Victoria Secret's Under Macro Environment

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Victoria’s Secret
I, Company Background:
Victoria’s Secret (VS) is an American retail brand of women’s wear, lingerie and beauty products. It was established by Roy Raymond in the San Francisco during the 1970s. Raymond saw an opportunity in taking “underwear” of the time and turning it into fashion. Products stood apart from the traditional white cotton pieces, which department stores offered, with colors, patterns and style that gave them more allure and sexiness. They combined European elegance and luxury. By 1982, Raymond had opened six stores and launched a modest catalog operation. He then sold VS to the American publicly-traded company Limited Brands, which took the lingerie company and sprinted away.

Today, VS is the fastest growing subsidiary in the six brands that are owned and run by Limited Brands, generates more than $4 billion sales in a year and contributes approximately 42% of corporate profit. More than 1000 Victoria's Secret retail stores have been opened in the United States. Products are also available through the catalogue and online business, VS Direct, with sales of approximately $870 million.

II, Raw materials:
Victoria’s Secret supply chain starts off with raw materials chosen by their designer's which then gets shipped from countries, such as: Sri Lanka, China, India, Vietnam, etc…for a cheaper price. This helps the company with price especially because the quality is high quality material. This high quality is satisfying to all their customers and that is VS top concerns.

Sri Lanka might be a small supplier to the global garment market (it accounts for less than 1% of total clothing imports into the US) – but when it comes to intimate apparel like sultry nightwear and sexy underwear, the conservative island has a hot reputation. Over the years Sri Lanka has become one of the biggest suppliers to the US lingerie giant brand. For instance, 55m of the 70m VS panties made every year come from Sri Lanka. Sri Lankan factories also supply 15m bras, 10m sleepwear items and 2.5m swimsuits per year for VS stores, catalogues and online sales and for sub-brands like VS Beauty, Pink, Intimissimi and Sexy Sport. In fact, VS bought up $500 million worth of bras, panties, swimwear as well as sleepwear and casual wear from Sri Lankan manufacturers last year, up from $300 million just two years ago. Most of this growth is to do with VS moving more business into the island over the last two years. Since stronger ties with high-end niche products like VS is good news for the Sri Lankan apparel industry that is besieged by rising domestic costs and pressures to increase wages.

Sri Lanka has been facing price pressures from cheaper producers like China, India and Vietnam and has tried to carve a niche instead on quality and new innovations such as in design and finishing of a garment. However, VS does not always look at the cheapest product but at the best product that can be had. It has seen phenomenal innovation from Sri Lanka and increasing vertical integration from raw materials, threads and buttons to the finished garment. Consequently, VS plans to source even more from Sri Lanka over the coming years. A new $5 million factory was just open in Sri Lanka last month, dedicated to the production of clothing for VS “Pink Collegiate Collection”, which also calls on the group's lean manufacturing skills. The new factory will manufacture about 1.5m pieces of apparel a year for the line, which will be exported to the US. It is hoped that output will expand to 2.3m pieces in 2012.

III, Final products:
Once the raw materials get processed through specific factories with specific machines in countries, such as China, Bangladesh, Vietnam (with cheap labor cost), they are on their ways to become final products. The final products are made in batches in different colors, sizes, designs, and cuts depending on their design. VS has its design office in New York which is responsible for driving the growth for...
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