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.
By the checkout counter, pins reading “Keep it Real!” and “Can’t Retouch This” fill colourful 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.
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 reorganised 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, 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 colours.
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.
The company is already offering bras costing as low as $8 while competitor Target’s offerings average about $15 and Victoria’s Secret’s average around $40.
Amazon also has an estimated 63 million registered Prime member households, a group dominated by households earning over $112,000 a year meaning its lines have the potential to gain market share fast.
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 utilise 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 omni-channel customer… The nice thing about a fit intensive category, like intimates, is that a lot of women do want to go into the store and get the experience,” says Foyle.
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.
“Because lingerie is such a technical product… you can’t just take a mold from a size 36D and scale it up and think that it’s going to hold,” explains explains Catalina Girald, chief executive and co-founder of Naja.
Predicting demand across the range is another challenge. “We would love to carry a broader range of sizes, but from an inventory management perspective… the capital costs of carrying that much investors at once are prohibitive,” she says.
The popularity of bralettes has come at a great time for lingerie retailers looking to appease price-conscious shoppers.
For one, they often come in traditional sizes of small, medium, large, reducing complexity.
“They are a more value-oriented product, sort of cheap and cheerful, fun fashion,” says Aerie’s Foyle.
Cordeiro Grant says the bralette category is here to stay, but that current growth will plateau at some point. “Skinny jeans are a mainstay, not a trend,” she says. “I think bralettes are the same way.”
Amazon has a history of tackling complicated and expensive categories, but will the particular challenges of lingerie prove tricky?
“People do tend to want a level of service or insight or knowledge or instruction around lingerie,” says Kit Yarrow, a consumer psychologist and professor at Golden Gate University in San Francisco.
“Women are willing to pay for solutions that are comfortable and are going to last with quality,” says senior vice president of marketing Kimberly Grabel. The retailer, which carried third-party brands and private label, is parent company Chico’s healthiest business.
“Aerie is a brand that we’re proud of, and when you think about Amazon, they probably couldn’t have an Aerie Real campaign and stand for something,” adds Foyle