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Victoria's Secret made an unprecedented decision — and it might be the savviest move it's made yet
Facebook/Victoria's Secret
Victoria's Secret dominates the lingerie market. But since CEO Sharen Jester Turney abruptly left in February, the company has made several moves that have sent consumers reeling — namely, ditching its iconic catalog and dropping its famous swimwear sector.
Swimwear is, on the surface, at least, tantamount to lingerie, so this change in particular left consumers scratching their heads.
But according Gabriella Santaniello, analyst and founder of A Line Partners, nixing swimwear was a brilliant decision. It's evidence that Victoria's Secret is adapting to an evolving time.
"I think they over-assorted the stores and they probably reassessed ... Their swimwear last year was not the best performing category for them," she said, adding that it's also seasonal, whereas undergarments and athleisure apparel are not.
Facebook/Victoria's Secret
Basically, the company had too much going on and needed to trim the fat. Still, cutting such an iconic part of the brand could send a troubling signal to consumers. Was everything falling apart?
"I could see how it raises a red flag and it ... would be cause for concern for the people who are looking at Victoria's Secret as a brand and what they stand for, "Santaniello said. "But I think at the end of the day, they know where their growth opportunity is, and they see the competition out there, and for them, right now it's [time] to look inward and say, 'Okay, let’s really focus on what we do best,'" Santaniello said.
Victoria's Secret hasn't officially declared the end of swimwear, but the plan has been widely reported. It was first disclosed by BuzzFeed.
Since Victoria's Secret's core product is lingerie, it's more important than ever for the brand to zero in on undergarments, particularly since the 'in' type of bra right now is the bralette — a lacy bra without padding — something that Santaniello said any retailer could execute.
Bralettes have recently become more fashionable as more women want a natural, more comfortable look without any padding, and Victoria's Secret has been visibly promoting its version.
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With numerous companies trying to grab a piece of the lingerie market, Victoria's Secret needs to prove exactly why it's been dominating the market for so long.
"I think for them, the bigger challenge is ... they're out in the malls, they see what's going on and they see that everyone's moving into intimate apparel. Everybody’s got their hand in that pot, American Eagle [with its Aerie brand] in particular ... American Eagle by sheer size is nowhere near a formidable competitor for Victoria's Secret, but they could get there," she said.
Aerie's comparable sales grew an impressive 20% in fiscal 2015, and the retailer still has plans to grow. But it still has nothing on Victoria's Secret, which in total (including e-commerce) brought in nearly $7.7 billion in sales in fiscal 2015. At the end of fiscal 2015, Aerie's parent company, American Eagle, had brought in just over $3.5 billion in revenue, and Aerie is a fraction of that business.
BuzzFeed had reported that Victoria's Secret would be zeroing in a new activewear line in lieu of swimwear. While activewear is a saturated market, it's likely to be a stronger sell for the Victoria's Secret brand than swimwear.
Being active is becoming central to marketing the "Angels," who, as Megan Garber of The Atlantic pointed out in December, have become hailed for being "fit" versus "thin." Their athleticism, Garber explained, is a keystone of the company's marketing schemes — how strong they are, how much they work out, the arduous aspects of being an Angel.
"It's about not only being sexy, but being fit [and] strong .... Focusing on the athletic wear is a better fit for the total brand and their 360 vision of the brand than swim," Santaniello said.
Show an image of an Angel working out instead of flouncing around in a bikini? Appeal to a mindset and sell clothes.
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There's a financial boon, too. Although BuzzFeed reported that last year the company said its swimwear sales totaled $500 million, it noted they were down at the end of the summer in August. At the same time, analysts estimated that Victoria's Secret's activewear line had a $1 billion potential.
And should Victoria's Secret stop spending its time on swimwear, Santaniello pointed out the brand could focus on its beauty section, a sector with a much higher margin. Further, that appears to be a part of Victoria's Secret's plan; when L Brands, Victoria's Secret's parent company, announced it was streamlining and restructuring its business, the company noted it would turn itself into three core businesses — lingerie, beauty, and PINK, which is Victoria's Secret's younger sister brand.
Despite criticism surrounding its marketing schemes, Victoria's Secret doesn't have to worry about losing its place as of now. Store sales totaled over $6.1 billion in fiscal 2015, during a time it's practically impossible to get people into stores thanks to the rise of e-commerce and the death of malls. In total, the company's sales were nearly $7.7 billion.
According to IBIS World, it holds 61.8% of the lingerie market. Amid a troubling time for traditional retailers, no one is impervious to troubles, but those that fail to evolve are more at risk.
It's evident Victoria's Secret knows that.
"Coming off a record year, now is the best time to make improvements … going from best to even better," recently appointed CEO Les Wexner said earlier this month.
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