Final Project for FSF Case Study Competition - Marie Post SUBJECT TO COPYRIGHT. - Work belong to Sandra M. Post.

1. FSF Case Study
Option B: Merchandising and Marketing
This case study describes how the New York based retailer Opening Ceremony would benefit
from expanding internationally to Seoul, South Korea.

2. 1
Part 1: Comparison of Leading Fashion Retailers Who Have Expanded Internationally
In an ever-changing retail landscape, international expansion has become an effective
way for fashion retailers to remain relevant and grow their customer base. From fast fashion
brands like Zara, to top luxury brands such as Gucci, international expansion has brought in a
huge new source of revenue and created recognition on a global scale. Classic brands such as
Tommy Hilfiger and Burberry have established themselves in untapped market locations such as
South America, particularly Brazil, which boasts the world’s fifth largest population of more
than 207 million people (Central Intelligence Agency, 2018). Luxury brands have continued
flocking to developing markets in the Middle East and to China, which already accounts for one
third of luxury sales, and is projected to grow to a whopping 44% of all luxury sales by 2025
(Zargani & Diderich, 2018).
Methods for expansion vary by retailer needs and brand image, but there are still core
approaches that can be learned from those who have succeeded. Nike is known worldwide for its
footwear and apparel, which account for 89% of its total sales. Its investment in an international
presence has helped the brand continue to succeed, bringing in more than $34 billion in sales in
2017 (Hoover’s Inc., 2018). A huge part of Nike’s success is driven by brand recognition.
Consistency in brand image, particularly through the famous “swoosh” logo, and global
advertising across markets has created a brand without borders. Even Nike’s most well known
motto, “Just do it,” is simple enough that it has cross-cultural appeal. However, Nike has also
recognized the different needs of individual markets when expanding globally. Localization
strategies are therefore used to build the brand in new markets. For example, in 2013 Nike
released a special sneaker in Shanghai that celebrated the city and featured a Chinese character
alongside the Nike logo; Nike has also narrowed its inventory in China to create a premium

3. 2
brand appeal that would be more attractive to the Asian market (Alpha, 2017). By having a
cultural understanding of its markets, Nike is able to give each of its prime locations an exclusive
feel, a daunting but seemingly necessary task, since not all locations are alike.
In comparison, Louis Vuitton is arguably the most recognizable luxury retail brand
worldwide. Louis Vuitton has founded itself on the pillars of craftsmanship and heritage, and
similar to the Nike “swoosh,” the interlocking “LV” logo is easy to recognize and translate
across cultures. Today, Louis Vuitton operates more than 450 stores in 65 different countries,
and with a heritage of more than 160 years, the company has a solid foundation to stand upon
(Business of Fashion, 2018). The relationship of Louis Vuitton with stars like Marilyn Monroe,
supermodel Kate Moss, and even today with Kanye West have kept the brand relevant and
desirable across cultures. Its aspirational quality has helped place the brand at the same global
recognition as these celebrities. Like Nike, localization strategies have also been utilized to
establish the brand’s presence in other locations. For example, when launching its flagship store
in Japan, Louis Vuitton hired prominent local architect Jun Aoki to create a building in Nagoya
Sakae that would appeal to the minimalist Japanese taste (Alpha, 2017). Louis Vuitton has also
collaborated with global artists in Britain, Japan, and beyond to design products that break the
mold and celebrate international diversity. Based on these two leading brands’ examples, having
a consistent and strong brand recognition across channels, developing an exclusive brand image,
a localized approach to merchandising and marketing, and a deep understanding of the target
market segments are the most important pieces toward successful international expansion.
Part 2: Identification of Retailer and Market to Expand Internationally
Opening Ceremony is a multi-brand American retailer with a “cool kid” image and
underground feel. As the name implies, both the Olympic games and the cultural richness of

4. 3
travel inspired the launch of Opening Ceremony in 2002. Co-founders Humberto Leon and Carol
Lim created a unique brand concept with the competitive advantage of highlighting and
collaborating with designers from a different country each year, which remains the root of the
business to this day (Kaiser & Iredale, 2009). Today, Opening Ceremony operates two locations
in New York City, one in Los Angeles, and in 2011 opened their first international location in
Japan. Opening Ceremony has the opportunity to capitalize on its already strong relationship
with the Asian market by expanding to Seoul, South Korea, where a promising apparel market is
blossoming.
Based on extensive research, expanding to South Korea appears to be a seamless fit for
Opening Ceremony for three important reasons: the rapid market growth, ease of expansion, and
consumer demand. While markets in the US, Japan, and Europe have remained sluggish in
luxury sales, South Korea has shown a steady upward trend in growth (Roberts, 2017). By
continuing to diversify its business, Opening Ceremony has the added benefit of compensating
for any negative growth in other markets. South Korea not only boasts the world’s 11th
largest
economy, but was also ranked number 4 globally by the World Bank for ‘Ease of Doing
Business’ in 2018, leading in criteria such as the ability to enforce contracts and obtain
electricity, putting the country two spots ahead of the United States (Santacreu, 2018). South
Korea’s strong transportation system and tech-savvy culture, which boasts the world’s fastest
Internet speeds and highest rate of digital connection (Roberts, 2017), will also make the country
an advantageous location for doing business. South Korea’s neighboring relationship to Japan,
both geographically and culturally, will likewise allow Opening Ceremony to utilize the
experience they’ve already gained from doing business there to help inform a further expansion.

5. 4
While the foundation for business is strong in South Korea, the demand is there also.
Apparel market demand in South Korea is projected to increase 34%, up from 8.5 billion USD in
2012, to 11.35 billion forecast in 2018 (see Appendix A), showing consistent growth each year
(Statista, 2015). Seoul has remained among the wealthiest and most innovative cities in the world
(Roberts, 2017), so local consumers will appreciate Opening Ceremony’s forward image. Seoul
is also an up and coming destination for fashion in Asia and internationally. Figures 1 and 2
show just how well Opening Ceremony’s brand aesthetic aligns with style trends in South Korea.
Source: Collage Created by Author. Adapted from www.openingceremony.com/Discovery/;
www.vogue.com/slideshow/seoul-fashion-week-fall-2018-street-style
Opening Ceremony Seoul will target affluent millennial South Koreans between the ages
of 18 and 30, who are fashion leaders with a non-traditional taste. The transformation of South
Korea over the last few years has led to the emergence of paepi, or “fashion people,” who are
defined as, “super-consumers [with] extremely refined sartorial taste, disposable income and new
attitudes towards consumption” (Hurt, 2018). This consumer segment will be key for Opening
Figure 1: Opening Ceremony Brand
Image
Figure 2: Seoul Street Style 2018

6. 5
Ceremony to attract. Having a Seoul location will also be an attraction point for Chinese tourists,
who by 2020 are estimated to spend $29 billion at luxury stores in South Korea (The Fashion
Law, 2017). Opening Ceremony will have the unique competitive advantage of offering a variety
of foreign brands that are currently unavailable in the country, such as Raf Simons and
Vetements. Opening up these and other emerging designers and rare brands will be a strong
selling point for Opening Ceremony. According to a recent report, shopping was the second
highest reason South Koreans travel to the U.S. (International Trade Administration, 2015),
making it clear that this market has a thirst for foreign brands.
Part 3: Omni-Channel Launch Plan
Launch Plan
The ‘Opening Ceremony Est. 2002’ signature brand logo is boxy, bold, and easily
recognizable (see Appendix B). Although the brand has a strong identity, it is still a niche brand
that will require time to build familiarity in the Korean market. In order to mitigate risk and test
the market, Opening Ceremony will follow the strategy set by the Uppsala Model. This
established international retiling theory recommends taking a stepwise market entry approach,
and gradually increasing foreign market investment after gathering market knowledge
(Sternquist, 2018). Opening Ceremony will begin by increasing awareness through the launch of
pop-up shops in two popular, upscale department stores, Shinsegae and Lotte in Seoul. Based on
research, these large-scale retail chains dominate the apparel market in South Korea, and without
them an independent entry would be highly risky and difficult for a smaller brand like Opening
Ceremony (Lee, 2018). The brand would also use local celebrities in advertising, and work with
shops like Tom Greyhound in Seoul who have sold select Opening Ceremony merchandise, to
gather important data needed to inform a permanent expansion. Lastly, Opening Ceremony will

7. 6
utilize this information to pursue a joint venture with a leading holding company, such as I.D.
LOOK LTD in Seoul (http://www.idlook.co.kr/kr/index.asp), similar to their partnership with
Onward Holdings Co. Ltd during their expansion to Japan (Kaiser & Iredale, 2009) to launch a
permanent store location. This partnership will ensure Opening Ceremony has the insider
knowledge, production, and negotiation power they need to compete in the South Korean market.
Product Assortment
The Opening Ceremony store in Seoul will carry a fashion-forward assortment in all
major categories of men and women’s apparel, as well as a variety of accessories from shoes to
handbags, jewelry, beauty, and more. The product assortment strategy for Seoul will focus on
elevated luxury and avant-garde brands that may not be found in South Korea, leveraging the
appeal of foreign designers. An example assortment pyramid in Appendix B lists brands Opening
Ceremony presently carries or would introduce, including labels that are currently unavailable in
the country. The South Korean consumer has little guilt over spending money on high-end
products and showing them off, so although it will require greater investment, it is necessary to
offer a strong luxury assortment to compete in Seoul (Roberts, 2017). Exclusive collaborations
with local artists and celebrities and limited edition private label lines will be used to create a
stand out assortment. These collaborations have the added benefit of flexible designs based on
local demand and trends. The brand name will be incorporated into collaborative merchandise
and clothing labels to further promote the brand. Opening Ceremony Seoul will also carry a wide
breadth of styles but a lower depth of units per SKU to ensure the store maintains an exclusive
feel, minimizes inventory, and increases gross margin.
Merchandising Strategy

8. 7
Opening Ceremony is known for its creative merchandising, and this will play a huge
role in the store’s appeal and ability to draw in new customers. Remaining consistent with the
brand image, store displays would look similar to art galleries (see Appendix C) with minimalist
and photogenic layouts that will engage the millennial Korean consumer. Since experience is
now essential to drive traffic into brick and mortar stores (Jordan, 2018), each floor would have a
different theme, with eclectic displays to inspire shoppers to share images on social media,
generating local buzz about the business. A black and white color scheme will be used for the
exterior of the storefront, based on the logo, to further emphasize the brand’s identity.
Collaborations will also be set up as rotating boutiques, or “shop-in-shops,” to generate
excitement, and give the merchandise a limited edition feel. Another key focus of the
merchandising strategy in South Korea will be merging both the online and store channels to
create an omnichannel experience. Therefore, the Seoul store would be the first Opening
Ceremony location to offer buy online, pick up in store services, and partner with local carriers
for same-day delivery, to satisfy fast paced and digitally connected Korean consumers.
Pricing Strategy
Based on the aforementioned luxury focused strategy, Opening Ceremony Seoul will
offer a mid to high priced assortment, with apparel price points ranging anywhere from
₩222,540 to upwards of ₩3,885,560 (between $200 and $3,500 USD), depending on the brand.
Within the past four years, purchasing power parity in South Korean has exceeded even Japan,
supporting a higher pricing strategy (Worstall, 2015). Based on the U.S.-Korea Free Trade
Agreement, all textile and apparel goods are virtually duty-free, which is also a great benefit for
transitioning to this market (International Trade Administration, 2017). There is, however, a
Value Added Tax at a flat rate of 10% on all imported and domestic goods, as well as a special

9. 8
tax of 10-20% on certain imported luxury items (International Trade Administration, 2017). This
added tax is standard in South Korea, and considering the market’s appreciation for foreign
fashion brands and lower price sensitivity, it should have minimal impact (Hurt, 2018).
Part 4: Creative Marketing Campaign
The marketing campaign will be concentrated on building brand awareness through
localization and celebrity sponsorship. The theme of the campaign will celebrate art, fashion, and
unity. Inspired by a poster for the 1988 Olympics in Seoul, and images from previous Opening
Ceremony collaborations, the retro style campaign will emphasize the uniqueness and exclusivity
of Opening Ceremony product (see Appendix D). The face of the campaign will feature three
Korean celebrities who fit the brand aesthetic and resonate with the target market: singer G-
Dragon, model and influencer Irene Kim, and musician DJ Soda. This tactic maximizes on the
celebrity and K-Pop centric culture in South Korea by using recognized figures. Since the target
consumer falls between the ages of 18 and 30, and South Koreans are so highly connected
(Roberts, 2017), the best way to reach the market will be through social media. This will include
images and video appearances of the chosen celebrities and other models in Opening Ceremony
clothing posted on Facebook, YouTube, Instagram, and Twitter. The hashtags #OCxSeoul and
#OCx will be used throughout the campaign to raise both international and local awareness.
Tools like Facebook’s “Location Targeting” will also be used to target Seoul. Interviews with
each of the chosen celebrities on topics like their personal style and local hangouts will be posted
on the Opening Ceremony blog “Discovery” (https://www.openingceremony.com/Discovery),
and campaign images will be featured on the website home page to announce the store launch.
Lastly, a store opening event will feature music mixed by DJ Soda, celebrity meet and greets,
and an in-store photo booth to draw young and hip Korean consumers.

10. 9
Part 5: 6-Month Plan and Financials
Although Opening Ceremony is a privately owned company, and therefore does not
release any financial information, estimated earnings and industry standards were utilized to
determine a financial plan (see Appendix E). The D&B Hoovers database shows Opening
Ceremony New York had estimated annual sales of $1.7 million, and similar competitors La
Garconne and Dover Street Market had estimated annual sales of $1.2 and $2.6 million,
respectively. Previous reporting also showed that amongst five major retail areas in Seoul, daily
foot traffic ranged from 89,000 to 110,000 (Savills World Research, 2013), and considering
growth factors, it is likely the numbers are even higher today. Based on this expected high foot
traffic and competitive research, planned first year net sales are $1.3 million. Estimated gross
profit margin is at 59.4%, higher than the industry benchmark average of 46.5% (Retail Owner’s
Institute, 2018) due to the high initial markup and low reductions percentages, which reflect the
luxury pricing strategy for the Seoul store. In reference to the annual, five-year average
benchmark turnover of 4.2 (Retail Owner’s Institute, 2018), planned seasonal inventory turn is at
2.1. This is also built upon the fact that the Seoul store strategy is to sell more luxury products
with slower turn, however, this turn is still relatively fast because of the lower number of units
per SKU to be carried. Sales distribution by month was planned based on local calendar and
climate research. The highest sales were planned for June and July, which are popular tourist
months. Opening Ceremony typically holds a sale near the end of July to make room for fall
inventory, and this strategy is reflected in July reductions. Higher sales were also anticipated for
February, based on a planned store opening of January 2020 that would still be generating much
excitement around the store. The stock-to-sales ratio was based on planned net sales, and reflects
inventory needed to drive sales in each month. Average Unit Retail (AUR) was calculated based

11. 10
on the average of the most frequently used price points on Opening Ceremony’s website, and
divided by BOM stock to project monthly unit inventory.
Part 6: Plans to Scale Expansion
If Opening Ceremony’s ROI proves successful, and there is a positive trend seen in Key
Performance Indicators like revenue and gross margin, the company could mostly quickly
continue to expand by introducing new brands and collaborating with designers, as previously
discussed. Opening Ceremony’s reputation and solid partnership with brands would allow 1 to 3
months for new brand entry, and 6 months for a collaborative line.
One of the challenges Opening Ceremony faces is that the Korean consumer is fast paced
and constantly seeking new trends. A side effect of this challenge is the unofficial ways some
Korean consumers obtain street wear brands, such as online or through counterfeit trade (Cook,
2017). Although Opening Ceremony is targeting the fashion-knowledgeable consumer who is
already wearing genuine product, having limited edition brand collaborations and a compelling
store experience will help fight this problem and bring consumers to the official retail channels.
The brand will also rotate store sets every 3 to 6 months with creative and new displays, and
regularly seek new celebrities and influencers to keep marketing up to date with local trends. An
in-house team will be formed to anticipate Korean market demand, trends, and provide strategies
for store events and getting the right product at the right time.
While this is the quickest and most profitable way to expand the business, another option
would be to introduce innovative technology into stores, such as smart mirrors and touch screen
checkout, in order to appeal to the culture of technology in Korea. In the long-term, Opening
Ceremony might also begin to test shopping centers like Busan and Daegu with pop-up shops as
the brand sees growing success in Korea and the option for more locations.

12. 11
References:
Alpha. (2017, April). How the top 5 fashion & apparel brands went global. Retrieved July 1,
2018, from http://www.thisisalpha.com/wp-content/uploads/2017/08/How-The-Top-5-
Fashion-Labels-went-Global_EN-US.pdf
Business of Fashion. (2018). Discover Louis Vuitton's company page. Retrieved July 1, 2018,
from https://www.businessoffashion.com/community/companies/louis-vuitton
Central Intelligence Agency. (2018, June 25). Brazil. In The World Factbook. Retrieved June 30,
2018 from https://www.cia.gov/library/publications/the-world-factbook/geos/br.html
Hoover’s Inc. (2018). Nike, Inc.. Retrieved June 30, 2018 from Hoovers Database.
Hurt, M. (2017, June 22). 'Paepi' and new Seoul - Fashion psychoanalysis. Retrieved July 27,
2018, from https://www.koreatimes.co.kr/www/opinion/2017/06/197_230478.html
International Trade Administration. (2017, June 20). Korea - Import tariffs. Retrieved from
https://www.export.gov/article?id=Korea-Import-Tariffs
International Trade Administration (2015) ITA - travel and tourism top markets report. Retrieved
from https://www.trade.gov/topmarkets
Iredale, J., & Kaiser, A. (2009, March 31). Opening Ceremony to expand in Japan with onward.
Retrieved July 21, 2018, from https://wwd.com/business-news/retail/opening-ceremony-
to-expand-in-japan-with-onward-2087999/
Jordan, K. (2018, March 30). 5 research-backed retail concepts to embrace this year. Retrieved
September 12, 2018, from https://nrf.com/blog/5-research-backed-retail-concepts-
embrace-this-year
Lee, J. (2018, April 4). Korea: Retail industry. Retrieved August 27, 2018, from
https://2016.export.gov/southkorea/marketreports/retailchannels/eg_kr_120325.asp

13. 12
Retail Owners Institute. (2018). Margins and profits. Retrieved July 31, 2018, from
http://retailowner.com/Benchmarks/Apparel-Accessories-Stores/Womens-Apparel-Stores
Roberts, F. (2017, May 19). South Korea: The new market for luxury brands? Retrieved July 12,
2018, from https://www.luxurysociety.com/en/articles/2017/05/south-korea-new-market-
luxury-brands/
Santacreu, A. (2018, March 19). How did South Korea's economy develop so quickly? St. Louis
Fed. Retrieved July 21, 2018, from https://www.stlouisfed.org/on-the-
economy/2018/march/how-south-korea-economy-develop-quickly
Savills World Research. (2013). Spotlight: Seoul retail market. Retrieved August 1, 2018, from
http://pdf.savills.asia/asia-pacific-research/korea-research/korea-spotlight/2013-11-26-
spotlight-seoul-reatail-market-2h-2013-en.pdf
Statista. (2015, February). Market demand of clothing in South Korea from 2011 to 2018 in
billion U.S. dollars. Retrieved from Statista database.
Sternquist, B. (2018). International Retailing. New York, NY: Fairchild Books.
The Fashion Law. (2017, June 8). Brands are looking to Korea for growth & Korea is looking
right back. Retrieved July 21, 2018, from http://www.thefashionlaw.com/home/brands-
are-looking-to-korea-for-growth-korea-is-looking-right-back
Worstall, T. (2015, February 14). Korean wages are now higher than Japanese wages. Retrieved
August 29, 2018, from https://www.forbes.com/sites/timworstall/2015/02/14/korean-
wages-are-now-higher-than-japanese-wages-perhaps-for-the-first-time-in-3000-years/
Zargani, L., & Diderich, J. (2018, May 30). China in depth: Luxury brands vie to keep up with
Chinese consumers. Retrieved July 1, 2018, from https://wwd.com/business-
news/business-features/china-depth-luxury-brands-chinese-consumers-1202679082/

14. 13
Appendix A: Market Demand of Clothing in South Korea from 2011-2018
Figure A1: Retrieved from https://www.statista.com/statistics/640258/south-korean-clothing-market-demand/
Appendix B: Product Assortment and Logo
Figure B1: Authors Own Creation. Logo Retrieved from https://www.openingceremony.com/Discovery

15. 14
Appendix C: Store Display Concepts
Appendix D: Mock-up Advertising Campaign and Inspiration Board
Image C1: Trotter, C. (2017). Retrieved from https://www.insider-trends.com/
Image D1: Collage and Mockup Created by Author. Images adapted from https://www.pinterest.com

16. 15
Appendix E: Financial Plan
Plan
Expected Sales 2020 $1,300,000
6-month sales $650,000
IMU% 67.50%
Reductions% 25.00%
6-month Inventory Turnover 2.1
Gross Profit Margin% 59.38%
AUR $ $409.44
Formulas:
• Monthly Sales = Total Sales * Sales Distribution %
• Total Reductions = Total Sales * Reduction %
• Monthly Reductions = Total reductions * Reduction distribution %
• BOM Stock = Monthly Sales * Stock-to-Sales
• Receipts = Monthly Sales + Monthly Reductions - BOM Stock + EOM Stock
• Receipts at Cost= Receipts * (100% - IMU%)
• Unit Inventory = BOM Stock / AUR
• Inventory Turnover = Seasonal Sales / Average Inventory (Retail)
• Profit Margin % = IMU% - (Reductions% * (100% - IMU%))
Six-Month Merchandise Budget Plan
February March April May June July TOTAL
1. Net Sales
Distribution (%) by
Month
18.0% 14.0% 16.0% 10.0% 20.0% 22.0% 100.00%
2. Net Sales ($) by
Month
$117,000 $91,000 $104,000 $65,000 $130,000 $143,000 $650,000
3. Reductions
Distribution (%) by
Month
8.0% 10.0% 20.0% 10.0% 22.0% 30.0% 100.00%
4. Reductions ($)
by Month & Total
$13,000 $16,250 $32,500 $16,250 $35,750 $48,750 $162,500
5. BOM Stock-
Sales Ratio
3.00 3.30 3.00 3.50 2.50 2.40
6. BOM Stock $351,000 $300,300 $312,000 $227,500 $325,000 $343,200
7. EOM Stock $300,300 $312,000 $227,500 $325,000 $343,200 $309,833
8. Receipts (Retail) $79,300 $118,950 $52,000 $178,750 $183,950 $158,383 $771,333
9. Receipts (Cost) $25,773 $38,659 $16,900 $58,094 $59,784 $51,475 $250,683
10. Unit Inventory 857 733 762 556 794 838 4540