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How Sainsbury's is building a £1bn fashion brand

Drapers james brown 485

Drapers talks to Sainsbury’s Argos commercial director James Brown about Tu’s ambitions to become a destination fashion brand.

“This was only £45,” boasts James Brown, commercial director of Sainsbury’s Argos, gesturing to his smart, single-breasted grey suit jacket, part of the supermarket’s blossoming menswear range. We are sitting in a meeting room at Sainsbury’s headquarters in Ansty, near Coventry, discussing the evolution of its clothing brand, Tu. Behind Brown, a selection of key stories from the autumn 17 womenswear collection are displayed on the walls, featuring on-trend items such as embroidered jeans and dresses with ruffled sleeves – a visual reminder of the new, more fashionable direction of the brand.

Over the past three years Brown has overseen a revamp of Tu’s product, branding and in-store environment. But it does not stop there: earlier this year Sainsbury’s appointed Portas, the creative agency founded by self-styled “queen of shops” Mary Portas, to step up Tu’s fashion credentials. Brown predicts annual sales will hit the £1bn mark for the first time “within 12 months” – two years ahead of the original target.

“We saw Tu as a sleeping giant,” explains Richard Danks, brand director at Portas, of his decision to pitch for the Tu account. “It keeps customers coming back with design, quality and a range that’s as good as its high street competitors – but it’s not thought of as a destination fashion brand.”  

Past experience

Brown joined Sainsbury’s to lead its clothing unit in 2011. His previous experience at Marks & Spencer, where he began his career as a management trainee in 1988, Matalan and latterly Shop Direct – where he was trading director for clothing, footwear, home and furniture for Littlewoods – taught him some valuable lessons, including how to get close to his supply base and assess the true cost of a product. By the time Sainsbury’s came along, he was ready for a new challenge.

“Supermarket fashion was really coming into its own, giving the discounters in fashion a run for their money,” Brown recalls. “We have on average 24 million customers a week coming through our doors, and we’ve got clothing in nearly 500 of our supermarkets [out of a total of 650]. Yet it felt quite under-potentialised.”

We have on average 24 million customers a week coming through our doors

Tu sells clothing and footwear for men, women and children, trading 13,000 SKUs a year. Womenswear prices range from £3 for a vest to £60 for a lace dress from Tu Premium (the upmarket sub-brand launched in September 2016); menswear, which now accounts for almost 20% of clothing sales, ranges from £5 for a T-shirt to £45 for a suit jacket, and £65 for a whole suit; and childrenswear ranges from £3 for T-shirts to £24 for a sequinned dress.

It is now ranked as the sixth biggest clothing retailer in the UK by volume and 10th by value, by Kantar Worldpanel. But when Brown joined it was much smaller, and the product and brand felt outdated.

In 2013, he relaunched Tu with new branding and an enlarged design team, and introduced a “department store” shopfit that includes merchandising on mannequins to help customers build their outfits. This layout is now in 150 stores.

“It’s still in a supermarket, you can still smell bread being baked in the back – but customers feel they’re going into a different part of the store,” says Brown.

“From a brand and marketing point of view, the main opportunity for us is getting customers to see Tu as a standalone shopping destination rather than a convenient department in a supermarket,” says Danks. “That means establishing a distinctive, modern brand handwriting to drive demand. We also see a lot of opportunity in transforming the retail experience and continuing to support the growth of ecommerce.”

Paul Thomas, analyst at Retail Remedy, however, believes there is more work to be done: “Tu could rival high street fashion brands, but only in the right environment. It needs to be treated like a fashion brand, not a supermarket brand. The clothes and price points are pretty good. The [upmarket womenswear sub-brand] Tu Premium Collection range is really strong: you pay £40 for a dress that would cost £100 somewhere else. But the merchandising needs some real fashion expertise. They squeeze too much in and it makes it look cheap.”

Portas is working with Sainsbury’s on a new campaign that will launch later this year.

Brand identity

The nationwide rollout of Tu’s ecommerce site in 2015 helped to further strengthen the brand’s identity. Yet Brown knew he could not rest on his laurels. Last year, customer research revealed that customers want Tu to become even more fashionable.

“What we learned is we have customers who see us as a destination brand already. They were saying: ‘Be more confident with it,’” he explains.

The Tu Premium Collection launched in September 2016 and included a leather jacket retailing at £95 and a silk blouse for £30.

“We’ve never had a £30 blouse before – it sold out,” says Brown. “People want certain elements of their wardrobe to last. That’s the sweet spot that we have found with the Premium range.”

Because we know the true cost of our product, we know the right price to put it out at

In May, Tu revealed it had hired a team of 30 fashion trend spotters who will travel the world looking for inspiration to help it to elevate its designs. It also sponsored the main womenswear and menswear design awards at Graduate Fashion Week in June – the two winning graduates will begin a year-long scholarship at Sainsbury’s later this year, mentored by fashion designers Henry Holland and Oliver Spencer.

Tu premium ss17

Tu premium ss17

Tu Premium spring 17

This week, Portas released its first creative campaign for Tu, featuring “real people” instead of fashion models, in a series of recognisably British locations. The “Be You” campaign has an empowering tone that is becoming increasingly popular.

Brown’s strategy has been successful to date: over the past three years Tu’s sales have grown by more than 20%. Menswear is currently its fastest-growing category – albeit the one in which it has the smallest market share.

But there are challenges. As a business focused solely on the UK and Ireland, Tu has been hit by the steep drop in the value of sterling since the European Union referendum last summer.

“We’re quite lucky because we hedge in terms of dollar rate, but we have seen an impact come through,” says Brown. “The flexibility in our sourcing model and variances in costs of raw materials have helped. Because we know the true cost of our product, we know the right price to put it out at.”

However, he admits some of the cost is being passed on to its customers: “We’re doing it in a customer-centric way,” he insists. “There are certain price points we won’t compromise on, and we won’t re-engineer product.”

Direct lines

Like some of its high street counterparts, Tu has been introducing more direct sourcing into its mix. It has four sourcing offices in Asia: a main office in Hong Kong and smaller ones in Shanghai, Dhaka and Delhi.

One supply source warns that it is going down “a very difficult route” by going direct to factories: “They want a beautiful, good-quality product, but the problem is their prices have gone down and margins up. And in a tough manufacturing world, it’s difficult to keep quality at the level they want if they don’t want to pay for it. Factories [in Asia] don’t have a western handwriting in terms of design. If the design of the product is not good enough, people won’t buy it.”

Gone are the days where you plan by season. We’re constantly buying now

But Brown argues that going direct to the factories has allowed Tu to build up stronger relationships with them: “That’s also part of the reason why growing our design team was important. We’re now designing clothes and briefing direct to the factory.” Sainsbury’s is developing Turkey as a sourcing route for non-food, with the aim of shortening lead times.

“We’ve been working with Turkey since before I joined and that sourcing mix has increased quite a lot over the past few years, particularly in womenswear,” says Brown. “We can get product within eight weeks from Turkey. We’re working on how we can get shorter lead times out of countries such as India and Bangladesh as well. And that’s about how we can be more fleet of foot in terms of how we operate in the UK.

“Gone are the days where you plan by season. We’re constantly buying now. Seasonality is important, but you don’t just buy for spring/summer because the weather changes. It’s more about making sure you’re landing your stories, colour, print and trends in line with the market. It’s become a constant process.”

Home corner

There are other opportunities for Sainsbury’s to make savings in the supply chain following its headline-grabbing acquisition of Argos and Habitat owner Home Retail Group, which completed last September. Brown was promoted to commercial director for the non-food offer across the combined business, including furniture and jewellery for Argos.

“The Home Retail/Argos [acquisition] gives Tu a better online presence and new customers, which can only give it more opportunities as a destination brand not driven by a physical footprint,” observes Fiona Lambert, product director of Dunelm and former boss of Asda’s clothing brand, George.

“It’s a great opportunity, particularly in home and furniture,” he says. “At the moment we don’t have a furniture offer and Argos has a fantastic furniture business. The combination of the two is quite powerful. My role is to look at the synergies, and how we can leverage a customer journey that gives access of our combined ranges to both customers. We can bring our buy together, be more efficient with the way we source our product.”

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There’s a real opportunity to launch Tu as a brand to our Argos customer base

And there are further synergies with Tu and Argos. At the time of writing, there is a clothing section on the Argos website. At the top of each category page is a link to the Tu site. It is hardly a seamless shopping journey, but there is clearly potential there.

“There’s a real opportunity to launch Tu as a brand to our Argos customer base, so that is the piece of work we’re looking at,” says Brown.

The process has already begun – there are digital Argos shop-in-shops in 79 Sainsbury’s supermarkets.

“That’s going really well and has given us an opportunity to bring Argos and Sainsbury’s together,” says Brown.

Tu is still very much a supermarket brand, but with its growing design team, improved in-store format, ecommerce site and now the tie-up with Argos and support from Portas, it is on the path to becoming a destination brand in its own right.

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