At Vera Bradley, it’s year two of the three-year “Vision 2020” strategy and the focus is on targeted marketing, picking up the pace of innovation, category growth and collaborations.
The latest hookup is with Crocs. It’s a capsule collection blending Vera Bradley’s signature bright florals and paisleys with Crocs’ inexpensive footwear designed for comfort. Twelve styles began selling Monday at Vera Bradley stores, verabradley.com and crocs.com.
Last month, Vera Bradley bought 75 percent of Creative Genius Inc., which operates Pura Vida Bracelets. The $75 million deal, bringing Vera Bradley into the jewelry business with string bracelets, anklets and stackable rings, suggests additional acquisitions to further diversify and grow the business.
“Vera Bradley is really a lifestyle brand and our customer continues to ask us to expand to new categories and do new things,” Robert Wallstrom, president and chief executive officer of the Fort Wayne, Ind.-based Vera Bradley, told WWD.
“Our primary focus in the short and moderate term is on continuing to strengthen and grow both the Vera Bradley and Pura Vida brands and businesses,” Wallstrom said. “Should we consider another acquisition in the future, it would have to be the right fit, with similar characteristics to Pura Vida — a great culture, an expanding and vibrant business and a complementary lifestyle brand bringing with it specific strengths and capabilities.”
Vera Bradley and Crocs, said Wallstrom, are “complementary, with unique products, niche businesses and very loyal customers. Both are casual, comfortable, affordable brands. We thought one-plus-one could equal three in this.”
The $400 million-plus handbag, accessories, travel, gift and home business has been evolving since Wallstrom joined the company in November 2013. The former Saks Fifth Avenue and Saks Off 5th executive has been modernizing the Vera Bradley brand image while striving to maintain its heritage traits. Backpacks and lunch bags; travel bags including duffel bags, and everyday handbags and fashion accessories, in floral, paisley and medallion designs, represent the core of the business, though updated solids, particularly grays, purples and pinks, have found a place.
Fifty percent of the product is in cotton, though nylons, microfibers, denims and other new fabrics are also finding the place.
A performance twill that Wallstrom described as lightweight, water-repellent and durable is being tested for an August launch. “We have other product launches in the pipeline, playing on this performance category,” Wallstrom said. “There are going to be new lightweight fabrics and other new things coming up. Performance twill is the first.”
He said the Crocs collaboration reflects the ongoing strategy that has seen partnerships with Gillette Venus razors sold at Target; the New Hope Girls nonprofit organization in the Dominican Republic; Disney, with a limited-edition novelty pattern called Mickey’s Paisley Celebration, and even Starbucks in Asia, where Vera Bradley patterns appear on Starbucks mugs, tumblers and cups and other items.
With collaborations, “It’s about driving newness with limited collections, creating excitement and getting the consumer to look back at the brand in a fresh way,” Wallstrom said. “This year, we have a very full robust pipeline and we’ve put a team behind it to actively be pursuing it.” In the works are a partnership involving a well-known sports figure; co-branding with an animated character, and a tie-in to Veterans Day to support the military.
According to Wallstrom, “The biggest thing happening in retail is micro-segmentation, whether it’s micro-segmentation in assortment, micro-segmentation in marketing, or micro-segmentation in store format. That’s why collaborations become so important because everybody is looking for newness and if you get a new partner, it’s much easier to come up with what’s new. It’s very hard to reinvent yourself every day. Being in these different categories helps bring new customers into the brand and reinvigorate existing customers.”
In a progress report on Vision 2020, Wallstrom explained that year one involved restoring the 37-year-old brand to financial health by removing clearance activity and cutting costs. “We took $40 million out of the volume by taking clearance out. We saw our full-price business over the first year go up by 20 percent.
“The second thing we did was getting our expense structure in place. And the third piece, in some ways the most important piece, long-term, was to rebuild the design and product development teams, so the product would be much more consistent, would resonate with our heritage customer and at the same time bring innovation to market. Between print and design, we brought in a couple of dozen people. Beatrice Mac Cabe, our chief creative officer, was brought in about two years ago to specifically do that. We brought in some outside talent and built up a strong technical team in design, pattern work and product development from places like Coach and Vince Camuto.”
Wallstrom said more than $25 million in annual costs were cut, through some staff reductions, process improvements, reduced marketing and full-price store closings. He’s looking to cut another $5 million or so, primarily related to store closings. Last year, net income reached $20.8 million, up from $7 million the year before. There was a small decline in revenues to $416.1 million from $454.7 million.
In the first quarter of this year, the customer count grew by low double-digits, which Wallstrom attributed to product innovation, collaborations with third parties and better marketing.
“The number-one area where we are getting growth is with reactivated customers,” said Wallstrom. “Absolutely, we will be able to retain those customers pulled into the business. We are seeing all the investment in more analytical, data-focused micro-marketing paying off.” He considers loyal customers those who shop the brand for over a year, and make two or three purchases in that time frame.
“As we move into year two of Vision 2020, the focus is on demonstrating growth,” Wallstrom said. “We got out of the first quarter with a 5 percent comp growth and very broad growth across categories and channels. We are demonstrating growth, but I don’t think we can declare victory. We’ve got to get through a full year to continue to demonstrate the kind of growth we’ve seen.
“The number-one thing we are working on in year two, in addition to general growth, is making sure our marketing is becoming very effective. We brought in Daren Hull as chief customer officer to become a data-centric, responsive, marketing-driven organization. Our e-commerce business grew almost double-digits in the first quarter, which he is in charge of. He has built a data science team of five people who are really looking at what’s happening with the customer, how we target her and how we learn.
“Marketing used to be about the idea, the creative execution and the picture. Now it’s turned into understanding who the customer is — how we bring communication tailored specifically for the individual customer that engages her and gets her to buy.” It’s mico-segmentation, working with Google, Facebook, Instagram, digital ads, e-mail and utilizing data.
Another change is in sourcing outside of China. “It’s a big challenge, not a crisis,” Wallstrom said. “We ended last year 60 percent sourced out of China. By the end of this year it will be 25 percent.”
A few years ago, the sourcing team identified a risk with China based on rising prices, shifts to high-tech and China outsourcing its low-end manufacturing. “Our team started diversifying the factory process three years ago. When tariffs came in, it just forced us to accelerate it, but it’s not like we started when the tariffs were announced. We were well on our way.”
Vietnam will be the company’s primary sourcing country, supported by Myanmar and Cambodia. “We are finding that a lot of our Chinese partners are opening factories in these areas, so they already know the product and the manufacturing. They bring in higher-quality equipment for new factories. We are not seeing a quality issue. We are seeing lower productivity coming out of the factories, but with time that will change.”
Wallstrom acknowledged, “Logistics are longer. It probably takes an average of about 30 days or more when you are running outside of China as opposed to inside.”
As part of Vision 2020, the company is closing about 40 regular-priced stores, and will end up with about 80 by the end of 2020. Currently, there are 97 stores in operation.
There are also 60 factory outlets, ranging in size from 2,000 to 4,000 square feet. Six will open annually through the next two years and some of the most productive locations are being expanded.
Year three of Vision 2020 will focus on continuing to grow the Vera Bradley and Pura Vida brands, furthering product and fabric innovations, and refining the marketing.
The company will also test regular-priced stores in smaller and larger formats. Right now they’re mostly 1,500 to 2,000 square feet.
“I think of retail as the physical manifestation of the brand,” said Wallstrom. “It can be pop-ups. It can be large stores. It’s not a static model anymore. It’s a very dynamic model, which is a much harder way to operate. We are in the middle of experimentation ideation. We did open up a 200-square-foot pop-up in the Washington, D.C., train station. It was so small and so micro, and a little hard to leverage the payroll. But there have been a lot of good learnings,” about micro-assorting, operating in a transportation hub, and utilizing a vending machine. Some regular-priced stores could emphasize one category, such as handbags, over another category, depending on selling trends.
In Vision 2020, Wallstrom said, “Our goal is to return to positive comparable sales growth this year, but we’re not turning into a high-growth vehicle. This will be a real learning year and there will be a lot of experimentation in the next year of Vision 2020.
“It’s been a very purposeful one, two, three approach.”