The manufacturing group is dedicated to designing, producing, and marketing upscale women’s apparel. The retail group focused on retail based operations for company owned stores.
Haute couture = tens of thousands of dollars; ex includes Chanel, Dior*Designer = more than $1,000; ex Gucci*Bridge = near, but less than, $1,000; ex Tahari*Better = $500; ex Liz ClaiborneModerate = $100; ex Gap and Nine WestBudget = $50; Old Navy
Harrington Limited: Designer Collection- dresses, skirts, blouses, pants, suits, and coats Target Customer- avg household income $200,000+; college educated professional seeking conservative designer clothingSopra: Target Customer- avg household income $150,000+; college educated professional seeking status brandsChristina Cole: Career wear- dresses, skirts, blouses, pants, suits, and coats Target Customer- avg household income $100,000+; college educated professional seeking stylish refined clothing for workVigor: Career wear- dresses, skirts, blouses, pants and coats Target Customer- avg household income of $75,000+; college educated professional seeking fashionable yet comfortable clothing for work
**QUALITATIVE analysis especially for margins because higher prices always lead to higher marginsLower prices are in a larger market for more purchase possibilities, however more promotion will be required because more stores will be required, can tarnish brand image with lower prices
ERINObjective- Increase Margins, which I will further explain in pricing strategy, Break Even, which Aaron explained in the evaluation of alternatives Tremendous growth in the active-wear segmentStrategy- Differentiation from higher end designer activewear, and from lower end budget activewear short-lived fashion product life styles TM: keep target market the same as our original line of clothing
Product Differentiation- appeal to the same market, but a more relaxed side than the traditional dress clothes offered by HarringtonTactics- Offer a line of hoodies, t-shirts, and pants in a variety of colors that is consistent with our current customers’ style
Objective – “Better” product category could give us an 18% margin, compared to the (13%?) margin with the “moderate” pricingStrategy- Skimming to maintain sophisticated, high class status
Objective – Strategy – Push, retailers will have to be enticed to carry the new product line before we can market to consumersTactics: fashion shows to attract retail outlets, as well as consistent training for personal selling staff in company owned stores
Strategy – Direct to company owned stores and e-comm site Indirect to department stores and specialty stores where our other product is offered
PP – Online surveys, give email in online survey to do a follow up surveyM – make sure margins are consistent with the 18% for the “better” product segment
Awareness – Implement – low awareness=increased training for personal selling high awareness=if enough people know about the product line, focus money on expanding product lineRetail – If sales are low, keep active-wear line in the company owned stores until awareness and sales increase
+HarringtonCollection Case Analysis Trent Halverson, Aaron Kinning, Erin Moller, Alyssa Nelson
+ Internal Analysis Overall Objective: To provide preeminent brands for women desiring elegant, high-end fashions. Overall Strategy: Differentiation
+ Internal Analysis Target Market: Affluent, fashionable, college- educated, professional women ages 25-60. Each division focused more narrowly on a specific TM. Positioning: Lifestyle branding strategy, wearing the label is a sign of status
+ Product Objective: To provide the highest quality clothing that offers a lifestyle of prestige and status Strategy: Product Differentiation Tactics: All 4 divisions include: Harrington Limited, Sopra, Christina Cole, and Vigor. No private label brands.
+ Price Objective: To increase market share and profit margins Strategy: Skimming Tactics: Offer premium prices to support status of brand. Harrington Limited: $500-$1,000 Sopra: $400-$800 Christina Cole: $300-$700 Vigor: $150-500
+ Promotion Objective: To provide convenience to retailers, and help them obtain and sell the brand Strategy: Push Tactics: Retail sales force well trained; Offer channel partners more support and incentives than most manufacturers; Offer retailers valuable inventory and sales advice.
+ Channel Objective: Toprovide convenience to both retailers and final consumers by offering the Harrington collection at only the best retailers or directly through e-commerce Strategy: Dual channel strategy Tactics: Company owned retail stores (20% sales); upscale department stores (60% sales) and specialty stores (40% sales); e-commerce
+ Performance Sales $2,433,900,000 in retail sales Total revenue: $1,344 million Manufacturing Group: $538 million Retail Group: $806 million Total Profit before tax: $118 million
+ Performance Market Share: 2007 women’s apparel industry = $133 billion in retail sales Harrington Collection held approximately 1.83% share of total women’s apparel market in 2007 Trends (CAGR): Average Growth Rate in U.S. retail sales of women’s apparel 2002-2007: 4.66% (ex 1, p 240)
+ External Analysis Political/Legal/Regulatory: Textile import quotas from China eliminated in 2004. Economic: The economic downturn that began in the early 2000s significantly impacted the industry for U.S. women’s apparel. Consumers had become very price sensitive- half of all apparel purchases were sold ―on sale.‖
+ External Analysis Technological: E-commerce. Social/Cultural: Women were buying more casual clothing. More dollars were being spent on technology products, home design, and leisure- activities. Fast changing fashion product life cycles—consumers’ tastes constantly changing.
+ Competitive Analysis – Porter’s Five Forces Macro (5 forces) Threat of New Entrants: High- Due to the ease of outsourcing production, low barriers to entry Bargaining Power of Buyers: Moderate- Manufacturers integrating forward with company- owned stores; but department store mergers gave more bargaining power to suppliers
+ Porter’s Five Forces (cont.) Bargaining Power of Suppliers: Moderate- willing and cheap labor overseas. More retail outlets integrating backwards (providing margins of about 10-20% higher). Threatof Substitutes: High- easy to imitate designs at lower costs Intensityof Rivalry: High- many brands competing for shelf space and market share. The industry was moderately concentrated.
+ Competitive Analysis Micro Leading brands: Jones Apparel Group, Liz Claiborne due to their diverse portfolios Both outsource production of apparel overseas Both involved in design, marketing, wholesaling, and retailing of women’s apparel Jones: 396 specialty retail stores Brands include: Jones New York, Nine West, Anne Klein, Gloria Vanderbilt, Kasper, Bandolino, Evan- Picone, Energie, EnzoAngiolini Claiborne: 338 retail stores around the globe (201 in US) Brands include: Liz Claiborne, Mexx, Juicy Couture, Lucky Brand Jeans, Ellen Tracy
+ Market Segments Women’s apparel products could be divided into six general categories based on quality and price: 1) Haute couture 2) Designer 3) Bridge 4) Better 5) Moderate 6) Budget
+ Market AnalysisDivision Product Product Retail Target Competitio Market Line Classificati Price Custome n Share Focus on Range rHarringto Designer Designer $500- Sophistic Donna 20%n Limited collection 1000+ ated Karan, St. Elegance John ; women 35-60Sopra Evening Bridge $400-800 Status Diane von 5% Wear, Seeker; Furstenber Dresses women g, Kay and suits 35-60 Unger New YorkChristina Career Bridge $300-700 Office Tahari, 8%Cole wear Chic; Dana women Buckman 30-55Vigor Career Better $150-500 Trend Theory, 7% Wear Setter; BCBG Max women Azria 25-50
+ Market Analysis Channel Retail Sales Percent of Women’s Apparel Retail Sales 3% Other 8% 11% Discount or Mass 19% Merchandisers Specialty Stores Department Stores 59% Warehouse Clubs and Supercenters
+ Case Brief Problem: How should Harrington Collection put forth their new active wear line?
+ Alternatives • Option A: ―Better‖ pricing with same channels • Option B: ―Moderate‖ pricing and expand channels
+ Criteria Maintain sophisticated, high-class status Increase margins Break even in first year
+ What is a unit? Since active wear is sold as separates, the ratio of hoodies to tee-shirts to pants was not equal. Therefore one ―unit‖ = ½ hoodie + 1.5 tee-shirts + 1 pant
+ Evaluation of Alternatives Option A ―Better‖ Pricing, same channels Break Even = 269,255 units ($25,579,186.45) Profit Margin = 18% Brand image = High quality, fashionable merchandise with status branding ($220/unit) Assumptions Higher prices consistent with desired brand image Smaller Market Size 15,000,000 X .4 X .07= 420,000 units Less distribution outlets (less promotion costs)
+ Evaluation of Alternatives Option B ―Moderate‖ Pricing, more channels Break Even = 390,069 units ($31,205,504.04) Profit Margin = 15% Brand image = Prestigious brand image at risk with lower prices ($187/unit) Assumptions Larger market size 15,000,000 units sold X .6 X .07= 630,000 units Higher fixed costs More competitive market Might not receive 7% market share
Option A Option BContributionWholesale price "Unit" $ 95.00 ($220 Retail) $ 80.00 ($187 Retail)Less total Variable cost per "unit" $ 46.57 $ 46.57Contribution per "unit" $ 48.43 $ 33.43Breakeven:Fixed annual costs $ 13,040,000.00 $ 13,040,000.00÷Contribution per "unit" $ 48.43 $ 33.43Breakeven "Units" 269255 390069X Wholesale price per "unit" $ 95.00 $ 80.00Total Breakeven Dollar Sales $ 25,579,186.45 $ 31,205,504.04Profit Margin:Revenue $ 39,900,000.00 $ 50,400,000.00Less fixed annual costs $ 13,040,000.00 $ 13,040,000.00Less total variable costs $ 19,765,200.00 $ 29,647,800.00Profit before tax $ 7,094,800.00 $ 7,712,200.00Profit margin before tax 18% 15%
+ Recommendations Overall Objective: To introduce a brand new active-wear line in the Vigor division to increase margins and break even in the first year Overall Strategy: Differentiation Target Market: Women 25 to 50 seeking fashionable and comfortable active-wear
+ Product Objective: To provide comfortable and fashionable active wear with superior styling, fabric, and fit to consumers Strategy: Product Differentiation Tactics: Hoodie, Tee-shirt, and Pants
+ Price Objective: To increase margins to 18% and portray high quality active-wear via prices Strategy: Price Skimming Tactics: Hoodie = $100 retail Tee-Shirt = $40 retail Pants = $80 retail
+ Promotion Objective: To increase awareness of the new product line with both retailers and final consumers Strategy: Push Tactics: Personal selling, fashion shows
+ Channel Objective: To introduce the new active-wear line in Vigor’s current retail outlets Strategy: Direct and Indirect Tactics: Department Stores, Specialty Stores, Company Owned Stores, E-commerce site
+ Evaluation and Control Product Perceptions: Measure: With each receipt of an active-wear purchase the consumer will be asked to fill out a survey about the product. Six months later they will receive a follow-up survey of performance Implement: Based on the results adjust accordingly for next product offering Margins: Measure: Overall profit margins for the first year Implement: If margins are not at 18%, look to decrease production costs and increase sales training. If margins are above, consider expansion of line into new colors and styles and increase promotional efforts
+ Evaluation and Control Awareness: Measure: Survey TM consumers about product knowledge Implement: If awareness is low, consider placing more emphasis on promotions and personal selling. If awareness is high, continue promotional efforts and consider cutting back Retail outlets: Measure: Measure sales in each outlet. Implement: When sales are high with a certain retailer, consider expanding into similar stores and vice versa.