Dillards Womens Footwear Department Case Study

Buyers: Hannah Henderson, Denice Bailey, Katherine Campbell

Table of Contents:
Dillards Company and Womens Footwear Department Analysis ...3
Our Customers .4
Our Merchandise ....4
Primary Competitors and SWOT Analysis.5
Marketing Strategies .6
Executive Summary....7
Financial Goals and Buying Plan...8
Merchandise Classification..9
Market Research...10
Classifications & Pricing Plans ...14
Assortment Plan for Boots and Pumps for August 2016..17
References ...19

Dillards Company and Womens Footwear Department Analysis

Dillards prioritizes its womens footwear department and considers it to be one of the
primary customer draws for the store, as the company began exclusively as a womens shoe store
(Phoster Industries, 2015). As the company has
grown throughout the years, it has expanded and
excelled in additional departments, however, shoes
continue to stand at the forefront of overall store
sales. Among Dillards departments, sales trends
were strongest in footwear for the period leading to
August 1, 2015 (Talk Business and Politics, 2015). Financially, Dillards net income has fallen
short to that of the same time last year from $34.5 million to $29.9 million, and shares have
decreased from 80 cents per share to 75 cents per share (Talk Business and Politics, 2015). This
could be contributed to the many new challenges to company faces. Such challenges included the
excessive use of 20 watt halogen puck lights distributed throughout the store, specifically
concentrated in the shoe departments, which have caused UV damage to merchandise and have
tremendously increased the energy consumed (Phoster Industries, 2015). We struggle currently
with projecting a consistent brand image across multiple platforms, a changing retail atmosphere
emphasizing off-mall location importance, and a disconnect between our previous target
customer and our newer target customer. Our current store image emphasizes an older target
customer; however, we want to aim to reach younger women as well. Dillards remains a
relevant shopping destination by creating a pristine and luxurious shopping experience for their
customers, while still offering merchandise that is financially acquirable for middle class,

slightly price conscious consumers (Lewis, 2014). Additionally, the company has maintained an
advantage over its competitors by tapping into exclusive brand partnerships (Lewis, 2014).
Our Customer
Our primary customer at Dillards is the middle class to upper-middle class woman
shopping for the whole family.She usually has a disposable income as well as an interest to make
an investment in upscale, high-priced private label clothing. However, there has been advances
towards an untapped market of younger teen and college-aged students across the U.S. The
Dillards customer buys from the store because of the quality and price balance, the store
reputation, and the presence of popular brand names such as Michael Kors and Frye and private
label brands such as Roundtree & Yorke and Antonio Melani according to Dillards.com (2015).
Our Merchandise
Our store is a one-stop-shop, operating as a fashion retailer with a range of departments
including cosmetics, womens wear, mens wear, childrens clothing, home furnishings, as well
as accessories and many other consumer goods; however, more than 35% of sales came from
womens apparel and accessories alone (Hoovers Inc., 2015). Our department offers several
popular brands such as Frye, UGG, Lucky Brand, Steve Madden, TOMS, Gianni Bini, and
Jessica Simpson . While it varies depending on the location, we have listed some main price
points frequent in our Womens shoes department.
Dillards Womens Shoes Department
Pumps

$59.99, $69.99, $79.99, $89.99, $99.99, $110.00, $119.00, $129.00, $139.00,

$150.00

Boots

$59.99, $64.99, $69.99, $79.99, $89.99, $98.00, $99.99, $109.00, $119.99,

$129.99, $135.00, $139.99, $149.99, $159.99, $169.99, $175.00, $189.99,
$195.00, $199.99, $200.00, $220.00, $225.00, $240.00, $250.00, $275.00,
$295.00, $298.00, $325.00, $348.00, $358.00, $398.00, $428.00, $498.00

Primary Competitors
Our two main retail competitors specifically within the womens shoe department are
Belk and J.C.Penney. Although J.C. Penney is not necessarily a competitor in terms of target
customer, it is noted by Hoovers Inc. (2015) that the retailer is a top cooperate competitor to
Dillards. Belk carries similar popular brands to those carried by our footwear department. Our
competitive advantage amongst all other retailers would be our great prices in relationship with
the quality of our merchandise, our exclusive private label brands, and our educated staff and
excellent customer service.

Strengths
Exclusive and private brands
Value advantage over some
competitors
Product quality

Opportunities
Increasing customer service
Increasing consumer confidence
Attracting new customers on
platforms like Twitter and Instagram

Weaknesses
Trouble reducing operating expenses
Downsizing fleet and shutting down
many stores
Only recently developed some social
media presence (ex. Instagram)

Threats
Highly competitive retail market
Economic and political changes
affecting consumer confidence and
spending
Human error of improper forecasting
Changing styles and fashion focus
Increases in raw material costs and
labor could raise prices

Retail Strategy Analysis

We continue to promote achieving successful long-term growth strategies through
enhancing our e-commerce capabilities, and customer service. According to Hoovers Inc.,
(2015) shoes make up approximately 9% of department store sales. Hoovers Inc. (2015) also

stated that of major products sold by shoe stores, womens shoes makes up approximately 30%
of industry revenue. Figure 1 sheds light on the overwhelming majority of shoe store sales
dedicated to womens footwear. We are at a constant challenge to keeping up within
multi-channel retailing. E-commerce has caused our company to be forced to look online to
fight for a share of retail spend and keep up growth (Borrison, 2015).

Figure 1

Marketing Strategies
In order to appeal to our specific target market, we want to focus on competitive
strategies that enable strong customer relationships in store and through social media, a good
price and quality balance, and multi-channel shopping capabilities. We strive for a large
merchandise assortment with on-trend styles and large brand names, such as Hunter, Lucky
Brand, and Antonio Melani, that our customers look for at Dillards. Adding these popular
brands to our assortment this will give our company a significant advantage against our
competitors. Its important to maintain our quality and prices while emphasizing our push for
more fashion-forward styles.

The value and quality of our merchandise also gives us a large advantage over other
retailers. Furthermore, Hoovers Inc. (2015) states that while larger companies, such as Dillards,
focus on their strengths in purchasing, distribution, and marketing, smaller firms can provide
superior customer service and provide better assortments of specialty goods for local, smaller
markets. Overall, as a bigger player in the competitive shoe market, Dillards prices must remain
competitive due to our superior abilities in purchasing and marketing (Hoovers Inc., 2015).
In order to strongly compete with other retailers, we must focus on strong multi-channel
retailing because consumers look to websites for a stores selection before going to brick and
mortar stores, to order online when there is not a nearby location, or to online shop for
convenience. Our retail communication mix focuses on advertising, sales promotions, our
website, and word of mouth from our loyal customers. Our staff is fully equipped, and we
provide a friendly store atmosphere that will ensure a great shopping experience. Our store is
visually appealing to all individuals within our target market including their children depending
upon the specific merchandise our customers seek. Specifically within our shoe department, we
manage to keep an organized and tidy layout to ensure our customers have a pleasant shopping
experience.
Executive Summary
We hope to use strong customer service and efficient buying to attract the Dillards
customer. Dillards needs an increased focus on other platforms of reaching shoppers, especially
through social media. By increasing this presence, we can compete with other big retailers and
competitors. We want the Dillards customer to value our trendiness as well as great quality.

Financial Goals & Buying Plan

Our gross margin percentage increased from the year ended January 2015 to the year
ended January 2016. We project our planned sales will increase approximately 5% for 2016.
Inventory turnover slightly decreased from 3.20 to 3.14 from 2014 to 2015 (Morningstar, 2015).
2015 - 2016 Values

August 2015 - January 2016 for

Boots and Pumps

Gross Margin ($)

$147,134,391.00

$87,485,314

Gross Margin (%)

40%

42%

$397,660,515

$417,543,541

Inventory Turnover

1.57

1.75

GMROI

1.84

2.00

Planned Sales

Our buying plans will focus on two major merchandise classifications for Dillards.
These classifications include womens pumps and boots for Fall/Winter 2015/2016. We expect
them to make up approximately 35% of our planned sales for the department because womens
shoes, which includes boots and pumps, make up nearly 30% of the entire footwear industry
(Hoovers Inc., 2015). Furthermore, Dillards is a store highly focused on their womens shoe
department (Phoster Industries, 2015).

% Breakdown of Planned Sales by Classification

Classification

% of Planned Sales

Pumps

17%

Boots

18%

Merchandise Classification
Sales Plan for Fall/ Winter
Classification

Pumps

Boots

Sub-classifications

Price Points

% Distribution by
Sub-Classification

heel

$49.99, $59.99, $69.99,

$79.99, $89.99, $94.00,
$95.00, $110.00, $119.00,
$129.00

40%

platform

$69.99, $79.99, $89.00,

$109.00, $119.00, $139.00

20%

wedge

$399.00, $395.00, $298.00,

$295.00, $265.00, $250.00,
$225.00, $200.00, $198.00,
$195.00, $178.00, $155.00,
$150.00, $145.00, $141.00,
$110.00, $95.00, $60.00,
$21.00

40%

ankle booties

$89.99, $99.99, $129.99,

$139.99, $149.99, $160.00,
$175.00, $200.00, $225.00,
$250.00, $298.00, $328.00,
$348.00

40%

mid-calf

$69.99, $120.00, $149.99,

$180.00, $240.00, $250.00

35%

tall/over-the-knee

$79.99, $99.99, $149.99,

$169.99, $199.99, $229.00,
$250.00, $275.00, $295.00,
$398.00

25%

Our pricing strategy appeals to a moderate to upper moderate price category. We promote
over-time growth strategies by enhancing our e-commerce, customer service, as well as
achieving to reach our overall goal to increase sales; specifically in shoes. Dillard's has managed
to utilize their sales by launching partnerships along with product marketing strategies such as
offering their merchandise in shopping malls and open-air centers (Vault, 2015). We pride
ourselves on the quality of our merchandise and customer satisfaction. Furthermore, evaluating
that we must remain competitive due to our superb abilities in purchasing and marketing
throughout the market.
Market Research
Our business plan reflects buying for a particular location of Dillards located in Auburn,
Alabama at the Village Mall at 1627 on Opelika Road. The two competitors, Belk and J.C.
Penney, are located inside the same shopping mall. Out of the three department stores assessed,
we found that Dillards has the best selection of womens shoes based on its diverse assortment
for any occasion. They carry the broadest selection of more recognizable name brands, such as
Frye, Steve Madden, and Michael Kors. Other popular brands would include Jessica Simpson
and Ugg. For this location, the appealing store atmosphere excites the customer with strong
visual merchandising. The store has bright lighting, interesting advertising, and well designed
color coordinated displays. Customer service was superb and the department had an overall
organized feel. We have a pricing strategy appealing to a moderate to upper moderate price range
with a separate additional, smaller promotional sales selection as well. Our main classifications
for the shoe department would include pumps and boots. With the pumps classification being
divided into subclassifications of heels, platforms, and wedges. Our subclassifications for boots
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include ankle boots, mid-calf, along with tall or over-the-knee boots. There was a large focus on
heels and ankle to mid-calf boots overall, with specialty brands like Jessica Simpson focusing on
dressier selections. The store feels approximately evenly divided between the subclassifications.
Dillards stands out due to its superior service, strong visual merchandising, and customer
satisfaction.
Belk has many comparable brands to our store but has a different atmosphere. While the
Auburn location struggles with visual merchandising, theres an obvious organization and layout
throughout the department. It did not have the same well-kept appearance as Dillards, with
respect to their messy displays and limited signage. Customer service was very limited at Belk.
They had a less evenly distributed assortment throughout their subclassifications, focusing
heavily on boots for their department selection. Their target customer is a moderate
price-oriented consumer who seeks fashionable and recognizable brands. Main recognizable
brands include Lucky Brand, Frye, and Nike.
Despite carrying a few of the same brands, such as Nike and Converse, J.C. Penneys
womens footwear department struggles at the Auburn location with little to no customer service,
disorganized visual merchandising, and an overall small assortment. J.C. Penney compares to
Dillards in that it offers multiple clearance items; however, Dillards focusing much less on
markdowns than J.C. Penney. Dillards has the opportunity to attract their moderate
price-oriented consumer by offering a wider selection of comparable, fashionable brands. J.C.
Penneys main brands represented inside the store include their private brands Arizona Jean Co.
and St. Johns Bay. It can be noted that J.C. Penney strongly communicates the fact that their
footwear online presence is much stronger than that of their brick and mortar locations.

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Our tables below help to illustrate the findings of the buyers research trip to Auburns
Village Mall. These figures show the main popular brands and the most frequently found price
points. Additionally, pie charts from information gathered on the visit show the main breakdown
of classifications found in Dillards, Belk, and J.C. Penney by percent.

Popular Brands Found Shopping at Auburns Village Mall

Store

Main Brands

Dillards

Michael Kors, Nike, Frye, Hunter, Jessica Simpson, Steve Madden, Ugg, Converse, Vince
Camuto, Antonio Melani, Gianni Bini

Belk

Michael Kors, Nike, Frye, Ralph Lauren, Jessica Simpson, Tommy Hilfiger, Lucky Brand

JCPenney

Arizona Jean Co., St. Johns Bay, Converse, Nike

Popular Price Points Found Shopping at Auburns Village Mall by %

Store

$0-$25

$26-$50

$51-$75

$76-$100

$100-$150 $150-$200

$200-$250

$250+

Dillards

0%

10%

15%

40%

15%

10%

5%

5%

Belk

0%

15%

20%

35%

20%

5%

5%

0%

15%

40%

30%

15%

0%

0%

0%

0%

JCPenney

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For the Fall/Winter 2015 season, the womens footwear market looks positive due to the
upcoming holiday season. Some meaningful upcoming trends that our customers will look for
are mary jane styles, low ankle boots, dOrsay pumps, over the knee boots, and kitten heels
(weconnectfashion-cite!). Both classifications will reflect other popular trends, such as the use of
suede, fur, laces, and animal skin leather (amfu). Our target customer will look to us to represent
these trends in our Fall/Winter inventory.
Classification for Pumps
The womens shoe departments planned sales figure for 2016 is calculated according to
last years total department sales, previously provided by the instructor. With a goal to increase
5% from last year, the total department sales rise from $378,724,300 in 2015 to $397,660,515 in
2016. As overall sales increase, gross margin for the department also rises from 40% to 42%.
Within the womens shoes department, the heels classification holds 12% of total department
sales for this year and last year. The percentage is based on figures provided by previous industry
research regarding classifications within the womens shoes department (Cogitamus Consulting,
2009, p. 28). Planned monthly sales for heels gradually decreases from August to January, as this
type of shoe become less appropriate for colder weather. There is also a gradual increase in
sales-stock ratio as the months progress, as this figure has an inverse correlation with monthly
sales. Markdowns at 18%, discounts at 1%, and shrinkage at 1.15% will make up total
department reductions of 20.15%. Total department reductions is determined based on similar
average figures provided by the FOR/MOR (1998, p. 62-63). Due to an actual average inventory
at retail of $12,716,383, the actual inventory turnover reaches the planned inventory turnover of

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3.75 for heels. Within the classification, planned GMROI is 2.72, given 42% gross margin. For
every dollar invested in inventory, there will be $2.72 earned.
Pricing Plan for Pumps
The forecasted pricing outline for the department plans an initial markup percentage of
51.73%. This percent indicates that there will be an initial markup on the merchandise received
within the store to ensure a gross margin figure that will exceed expenses and provide a preferred
profit for the company. Markdowns take place at the beginning of every month beginning on the
1st. With the 18% markdown on heels determines the earliest time period to reduce the price as
well as the markdown price. Following the initial markdown, the merchandise will continue to
have adjustments in price in accordance to the amount of sales made within this classification.
Ensuring that there is no excess stock at end of the season as well as new product introductions
being advertised ahead of time (Leith, 2011).
Classification for Boots
Based on last years sales figures given by the instructor, the total womens footwear
departments season planned sales is $378,724,300. Season planned sales for the classification,
boots, would be an estimated 10% of planned season sales for the department based on The
Global Footwear Markets report on footwear from August 2009; boots accounted from 7-9% of
consumer penetration levels for womens footwears between the years 2004 to 2009 (Cogitamus
Consulting, 2009, p. 28). In order to determine monthly planned sales by percent of classification
sales and by dollar amount, factors like customer traffic and weather are considered. Thus,
monthly planned sales will be lower in August when its warmer, but highest at 25% in
December with the holiday season and the colder temperatures. Overall, department reductions

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will increase by less than a percent from 2015 to 2016. Planned reductions for each month reflect
the larger sales that retail stores have during the back-to-school season and the holiday season,
such as Black Friday in November. Based on industry trends, 3.75 is an ideal inventory turnover
to strive for in 2016. The boots stock-to-sales ratios for the six months reflects the inverse
correlation between planned sales and stock-to-sales ratios; as planned sales increase, the ratio
will decrease. As consumer demand increases, so does stock-to-sales ratio. BOM will be lowest
in the months with little consumer demand for boots, such as August. Higher sales for a month
lead to more purchases causing higher EOM values. By comparing Januarys sales to its most
similar sales month, October, its EOM can be approximated at $11,500,000. The average
inventory at retail for these six months is found through averaging the BOMs and the final EOM
values of the planned stock. To find average inventory at cost, the value of average inventory at
retail is calculated by multiplying with gross margin percent An actual planned inventory
turnover of 3.74 reflects the high projected consumer demand for the six months. Planned
purchases at retail and cost reflect the inventory turnover and planned sales values for each
month. Months with lower stock-to-sales ratios had higher planned purchases, such as
December. Gross margin percent is intended to increase from 2015 to 2016 by 2% to reflect
overall department growth and improvement. GMROI for the classification reveals for every
dollar invested in inventory, $2.71 will be the planned return.
Pricing Plan for Boots
The forecasted pricing outline for the department planned an initial markup percentage of
51.73%. This percent indicates that there will be an initial markup on the merchandise received
within the store to ensure a gross margin figure that will exceed expenses and provide a preferred

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profit for the company. Markdowns take place at the beginning of every month beginning on the
1st. With this 18% markdown on boots determines the earliest time period to reduce the price as
well as the markdown price. Following the initial markdown, the merchandise will continue to
have adjustments in price in accordance to the amount of sales made within this classification.
Ensuring that there is no excess stock at end of the season as well as new product introductions
being advertised ahead of time. Although boots will be continue to sell throughout the season,
projections have been determined that the markdowns for boots will be limited to only older and
rapid selling styles. Only newer merchandise will be left at regular price to ensure growth in
sales (Leith, 2011).
Dillards' Assortment Plan for Pumps for August 2016
By utilizing our projected BOM for August of 2016, we determined the distribution for
multiple pumps for the womens footwear department. We projected a BOM amount of
$11,548,061.00. While it varies by brand and category, Dillards generally carries sizes 5.5-11
in stores. For boots, we separate the styles by boot height allows us to categorize them into
booties, mid-calf boots, and taller boots. For colors, the more popular colors include tan, brown,
black, red, and grey as they appear most frequently in inventory. Our price points reflect
Dillards' Assortment Plan for Boots for August 2016
The BOM for August 2016 for the classification boots is $4,970,756.00. Our pumps
assortment factors vary from boots due to their functionality and aesthetics. Again, sizes vary by
brand and category, but we generally carry sizes 5.5-11 in stores. We categorize pumps by heel
shape including heels, platforms, and wedges. Consumers look for these popular styles in a few
main colors, which include red, tan, black, blue, and grey. Price points attract consumers looking

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for quality merchandise with good value at $59.99, $69.99, $79.99, $110.00, and $139.00. These
prices allow for consumers to find the right shoe at the right price for them.

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The Street. Retrieved from
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-e-commerce-push.html
Brock, R. (2015, August 13). Dillard's reports lower profits Of $30 million. Retrieved from
http://talkbusiness.net/2015/08/dillards-reports-lower-profits-of-30-million/
Cogitamus Consulting. (2009). The global footwear market: athletic and non-athletic shoes.
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8dd77.html
Leith, P. (Ed.). (2011, September 2). How markdown planning can help retailers increase sales,
improve margins and better manage product lifecycles. Retrieved from
http://www.sdcexec.com/article/10324365/the-upside-to-markdowns

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Lewis, M. (2014, May 17). Dillard's is a retailer doing it right. Retrieved from
http://www.fool.com/investing/general/2014/05/17/dillards-is-a-retailer-doing-it-right.asp
x
Moran, A. (Ed.). (1998). FOR/MOR 1998 edition the combined financial, merchandising, &
operating results of retail stores in 1997 (73rd ed.). Gainesville, FL: National Retail
Federation.
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http://financials.morningstar.com/ratios/r.html?t=DDS
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http://phosterindustries.com/case-studies/dillards-department-stores/
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