Wet Seal Analysis

Only available on StudyMode
  • Download(s) : 54
  • Published : February 27, 2013
Open Document
Text Preview
SITUATION ANALYSIS

Industry overview

Clothing Store
NAICS Code: 4481
SIC CODES: 5611, 5621, 5632, 5641, 5651, 5661, 5699

Companies in this industry operate physical retail establishments that sell clothing and accessories. Major companies include TJX Companies (TJ Maxx, Marshalls), Gap, and Limited Brands (all based in the US), along with Hennes & Mauritz (Sweden), Inditex's Zara chain (Spain), and Arcadia Group's Topshop (UK). The US clothing store industry includes about 100,000 stores with combined annual revenue of about $165 billion and is expected to grow at a low rate in the next two years. Key growth drivers include consumer spending levels and popular clothing styles. Competitive Landscape

Personal income and fashion trends drive demand for clothing. The profitability of individual companies depends heavily on effective merchandising and marketing. Large companies offer wide selections of clothing and have advantages in purchasing, distribution, and marketing. Small stores compete by offering unique merchandise, targeting a specific demographic, providing superior customer service, or serving a local market. The industry is concentrated: the 50 largest companies account for about 65 percent of industry revenue. Competition for the clothing store industry includes department stores, discount stores, and Internet and catalog retailers.

The clothing retail industry includes stores specializing in women's clothing (50 percent of industry revenue) or men's clothing (20 percent). Stores may also specialize in children's clothing (nearly 10 percent of sales) or accessories.

Sales & Marketing
Customer demographics vary according to an individual company's strategy. Companies also consider customer lifestyle (casual, working professional, etc.) when developing marketing plans. Marketing and promotional vehicles include TV, print, and newspaper advertising; direct mail; catalogs; social media; and in-store events. Large chains may run extensive national TV and print campaigns. In-store events include fashion and trunk shows. Locally, clothing stores often use window displays to attract store traffic. Companies may use a signature decor to define store image. Companies offer loyalty programs, which offer special discounts for frequent or large purchases. Loyalty programs may be linked to proprietary credit cards. Price markdowns or discounts are a common marketing strategy and often warrant direct mail or advertising campaigns. Clearance sales help drive store traffic and sell excess merchandise. Large companies may perform sophisticated pricing analysis to determine the timing and amount of discounting needed to maximize profitability. Customer service is especially important in high-end or designer clothing stores, where garments can cost thousands. •While still a small percentage of total retail clothing sales, apparel is one of the top-selling online categories, according to Forrester Research. Clothing retailers may offer colors, styles, or sizes not available in stores through websites or catalogs. Some companies advertise in-store promotions on Internet sites or run exclusive web-only sales. Emails to website customers are a quick, inexpensive way to communicate promotions. US consumers buy an average of 64 items of clothing and seven pairs of shoes annually, according to the American Apparel and Footwear Association (AAFA). Designer brand apparel is typically the most expensive. Finance & Regulation

Cash flow is seasonal: peaks generally occur during the fourth quarter, which includes the back-to-school and winter holiday shopping periods. Companies may monitor the inventory to sales ratio to identify potential cash flow or inventory issues. Measuring comparable store sales from year to year helps clothing retailers gauge growth. Inventory typically fluctuates throughout the year and is highest in early spring and fall, when vendors introduce lines. Inventory may turn over four to five...
tracking img