Ann Taylor is being affected by external and internal factors that are making the company fight for survival in the specialty retail industry.
Ann Taylor is being affected by the declining economy, which is generating a wave of retail closures. The company is being threatened by slowing consumer demand due to the worsened macroeconomic conditions. Shoppers are now more careful when spending their money and as a result Ann Taylor lost $333.9 million in 2008 and the uncertainty continued for 2009. This loss also affects the company in the stock market because it makes it reluctant to give any profit forecast for the coming quarters and therefore causes lack of confidence from investors. The economic situation also limits the company to develop its new projects. Ann Taylor wanted to create a new chain of stores to target the 50+ segment because this particular segment has been the most significantly underserved in the market, but a result of the overall economic condition this new concept offering had to be delayed.
As an attempt to revitalize the flagship AT brand, Kay Krill, the CEO of Ann Taylor, has a very aggressive agenda consisting of opening a beauty business and an upscale expensive product in some of the top-selling Ann Taylor location around the world, among other projects. This is considered an issue because her agenda is too aggressive as the economy worsens. This agenda makes business very risky, which is one of the reasons why the company had to close its shoe store, reduced accessory inventory that the stores carried and eliminated the makeup line.
Another issue is that according to Talbot’s CEO Trudy Sullivan nobody is clearly winning in the 35+ consumer space right now and according to The National Retail Federation one of the retail niches that is showing the greatest growth is the ones aimed at women over 35. This means that Ann Taylor does not have a competitive advantage on this segment and therefore is sharing market share with its competitors and not leading the market.
Ann Taylor is facing branding issues. There is great risk of cannibalization within AT and LOFT brands. Customers might turn away from Ann Taylor in order to buy LOFT because they can get the products at a lower price in LOFT.
There is management team resignation at Ann Taylor. The management turnover consisted of seven resignations in two years, which is not normal. CEO Krill do not have a strong operating partner to help with merchandising and other creative decisions.
A key force in the industry environment that affect Ann Taylor’s choice of strategy is the risk that retailers stores have due to the focus on one type of product item (instead of many different types of products for many type of customers). It is risky because lost sales in one area could not be recovered by a shift of interest to another, entirely different product area. For this reason many specialty stores, such as Ann Taylor, look for new market segments that they could serve creating potential problems for branding.
DEMOGRAPHIC-Women purchasing power has increased
-Busy, socially upscale women
Busy, socially upscale women
SOCIOCULTURALChanging client fashion preferences
POLITICAL-LEGALImport taxes increase costs
GLOBALOnline presenceNo physical store
Women purchasing power has increased because more women are working and having better positions at work compared to 10 and 20 yeas ago. This demographic characteristic is positive for Ann Taylor because this company sells women clothing, a segment with high purchasing power. The fact that these women are categorized as busy, socially upscale is something good because the company can focus on the style that this specific segment prefer. The changing client fashion preference is a negative sociocultural characteristic because Ann Taylor’s success will...