Virgin ventures too far?

The news that Virgin has decided to dump its flagship stores for the Virgin Clothing range follows economic alarm bells ringing in the retail sector.

Virgin Clothing’s decision to drop its proposed standalone stores – which could have created a high-profile flagship for the new brand – could be seen as a blow for Redjacket, and also for the design group’s competitors.

The minnow-sized consultancy put itself in a promising position by winning the job in the first place, but has seen the chance to create a famous-name clothing chain snatched from its grasp.

The decision could have wider implications for other retail design groups. Retail insiders are increasingly pessimistic about the state of the economy, and suggest that now is a far from ideal time to be launching a new retail chain. Consumer confidence seems to be on the wane, and high street spending figures are hardly rosy.

SG analyst Nick Bubb says the pessimists have a point. “It’s touch and go, and it’s down to interest rate trends,” he says. Retailers will be keeping a close eye on rate changes when considering expansion or store openings, he says.

The British Retail Consortium’s monthly Retail Sales Monitor, treated as a barometer of high street health by much of the retail industry, shows a worrying recent dip. Figures for June show the first fall in retail sales in three years. “This move into negative territory confirms the slowdown in sales which we have seen [coming] for some time,” says BRC economic affairs committee chairman Andrew Higginson.

And while Higginson calls for retailers not to judge the market by one month’s figures, and rolls out the standard retail excuse for poor sales by blaming the weather, cautious retailers will indeed be preparing for the worst. They are likely to conclude that Virgin Clothing’s management has made a shrewd decision. And if clients are starting to tighten their belts then design groups will soon find themselves doing likewise.

Virgin Clothing’s explanation for the dropping of its retail concept is straightforward. A spokeswoman says the fashion retailers which will be selling the new ranges are uncomfortable with competition from Virgin Clothing-branded stores.

This flies in the face of what was beginning to look like the accepted logic in the world of fashion retailing: that a flagship store raises brand awareness and increases sales elsewhere. And it contradicts what the fashion group said earlier this year when it confirmed Redjacket’s appointment – that it was stockists’ desire to give their entire stores over to Virgin Clothing which was driving the idea of flagship units (DW 13 March). Redjacket was unable to comment on its departure from the project.

But the fashion for flagship stores may be slipping, along with the fortunes of its more famous exponents. Levi’s, often thought of as a prime example of a flagship operator with its Regent Street store in London, is weathering a fall in demand for jeans from young customers who are fed up with wearing the same clothes as their baby boom parents. Fashion in branding techniques, as well as clothing, can be a fickle business.

On a strictly financial basis, launching a new flagship retail operation is vastly expensive. Property, design, shopfitting and staff costs alone create an enormous bill. As well as putting more pressure on a fledgling group’s balance sheet, this reduces margins on sales – independent retailers of Virgin Clothing ranges could not be blamed for fearing that the end price of the product would rise, making their job harder, says Kevin Vyse of branding consultancy Brand Matters.

Bear in mind that Virgin Clothing’s parent company Victory Corporation, which is also behind the Virgin Vie cosmetics chain, is already licking its wounds from a 9.7m loss in the last year. It does not expect a profit until 2001, and the expense of a flagship store looks less appealing.

In this case, there is also the thorny, and these days constant, question of how far the Virgin brand can realistically be stretched. “That’s always been the biggest issue for Victory Corporation,” says Bubb at SG.

Generally seen as a brand for the young-at-heart baby boom generation, the Virgin name has been applied to almost everything. Vyse questions whether it can be applied to young fashion. “I’m a baby boomer. I’m creeping into Marks & Spencer more often these days,” he admits.

Virgin Vie, now trading for nearly a year, is already revising its store designs in a bid to increase their “Virgin-ness” (DW 10 July). Consumers have not flocked into the stores in the numbers hoped for. It seems unusual then that sister group Virgin Clothing has this week launched an identity which moves further than ever before from the logo associated with the Virgin brand – gone is the hand-written script to be replaced by a macho-looking V and a stern-looking Virgin.

Hugo Brooks, managing director of design group Brand Works which developed the identity, says consumer research showed strong support for a radical departure from the traditional Virgin image. “It’s part of the brand’s culture – people are able to accept things which are new and different… It’s all about Virgin making sense in that market,” he says.

Bubb says consumers are not yet seeing the sense in Virgin Vie. “They don’t know what to make of it,” he says. They will be able to look for answers in Virgin Clothing ranges from next month.

Company history of Victory Corporation

Victory Corporation was formed in 1996 as the holding company for Virgin-branded cosmetics and jeans companies, which developed into the Virgin Vie retail chain and Virgin Clothing brand.

The group is listed on the Alternative Investment Market. Virgin founder Richard Branson and other Virgin shareholders hold 53 per cent of the shares. Brothers Tim and Rory McCarthy, ballooning partners of Branson, hold a 22 per cent stake.

The group made losses of 9.7m in the year to March, and losses of 3.7m in the previous year. It is not expected to make a profit until 2001.

The store opening programme for Virgin Vie has been trimmed since its initial unveiling. Originally 14 stores were due to launch this financial year, but it is likely to finish with a total of nine.

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