Harrington Case

Topics: Variable cost, Fixed cost, Marketing Pages: 5 (1613 words) Published: February 10, 2013
HarHarrington Collection: Sizing Up the Active-Wear Market
Alejandra Carlos-Padilla, Eric Chang, Jessica Cheng, Jason Schieck, Allison Steinberg

Executive Summary
Harrington Collection is facing declining sales and shifting consumer tastes, and the company must consider new strategies to compete in the women’s apparel industry. The company should introduce a line of active wear under the Vigor brand, as this brand extension will result in $40 million dollar in sales per year, a 15.8% profit margin, and $6.3 million in profit. It will also allow Harrington to maintain, and possibly grow, its 7% market share in the “better” category.

Evaluation of Women’s Apparel Industry and Harrington’s Market Position The overall women’s apparel industry is characterized by fierce competition in production costs, decreasing prices, and fast-paced trends. Brands are adjusting to consumers’ preferences of buying less expensive and more casual apparel. The industry also faces external competitors as consumers are deciding to use their discretionary spending on products besides apparel, such as technology products, home design, and travel. This suggests that consumers value the experiences that come with their purchases. Harrington must acknowledge these general trends before losing its 1.83% market share in the women’s apparel industry. From a manufacturing perspective, the women’s apparel industry faces significant threats from outsourced production and shorter product life cycles. Cost advantages from outsourcing to low-cost countries could reach up to 50%, and these savings are integral in an industry in which consumers are becoming more price sensitive. Lower prices result in higher sales volume, which is a main indicator of market share. While market share is currently determined by retail sales dollars, it will also be noteworthy to assess how Harrington’s profits compare to its industry competitors. Additionally, shorter product life cycles are forcing manufacturers to reduce product design, production, and retail placement time. This directly affects Harrington because the company experiences additional pressure to deliver high quality products and services in a shorter amount of time. However, this pressure may be mitigated by the fact that its manufacturing plants are located in Mexico and it has sophisticated technology to track purchase trends and prevent overproduction. From a retail perspective, specialty stores and department stores still lead the US women’s apparel industry with 77.6% of sales in 2007. Discount retailers are burgeoning competitors within the industry, but it should also be noted that warehouse clubs and supercenter apparel sales are capturing a greater percentage of market share. The increase in discount and warehouse retail sales suggests that more consumers are buying apparel based on value. The shift in retail trends challenges Harrington’s lifestyle-branding strategy because some consumers are not as concerned with service and brand perception. Consumers may still value quality in their apparel, but Harrington will need to reassess how much they invest in service training and brand marketing.

Analysis of Harrington’s Financial Performance
There is little detailed information presented in the case regarding the finer points of Harrington’s financial performance. However, it is clear that Harrington’s sales performance is underperforming compared to the US market for women’s apparel. Unit sales for the $200+ segment of that market, where Harrington does most of its business, are growing while Harrington’s total retail sales are declining. In the absence of unit sales data from Harrington and assuming the company is keeping prices constant, this means that its unit sales have been declining. As another point of reference, sales of women’s clothing in specialty stores have increased 11% between 2005 and 2007, the main channel for Harrington’s products, while Harrington’s sales revenue has...
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