MARKS : 80
SUB : RETAIL MANAGEMENT
N. B. :
BOTH CASE STUDIES carries equal marks.
All questions are compulsory
CASE NO. 1
THE OUTLOOK FOR SOFT GOODS SPECIALITY STORES
Soft goods specialty retailers are on a quest to grow, with the high-growth ``stars’’ working to maintain momentum by rolling out successful concepts nationally while investing in new concepts that offer long-term promise. The less stellar performers are reinvigorating tired concepts and strengthening margins via better inventory and promotion management. A saturated marketplace will motivate more specialists at both ends of the spectrum to seek growth by building a portfolio of concepts focused on ever-finer customer groups. Concepts will vie for more attention by developing and applying deep customer insights to their assortment strategy, the shopping experience, and store brand building and communication.
The Retail Landscape
Many soft goods specialty retailers have seen recent improvements in sales and profits, but for most, the recovery is modest in nature and has done little to negate the pervasive price pressure on retail margins. The sustainability of the recovery is questionable given poor comparable stores sales performance.
Since bottoming out in the first part of this decade, sales have steadily improved in both the apparel and accessories specialty store and shoe specialty store channels. Yet, growth remains modest compared to the late 1990s.
The long-term sales outlook for apparel and accessories specialty stores is stronger than for shoe stores. Apparel stores are forecast to grow in the 4 to 5 percent range annually through 2008, while shoe stores are forecast to grow mostly around 1 percent a year over the same time period. Much of the sale improvement has gone straight to the bottom line for apparel and accessories specialty stores. Though still well below its performance in the late 1990s, the sector has improved another important measure of profitability, return on net worth.
In contrast, the very modest sales improvement among shoe specialty stores has not translated to improved financial performance, with the average net profit margin for publicly held shoe retailers declining. The financial struggles facing the shoe store channel are evident in the closing of individual stores and entire divisions by some of the channel’s leading players.
Pervasive price pressure has contributed to the commoditization of apparel and footwear, particularly basic styles that are easily sourced and widely distributed. Commoditization has also been propelled by the growth of Wal-Mart (www.walmart.com) and Target (www.farget.com), both of which offer wide assortments of basic and fashion-focused soft goods at sharp price points that appeal to a broad swath of consumers. This has increased the pressure on many retailer margins as their increasingly undifferentiated assortment goes head to head with price-driven retailer margins as their increasingly undifferentiated assortment goes head to head with price-driven retailers off the mall.
While apparel price deflation has made it challenging for soft goods specialists, many have proven worthy of the challenge. The availability of cheaper products allowed many of these specialists to improve inventory turns, resulting in a slight increase in their return on inventory ratio since 1998. This improvement reflects a focus by many apparel specialty store …3…
retailers on a combination of better markdown strategies, improved inventory management, and introduction of higher-margin fashion items.
A Challenging Environment
Soft goods specialty retailers face a crowded marketplace that is steadily becoming even more competitive. Most shoe specialty stores are faring far worse than the apparel specialists in the competitive wars. Off-mall retailers, including discount department stores/super...
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