Calvin Klein's Approach-Avoidance E-Commerce Challenge

When Calvin Klein brands, the diversified apparel line that sold almost $6 billion worth of clothing last year for parent company Phillips-Van Heusen, launched its first E-Commerce site six months ago, it had to deal with the same channel conflict issues for any business so dependent on its retail distributors. But instead of seeing a lot of sales shift from in-store to online, it found an increase in revenue as younger consumers embraced the brand online.

"Our sense is that this (Web) consumer skews a little younger than the department store channel," said Tom Murry, president/CEO of Calvin Klein Inc.. "We don't sell against the department store channel. We saw more than $2.5 million of sales in the first five months."

Given its strong focus on younger consumers, Calvin Klein started an E-Commerce operation much later than many had expected, waiting for about 15 years after the Web launched to unveil its own E-Commerce site. (For the Web history buffs out there, we are assuming 1993 as the practical launch of the web as that is roughly when NCSA Mosaic unveiled the first graphical browser, although Tim Berners-Lee technically finished the concept details in 1989 and deployed the first working system about 1990. And, yes, Calvin Klein had a Web site much earlier, but it didn't sell anything on it until last year.)

Murry's comments paint an almost picture-perfect E-Commerce launch strategy, one that avoided channel conflict, delivered new revenue, helped boost in-store retail sales (by pitching them as the place to try the clothes on) and was able to pull in younger consumers, which is essential for any long-time brand that needs to be seen as popular and cool among young shoppers.

"We first had to deal with the question: 'Is this going to make our brand stronger?'" Murry said. "It's really great advertising. It helps bring consumers to the Calvin Klein lifestyle. There is some underground exposure that we get out of it."

For a company that took this long to do E-Commerce, Calvin Klein does seem to be in any hurry to pursue other new media opportunities, even if they are the current rage with the younger demographic. That means that mobile and social networking are off the priority lists.

Mobile "hasn't been much of a concern. We're going to sit back and see how that develops," Murry said, adding that social sites are also "not really on our agenda at this time."Like the CEO of any business that annually sells some $6 billion of merchandise globally, Murry said he's concerned about the economy now. But he sees a bright spot, with many less-deep-pocketed rivals in serious risk of shutting down. "That increased marketshare is giving us a bigger slice of a smaller pie," he said. When—if?—the smoke clears from the economic fallout, Murry said, his hope is that his brand will emerge much stronger.

But from a strategic marketing perspective, Calvin Klein's approach-avoidance relationship with E-Commerce and New Media is fascinating. First, of top consumer brands, Calvin Klein is among those most associated with youth. (We'll try and avoid suggesting that if their consumers were actually as young as their models, they'd do fine.) And yet, it's the subtle aging of the department store shopper that has Calvin Klein's people most worried.

Like so many businesses, that worry is well-founded. Youth buzz is based on two factors: marketing and brand reputation (advertisements of all kinds); and purchases of peers that are seen as trend-setting. That means that a slight drop in marketshare in that demographic can very quickly mushroom into an irreversible plummet.

The youth market has another infuriating attribute: The relentless drive for something new and different. The mere fact that a brand is popular with parents—or even much older siblings—can label it as old and insufferably uncool. So a strong marketshare with one age grouping might actually be a disadvantage with the next younger grouping. (Full disclosure: My 11-year-old daughter would want me to point out that anyone listening to my insights on what is and isn't cool for today's youth probably needs to be a lot pickier about their influences. Full disclosure complete.)

But the retail marketer's struggles with understanding the young consumer is hardly new, as Gen Y strategies tend to be contradictory. Indeed, some recent E-Commerce stats tend to reinforce the marketing notion that social media (Twitter, Youtube, Myspace, Facebook, etc.) and mobile is a far more effective tactic than E-Commerce. Not so sure I fully buy into that, but those numbers do tend to raise some frightening questions.

Back to Calvin Klein's approach-avoidance.Back to Calvin Klein's approach-avoidance. They waited more than a decade to get into E-Commerce, even though they wanted that audience. Even when they did launch, they're hesitant to go mobile and social. And yet, this is the same fearless company that pushed the envelope—many would say blew past that envelope—of good taste in X-rated advertisements, trying to stir up attention among younger consumers. That's fine, of course, but it hardly fits the profile of a brand that is scared to move into mobile and social in 2009.

The fear isn't of consumer backlash. It's of upsetting its channel. Last year's E-Commerce launch was cautious in the extreme and it seems to have wonderfully navigated those choppy channel waters. But was it too conservative and slow? Could it not have been done six years earlier? Phillips-Van Heusen bought Calvin Klein in February 2003 in a cash and stock deal worth more than $430 million. It's understandable that many plans would have been shelved in the months before that deal was consummated. But why didn't the E-Commerce launch happen in 2003? 2005? They waited until the middle of 2008.

The problem with the fear of channel upset (when it comes to retail distributors) is that it shares many attributes with internal channel upset (worrying that online will interfere with in-store sales). Those two extreme fears of sales cannibalization are old-world thinking that tend to freeze a company's actions until it's too late or—if they're lucky--almost too late. Consider what happened with Starbucks and how it's handicapped their efforts to dig themselves out.

But the ultra-cautious approach-avoidance steps from Calvin Klein seem even more baffling when put into the youth market apparel concept, which requires nothing if not lightning-fast marketing moves. What should be a global apparel giant's bigger fear: making retailers nervous, pushing them to more aggressively market your gear; or boring your customers, not being where they are and making your brand seem out-of-touch? Think about that the next time you think of New Media as frightening.