Victoria Secret store in Geneva Switzerland - Term Paper Example

Introduction Victoria secret is a retail brand of lingerie and beauty products which is owned and run by Limited brands company. It is one of the largest American retailers and the biggest company within the ”Limited Brands which also has a hold of e.g. Bath & Body Works and La Senza. Victoria's Secret generates 84% total sales which are in total $6.32 billion net sales within the fiscal year of 2009. The store sales are in total $2.5 billion, while its sales in the direct-to-customer channel nearly reached $1.03 billion which made a total sale of the Victoria's Secret brand of $3.9 billion in 2009. [Sto11] Victoria's Secret products are purchased mostly through retail stores, online, and through the Victoria's Secret catalog. Victoria's secret has more than 1000 branches in its home country, the US, and for a long time it was engaged in domestic business due to the large size of its home country. Internationalization has recently appeared in the country's agenda for sustainable development and has ventured into markets in London, Canada and the UAE. Its absence in the European market and the lack of affordable and sexy night wear in the same market develops into an opportunity for Victoria's secret to develop a niche there which will be analyzed in this proposal Background Victoria's secret was founded in Stanford by Roy Raymond in 1977. He took the opportunity of changing underwear into fashion and was largely successful. His shop gradually expanded into 6 stores and was finally sold to Limited Brands for US $ 4 million. Growth with Limited Brands was unprecedented and the company diversified its business portfolio to include swimming suits, dresses, jeans, shoes and beauty products. Currently the business consists of 3 different segments which include Victoria's secrets stores, Victoria's secrets direct (online and catalogue) and Victoria's secrets beauty. It has become one of the largest lingerie retailers in the US and a store is present in almost every large shopping mall. It is time to expand its horizons and change its strategy from market saturation to discovering and penetrating new markets. Since markets in Asia and Europe are already being researched upon, opening of a store in Geneva is currently under study. Swiss apparel and intimate wear market analysis Switzerland is a country with a population of 7.5 million and has one of the highest per capita GDP's in the world. The disposable income among citizens makes it a particularly attractive market for American brands. Being located in the heart of Europe with a fashion conscious community, Switzerland is ideal for Victoria's secret's which is already known for its clothes with great sex appeal and class mostly because of its excellent promotional activities, advertisements, models and fashion shows. The presence of all major international apparel brands in Geneva kinds of makes it a necessary obligation for Victoria's secret to open a store there. [Wec07] The research of Swiss market research company, IHA-GfK, showed that the size of the Swiss apparel market in 2006 was US$ 6.6 billion in retail sales out of which over 10% was devoted to underwear, lingerie and pajamas. This made a considerable market share and the industry was huge. This also shows that there is a lot of room in the industry to adjust competitors as there are very few suppliers. [Wec07] The positive, trendy image of American apparel in Switzerland also greatly contributes to a potential market opening in the Swiss market. Geneva has a lot of young people with international background who mostly like to look for sexy, trendy and affordable lingerie which is branded. The high income, purchasing power and GDP makes Geneva a more favorable location than its Asian counterparts. Victoria's secrets sister concern and another brand of Limited can be found easily in Geneva and its financial performance and sales figures have been superb. This greatly indicates that the market is ripe for the entry of Victoria's secrets into Geneva as market demand is present. Target market The target market for Victoria's secret has always been middle class women who are fashion conscious. The target market remains the same in Geneva and it targets young women in Geneva who are looking for affordable yet fashionable and sexy swim suits, under garments and lingerie. The dearth of such a vendor is greatly felt in Geneva as the market being an upscale area consists of luxury intimate wear sellers like La Perla, Zimmerli and Hanro. The others which are cheap are a great compromise on quality and thus Victoria's secret's mix of functionality and affordability is a great advantage. Victoria's secret's strengths and the reason for expansion The Swiss apparel market difficulty analysis Switzerland has a limited market size, high leasing costs and extremely high salaries which keep the operational costs extremely high in Swiss markets and thus keeps profits down. Another factor which makes franchising and opening a store difficult in Switzerland is the fact that financing is readily available for locals and therefore investment in the local market has to be filled with flexibility. Another hurdle to open a store in Geneva is expensive shopping space. Geneva ranks 42nd in the world when it comes to the most expensive streets in the world. [Gre10] Thus with a very high rental cost, it will be unfeasible to open a large store with lots of room on Geneva. The typical method of entry into a Swiss market is through the appointment of a local company which acts as the agent. These companies have the experience and the knowledge to guide the new arrival about market rules and regulations. Since Victoria's secret is present but not very widespread in the European market, it might not be well versed with Swiss laws and those of the EU. Thus the appointment of a local agent will make thinks very easy for the company. It is normally difficult for a company to find a reliable agent in an international market but Victoria's secret and Limited have the advantage of LaSenza being already present in the Geneva's landscape. Victoria's Secret can use the information developed by La senza and also use the same agents to ensure a smooth market entry. Another possible way of entering the Swiss market is through the Market entry programme through commercial service in Bern. Another possibility is the usage of the Gold key service, which for a small fee schedules appointments with pre-selected agents. SWOT analysis for Victoria's secret in Geneva Strengths 1) An international brand recognition 2) Market presence in Geneva due to online selling 3) Affordable and functional with a high fashion appeal 4) Parent company Limited Brands is very resourceful and its market knowledge can be used 5) A very diverse portfolio of products 6) A very strong brand promotion programme already in action Weaknesses 1) No prior experience of the Swiss market 2) Very low exposure to the European market 3) High operational costs than those in the US 4) Proper distribution channels will have to be built which will lead to high start up costs[Vic11] Opportunities 1) Absence in the market of affordable yet fashionable high quality intimates 2) Geneva is in the heart of Europe and an international hub 3) The end of recession and the sub-prime crisis marks the end of the financial crunch and leads to an increase in the purchasing power of customers who are more cost conscious now. Threats 1) There are few but very strong competitors in the European market such as La perla. 2) The Swiss trade laws are more stringent that US trade laws. 3) Swiss citizens are more environment conscious and companies already functioning in Switzerland are well versed with this, but Victoria's secret will have to ensure being environment friendly and practice Corporate Social responsibility for their success. 4) The European market has plenty of classic brands which are scarce in the American market. Thus gathering a customer base which is not cost conscious will be problematic. Victoria Secret's strategy in Geneva Victoria's secret has been known for its excellent marketing strategies and it could do very well if it uses the same in Geneva. Pre-launch promotion with its already well known models and advertisements which are a core of Victoria's secret's publicity efforts would really help Victoria's secret make an initial mark in the Geneva market. The advantage to Victoria's secret is that it is already an expert in promotion and can capitalize on this strength. A second strategy would be to get a smaller shop for initial business to reduce the operational costs. It can work in the pattern if German retailing giant Zara who uses smaller outlets but presents them with a non-cluttered look to make them look chic and upper class. Thus Victoria's secret, if it changes the presentation and the display arrangements to suit the needs of the Swiss crowd will be highly successful. Since the basic theme of all shops is a bedroom style, Victoria's secret can cling to its trademark but change the bedroom to be an extremely classy one to appeal to Swiss customers who are extremely class conscious.[Aca11] The reason for opening up in Geneva has been to make use of its multi-channel strategy in the market. Since customers in Geneva are already familiar with the product, thanks to the websites direct selling, the aim of a store in Geneva is to give that high class crowd a taste of seeing, trying and buying the product. [The02] Victoria's secret will also have to ensure that it remains flexible in its dealings in the new market as flexibility is the key to overcome global challenges. It might not have the same costs as those in the USA and the workers will cost more but there is an added advantage of a crowd which might be willing to pay more. Thus Victoria's secret can revise its prices for sale in Geneva but still keep them competitive and well under the luxurious competitors to still keep scope for sales. Conclusion With a great brand image, great product quality, high store sales changes of 13% [Leo09]and quite a saturation of the local market, it is justifiable for Victoria's secret to venture into international markets. With stores already in Canada, UAE and UK, it will be feasible for Victoria's secret to open a store in one of these locations. Europe is feasible as people in Europe are more fashion conscious and the Swiss have a high purchasing power. This can lead to high sales and higher profits. It is easier to setup a store in Geneva than Paris or Milan as there is less competition in Geneva. A strong base in Geneva can make ways for the brands expansion later in other European countries. Another reason for expansion is that Victoria's secret is the highest contributor towards the net sales and the net income of its parent company, Limited brands, which is 62% and 67% respectively[Leo09]. Thus it is one brand which is proven successful and because of high profits can afford to invest in international ventures. Victoria's secret is also proposed to expand as it has a diverse portfolio which can accommodate customers who are thrifty and also those who can manage to splurge. With its diversified product line, it can also appeal to customers in all age ranges from the youth to old. This has been realized by Victoria's secret and Leslie Wexner has recognized and stated "We recognise we have to harvest this international opportunity in a sustained way so that it doesn't impact our domestic business." Thus Victoria's secret with a flexible attitude, loyal customer base and apt marketing strategy can enter the market in Geneva to make waves there too. References Sto11: , (Stock: limited brands), Wec07: , (We connect fashion guides:THE APPAREL MARKET IN SWITZERLAND ), Gre10: , (Immobilier), Vic11: , (Victoria's Secret Market Entry Strategy into China Report), Aca11: , (A case of brand marketing), The02: , (Durbin), Leo09: , (Barrie), Leo09: , (Barrie), Read More