NEW YORK — Limited Brands is on the offensive.
After closing 1,700 stores in the last eight years, Limited has embarked on a series of major strategic and philosophical shifts that, according to its chairman and chief executive Les Wexner, entail:
This story first appeared in the October 22, 2003 issue of WWD. Subscribe Today.
- Seeking third-party brands for Victoria’s Secret and Bath & Body Works, rather than relying only on its own product development
- Reducing the incessant price promoting and couponing, and staging fewer sales with more impact.
- Generating hype around store openings, rather than the soft openings of the past
- Stretching the reach of the divisions to categories and prices that heretofore were considered out of character, and implementing practices based on those from other industries like the fast-food sector, which glorifies restaurant openings.
- “Fleet optimization” to enlarge and maximize stores at the top 160 malls.
Of the company’s plans to add other brands, Wexner —speaking at Limited’s 2003 analysts update Tuesday in Columbus, Ohio, where the $9.4 billion specialty retailer is based — said: “If we can control brands through our channel it is an interesting proposition for Victoria’s Secret.” Already, Victoria’s Secret has begun selling “very expensive European lingerie in the direct channel.” It could be further exploited on line and in the catalog and ultimately by Victoria’s Secret stores.
“The notion of being close to the customer means you are close to your competitors and close to ideas,” Wexner said.
Bringing third-party brands to BBW is part of a reconceptualizing of the chain, which was originally regarded as “a 1,000-square-foot store, with Betty Crocker from the farm kind of position,” Wexner said. “That was a great position,” enabling BBW to attain a multibillion-dollar volume in 10 years. However, “it got stuck in its own warm wet diaper and liked to reflect on the golden old days,” Wexner said.
Meanwhile, the consumer became more aware of other brands. Now, Wexner views BBW as operating larger units, four times the size, and with outside brands, such as Molton Brown from the U.K., which operates its own stores in Britain and also wholesales to Barneys New York and Neiman Marcus.
“Molton Brown is a sophisticated and affordable perk at about $20. We have developed the beginning of a nice partnership.”
In personal care products, “we begin to sense that people want to see assortments. The future of Bath & Body is larger stores. In categories like hair care, I think we can have 20 brands, five are ours maybe and 15 are others. Those other brands give credibility and substance to our brands. If everything is single brand, it is kind of boring and limits the volume.”
He also noted that Express and Limited Stores have adopted end-of-season quarterly sales, in a shift from the near daily discounting and couponing they’ve conducted for years. The approach is based on Victoria’s Secret’s semi-annual sale, which Wexner characterized as “a major weapon that makes the store really stand for something.” With the change to quarterly sales at Express, “We are showing that we are willing to take a bold move to get into the future faster. When we are on sale, we will really be on sale.”
Wexner also pointed to such “gangbuster sales” as the Barneys New York Warehouse Sale, held twice a year. “It’s a happening,” he said.
“Our promotional strategies were becoming ineffective, like yelling wolf all the time,” Wexner said. “Pretty soon people don’t believe it. Having significant inventory on sale all the time was damaging the brand.” Instead, with Express and Limited Stores, the intent is to stage big quarterly sales, with clear starts and finishes, and definite volume projections. This will help create excitement around the brands, exit each season “aggressively,” and begin the next season with clean inventories, Wexner said.
Already, “There’s a hell of lot less promotional activity in the stores. We are delivering quality and value and not having to have Mickey Mouse deals.”
Regarding store openings, Wexner admitted, “We just didn’t do it very well. They were embarrassingly poor. It wasn’t an event. We are continuing to experiment so when a store opens, it really is a major marketing event so we can get to third- or fourth-year volumes in year one.”
The next big opening will be a remodeled Express store at 7 West 34th Street, which opens to the public on Oct. 31. It’s a dual-gender store, and considered a flagship. Express is continuing to shut men’s wear units, formerly called Structure, and create dual-gender units. At the 34th Street Express, a press breakfast is set for Oct. 29, and Limited is hoping to stir up as much hype there as it did when the Victoria’s Secret flagship opened last year on 34th Street and Sixth Avenue.
As Wexner sees it, grand openings of Victoria’s Secret commonly attract 200 or 300 people waiting on line to get in before the doors open. “It’s a terrific newsworthy event — ladies buying lingerie. I am really fascinated by it.”
However, Wexner said he believes that the mass media is going to be increasingly expensive, which means more local radio, print, direct mail and e-mail should be utilized. “This is a very big competitive necessity that every one of the stores gets launched” with industrial-strength hype.
In addition, Limited Brands will be seeking to draw greater attention to remodeled and expanded stores in its 160 to 180 top mall locations around the country. Capital expenditure has been increased in the past three years to $440 million from $300 million, the bulk of which is to enlarge and refurbish stores, rather than open new sites. Currently, Limited operates 3,977 units.
“What I worry about is having bad locations in real estate. Inventory is kind of like indigestion. If you make real estate errors you can die from them.” However, Limited now has a “clean portfolio of real estate, as clean as our inventories” and is working to update the fleet and aggressively expand stores. “That involves maximizing the size and volume and profit potential, center by center. This is a big damn deal. The top tier of stores, 160 to 180 locations, we are really focusing on them because they have the highest volume potential.”
During his speech, which came more in the form of a Q&A from his vice chairman, Len Schlesinger, Wexner also talked up the new Express business launched last spring, Express Design Studio. The line is for career-related sportswear, whereas Express has long been more of a chain for casual styles. Express Design Studio — which, in a break from Limited’s past strategy, is created by outside designers — has been tested in 27 stores, will expand to 100 stores in December, and rolled out to all Express stores by fall.
Pink, a younger, casual intimate apparel line at Victoria’s Secret introduced last spring, has been successful so far, Wexner said. He said Pink overlaps with sophisticated wear-to-work lingerie, but is not really targeting teens, though it is collegiate and casual. “All fashion brands have to be forever young,” Wexner philosophized. “We are seeing a younger, sophisticated psychographic. Pink is meant for somebody who has a casual young lifestyle, but people cross shop in very funny ways. A customer who buys Guerlain probably buys Bath & Body Works. The customer who has sophisticated lingerie also buys casual lingerie in her wardrobe.”
Wexner also sounded optimistic about the holiday season. “I shifted to being optimistic some time after the first of the year. Last year, I was rather conservative and pessimistic.” The economy shows “signs of motion” but things are still fragile, and that external factors, such as terrorism, conflicts in the Mideast and “the opportunity for a major catastrophe” make him feel worrisome. However, for Christmas, “We are much better prepared, the external factors are favorable this year. What we are likely to see in the fourth quarter is what we see in the third.”
He also said that after working on “defensive” tactics for the past several years — involving operational, financial and human resources improvements — he has returned to being more of a merchant.
“The difference is in how I spend my time, and that I am much better supported now. I don’t worry about inventory levels. We are tight as we should be. Operationally, the processes that have changed have been quite substantial. I am much more clearheaded,” and can think more about the next new products and new categories. “A merchant knows what people are going to want to buy and how to quantify it. There is a commerciality to it. Successful apparel designers are very good merchants. Giorgio Armani, Prada, Dolce & Gabbana know how to make money.”
As far as Limited stretching its merchandise horizons, for a new business to catch his interest, it must have $100 million to $500 million volume potential, Wexner said. “They have to be very significant from a financial point of view.”
He described Limited Brands as becoming “much more proactive than hindsighting. It feels more like we are getting it right at the first go…Now we are looking at other industries, whether it is the automobile industry or Procter & Gamble. I don’t believe every good idea comes from central Ohio or inside our enterprise.
“When you begin to play the offensive, you begin to press harder and take some appropriate risks,” Wexner said.