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Does Denim Have a Future at Big-Box Retailers?

Like almost every other industry, fashion took a massive hit in 2020, with at least 48 retail and fashion bankruptcies as a result of the pandemic. But for others, the pandemic was a time for record sales.

Classified as essential businesses, big-box stores such as Walmart and Target provided consumers with a one-stop shopping experience that allowed them to shop for food, medicine, clothing and supplies for working or attending school remotely. For consumers in search of a “normal” shopping experience and brands in need of new touchpoints, big-box stores became the ultimate destination in a pandemic society.

“The pandemic gave big-box retailers an exclusive advantage,” said Evy Lyons, vice president of marketing at influencer marketing technology platform Traackr. “It made them very appealing partners for brands that had to close their storefronts or only had small e-commerce operations.”

Walmart had a successful year, with apparel and online sales leading the charge in Q3 2020. Specifically, it improved its in-stock inventory levels and eased pressure on e-commerce fulfillment centers by utilizing 2,500 stores to fulfill online orders, positioning it well for the holiday season. Target found similar success during the same quarter, with 75 percent of digital sales fulfilled by brick and mortar, and quickly shifted to contactless strategies for fulfilling orders, including in-store pickup, drive up and Shipt.

And it wasn’t just the in-person shopping experience that seemed to drive consumers. According to data from product intelligence company Trendalytics, online searches for Walmart and Target increased 8 percent and 3 percent, respectively, from last year. One-stop shopping, whether in-store or online, is what resonated most with pandemic consumers.

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While consumers were picking up loungewear and sweats at these stores, jeans still owned a portion of the sales floor. Target’s house labels Universal Thread and Gen Z-focused Wild Fable, as well as Walmart’s own Free Assembly and newly launched selvedge jeans collection provided pandemic consumers with a denim hub.

Walmart has a new fashion private label called Free Assembly, and it's hoping to get the nod on its TikTok investment with Oracle.
Free Assembly Courtesy

Heritage denim brands such as Levi’s and Kontoor Brands-owned Wrangler and Lee, which already had partnerships with the retailers, found success in doubling down on their efforts. Sales at these stores helped fill in a gap while their own company-owned locations were shut, which in Levi’s case was a two-month period between March 16 and May 12, 2020.

In fact, Levi Strauss & Co. president and CEO Chip Bergh attributed a great deal of the company’s 2020 experience to its aggressive wholesale approach, citing past reports that its U.S. wholesale business accounted for 30 percent of revenue, and “will always be important.”

As a result, Levi’s has set its sights on further expanding wholesale in 2021, with plans to enter 500 Target stores throughout the year as a result of picking up “incremental new consumers” through the big-box partnership. In February, it branched into the home category with a limited-edition collaboration exclusively sold at the retailer.

Experts explore the future of denim brands at big box retailers such as Target, Walmart and Amazon in the aftermath of the pandemic.
Target x Levi’s Courtesy

Lee also increased its presence at big-box retailers at the beginning of the pandemic, and in Fall 2020 launched at over 2,000 Walmart stores. In an earnings call in May 2020, Kontoor Brands president and CEO Scott Baxter said the company’s largest retailer partners—Walmart, Amazon, Target and Kohl’s—are “positioned as stable long-term winners in their respective channels of distribution,” adding that the companies were gearing up for more collaboration in the future.

Even brands that never had a wholesale business are turning to hypermarkets. Gap recently announced it will launch its first-ever home decor collection with Walmart later this month.

But of the one-stop-shop retailers, e-commerce giant Amazon may have reigned supreme during the pandemic—specifically in terms of its apparel offerings. According to Wells Fargo analysis, Amazon’s clothing and shoe business is on track to generate $45 billion in revenue this year, outperforming its closest competitor Walmart by as much as 25 percent.

Along with being a sales platform for Levi’s, Wrangler, Lee and more, Amazon has its own value denim brands, including Goodthreads, Daily Ritual and Amazon Essentials, and the ability to tap into trend-driven denim pieces through its influencer-led collections called The Drop.

Consumer Intelligence Research Partners (CIRP) data showed that in 2020 alone, Amazon Prime added 30 million members to its roster, which as of Dec. 31, 2020, clocked in at 142 million. Additionally, 52 percent had an annual membership, up from 49 percent just three months earlier, indicating that more consumers are sticking around for the long haul.

One size does not fit all

But partnering with big retailers isn’t the right approach for every brand. According to Lyons, these partnerships can change how a brand is perceived. A brand that sells high-quality items partnering with a retailer known for its affordable items sold in bulk creates a confusing dynamic that could ultimately do more harm than good.

And branding crises are an increasing area of concern as consumers continue to place companies under an ethical microscope. Lyons pointed to the disconnect of a progressive brand partnering with a massive e-tailer like Amazon, which has fallen under scrutiny for its public anti-union stances and allegedly unfair working conditions.

“Last year proved that brands are now held to a higher standard of social awareness and responsibility,” she said. “Consumers not only want to see the human element behind the brand, they want to see brands hold each other accountable and carry out socially responsible missions with real, consistent and authentic action.”

This kind of partnership also makes it more difficult for a brand to stand out from a sea of competing products—a significant challenge when attempting to avoid discounting. Trendalytics data showed that Target’s denim assortment is discounted an average of 2.4 percent, while Walmart’s denim assortment sees an average discount of 7 percent.

“It can be challenging for a brand to disassociate from promotions happening in the store if they want their products to be offered at full price,” said Avery Faigen, fashion and retail analyst at retail analytics firm Edited. “Furthermore, if a competitor is running a sale and you’re not, you might lose a customer who chooses that brand for the discount.”

What’s next

With vaccine rollouts in the final stages in the U.S. and states lifting capacity rules, the future of these retailers’ popularity is up for debate. Some anticipate consumers will continue to favor convenience above all else, leading them to continue shopping big-box retailers and online giants. Others expect to see foot traffic pick up across the board, which may help boutiques and shopping malls. Still others believe social media, another sector that flourished through the pandemic, will play a larger role in driving sales.

“Over the past year, social commerce has become a shiny new channel that brands are beginning to tap into, especially in fashion, and I’d expect this to continue to grow as a key retail strategy,” Lyons said.

Traackr data shows a 27 percent increase in the number of influencers posting about social commerce in 2020 versus 2019, including direct calls to action in this content. Other social commerce strategies, such as Pinterest’s new visual discovery platform for fashion, have helped brands offer products in a visually appealing way and meet consumers where they are.

Still, Lyons believes big-box stores will hold unwavering appeal in the years ahead. Both Walmart and Target work with digital creators such as Amy Serrano and Christina Caradona to showcase how to style new arrivals, and both retailers have social media accounts dedicated to fashion.

“As in-store shopping bounces back, we may see some of this momentum slow a little, but as much of the growth has to do with changing consumer attitudes, I’d expect big-box retailers to remain important for denim and fashion brands,” she said. “If younger consumers aren’t shopping at boutique stores, they’re likely looking toward larger retailers like Walmart, Target and Amazon. As long as brands want easy access to this audience, they’ll likely want to partner with these types of stores in some way.”