Reference no: EM131584413
Rue 21 is a successful specialty retailer selling value fashion items and accessories to its target market of young men and women. The company attributes its success to its location strategy, which enables Rue 21 to take advantage of a variety of location types.
Read "Examining Rue 21's Location Strategy," on page 272 of your textbook, and visit the Rue 21 website for the most up-to-date information about this retailer.
In a two-page essay, evaluate Rue 21's location strategy. Be sure to discuss this in depth, citing sources to support your position. Your essay should relate to concepts discussed in your textbook, as well as other scholarly resources. Your essay should include the following information:
• Evaluate the pros and cons to Rue 21 of each location type: strip center, regional mall, and outlet center.
• Should Rue 21 expand beyond the United States? Explain the complexities of doing so.
For additional details, please refer to the Case Study Guidelines and Rubric in the Assignment Guidelines and Rubrics section of the course.
•Rue 21's Location Strategy (Module Four)
This case study allows you to apply knowledge you have gained about retail site location and selection strategy by analyzing Rue 21, a popular clothier for young adults.
Requirements of Submission: The case studies must follow these guidelines: approximately two pages in length, double spaced, 12-point Times New Roman font, one-inch margins, and APA-style citations.
Case 3: Examining Rue 21's Location Strategy`-3 Rue 21 (www.rue21.com) is the fast-growing specialty re-tailer that sells fashion items (including footwear, fragrance and beauty items, jewelry, intimate apparel and sleepwear, and accessories) to girls and young men at value-oriented prices. Most of Rue 21's merchandise is trendy and priced below $35. According to the retailer's annual report, "Our merchandise is designed to appeal to 11- to 17-year-olds who aspire to be `21.'"
As of the end of its 2011 fiscal year, the chain operated 740 stores in 45 states. Rue 21 opened 110 stores in 2011 alone; c-3The material in this case is drawn from Marianne Wilson, "Rue 21 in Expansion Mode," (June-July 2011), p. 22; and Rue 21 2011 Annual Report.
And it ultimately plans to have more than 1,000 U.S. retail stores. Its average store is 5,000 square feet. Most of its new stores will be in strip centers and regional malls in small- and middle-market communities. Rue 21 credits its success to its flexible real-estate strat-egy as well as its sourcing model.
Rue 21's overall location strategy is not based on market area or location type. Although many of Rue 21's stores are in rural markets, where it has little direct competition, it also has many successful stores in ur-ban locations. As of the beginning of 2012, 52 percent of Rue 21's stores were located in strip centers, 31 percent in regional malls, and 17 percent in outlet centers. Rue 21 favors locations that share customer traffic with adjacent retailers such as Wal-Mart, Target, and Kohl's. Unlike some other retailers, Rue 21 does not own any real-estate. Most store leases have initial terms of five to ten years, with additional five-year renewal options.
Many of these leases have early cancellation clauses that permit Rue 21 to terminate the lease if certain sales levels are not achieved or if a strip center does not meet specific overall occupancy levels. The retailer's store leases also provide for additional rental payments, based on a percentage of net sales, if Rue 21's sales at a given location exceed specified levels. Leases also require payment of common maintenance charges, real-estate insur-ance, and real-estate taxes.
This shifts the burden of higher op-erating expenses from the property owner to Rue 21. Renewal options generally require higher rental payments in subsequent years. Rue 21 faces several risks with regard to its real-estate strategy. In some instances, even with an early cancellation clause, it may be unable to get out of a lease at an unsuccessful location.
In these cases, the chain would be bound to continue rental payments. Bankruptcies and store closings in adjacent locations can reduce store traffic in a shopping center and ad-versely affect the remaining tenants, including Rue 21. In ad-dition, Rue 21 may not be able to renew a lease at a very suc-cessful location.
Rue 21 relies on more than 450 domestic suppliers and im-porters for product sourcing. Although most of its clothing and accessories are made by overseas suppliers, domestic suppli-ers are used when quick deliveries are needed to capitalize on a fast-moving fashion trend. Goods are shipped daily to each store to motivate shoppers to constantly visit the store location. Rue 21 also maintains its products' distinctiveness through its private-label brands: Rue 21 etc!, Carbon Elements, Ruse Beaute, and Tarea.
Questions
1. Evaluate the pros and cons to Rue 21 of each location type: strip center, regional mall, and outlet center.
2. Describe the pros and cons of Rue 21 not owning any real-estate.
3. How could Rue 21 reduce the risks associated with its real-estate strategy?
4. Should Rue 21 expand beyond the United States? Explain the complexities of doing so.