Reference no: EM133271920

Assignment:

1. Why has Victoria's Secret been so successful? How does the company reach its target audience?

2. What do you think are Victoria's Secret's biggest challenges?

3. What's next for Victoria's Secret? How does the company grow?

Victoria's Secret is the largest retailer of lingerie in the United States. Roy Raymond founded the company in 1977 because he thought retailers offered only "racks of terry-cloth robes and ugly floral-print nylon nightgowns." In 1982, Raymond sold the company to Leslie Wexner, creator of Limited Stores Inc., for $1 million. At the time, Victoria's Secret had expanded to four stores and a catalog business. The company wasn't profitable, but Wexner recalled its attraction: "There wasn't erotic lingerie, but there was very sexy lingerie, and I hadn't seen anything like it in the U.S." Although Wexner knew nothing about lingerie at the time, he saw an opportunity to look at the market in a new light. He explained, "Most of the women that I knew wore underwear most of the time, and most of the women that I knew I thought would rather wear lingerie most of the time, but there were no lingerie stores. I thought if we could develop price points and products that have a broader base of customer, it could be something big."

The market during the 1970s and early 1980s in fact offered women very few options for lingerie shopping. At one end, women could buy Fruit of the Loom, Hanes, or Jockey cotton underwear in three-pair packages just as men did. Department stores offered little in terms of design and style. And lacy lingerie could be found only in stores like Frederick's of Hollywood, whose products were considered provocative, not for daily wear, and often embarrassing to shop for. Wexner took several steps to revamp Victoria's Secret.

First, he realized the company should target female consumers who buy for themselves, rather than male customers who shop for their significant others. As a result, Victoria's Secret launched a range of new products in stylish colors, textiles, and patterns that made women feel sexy and glamorous in a tasteful manner. The company focused on consistency of fit, which helped create customer loyalty, and stores were reconfigured to appeal to female shoppers. Bra displays and fitting rooms were moved to the back, for instance, to provide customers with more privacy.

Next, Wexner reinforced the brand image of style and sophistication by evoking a European look and feel throughout the stores and catalogs. Catalogs bore a fake London address (the company was really headquartered in Columbus, Ohio), while storefronts resembled 19thcentury England, complete with soft classical music and romantic-style details throughout. Within five years, Victoria's Secret had expanded from a handful of stores to 346 and a growing catalog business. Victoria's Secret's catalog business is considered one of the most successful in the retail industry. When Wexner bought the company in 1982, each catalog cost a hefty $3 to produce and distribute. Its customer database grew significantly over the next 20 years and peaked at 400 million mailings in 1998.

Today, Victoria's Secret spends approximately $220 million a year and mails 390 million catalogs worldwide. Its catalog business has been so successful because it accomplishes several things a retail store cannot. Most importantly, catalogs allow consumers to browse and shop for lingerie in the comfort and privacy of their homes. To accommodate them, Victoria's Secret takes telephone orders 24 hours a day. Before the Internet, this was a critical key to the company's success. Catalogs also provide the opportunity to extend and test different product offerings, including bathing suits, sweaters, and dresses. Another milestone in Victoria's Secret's marketing strategy was its shift to include supermodel fashion shows and television commercials in the 1990s. In 1999, the company's steamy 30-second Super Bowl ad resulted in millions of visits to the company's Web site. Each year, millions more tune in to watch the world's top supermodels, including Victoria's Secret Angels, strut down the runway in diamond-studded lingerie, high heels, and the company's signature angel wings. Erika Maschmeyer, an analyst at Robert W. Baird & Co., explained that the TV show "is essentially an hour-long commercial.... There are a lot of places to buy intimate apparel, but there's no other place that has such a strong brand connotation to it, and I think the fashion show is definitely a part of that."

Victoria's Secret has accomplished what no company has: It took an intimate product and made it stylish, trendy, acceptable, and accessible through innovative and pitchperfect direct marketing. The company recently expanded with the launch of Pink, a lingerie line targeted at 15- to 22-year-old women. The hope is that Pink consumers remain loyal to the Victoria's Secret brand as they grow older. Today, Victoria's Secret sells its products through alluring catalogs, through its Web site, and in more than 1,075 stores located primarily in shopping malls throughout the United States, Canada, and the United Kingdom. Annual sales topped $6 billion in 2013, and the company continues to grow the business, making lingerie trendy and stylish for women of all ages.