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Led by Kmart Corp.'s pivotal new branding campaign, mass merchandisers this fall are telling teens and young adults it's cool to shop for back-to-school duds at discount chains, while upscale department stores continue to push brand-name merchandise as a point of differentiation.

Facing shoppers conditioned to expect discounts and deals, department stores are in for a tough sell this fall, analysts say. Management Horizons, Price Waterhouse's retail consultancy, predicts apparel sales in the second half of 1995 will grow only 3% to 4% at department stores but will rise a healthy 8% to 10% at discounters.

Sensitive to shoppers' bargain savvy, retailers across the board have cut women's and girls' apparel prices 5% below last year's levels, necessitating the need to boost traffic, said Carl Steidtmann, chief economist at Management Horizons, Columbus, Ohio.

"What you're seeing in a number of cases is an improvement in the kind of apparel Target and Kohl's are offering," he said.

"The discounters have really gotten themselves together to produce acceptable product quality," agreed Mandy Putnam, VP of retail design and consulting firm Fitch Inc., Columbus, Ohio. "I've been impressed with the way Wal-Mart's children's department has improved over the last few years."

Capturing sales of teen-age clothing, however, is much trickier for discount chains. An onslaught of promotions from Target and Kmart this month attempts to convince teens there's no shame in frugality.

With any jeans purchase, Target shoppers receive an alternative rock compact disc, with music from groups like Collective Soul and the Rembrandts. Also new this fall, high school seniors can order Jostens class rings at a discount at Target. Students buying rings qualify for a chance to win a 1995 Geo Tracker.

Target this season also attempts to better its station with fashion shows in funky locales like New York's SoHo.

Themed "School works wonders," Target's back-to-school campaign from Bates Southwest, Houston, features magician David Copperfield (AA, July 31).

To attract college students, Kmart is offering its "Dorm Starter Discount" in conjunction with Discover Card. Students can redeem coupons in Kmart circulars or in Discover Card mailings to pre-approved applicants to receive a 10% discount on housewares or apparel.

Kmart has also constructed a "Dorm Shop" in each of its 2,234 stores nationwide, featuring answering machines, towels, and other dorm room necessities.

Meanwhile, department store retailer Dayton Hudson Corp. continues to fight retailing's reliance on price promotion as it shifts marketing dollars away from promotional ads and into brand messages.

Two 30-second spots breaking this week feature denim designers Francois Girbaud and Guess Jeans' Maurice Marciano soliloquizing on the fit and quality of designer jeans. Airing in Minneapolis, Detroit and Chicago-home to 63 Dayton's, Hudson's and Marshall Field's stores-the ads are filmed in quick cuts resembling a music video.

"That in itself represents a dramatic increase in broadcast for us," said VP-Marketing Michael Francis of the spots from Pidgin Productions, Minneapolis. "We looked at the pace of our promotional activity and said we need to balance this with our brand message."

Dayton Hudson's department store division continues to use fewer, more targeted newspaper ads but is coming on strong with Today magazine, a weekly newspaper insert spotlighting a new apparel brand each week. The insert reaches 5.5 million homes. Dayton Hudson is also launching adult-targeted apparel ads slightly ahead of competitors, this week breaking its "Workday casual" campaign with TV, outdoor, print and transit ads from Martin Williams, Minneapolis.

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