Dive Brief:
- Kroger will launch its own apparel line next fall, according to CNBC. The new brand will appear in 300 Fred Meyer and Kroger Marketplace stores.
- The line will be “playful,” “modern” and “simple,” according to the company, and will include selections available for men, women and children. The line will also include a selection of active wear.
- "This new [apparel] brand gives Kroger a chance to inspire and connect with our customers, offering effortless style every day — from elevated basics to fashionable highlights," Robert Clark, Kroger's senior vice president of merchandising, said in a statement.
Dive Insight:
Kroger’s new apparel line is part of the company’s Restock plan, which seeks to generate more sales momentum through leveraging data, investing in ecommerce, focusing on high-impact items, and more. Kroger is also exploring the sale of its more than 800 convenience stores.
Specifically, Kroger is getting into clothing as part of its push to find profitable new revenue streams outside of groceries. The retailer has been under relentless pricing pressure of late, and has had to keep pushing its prices down to remain competitive with Walmart and discounters Aldi and Lidl. The market has also soured on Kroger, whose stock has fallen 40% on the year, in the wake of Amazon’s Whole Foods acquisition. Many in the industry predict the natural and organic retailer will regain at least some of the customers it lost to Kroger in recent years.
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. Many of Kroger's competitors sell apparel, including Walmart, Target, Costco and Lidl, which offers an exclusive clothing line designed by Heidi Klum.
Kroger is probably also encouraged by sales of its grocery private label items. Between 2011 and this year, Kroger’s store brands have increased sales by 37% to $20.5 billion.
Other grocers are looking to move beyond core retailing streams as competition heats up. The best example here may be Hy-Vee, which has become a successful restaurateur, health specialist and fast-food franchisee in recent months. The Des Moines-based grocer also sells apparel in some stores, and last year opened a clothing boutique in one of its Iowa stores.
Kroger’s move into clothing is understandable, but it won’t be easy. Target and Walmart enjoy considerable loyalty, while retailers like Kohl’s and H&M aren’t going to willingly cede ground. Selling the apparel in Fred Meyer and Kroger Markeplace will be a good start, since Fred Meyer has sold clothing and Kroger Marketplace is filled with general merchandise. If the apparel does well in these stores, a limited selection could start showing up in grocery stores across the country.
