Vertical Integration Trend Reaches Apparel Industry

The power shift from branded product makers to dominant retailers continues to march forward, and now reaches the apparel sector. In a bold move, Lord & Taylor has announced plans to invest directly in a major New York fashion house (Peter Som). Another vendor community receives notice that traditional branded manufacturing-retailing boundaries are blurring.

The development brings into focus the growing conflict between department stores and their biggest vendors. The retailers are keen to secure exclusive product offerings; the branded product makers are resisting by limiting distribution of their brands and opening their own stores. The WSJ reports that department stores that once counted on major branded lines as key product suppliers are now competing with the well-known designers' own stores in malls across the U.S.

The moves also highlights the willingness of Private Equity players to make the bold distribution moves others fear. NRDC Equity Partners owns Lord & Taylor and is looking hard for ways to dramatically restructure the company for growth (and a lucrative exit). The most recent scenario discussed calls for Peter Som Inc. to continue to own the Peter Som trademark and license his name to a new entity -- a company that will be roughly 35%-owned by Peter Som Inc. and 65%-owned by NRDC.