Dive Brief:

• Kroger has launched a new apparel brand called Dip. The line will include men’s, women’s, junior’s, kid’s, and baby collections, and will replace a dozen of the company’s already existing private label clothing brands. It will roll out in the fall across more than 300 Fred Meyer and Kroger Marketplace stores nationwide.
• Kroger said it has enlisted fashion designer Joe Mimran to develop the line. Mimran has previously designed clothing for Club Monaco and Pink Tartan. Mimran, with 30 years of experience in the fashion industry, also developed the highly successful Joe Fresh apparel line for Loblaws in Canada.
• The collection’s name, Dip, comes from the popular party snack which the company described as “simple, fresh, and goes great with everything,” just like the collection. Mimran adds that like the food product, Dip is designed to be a grab-and-go collection.

Dive Insight:

As competition between supermarkets intensifies and grocers feel threatened by Amazon, retailers are looking for new ways to attract customers. Kroger, which is arguably under more pressure than any major chain, has turned to restaurants, meal kits and online shopping, among other outlets. Now it's turning to apparel. 

The company has previously sold some basic clothing at its Fred Meyers stores but nothing deemed to be fashionable or premium quality. But Kroger is trying to change that. The company has partnered with experienced fashion designer Joe Mimran, whose Joe Fresh label at Loblaws quickly expanded into everything from children’s clothing to sunglasses and cosmetics. The brand became so popular that Loblaws opened free-standing Joe Fresh stores in Vancouver and New York City. Mimran has since left the company.

Mimran took Loblaws clothing brand to the next level, and Kroger no doubt hopes for the same result as it looks to re-brand its apparel assortment. The company will likely find a receptive audience at banners like Fred Meyer, which already sell a wide selection of apparel. However, moving the line into its grocery-focused brands will likely be more difficult.

It's easy to see why Kroger is focusing on apparel. While grocers earn around a 2% margin, apparel brings in profit margins of as high as 13%, according to industry analysts interviewed by the San Francisco Chronicle. The apparel industry as a whole is worth around $220 billion, per NPD numbers, and has grown 3% or less the past several years. There are, however, pockets of considerable growth, including athleisure, which grew dollar sales 11% last year and is a $46 billion market. 

The launch of Dip is part of the grocer's Restock plan which hopes to generate more sales through rigorous e-commerce initiatives and by focusing on high-impact products. Late last year, the retailer rolled out its private-label meal kits Prep+pared, and in May the company acquired meal kit company Home Chef for $300 million. Earlier this year, it partnered with grocery delivery service Instacart, and in April opened its own restaurant, Kitchen 1883.  Kroger also is ramping up its R&D efforts by testing out driverless delivery and digital shelf display options.

More retailers are trying to be one-stop shops like big box stores Walmart or Target. Lidl, a German-based grocer expanding to the U.S., is known for selling clothing and other household goods. The company partnered with celebrity designer Heidi Klum and used influencer marketing to drive growth. However, reports have indicated that so far the line isn't performing up to expectations.

As Kroger attempts to remain competitive in the industry, it shouldn't lose focus on the core of its sales, which is grocery. But if recent initiatives, like Dip, are successful, they could help drive traffic to its stores, which will only serve to benefit Kroger's grocery operations in the long term.