Style: Betsey Johnson Faces a Makeover --- New CEO Aims to Boost Online Sales and Move Beyond Dresses She Sees as Too Youthful and 'Short' Ray A. Smith. Wall Street Journal. (Eastern edition). New York, N.Y.: Nov 18, 2010. pg. D.6 » Jump to indexing (document details) (c) 2010 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.

Betsey Johnson, a designer known for her fun, colorful clothing -- and personality -- is facing a serious makeover.

In addition to expanding online sales and opening more boutiques, the new CEO of Betsey Johnson LLC, Susan Falk, says she plans to expand the range of the label's dresses, which she feels have been looking too young and "a little too short."

In October, the 68-year-old designer relinquished control of her 32-year-old label, including its licensing agreements, to Steven Madden Ltd. In return, the owner of fashion shoe brand Steve Madden agreed to forgive a $48 million loan. Steven Madden also gained a 10% interest in Betsey Johnson LLC in exchange for giving her company a five-year $3 million loan to help fund operations.

While Ms. Johnson is staying on as designer, her longtime chief executive, Chantal Bacon, with whom Ms. Johnson started the company, has since left. She was replaced by Ms. Falk, former president of Henri Bendel and Express and a recent consultant to Betsey Johnson.

This week marks the launch of a revamped e-commerce site. The label tapped GSI Commerce Inc., a firm that has developed online stores for designers including Kate Spade, BCBG Max Azria and Ralph Lauren, to revamp the site. New features of the Web store include a "Head 2 Toe" section that makes it easier for consumers to buy a whole ensemble with one click.

In an interview, Ms. Falk said that she envisions the relaunched e-commerce site becoming a bigger part of sales. "It's small right now, under $5 million," she said. "We should have a $20 million e-commerce business." She said the website had been more of a "grass roots" effort before and needed "professionals" like GSI to bolster it.

There are currently 65 boutiques in the U.S., and Ms. Falk wants to see that number rise to "100 plus" in the near term.

As for dresses, Ms. Falk plans to appeal to a wider range of women -- "that lost customer," she says, who used to buy Betsey Johnson but in recent years felt alienated by styles that skewed too young.

Betsey Johnson's youthful clothes have long been infused with bright neon colors, nods to psychedelia and riffs on punk-rock and pop-music styles, topped off with a slightly street edge.

In an email, Ms. Johnson, who continues to end her runway shows by performing cartwheels, said, "I am so happy Madden loves our brand! I am still the captain of the ship, and it's a happy and exciting 'full speed ahead!'" When asked if her role will be diluted or if her wild design sensibility will be kept in check under the new regime, she wrote, "I've been true-blue to my brand for over 30 years and I'm not about to stop now."

The weak economy has put pressure on many designer labels, especially those with large amounts of debt coming due. It's unusual for a fashion label to lose control to another fashion company that is acting as a lender.

But Betsey Johnson is among a number of designer labels who have recently had outside investors or parties intervene and shake up management to take the labels in more commercial directions. Zac Posen's owner, Yucaipa Cos., this fall named Susan Davidson chief executive of the fashion house, a role that had been occupied by Mr. Posen's mother, Susan.

Such partnerships often come with questions about whether new managers will alienate the designers or water down their vision. Ms. Johnson "has to be very careful of that. She has to remain very true to herself," says Mickey Klein, managing director of Astor Group, a global advisory firm. He adds, however, that in the harsh retail climate of recent years, "sometimes it can be important to bring a new pair of glasses for an old pair of eyes. You have to adapt to a new way of doing business."

Mr. Klein says that Steven Madden could likely help the $200 million Betsey Johnson label expand, allowing it "to put money into the organization, product development, marketing and corporate growth." What's more, Steven Madden's expertise with shoes should help Betsey Johnson expand in that area.

Steven Madden already had ties to Betsey Johnson, holding licenses for accessories including handbags.

Executives from Steven Madden, whose founder in 2002 was sentenced to 41 months in prison for securities fraud and money laundering, couldn't be reached for comment.

Credit: By Ray A. Smith