Why Tesco has to mind the Gap

TESCO is throwing down the gauntlet to Gap and Next by introducing a range of fashion clothing directed at the young and trendy. It plans to sell the Cherokee line, a great hit with giant US retailer Target.

Tesco has proved it can sell clothing, indeed it once had a run-in with Levi's, which got stroppy when the supermarket offered cut-price jeans. Levi's won a court case, now under appeal, which set precedents and enabled it to stop Tesco's supplies.

However, what the exercise proved was that if you can get hold of a big brand product and cut the price, then you will sell shedloads. It is quite another ball game to introduce an unknown brand. Who has heard of Cherokee?

Is this a case of keeping up with the Joneses or, more to the point, George at Asda? He is using the teenage Olsen twins who have taken America by storm by promoting, among other things, a range of kids' clothing. Tesco cannot ignore the likes of Nike and Adidas who thrash it out in advertising wars.

You can buy a pair of no-brand trainers at some supermarkets for as little as £9.95. They look similar to Nike and Adidas. In fact, in some cases, it is hard to tell the difference. Do kids buy them? No way. They would not be seen dead in them - Beckham doesn't wear them. The youngsters want the Nike Tick or the famous Three Stripes.

Retail prices for fashion clothing bear no resemblance to the cost of making such items. The biggest cost is advertising - launching a new brand to attract the young and trendy is no easy task. That is why I do not think it matters how much Tesco spends nor which pop star it uses to promote this range. At the end of the day, it is still a Tesco product. I just cannot see the kids going for it.

If you had to pick a vulnerable product category, then trendy clothing for the young comes high on the list. Kids are mercenary and when they love something there aren't enough boats or planes in the world to deliver enough to stores. But when it is no longer cool, you cannot give it away.

Unlike Tesco, the likes of Gap and Next have been at this for years. They have people who should know how many to buy and when to cut and run, and even they can still get it wrong. Gap was the darling of the US market, but now the kids are running away to a newcomer - the rapidly-growing Abercrombie and Fitch.

If you stand outside a Gap store in a shopping mall, you can play spot the punter. Outside the Abercrombie shop, they are lining up. It is a cruel business, one where fortunes can be made then squandered in one bad season. Kids are not loyal. They are very brand-conscious, and to them Tesco means food.

Tesco is a great British retailer, known for quality and price, but the bottom line is that the leading food manufacturers advertise like crazy to drive the punters into its stores. It is good at displaying and selling the stuff at low prices. I am sure it was one of Tesco founder Sir Jack Cohen's slogans: 'If the punters want it, we will stock it; if they don't we won't.'

Why Tesco wants to get involved in creating a brand of clothes mystifies me. The firm may ask 'what the hell does he know about the fashion industry?' The answer is: 'The same as you lads. Nothing. Stick to baked beans, but make sure they are Heinz. They still outstrip sales of own-label beans, don't they?'

Figure it out

IN the past, trying to work out the financials of the Virgin empire has been as hard as locating Osama Bin Laden. I noticed last week Sir Richard Branson made a trading statement for Virgin mobile. No, this is not a change of heart. It's a joint venture and I guess his partners have to disclose it anyway. Perhaps more surprising was that the format was a three months statement, which is what you expect from a American-listed company.

Is this the wind before the storm in preparation of the multi Virgin flotations we are going see in the coming months?

He has even gone to the trouble of forecasting the full year at £11m (ebitda) which, to those old-fashioned people who don't understand these new terms could mean Even-Before-I-Try-Dumping-Air Balloons.

Stelios writes

IT seems I touched a nerve last week. EasyJet founder Stelios Haji-Ioannou took exception to something I commented on and wrote a reply. 'Don't compare easyJet with the dotcom and telecoms failures. The 'E' in easyJet means earnings,' he writes. That's a new one. Still, this clears up the idle rumours that he wants to sell £100m worth of shares. No one in their right mind would want to sell now, would they?

Sir Alan Sugar has donated his fee to charity