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Harrington Collection

Case Analysis
Trent Halverson, Aaron Kinning, Erin Moller, Alyssa Nelson

Internal Analysis
Overall

Objective: To provide preeminent brands for women desiring elegant, high-end fashions.
Strategy: Differentiation

Overall

Internal Analysis
Target

Market: Affluent, fashionable, collegeeducated, professional women ages 25-60.

Each division focused more narrowly on a specific TM.

Positioning:

Lifestyle branding strategy, wearing the label is a sign of status

Product
Objective:

To provide the highest quality clothing that offers a lifestyle of prestige and status
Product Differentiation

Strategy:

Tactics: All

4 divisions include: Harrington Limited, Sopra, Christina Cole, and Vigor. No private label brands.

Price
Objective:

To increase market share and profit

margins
Strategy: Tactics:

Skimming

Offer premium prices to support status of

brand.

Harrington Limited: $500-$1,000 Sopra: $400-$800 Christina Cole: $300-$700 Vigor: $150-500

Promotion
Objective:

To provide convenience to retailers, and help them obtain and sell the brand
Push

Strategy: Tactics:

Retail sales force well trained; Offer channel partners more support and incentives than most manufacturers; Offer retailers valuable inventory and sales advice.

Channel
Objective:

To provide convenience to both retailers and final consumers by offering the Harrington collection at only the best retailers or directly through e-commerce Dual channel strategy

Strategy:
Tactics:

Company owned retail stores (20% sales); upscale department stores (60% sales) and specialty stores (40% sales); e-commerce

Performance
Sales
$2,433,900,000 Total

in retail sales

revenue: $1,344 million

Manufacturing Group: $538 million Retail Group: $806 million

Total

Profit before tax: $118 million

Performance
Market

Share:

2007 womens apparel industry = $133 billion in retail sales Harrington Collection held approximately 1.83% share of total womens apparel market in 2007

Trends

(CAGR):

Average Growth Rate in U.S. retail sales of womens apparel 2002-2007: 4.66% (ex 1, p 240)

External Analysis
Political/Legal/Regulatory:

Textile import quotas from

China eliminated in 2004.

Economic:

The economic downturn that began in the early 2000s significantly impacted the industry for U.S. womens apparel. Consumers had become very price sensitive- half of all apparel purchases were sold on sale.

External Analysis
Technological:

E-commerce.

Social/Cultural:

Women were buying more casual clothing. More dollars were being spent on technology products, home design, and leisureactivities. Fast changing fashion product life cycles consumers tastes constantly changing.

Competitive Analysis Porters Five Forces

Macro (5 forces)
Threat

of New Entrants: High- Due to the ease of outsourcing production, low barriers to entry

Bargaining

Power of Buyers: ModerateManufacturers integrating forward with companyowned stores; but department store mergers gave more bargaining power to suppliers

Porters Five Forces (cont.)

Bargaining

Power of Suppliers: Moderate- willing and cheap labor overseas. More retail outlets integrating backwards (providing margins of about 10-20% higher). of Substitutes: High- easy to imitate designs at lower costs
of Rivalry: High- many brands competing for shelf space and market share. The industry was moderately concentrated.

Threat

Intensity

Competitive Analysis
Micro

Leading brands: Jones Apparel Group, Liz Claiborne due to their diverse portfolios Both outsource production of apparel overseas Both involved in design, marketing, wholesaling, and retailing of womens apparel Jones: 396 specialty retail stores Brands include: Jones New York, Nine West, Anne Klein, Gloria Vanderbilt, Kasper, Bandolino, EvanPicone, Energie, Enzo Angiolini Claiborne: 338 retail stores around the globe (201 in US) Brands include: Liz Claiborne, Mexx, Juicy Couture, Lucky Brand Jeans, Ellen Tracy

Market Segments
Womens apparel products could be divided into six general categories based on quality and price:
1) 2) 3) 4)

Haute couture Designer Bridge Better

5)
6)

Moderate
Budget

+ Market Analysis
Division Product Line Focus Designer collection Product Classificatio n Designer Retail Price Range $5001000+ Target Customer Competitio n Market Share 20% Harrington Limited Sophistic Donna ated Karan, St. Elegance; John women 35-60 Status Seeker; women 35-60 Office Chic; women 30-55 Trend Setter; women 25-50 Diane von Furstenber g, Kay Unger New York Tahari, Dana Buckman Theory, BCBG Max Azria

Sopra

Evening Wear, Dresses and suits Career wear

Bridge

$400-800

5%

Christina Cole

Bridge

$300-700

8%

Vigor

Career Wear

Better

$150-500

7%

Market Analysis
Channel Retail Sales
Percent of Womens Apparel Retail Sales
3% 8% 19% Other 11% Discount or Mass Merchandisers Specialty Stores Department Stores 59%

Warehouse Clubs and Supercenters

Case Brief
Problem: How should Harrington Collection put forth their new active wear line?

Alternatives

Option A: Better pricing with same channels

Option B: Moderate pricing and expand channels

Criteria
Maintain
Increase Break

sophisticated, high-class status

margins

even in first year

What is a unit?
Since

active wear is sold as separates, the ratio of hoodies to tee-shirts to pants was not equal.
one unit = hoodie + 1.5 tee-shirts + 1

Therefore

pant

Evaluation of Alternatives
Option A
Better Pricing, same channels

Break Even = 269,255 units ($25,579,186.45) Profit Margin = 18% Brand image = High quality, fashionable merchandise with status branding ($220/unit) Assumptions

Higher prices consistent with desired brand image Smaller Market Size

15,000,000 X .4 X .07= 420,000 units

Less distribution outlets (less promotion costs)

+ Evaluation of Alternatives
Option B
Moderate Pricing, more channels

Break Even = 390,069 units ($31,205,504.04)

Profit Margin = 15% Brand image = Prestigious brand image at risk with lower prices ($187/unit) Assumptions

Larger market size

15,000,000 units sold X .6 X .07= 630,000 units

Higher fixed costs More competitive market Might not receive 7% market share

Option A Contribution Wholesale price "Unit" Less total Variable cost per "unit" Contribution per "unit" Breakeven: Fixed annual costs Contribution per "unit" Breakeven "Units" X Wholesale price per "unit" Total Breakeven Dollar Sales $ $ $

Option B 95.00 ($220 Retail) $ 46.57 $ 48.43 $ 80.00 ($187 Retail) 46.57 33.43

$ $ $ $

13,040,000.00 48.43 269255 95.00 25,579,186.45

$ $ $ $

13,040,000.00 33.43 390069 80.00 31,205,504.04

Profit Margin: Revenue Less fixed annual costs Less total variable costs Profit before tax Profit margin before tax $ $ $ $ 39,900,000.00 13,040,000.00 19,765,200.00 7,094,800.00 18% $ $ $ $ 50,400,000.00 13,040,000.00 29,647,800.00 7,712,200.00 15%

Recommendations

Overall Objective: To introduce a brand new active-wear line in the Vigor division to increase margins and break even in the first year
Overall Strategy: Differentiation

Target Market: Women 25 to 50 seeking fashionable and comfortable active-wear

Product

Objective: To provide comfortable and fashionable active wear with superior styling, fabric, and fit to consumers
Strategy: Product Differentiation Tactics: Hoodie, Tee-shirt, and Pants

Price

Objective: To increase margins to 18% and portray high quality active-wear via prices
Strategy: Price Skimming Tactics:

Hoodie = $100 retail Tee-Shirt = $40 retail Pants = $80 retail

Promotion

Objective: To increase awareness of the new product line with both retailers and final consumers
Strategy: Push Tactics: Personal selling, fashion shows

Channel

Objective: To introduce the new active-wear line in Vigors current retail outlets
Strategy: Direct and Indirect Tactics: Department Stores, Specialty Stores, Company Owned Stores, E-commerce site

Evaluation and Control

Product Perceptions:

Measure: With each receipt of an active-wear purchase the consumer will be asked to fill out a survey about the product. Six months later they will receive a follow-up survey of performance Implement: Based on the results adjust accordingly for next product offering

Margins:

Measure: Overall profit margins for the first year Implement: If margins are not at 18%, look to decrease production costs and increase sales training. If margins are above, consider expansion of line into new colors and styles and increase promotional efforts

Evaluation and Control

Awareness:

Measure: Survey TM consumers about product knowledge Implement: If awareness is low, consider placing more emphasis on promotions and personal selling. If awareness is high, continue promotional efforts and consider cutting back

Retail outlets:

Measure: Measure sales in each outlet. Implement: When sales are high with a certain retailer, consider expanding into similar stores and vice versa.

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