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  • Nick Monjo

Christopher Scharff Discusses Market Trends

Christopher Scharff was, until a few years ago, the CEO of DG Brands. In this interview, inspired by many previous discussions together, Scharff and BODY publisher Nick Monjo covered a variety of topics of concern in the intimate apparel industry today.

MONJO: Christopher, you often give industry talks about “disintermediation.” What does it mean and why is such an important topic?

SCHARFF: Disintermediation is a sales and economics term that refers to the process of a consumer buying their product directly from a manufacturer, rather than from an intermediary business or retail distributor. This effectively shortens the supply chain and creates a direct interaction between the supplier and the buyer. It also makes the end product cheaper for the consumer.

MONJO: What accelerated the process of disintermediation in the apparel industry?

SCHARFF: Although I did not realize it at the time, perhaps Amazon. They were actively promoting disintermediation in many channels of consumer goods including apparel almost as soon as they entered the product category. Approximately slightly more than a decade ago, Amazon launched its Disintermediation Strategy where Amazon senior management sought to strategically gain market share through increased price competition by promoting the disintermediation of the U.S. market in soft goods. Basically, Amazon enabled foreign manufacturers or factories to list products directly on their site and then ship these products directly from China taking advantage of the fact that most products shipped this way enter the U.S. market duty free. Thereby giving Amazon a huge price competitive advantage over other online sellers. In this way, Amazon undermined U.S. wholesalers, manufacturers and retailers by engaging in a strategy of allowing foreign sellers to list products on its site often which infringed upon trademarks, copyrights or worse with counterfeit products. Lately, Amazon has started to clean up their site and reduce the quantity of counterfeit/copyright/trademark infringing products on their site. But they continue to aggressively double down on their strategy of disintermediation and promoting as many inexpensive foreign brands on their site as possible.

MONJO: What does disintermediation mean for the intimate apparel industry? Who will be impacted negatively?

SCHARFF: There is always the possibility that various market players across various channels in the intimate apparel industry may be negatively impacted such as freight forwarders, customs brokers, U.S. manufacturers, U.S. wholesalers/importers, international distributors and agents and retailers across the U.S. intimate apparel sales and distribution channel. Basically, it means all industry players are negatively impacted by disintermediation in terms of sales and margins. This is a trend that has begun albeit slowly but I fear the trend may start accelerating rapidly because of a wide variety of geopolitical, technological and financial factors starting in 2024.

MONJO: Why 2024?

SCHARFF: I think Total Disintermediation of the global intimate apparel online retailing industry is further accelerating with the recent announcement that fast-fashion giant Shein filed to go public probably sometime in 2024. The China founded company now based in Singapore was valued at $66 billion earlier this year. Goldman Sachs, JP Morgan Chase and Morgan Stanley have been hired at the lead underwriters on the offering. Shein has disrupted the clothing industry with its on trend $5 skirts and $8 jeans in the past few years. The 11 year old company is now one of the largest fashion brands in the world. Indeed, it markets aggressively to consumers online. Basically it offers the entire Chinese supply chain, sourcing directly from the same factories used by many intimate North American apparel manufacturers, wholesalers and retailers. It sells these products online to the American consumer for just $3 to $4 extra for shipping and freight costs and profit for Shein.

MONJO: What other factors make you think the trend toward disintermediation in the intimate apparel industry will accelerate?

SCHARFF: The recent quarterly reports of Meta (parent of Facebook) and Alphabet (parent of Google) showed accelerating revenue growth from online advertising. Most of the increase of this growth came from such firms like Shein and Temu. The story is the same for Amazon. These firms are all disrupting the apparel industry through this process of disintermediation as championed by their aggressive online global business models and global supply chains by basically being a seamless online store, logistics, communications and payment platform from the small Chinese manufacturer direct to the American consumer.

MONJO: Are the same factories that sell to U.S. manufacturers and brands of intimate apparel also do business with Shein and Temu?

SCHARFF: Not all. Probably not most. But some – definitely. Yes, you can quote me on that. In fact, the trend is accelerating with many more Chinese factories trying to sign up to be vendors on these platforms. I have spoken with a few of them recently about the processes involved in signing up to be a vendor for Shein and Temu.

MONJO: Amazon has introduced a vast number of new, unknown brands to American consumers, placing those brands right next to the known, familiar brands. Comment?

SCHARFF: Brands have felt the need to be on Amazon despite the erosion of prices, theft of intellectual property, theft of customer data. Amazon will continue to expand its offering of intimate apparel by leading not only on domestic brands and sourcing from domestic manufacturers but also through foreign particularly Asian and especially Chinese manufacturers/retailers. At the same time, Amazon is not just a retail store but a search engine as well. It is a place where one out of three consumers go to search for products or name brands and therefore it is critical that brands maintain a retail presence on Amazon, taking care to keep their products on display, well merchandised and priced at their manufacturer’s suggested price or MAP. I firmly believe that it is important for brands to have a presence on Amazon which they manage themselves and do their very best to maintain MAP.

MONJO: What’s next for Shein in the field of intimate apparel.

SCHARFF: Amazon started the trend of disintermediation a decade ago in the United States intimate apparel retail market, but Shein and now their competitor, Temu, have supercharged and accelerated this trend through the latter part of 2023. By going public, Shein will have the ability to tap the public capital markets and will have much more money to invest in online advertising, sourcing, customer acquisition and logistics. Indeed, they will be an even more fearsome competitor. Shein and Temu are far more aggressively going after new customers and are not only taking market share from traditional bricks and mortar retailers like Victoria Secret, but also from other internet players like Amazon. Thus accelerating the trend of further disintermediation in the intimate apparel industry in 2024.

MONJO: Is there a future for the intimate apparel specialty store?

SCHARFF: Yes, I continue to believe in specialty intimate apparel stores run by talented operators who carefully locate their stores in high traffic locations and pay attention to the demands and tastes of their consumers and offer exciting assortments of merchandise. In my travels around North American and Europe, I continue meet many independent apparel stores. Intimate apparel stores and novelty stores which are extremely well run and successful.

MONJO: What is the future of the intimate apparel department in the department store?

SCHARFF: In fact, there has been a renaissance at department stores as they adapt to an online world and offer more brands on their online merchandise assortments, which allows them to better compete against online only retailers. In fact, recently, I have seen an influx of intimate apparel brands on such sites as and Many of these brands emanate from the sexy area and were previously not part of these retailers product mixes. So it is nice to see department stores innovate and give their consumers more choiceful options in todays shopping environment.

In the bricks and mortar area, intimate apparel departments can better merchandise and display products for the holidays then online stores can. And they will continue to have a future which allows them to maintain their existing business although they will be unable to grow these departments substantially and will always need to compete for open to buy dollars with more lucrative merchandise categories like sportswear.

MONJO: What’s next for the mono brand shops? Will brands like Savage X, ThirdLove, Honey Birdette, Bras n Things, Intimissimi, Etam continue to open more stores?

SCHARFF: Mono brand stores which engage with a growing core of faithful consumers, will be able to continue to grow their store footprints as they have not reached an over saturation point like Victoria Secret. We should still see growth from these niche mono brand players as long as they do not over expand and their merchandise assortments are innovative and trend right.

MONJO: What’s next for Victoria’s Secret? Have they charted a successful way forward?

SCHARFF: In this post pandemic environment characterized by rising competition and increased apparel retail and wholesale disintermediation, along with sluggish consumption for soft goods in general, it is hard for me to be optimistic about Victoria Secret’s chances to engineer a lasting turnaround of their brand. In fact, I predict a steady and continued decline in same store sales and profitability for this one time leading intimate apparel retailing giant. Not only has their overall financial restructuring strategy not worked, but their much-hyped image revamp has failed to bring back customers. Now, the management team has no choice but to focus on their Plan B, which is to slowly spruce up their most profitable locations and expand into new categories of merchandise.

MONJO: VS says “We will be at the leading edge of what sexy means today.”

SCHARFF: Victoria’s Secret’s attempt to rebrand themselves as being “the leading edge of what sexy means today” is really an attempt to avoid saying “that they allowed the brand to lose its way and they have stopped being a leader and innovator and now are a follower trying to catch up to changing consumer tastes and demands.” Victoria’s Secret was slow to embrace diversity, inclusivity and promote body positivity like so many other intimate apparel retail brands and online retailers have done.

MONJO: The new VS adaptive lingerie line makes them more inclusive than any other brand. Comment?

SCHARFF: Victoria’s Secret’s adaptive lingerie line really misses this mark. Yes, of course, it is really a positive development that VS has entered this market of adaptive which is an incredibly tiny niche driven market characterized by relatively small sales volume. So this initiative will just not do anything to reverse the long term decline of Victoria Secret sales and profits, although it’s speaks well to the inclusivity of the brand. I would like to further add that I began my career in the intimate apparel industry in the late 1980’s by emphasizing inclusivity and licensing a manufacturer to produce an entire line of maternity intimate apparel. I would say that Victoria Secret is decades late.

MONJO: The acquisition of AdoreMe led to VS growth this year. Comment?

SCHARFF: Victoria Secret’s Adore Me acquisition represented a “hail mary” attempt by VS senior management to place a band-aid on their declining short term results with an acquisition. It highlights the failure of VS senior management’s long run inability to properly invest in the digital infrastructure that a brand like Victoria Secret needs to successfully operate in today’s retail environment.

Over the next decade, Victoria’s Secret will continue to shrink their store footprint given that in the age of omni channel retailing, VS is still over stored with approximate 850 stores.

At the same time, you will continue to see many new intimate apparel brands either onlne or in bricks and mortar stores. Intimate apparel and apparel independent specialty stores will continue to thrive and many are opening in new outdoor suburban mixed use shopping malls while department stores continue to evolve their assortments and try new brands through their online stores before giving them space within their freestanding stores. Finally, lingerie and novelty stores will continue to thrive as long as they innovate and improve the instore shopping experience by maintaining attractive well lit stores in high traffic locations with parking. All intimate apparel retailers, whether freestanding or online, will start to see an improvement in their overall businesses beginning the first quarter of 2024 for Valentine’s Day as consumer spending patterns recover from their post pandemic hangover and return to normal.


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