Is the Lingerie Market on the Verge of Another Disruption?
Inside the Aerie pop-up shop in Soho, the body positive, post-Victoria’s Secret message that has become the brand’s calling card since it released its first photoshop-free campaign in early 2014 is perfectly packaged up and displayed on walls covered in bralettes or one-piece bathing suits. “No Retouching. No Makeup. No Problems,” reads one sign, next to a cushion-covered banquette. There’s a yoga studio in the back next to the changing rooms. By the checkout counter, pins reading “Keep it Real!” and “Can’t Retouch This” fill colorful buckets. They are free to shoppers who donate to the National Eating Disorders Association.
Aerie, just a small slice of parent company American Eagle’s overall business, is resonating with a consumer base that’s growing tired of traditional, sexy lingerie brands like Victoria’s Secret. Aerie grew sales revenue by 20 percent year-over-year in 2015 and 23 percent year-over-year in 2016. (American Eagle saw net revenue decreased 1 percent to $1.10 billion in 2016.)
Meanwhile, Victoria’s Secret — the Goliath which still dominates the lingerie market, worth at least $12 billion in the US alone — has struggled to maintain momentum. Sales decreased 13 percent in March, year-over-year, as the company continues to feel the impact of discontinuing its non-athletic apparel and swimwear ranges in 2016. (The business has since been reorganized around three buckets — lingerie, the Gen Z-targeted Pink range, and beauty — and pulled back on promotions).
As Victoria’s Secret has stumbled, a series of disruptive niche lingerie brands — such as Lively, Naja, Negative Underwear and Third Love — have also entered the playing field, peddling a new kind of inclusive, a female-centric identity that’s more about the wearer and less about who might be looking at her. They also offer a broader swath of nude shades — serving a wider range of ethnicities — and aim to undercut competitors on price with direct-to-consumer distribution. Mass market brands like Aerie and Madewell, which launched intimates in February, have taken notice. In March, Phillips Van Heusen acquired True & Co, a vertically integrated online brand that prides itself on fit, for an undisclosed amount.
“The category has been so overlooked for so long,” says Michelle Cordeiro Grant, founder of direct-to-consumer niche brand Lively, who previously worked at Victoria’s Secret. “It still is run by old-school retailers.”
Now, Amazon is entering the market with a private label lingerie brand. The line, called Iris & Lilly has already launched in the UK with a limited assortment of sizes and colors.
Amazon has several advantages. The sophistication level of its data operation allows the company to birth and swiftly iterate its private labels in response to market feedback. And once a label gets traction, Amazon’s scale means it can negotiate the lowest prices from suppliers. Indeed, the company is already offering bras costing as low as $8. (By contrast, Target’s offerings average about $15, while Victoria’s Secret’s average around $40.)
Amazon also has an estimated 63 million registered Prime member households, according to the firm Consumer Intelligence Retail Partners, a group dominated by households earning over $112,000 a year, according to Piper Jaffray, meaning its lines have the potential to gain market share fast.
“Our goal is to make Amazon the best place to buy fashion online,” said a spokesperson from Amazon in a statement. “It’s important that our customers can find exactly what they’re looking for so we’re constantly exploring and testing ways to do just that. Creating products for specific categories enables us to increase the overall assortment available to Amazon customers.”
The question becomes: will Amazon disrupt lingerie’s disruptors before they have a chance to reach significant scale? And what are they doing to defend themselves?
“It’s something we talk about every day,” says Aerie global brand president Jennifer Foyle. “The Aerie Real platform has certainly set us apart and there are so many ways to utilize that platform.” For one, Aerie is doubling down on physical stores, aiming to have a total of 200 standalone locations by the end of the year as a way to further differentiate itself from online-only players — including Amazon. Still, 40 percent of Aerie’s sales take place online. “I think what’s important today is to really leverage this omnichannel customer… The nice thing about a fit intensive category, like intimates, is that a lot of women do want to go to the store and get the experience,” says Foyle.
The fit is just one of the many challenges of both making and selling lingerie, specifically bras — the more structured of which can have anywhere from 18 to 25 components. “It’s probably the hardest product that I’ve ever had the opportunity to work on,” says Cordeiro Grant, the founder and chief executive of Lively.