Professional Documents
Culture Documents
[NAMES REMOVED]
Contents
Case Overview .....................................................................................................................................................................................................2 Central Case Issues............................................................................................................................................................................................3 Ann Taylors Success ....................................................................................................................................................................................... 4 Key Changes in the General Environment............................................................................................................................................... 6 Ann Taylor within the Industry ....................................................................................................................................................................7 Analysis of Ann Taylor Companies using Porters Five Forces ........................................................................................................ 8 Threat of New Entrants............................................................................................................................................................................. 8 Bargaining Power of Suppliers ............................................................................................................................................................... 8 Threat of Substitute Products/Services ............................................................................................................................................... 9 Bargaining Power of Buyers..................................................................................................................................................................... 9 Rivalry Among Existing Competitors ................................................................................................................................................... 9 Ann Taylor and Competitive Strategy...................................................................................................................................................... 10 Ann Taylor Stores Internal Resources ....................................................................................................................................................... 11 Ann Taylor Stores Branding Strategy ........................................................................................................................................................ 11 Ann Taylors Strategic and Corporate Strategy .................................................................................................................................... 13 Ann Taylors Growth Strategy..................................................................................................................................................................... 13 Conclusion .......................................................................................................................................................................................................... 15
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Case Overview
For upper class women to be fashionable, they used to have to hire dressmakers to create their unique, stylized garments. This started to change when seamstresses and dressmakers started mass producing dresses. This led to the emergence of retail stores: some of them specialty stores and some of them department stores. A store in the specialty store sector, Ann Taylor, was founded in 1954. Ann Taylor was a specialty store for classy, professionally dressed women. The two major staples of Ann Taylors wardrobe line are the classic basic black dress and the womans power suit. With this concept they developed a mail-order catalogue business, a fragrance line, and shoe stores in 1994. When their catalogue business failed in 1995, they developed Ann Taylor LOFT as a way address the younger, professional consumer with a more casual, cost-conscious wardrobe option. In 1998, ANN, also branched out into a third division, Ann Taylor Factory. This division offered Ann Taylor items off the rack at prices 25-30% lower than the Ann Taylor division prices. With the same items offered for less and consumers trending toward a more casual work attire style, the LOFT and factory divisions seemed to be cannibalizing profits from the original Ann Taylor division. While Ann Taylor was facing the pressure that division branches had caused, there was also pressure from competitors in the market: Talbots, Coldwater Creek, and Chicos. Stylistically, consumers were trending toward a more casual style which was beneficial to Anns competitors. Anns competitive edge was that LOFTs casual style was aimed at a younger crowd whereas their competitors were only focused on women over 35. Ann Taylor also faced problems with the declining economy. If consumers were watching their budget, they werent likely to spend money on higher priced clothing. Some consumers felt the constrictions placed on their pocketbooks and opted for purchases at department stores or discount stores instead of specialty retail. Executives at Ann Taylor were not worried and said that their customer base was made up of upscale women that
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werent likely to be feeling the pressures of the declining economy, and were willing to spend a lot of money on quality clothing. Anns investments in branch extensions and company expansion brought about two major concerns: the internal distribution system would be pressured due to increased sales volumes, and if projected earnings would be enough to cover Anns lease obligations due to the economic conditions. The company went through a restructuring, in 2008, where they wanted to keep both brands, Ann Taylor and LOFT, evolving while keeping prices low and pursuing growth. In attempts to accomplish these goals they closed underperforming stores and eliminated 260 corporate and divisional staff positions throughout the company.
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Kay Krill had to make the difficult decision to restructure the company in order to reduce the firms costs. This restructuring included laying off staff at the companys headquarters, reevaluating executive bonuses and even consolidation of positions within the company. Although in the short term, this seemed like a brash move on Krills part, it led the company to regain its footing in the market in the long term. In addition to the financial problems faced nationwide, the company was also facing stiff competition from other popular stores within the market. Unlike many of their competitors, ANN specialized in one area without much deviation. The companys main store Ann Taylor focuses on mature, sophisticated women who dress for success in updated classics. Their LOFT store brings similar styles as their flagship store, but with a more casual feel and a lower price point. This LOFT store attracts a younger crowd while still providing the signature Ann Taylor style and sophistication. However, even with the combination of both stores, the company still does not have the majority of the market. As the CEO from Talbots states, Nobody is clearly winning in the 35+ consumer space right now we need to absolutely wow her with this irresistible product and none of us have done that. The competition faced by ANN includes such retailers as Talbots, Chicos, Gap, and the enormous Limited Brands. All of these competitors have a similar line of clothing as ANN while having a lower price point. The thing that sets ANN apart from the rest is the quality, luxury, and overall brand that Ann Taylor provides. Still, even with this, Krill still feels that the company has untapped potential that will allow them to flourish and become an even bigger name.
Ann Taylor had this disadvantage, ANN has managed to increase its sales from 2004 to 2008. In 2004 total company sales totaled $1,587,700. Every year after 2004, ANN has managed to increase their sales and by 2008, sales totaled $2,396,500. ANN has successfully increased sales when the 2008 situation was the most unpredictable environment in his 39-year retail career, said Chief Executive of J.C. Penneys. Compared to sales verses ANNs immediate competitors like Talbots, Chicos and Coldwater Creek, Ann successfully brought in more revenue than any of the three in 2007. ANN had total revenue of $2,396,500 in 2007 and impressively operates fewer stores than Talbots and Chicos. During this time, ANN appeared in the Womens Wear Daily Top 10 lists of selling dresses, suits and eveningwear as well as appearing in the Top 20 most publically traded retail stores. ANN seems to continue to impress through a difficult financial period, which further proves why ANN is one of the most successful retail companies. In addition to beating other retail companies in sales and achieving high rankings on prestigious list, ANN creates competition within the company itself. In October of 2004, LOFT out sold the main line of clothing ANN in overall sales and opened up more retail stores which brought the total square footage for LOFT over the total square footage of ANN. Creating competition within the company is a great way to challenge the sales directors of each company to strive to increase sales and to never settle. Continuing the trend of creating competition within the company, in 2008 Ann Taylor Stores Corp. recorded $130,603 in individual revenue from the companys employees. The sales revenue recorded beats all other rival companies except Talbots, but Talbots had a net income of negative $188,800,00 while Ann Taylor had a net income of a positive $97,300,000. Through 2004 to 2008 Ann Taylor has been extremely successful because of their recorded internet sales of $189.5 million in 2011.
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Another key factor affecting the general environment today is price. Many consumers are looking for the best value or deal when shopping, especially when it comes to clothing. The introduction of factory or outlet stores has proved vital to many upscale retailers like Ann Taylor, Gucci, Brooks Brothers and many others. ANN, especially, saw a very significant increase in gross profit with the introduction of Ann Taylor Factory stores in 1998. With many retailers following suit, ANN then turned attention to the wealthier side of the market. They did this by introducing product lines that were often 40 percent more expensive in attempts to appeal to more affluent working women who werent feeling pinched in the pocketbook. ANN always shared the belief that there will always be a client who has an appetite for more upscale and expensive products. These changes have affected retailers by causing some to restructure their pricing strategy. This is caused by rival companies offering the same type of product at a better value. Price will always affect sales and the person with the most power when it comes to price is the consumer.
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busy socially upscale women. Their focus was to appeal to women who were more inclined to make expensive wardrobe purchases that fit all aspects of their life. Kay Krill, Chief Executive Officer of Ann Taylor said We understand that a woman expresses herself through what she wears- at work, at home and at play To meet her needs, we design pieces for her life and her changing roles to help her look and feel confident and beautiful. (ANN INC.) Ann Taylors staples, the classic basic black dress and the womans power suit were taken and developed into many beautiful variations that got put in their collections.
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them a higher profit. The supplier and retailer relationship in this market almost goes hand-inhand.
upscale casual womens clothing line. For example, Coldwater Creek offers casual outdoorsy and contemporary clothing whereas Talbots focuses more on the high society and classic clothing. So, in other words, while the four retailers are competitors, each store offers clothing that is very different from the other. The only similarities are the price asked for the goods and the age groups that these companies target. Each retailer in the industry has relatively the same opportunity as the others, depending on which fashion style is in at the time.
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accommodate the needs of smaller women who still wanted to have a professional, upscale style, as well as, at one point, having an altogether separate store concept, Ann Taylor Petites.
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consumers can buy less expensive and more casual clothing at LOFT, while, generally, Ann Taylor offers a more expensive line of professional type clothing. The Top executives at ANN need to differentiate their LOFT and Ann Taylor products to create at brand gap between the two. A quote from C. Curan, Its not clear that the Ann Taylor customer will continue paying $88 for a silk cardigan sweater when she knows she can pick up a similar cardigan for $39 a few blocks away at LOFT. It seems that LOFT is obtaining most of the borderline sales due to the fact that they offer a cheaper price for their items. To continue to expand both LOFT and Ann Taylor, they need to differentiate their products to make a more clear-cut difference to ensure that brand cannibalization does not occur in the future. With work attire trending toward a more casual feel, the LOFT line crosses over into the business world, an area whose sales should go to Ann Taylor. Ann Taylor needs to market their clothes separately from LOFT and even space the Ann Taylor and LOFT stores farther apart to ensure that if customers are shopping at Ann Taylor that they will buy their items there instead of walking down the street to buy from LOFT. In 2005, ANN had begun to revamp their stores by upgrading 43 stores to a store of the future look. By upgrading the store look, ANN was able to continue to grow by generating more sales from their stores. With the increase of sales volume, both Ann Taylor and LOFT needed to be supplied with more goods to keep up with the demand. The distribution center, located in Louisville, which both LOFT and Ann Taylor share, was being stressed from the high volume of sales. LOFT and Ann Taylor need to either separate distribution centers, so that each LOFT and Ann Taylor have their own distribution center, or ANN opens up another distribution center near the west coast to support the sales on the western half of American. The second distribution center would enable the Louisville center to focus exclusively on supplying the eastern half. By doing this it would lessen the stress on the current distribution set up.
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and maternity line still exist in some form today within their Ann Taylor main line. With their two main entities (Ann Taylor and LOFT), the company had focused on tight inventory management and the restructuring in order to promote long term growth and success. It seems that Krill had learned that introducing new products in times of economic uncertainty does not work. Instead of opening new departments, she needed to promote the brands that currently are successful. Keeping brand identity in mind, Krill needs to continue building the image and style of Ann Taylor and LOFT. After posting a major net loss of $333,906,000 for fiscal year 2008, it became clear that Krill needed to rethink her plans and expand on her restructuring. Although most of this major net loss can be contributed to the economic climate, the company also needs to take responsibility for this crippling loss. Such a major net loss hurts the company on many levels including their overall image. A strong campaign to rebuild the company image is needed to promote the untapped potential the company has. In addition to a strong image, the company should cut back on the number of stores opened. Although the company has since built itself up while posting a net income of $102,590,000 income in fiscal year 2012, underperforming stores need to be reevaluated and even restructured in order to facilitate growth. Finally, the strongest point to consider moving forward is the connection to their clients. Without a strong connection to the client base, there is no hope for survival in the retail world. To the special consumer, it does not matter if a certain style is in or certain colors are hits if it is not what they are looking for in their product. ANN has realized this in recent years and is focusing more and more on pleasing the client. However, in order to succeed and grow further, the company has to stay on track with the current needs and wants of their upscale clientele.
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Conclusion
ANN has continued to dominate the market for female professional and casual attire since 2004. From this the company has seen myriad changes to its strategic environment and management systems. More specifically, Ann's total sales revenue has seen an increase from year to year. This growth may even warrant the expansion of stores, distribution efforts and the entire management system. In order to continue on this path, Ann must be able to fill the marketing gaps in technology use for the older portion of their target market. With Ann's great success also comes the danger of encountering problems such as overflow in distribution, lack of product differentiation and increase in competition. Fortunately, Ann continues to outpace the competition in terms of annual total revenue. With an ever growing competition and the desire for increased market share, there is no need for Ann to ignore attempts to increase profitability. Ann needs to align itself in a position to have continuous annual success within the women's professional and casual clothing industries.
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Ann Taylor Annual Report 2008. Rep. Ann Taylor, Mar. 2009. Web. Ann Taylor Annual Report 2009. Rep. Ann Taylor, Mar. 2010. Web. Ann Taylor Annual Report 2010. Rep. N.p., Mar. 2011. Web. Ann Taylor Annual Report 2011. Rep. N.p., Mar. 2012. Web. Ann Taylor Annual Report 2012. Rep. N.p., Mar. 2013. Web. "AnnTaylor Stores (ANN)." Net Income for AnnTaylor_Stores (ANN). N.p., n.d. Web. 05 Apr. 2013. Maestri, Nicole. "AnnTaylor Posts Loss." UPDATE 3. Reuters, 14 Mar. 2008. Web. 5 Apr. 2013. McCarthy, Ryan. "AnnTaylor Stores (ANN)." Stock:. N.p., n.d. Web. 05 Apr. 2013.
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