Paul Charron, chief executive officer of Liz Claiborne Inc, believes that clothing suppliers will increasingly move towards a hybrid model where they are both manufacturer and retailer. In an exclusive interview with just-style, Charron discusses crucial industry issues, including retail consolidation and the need for wholesalers to develop lifestyle brands to deal with low-price competition.

Paul Charron is regarded by many as an industry legend, having run Liz Claiborne Inc for 12 years and more than doubled its sales to $4.8bn. The company has also bought numerous high-profile brands during his tenure including Lucky Brand Jeans, Juicy Couture and C&C California.

He announced his intention to retire at the start of this year and Wall Street expectation is that he will be replaced by Patrick Bousquet-Chavanne, a group president at Estée Lauder.

But tough trading conditions have hurt Liz Claiborne recently, with retail consolidation being blamed for its difficulties. The company's sales fell 3.4% in the first quarter of this year to $1.17bn, and climbed a marginal 2.4% to $1.13bn in the second quarter.

Charron says: "Retail consolidation simply means that there are fewer people for us to supply. Retailers are also more focused on productivity now, so fewer goods are being ordered into stores and that affects our sales."

Wholesalers have responded by consolidating themselves and companies like Liz Claiborne have led the way, buying numerous smaller brands and making it harder for retailers to demand discounts and concessions.

"Wholesaler consolidation means there are now a few players who have become larger and more powerful and that makes it tougher for retailers to wring money out of us," Charron says.

High-fashion lifestyle brands
Another strategy Charron helped pioneer was the acquisition of high-fashion, high-margin "lifestyle" brands to differentiate the company from low-price retailers.

Competition at the low-price end of the market has been brutal as Wal-Mart, Target and their equivalents have driven down prices.

Lifestyle brands are more resistant to this sort of price pressure as they command consumer loyalty and offer a unique proposition that people are willing to pay premium prices for.

"Many of us are concentrating on brands and the people most seriously affected by retail consolidation are those without brands that have a strong consumer following.

"We have a collection of lifestyle brands that only operate at the upper end. We have no opening-price point area because the people who deal there are effectively selling commodity goods. They are living on borrowed time."

Charron is also keen to increase the number of Claiborne-owned stores, which offers the company more retail outlets to sell product through.

"Having our own stores and brands is an attempt by us to control our destiny. How much a store like Federated-May decides to buy depends on their strategy and they do their own pricing. They have control of these decisions and they are not always made in the best interest of our brands."

Hybrid model
As a result, larger wholesalers like Claiborne are moving toward this hybrid model with a large retail side to the business as well as traditional retail supply.

Retailers, too, are becoming hybrids with many cutting out the middlemen and sourcing directly from factory gates for their own-label products.

"We want the retailer's margin as well as our wholesaler margin. We are becoming a hybrid, as are the retailers," Charron explains.

European acquisitions
Liz Claiborne is also planning an expansion of its European operations, which are centred on the Mexx brand. Charron flew London last week to work on a strategy for growth in the UK and Europe.

Claiborne plans to make a number of acquisitions of European brands in the $100m to $400m range and analysts believe the company could be tempted by Ted Baker, French Connection or Diesel.

At the boutique end, brands like Reiss and Mulberry might give the company the uniqueness it is seeking.

Charron said: "We are looking for acquisitions in Europe, particularly in the UK. There are a number of European brands on our radar. There is some really good fashion and design talent building some interesting brands there."

Claiborne will also push more of its US brands into Europe and further develop Mexx in Britain. Lucky Brand Jeans had been expected to open its first stand-alone store in London this year but this plan has been scrapped. Lucky is still available in department stores but the company will now concentrate on developing Juicy Couture in the UK instead.

Charron said: "The opportunities in the UK are, at this moment, more robust for a brand like Juicy than Lucky. Juicy competes at a high price point and should do well in the UK."

Despite the recent difficulties Claiborne and numerous others have faced in recent years Charron's strategy for survival has been clearly laid out for his successor.

But the retirement of Paul Charron will be as significant a blow to Liz Claiborne as the 1989 departure of the designer herself.

Mr Charron joined Liz Claiborne Inc as vice chairman and chief operating officer, and became a director, in 1994. In 1995, he became president (a position held until October 1996) and chief executive officer of the company. In 1996, Mr Charron became chairman of the board.

Prior to joining Liz Claiborne Inc, Mr Charron served in various executive capacities at apparel manufacturer VF Corporation, including group vice president and executive vice president, from 1988.

Mr Charron also serves as a director of Campbell Soup Company and on a number of not-for-profit boards, including the National Retail Federation, the American Apparel & Footwear Association, Vital Voices Global Partnership and the Partnership for New York.

By David Robertson.