Target’s latest design collaboration, a 250-piece collection with old school Palm Beach brand Lilly Pulitzer, doesn’t hit stores until April 19. Yet editors and fans alike have are expecting a hit. “Lilly Pulitzer seems like a safe -- but smart -- bet for Target; its visual identity is established and its customer base is fanatic,” wrote Racked’s Nicola Fumo. “I’ll be camping outside Target for the next four months....,” commented @sjwiley on an Elle magazine Instagram post.
The appeal of Lilly for Target is easy to understand. The brand is bright, cheerful and aspirational. But after more than a decade of designer collaborations behind us, what does it really need to accomplish to be considered successful?
“First off, even when they’re not successful, they’re successful,” says Marshal Cohen, chief industry analyst at the market research firm NPD Group, who has been been tracking these partnerships closely since Isaac Mizrahi hit Target in 2002. “The collaboration has little to do with the overall performance of the retailer. It’s icing on the cake.”
It’s not that mass retailers don’t want collaborations to sell out. But when it comes down to it, very few of these partnerships move enough product to affect the bottom line. Apparel and accessories made up 19 percent of Target’s overall business in 2013: that’s $13.5 billion. Target doesn’t release sales figures related for its one-off collaborations, but it was reported by the New York Times in 2008 that Isaac Mizrahi x Target, an ongoing collection, generated more than $300 million a year at its peak in the mid-2000s. That’s a good chunk of money, although still a small sliver of what Target generates in the apparel category every year.
Short-lived collaborations -- particularly with lesser known designers -- make far less than that. After years of tracking Target’s sales during the quarters when a one-off partnership sat on the floor, one retail analyst with whom I spoke estimates that the biggest of the collabs can bring in $20 to $50 million across categories. Another person with inside knowledge of many of these deals says that, thanks to limited distribution, the capsule collections with up-and-coming designers make “far less” than $20 million. H&M’s partnerships are similar in scope. Analysts were quick to posit that Isabel Marant’s November 2013 collaboration was a big reason the Swedish fast fashion retailer exceeded projected sales in that quarter, even though it was only available in limited quantities in 250 of H&M’s 3,132 stores. Alexander Wang x H&M, which came out a year later, earned similar praise. But given how little product is actually for sale, it’s doubtful that these collaborations directly moved the financial needle. Even when Banana Republic bragged that its first Mad Men collection helped to boost sales, it would not reveal by exactly how much. There’s a reason for that.
High-low collaborations, when it comes to it, are about marketing. And marketing isn’t always directly about money. It’s about the promise of it.
The designer, who is being paid a nominal fee to participate, is devoting resources he might not have to create a range of products that are often not as high of quality as he’s used to. That’s a risk, financially and strategically. The return, however, is worth it. The designer gets the sort of global advertising campaign he couldn’t afford for another 10 or 20 years down the line. When you think about it like that, who cares if the goods are only in a few stores?
For the retailers, the hope is to drive foot traffic. Yes, it’s great if the product flies off the shelves. But it’s more about shaping store perception for those who are not yet customers, and also helping to further drive home store messaging for those who are already shopping there. “The magic of these is when you get crossover between their guest and our guest,” Stacia Andersen, senior vice president of apparel and accessories at Target, told me at the Lilly Pulitzer launch.
To get people in the door, retailers work hard to get the right message out. “Since these collaborations are intended to create PR, social media buzz and cultural immediacy, we need to create FOMO frenzy,” says Shireen Jiwan, CEO of Sleuth, a brand consultancy. “We want to see people lining up outside Target at 6 a.m. or trying to bribe salespeople for a spot on the tote bag waiting list.”
For instance, the biggest headlines about the H&M for Alexander Wang collaboration were tied to fans camping outside of stores queued up for the goods. However, there was no discernable frenzy when I visited an H&M in New Orleans on Friday, Nov. 7, a full day after the collection hit stores. In fact, there was still a considerable amount of product available in a range of sizes. Did it eventually sell out? Probably. But again, it’s all about perception.
Sometimes, there’s a long tail effect. Recently, Ebay released a list of the 2014 collaborations that re-sold best via the global marketplace. While Peter Pilotto’s range for Target didn’t sell out initially, it was the most popular collaboration of the year on Ebay. More than 9,200 items from the range were sold on the site -- even more than Alexander Wang for H&M, which was perceived as a bigger hit. (Rounding out the top five were Nike Air Yeezy Red October, Altuzarra for Target, and Roland Mouret for Banana Republic.) And this is based on items sold, not items put up for sale, which means that there was legitimate demand for Pilotto -- which is both good for him and for Target. “The thing that nobody ever talks about is the long term,” says Cohen. “The Missoni products for Target are a walking billboard for the brand.”
Ultimately, collaborations are about practicing the right alchemy. “It should take the designer out of his usual wheelhouse, creating the impression that the artist's creativity knows no bounds,” Jiwan says. “At the same time, the end product should be somehow consistent with each party’s brand signature.” She cites designer Mary Katrantzou’s printed coats for Moncler as a successful example: “The result was something both dreamy and structured -- a wholly original mashup of two distinct brands.” Another sure bet? Toms's holiday 2014 partnership with Target. “It gave shoppers an accessible way to be generous with both loved ones and strangers in-need, at precisely the time of year when we’re all in a giving mood," says Jiwan.
One thing is for sure: Collaborations have earned a certain permanency in the marketing strategy of some of the world's biggest retailers and brands. And that’s not changing anytime soon. Says Cohen, “Even when the brand association isn’t deemed successful, they still get credit for doing it.”