Most brands and retailers know all too well the pressures of apparel price deflation. Since 1994, the consumer price index has declined in the U.S. market by an annual average of 1.3%. This deflation has many causes, but can generally be attributed to four factors: (1) increased share of clothing sales through the mass-merchant channel, (2) the trend toward casual wardrobes, (3) excess retail floor space, leading to increased competition among retailers, and (4) conditioning of consumers to expect and wait for sale prices. Data from STS Market Research's AccuPanel Survey provide compelling evidence that the effects of price deflation are widespread in the retail apparel market. All of the major apparel categories tracked showed price declines over the last two years. And prices fell not only across key product groups, but across all retail channels.

Against the backdrop of falling prices, brands and retailers have sought ways to counteract the effects of lower retail prices on profit margins. One strategy employed by retailers has been to develop and market private-label brands. These “store brands” now account for 45% of total U.S. apparel unit sales, up from 39% just two years ago and 35% five years ago. In some adult apparel categories, such as skirts, private-label sales account for an estimated 76% of unit sales. In the children's clothing market, research conducted by Cotton Incorporated estimates that 65% of products offered are private label.