CompanyXYZ: The US Apparel Retailer’s “Three-M’s” Strategy
Case Assignment Question:
Retailer’s demands for leaner inventory and faster fashion deliveries have impacted CompanyXYZ’sbusiness model with greater urgency and intensity than ever before, requiring a sea change in operatingthis wholesale business. To overcome these problems, William L. McComb, the CEO of the company,initiated ‘the three M’s’ strategy – multi-brand, multi-channel and multi-geography – to offer apparel to itscustomers across a range of styles, price points and channels of distribution. However, analysts areskeptical about the success of McComb’s strategies. We need to provide our judgment with justifications.
During the mid-2000s, CompanyXYZ, a US apparel retailer, was whacked by the changing dynamics in theapparel industry. The industry has been undergoing many changes, due to consolidations among major departmental stores and the stores preferring their own private labels. These changing market trends forcedcompanies to rethink ways of doing business. As a result, companies implemented strategies to expandtheir brand portfolios and widen the distribution network across channels. To bring back its lost glory,William L. McComb, CompanyXYZ’s CEO, initiated ‘
– multi-brand, multi-geographyand multi-channel, through which he hopes to win out in the fiercely competitive apparel industry.
The trends affecting the US apparel industry are:
Due to the fast changing fashion trends, apparel retailers – who used to carryhuge inventory – saw their sales decline. Customer’s buying patterns have also changed and nowthey purchase close to their needs. As a result, apparel retailers need to shorten the design,development, production and distribution cycles.
Firms that are capable enough to invest in technology are enjoyingcompetitive advantage, whereas smaller firms that cannot are jostled.
Since 1994 apparel prices have been declining, creating margin pressures for most of US retailers. Factors forcing the prices to come down include increase in imports, retailpromotions and increase in discounter’s market share.
With the rising competition and bargaining power of the retailers, US apparel-makersare forced to cut costs. As a result, they had to look for means to cut costs and outsourcingproduction was a possible way out. But the trade regulations, which put restrictions for free trade,acted as a barrier. However, when quota restrictions ended in 2005, makers could opt for any low-cost country as their production house.