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MANAGEMENT OF CHANGE | GROUP 2
Candice Swanepoel Victoria’s Secret Angel Victoria’s Secret Fashion Show 2011
Victoria’s Secret is an American retailer of lingerie, women’s wear and beauty products. It is the largest subsidiary of Limited Brands with sales over 6 Billion USD. The brand has been very creative in keeping itself relevant to customers and redefining the category as such.
AAQUIB AL HOSSAIN ABHISHEK BHATIA AJITABH CHAUDHURI ANIKET PATKI
one should know that the average number of viewers for one of the highest rated sitcoms aired over CBS. who are usually among the top supermodels in the world and they have helped Victoria’s Secret earn a tremendous following from the American teenage girls and young women. unofficially termed as the largest fashion event in the world was seen by over 10. garners only around 6-7 million viewers in the prime time slot. and women’s lingerie was just considered as an aide for comfort (or as Victoria’s Secret would term: “Boring”). How I Met Your Mother. Victoria’s Secret Facebook page has over 20 million users and its website has a very high Alexa ranking (one of the highest visited corporate sites. the annual Victoria’s Secret Fashion Show was telecasted across America over the prime time channel CBS.) WHY VICTORIA’s SECRET? “It’s amazing what they can do with a pair of bra and panties”:Doutzen Kroes (Supermodel and Victoria’s Secret Angel) On November 9. It is also renowned for its popular brand ambassadors famously termed as the MANAGEMENT OF CHANGE GROUP 2 REPORT Although enjoying a great status now. the company has currently the largest share in the lingerie market in US. the market was cluttered. With some innovative marketing. when Victoria’s Secret entered. Victoria’s Secret was initially a brand established for women’s lingerie. Victoria’s Secret has blossomed over the last 3 decades to become the fastest growing subsidiary and largest contributor to its parent company Limited Brands with a revenue over 6 billion USD. The show. 2011 in New York City. To understand the value of the number.3 million people. 2012 VICTORIA’S SECRET TO SUCCESS Victoria’s Secret Angels.August 22. Page 2 . Established only in 1977. distribution and supply chain strategies. To have grown in an industry which was not openly discussed. The company has over 1000 stores across different parts of US. Victoria’s Secret has performed exceptionally well to change the way the category is perceived and also employ a strategy which differentiates itself significantly to keep it as the market leader.
yet socially acceptable settings. However. Popularity of the brand amongst men was high as Victoria’s Secret provided them a welcoming environment to buy and also educated them about lingerie and how to make a choice. This was the genesis of the two separate divisions: The Catalog (Present Day Victoria’s Secret Direct) and The Stores (Present Day Victoria’s Secret Stores). Raymond also popularly introduced a mail order catalog in the following year to sell the lingerie under the Victoria’s Secret brand. Raymond thus founded Victoria’s Secret in 1977 with the vision of creating an appealing shop with a welcoming stylish décor inspired by the Victorian era.August 22.000 in its first year of operations. The response to Raymond’s idea had been positive and Victoria’s Secret had earned $500. The change led to doubling of catalog sales within a year to a value exceeding a million USD. BREAKING THE CLUTTER ORIGIN OF A MULTI BILLION DOLLAR IDEA The story of Victoria’s Secret’s origin is an interesting one. The catalogue telephone operators were trained to be patient and helpful to the male customers who formed a sizeable portion of the customers calling for help. It was at this time that Raymond sold the company for 4 million USD to Leslie Wexner. this concept had not taken off with women although being a hit amongst men To develop the brand following amongst women. Thus Fedus believed in importance of customer education and built a telephone operating team to cater primarily to embarrassed men who were attempting to purchase lingerie as gift items for their wife/ girlfriends. Wexner also strongly believed in the catalog business of Victoria’s Secret. Wexner thus hired CYNTHIA FEDUS and made her the chief executive officer of the Victoria’s Secret Catalog operation. focus was shifted to building Brand identity. CEO of Limited Brands (Hoovers) CYNTHIA FEDUS’ VISION FOR VICTORIA’S SECRET CATALOG Cynthia Fedus as the chief executive of Catalog Division pushed for Customer education and brand identity building. a Stanford graduate found it highly embarrassing to shop for lingerie for his wife in austere surroundings. Roy Raymond. Page 3 MANAGEMENT OF CHANGE GROUP 2 REPORT . It had 5 stores under its name and its 42 page mail order catalog was earning 6 million USD per year by 1982. 2012 VICTORIA’S SECRET TO SUCCESS UNDER LIMITED BRANDS Leslie Wexner carried forward the Victoria’s Secret idea and invested money in the concept to create a power brand. The lingerie was also offered in a variety of designs and styles to provide choice to women while shopping and boost sales. More stores were built on similar lines with Victorian era design and wooden paneled walls to make the décor inviting for men. The shop’s design was meant to make men comfortable while shopping for lingerie with or in absence of their better half. Fedus changed the focus in the catalog from steamy shots of men and women to that of women posing alone in romantic and seductive.
Nichols developed relations with reliable vendors such as Vanity Fair and Hanes. Nichols also appointed a person from Marks and Spencer for quality management. Victoria’s Secret was a premium lingerie brand and quality was one feature that could not be compromised upon. Having obtained the right vendors. To ensure quality.. Later on. Nichols achievements during her stint as an EVP took Victoria’s Secret in the top 10 apparel brands in the US. however the quality did not back up the message Grace Nichols was the executive Vice President of Victoria’s Secret Stores and held the position from 1986 to 1992. The person was responsible for assuring quality work by suppliers as per the contractual agreements. Nichols hence started the system of truly developing the quality private label of MANAGEMENT OF CHANGE GROUP 2 REPORT Page 4 . 2012 VICTORIA’S SECRET TO SUCCESS Victoria’s Secret. Nichols pushed for increase in Stores and communicating the message. In the beginning stages. they were convinced later with the results. Victoria’s Secret before Nichols had a 5 member team in the Stores division who were responsible for obtaining merchandise. She convinced these major suppliers to remove their tags and name them as Victoria’s Secret by assuring them considerable sales. The first being poor vendor choice and the second being lack of quality testing. the Company had begun to face issues with quality. Victoria’s Secret had mostly made use of designs which were knockoffs from other popular brands. Mrs.August 22. which although the suppliers were reluctant about. She identified two reasons for the lack of quality. The marketing strategy had worked effectively to establish a premium image. Nichols next step after laying the building blocks for private label creation was to create the image of Victoria’s Secret lingerie as an extension to wardrobe. Victoria’s Secret sourced designs from various vendors.Nichols known for her outgoing nature. Hence Fedus’ move to focus on women and increase revenues had paid off. Nichols went on an average of creating 50 stores every year. took the problem head on. Having developed the supplier database. GRACE NICHOLS: THE SAVIOUR In the nineties. In fact the same theme has carried onto present day catalogs. These functionalities were weak in Victoria’s Secret as the two primary divisions were catalog and Stores whose prime responsibility and core competency was selling designs. When complaints regarding quality of the lingerie upon washing came under question.
The same could not have been imagined with mail catalogs. He enabled live streaming of Victoria’s Secret fashion events in the mid-nineties.com was established in 1995 and Victoria’s Secret made its first online sale worth 39 dollars only three years later. Amazon. The division has become an essential part of the Direct Division and has a budget of over 10 million dollars annually with a size exceeding 40 members. Customized e-mails were sent to cater to the customers as per their likes.victoriassecret. The company felt that this would ensure better MANAGEMENT OF CHANGE GROUP 2 REPORT management and database management capability called WENDI. a veteran from an Internet professional services firm (Proxicom). and since the customers weren’t able to gain access to the same.August 22. The website has accomplished what it was established for and has grown to become a great interaction medium between the company and its customers. The website was launched with two goals Strengthen and support the Victoria’s Secret brand Increase Sales goals. Victoria’s Secret parties and events had gained a great reputation. The new web group was here to stay and it was directly incorporated into Victoria’s Secret Direct instead of being made into a different division. 2012 VICTORIA’S SECRET TO SUCCESS communication and customer service and generate lesser confusion. VICTORASSECRET. and the experience at that time was phenomenal for the customers. The key to Victoria’s Secret Success has been its adaptability and ability to set trend and make them traditions. The company is known for its extensive innovative marketing and one of the best adopters of e-commerce in the industry. Ken Weil attributes the success to his following moves Developing an in-house content PIONEERS OF THE INDUSTRY Victoria’s Secret could not have become a 6 billion dollar brand just by having a clutter breaking concept. the online viewing made the site very popular.com in 1998. thereby keeping the website interesting and dynamic. The e-commerce of Victoria’s Secret has been profitable too. The in-house system helped Victoria’s Secret in easier customization of its look and also enabling changes on a very short notice. Development of the website also helped in a demographic and historic analysis of buyers. Ken was able to utilize the call centre support of Catalog division (now the Direct Sales Division) and he successfully digitized the catalog.COM THE ONLINE PIONEERS Victoria’s Secret entered the online medium through www. The web group was headed by KEN WEIL. The success of the online medium was truly phenomenal with sales increasing from near zero Page 5 .
August 22. they were the Angels and the Annual Fashion Show. it was deemed necessary to develop the brand with a unified marketing effort across the distribution channels. In midst of the problems mentioned. The web presence has also taken Victoria’s Secret directly to the customers. Hence merging the two channels did bring up issues regarding resource allocation and appraisal calculations. Edward Razek (popularly called Ed Razek). Although webcasts are common now. Victoria’s Secret in 2000 beat Amazon and Paypal to win many e-retailing awards.000 dollars and was in Razek’s opinion. its impact in 1998 is tough to gauge but was a remarkable feat which helped make the brand more popular Develop the RFM (Recency. in May 2000. The importance of the medium for Victoria’s Secret can be gauged from Appendix F. a potential brand building tool was discovered. Ed Razek is also popular for the eye-catching and creative Victoria’s Secret Commercials aired on TV. PACIFYING CATALOG AND WEB The web medium inspite of being a success was under the Direct Sales division whose Catalog Sales department had a proud legacy and had basically spearheaded its revenue up until now. the current CEO of Victoria’s Secret Megabrand was named Chief Executive Officer and President of Victoria’s Secret Direct. Infact. However the show was termed by media as the ‘lingerie event of the century’ and thus. Frequency and Monetary Value” System totrack customer behavior so as to mail catalogs accordingly in proportional volumes to more profitable buyers as mail catalogs costed more than web catalogs. the web still drew some flak as its returns and necessity of existence as additional brand builder tool was questioned. Before this. The show was since. SHAREN TURNEY. held annually except in 2004. With extensive experience in retail. her major actions to reduce the tension were Align incentives for the management with perks and bonus dependent upon divisional performance rather than channel performance Not calculating Channel profitability but releasing Divisional sales and profitability to enhance collective responsibility. The show was organized on a budget of 120. In 1995. the marketing efforts of Victoria’s Secret were brought under the Chief marketing Officer of Limited Brands. MANAGEMENT OF CHANGE GROUP 2 REPORT Page 6 . THE VICTORIA’S SECRET FASHION SHOW ED RAZEK: THE MAN BEHIND THE ANGELS With the increasing contribution of Victoria’s Secret to Limited Brand’s revenue. Ed Razek introduced two of the most innovative and unique features of Victoria’s Secret. her thoughts were clear about the necessity of the catalog and e-commerce arms to exist together. the Direct Sales and Stores Division took their own marketing initiatives and this sometimes confused the customer as they were not always aligned. 2012 VICTORIA’S SECRET TO SUCCESS in 1998 to over 200 million USD in 2001. Ed Razek organized the first Victoria’s Secret Fashion Show. more of a learning experience as they had no idea of the future of the concept. The web was also blamed for cannibalization of sales from the other channels. Hence in 1993. Irrespective of a definite cost advantage over mail catalogs.
Kanye West. the show was aired over television for the first time in the ABC network. The Fashion Show had major star performances by Nicki Minaj. Since 2001. A still (left) from the Victoria’s Secret Fashion Show 2011. Ed Razerk infact has a team of 200 people assisting him to manage a marketing budget of 250 million USD. The Angels initially introduced for the glamour factor were soon used to enhance the positioning and create role models for the target audience. In 2000.August 22. 2012 VICTORIA’S SECRET TO SUCCESS In 1999. the fashion show has aired on the prime time slot of CBS network. the show was also featured through a live webcast which received viewership of almost 2 million. Ed Razek introduced the concept of Angels. one of the highest in the industry. where some of the top supermodels became the brand ambassadors for Victoria’s Secret. The star value is an indicator of the high production value of this event MANAGEMENT OF CHANGE GROUP 2 REPORT Page 7 . Jay Z and Maroon 5. and famously walked in lingerie during the annual fashion show. The fashion shows now hire the best of the designers and have a much higher production value with the one in 2011 having a budget of 13 million USD. The Fashion Shows and Angels have in the current day become unanimous with the brand and have resulted in huge popularity for the brand. With the success of the fashion show.
Based upon the initial market test. MERCHANDISING PLANNING AND ALLOCATION The Chief Executive Officer (CEO) of the brand. the products are classified into Launch Fashion. The new products are market tested in the Henri Bendel store in New York to decide the positioning. Page 8 KEEPING THE BASICS RIGHT SUPPLY CHAIN: THE LIFELINE Victoria's Secret consists of several sub-brands (PINK. All brands including Victoria’s Secret go through a quarterly review process with the Chief Financial Officer to decide upon the value for the next buy period. Forecasting and delivery of these goods in an efficient manner hence becomes a major factor for an excellent customer experience In terms of determining the ideal source. and the General Merchandise Manager (GMM) together formulate a merchandise growth strategy creating a roadmap with a three year planning horizon. The critical processes that make up the Victoria's Secret's supply chain are: 1) Product Design and Product Launch. A design idea. and 5) Store Operations/Delivery... a significant investment is made. MANAGEMENT OF CHANGE GROUP 2 REPORT . from conceptualization to delivery is termed as "Concept-To-Market". Almost 25% are Non-Launch fashion and 15% are Launch fashion products. Body etc) with each conveying a specific theme or targeting a specific audience. lace etc) and various materials (cotton. There is also an enterprise-wide design department called the Limited Design Studios (LDS) in New York. However the ideas for new products may come from third party designers too. Allocation and Forecasting.August 22. Each of these sub-brands is offered in various styles (push-up. Non-Launch Fashion and Basic Products. The Buy Meeting is organized to finalize upon the purchase orders The orders decided upon are passed by the Victoria’s Secret Production Group. “A design Ratio is determined in which the various different sub-brands would be chosen specifically depending upon their potential. Fashion Products are those which are marketed for specific seasons and Launch items are those on whose introduction. 2) Merchandise Planning. satin etc). 4) Logistics. 2012 VICTORIA’S SECRET TO SUCCESS PRODUCT DESIGN AND LAUNCH Victoria’s Secret has its design office in New York (Victoria’s Secret Design: VSD). 3) Production & Sourcing. the Executive Vice President (EVP) of Planning. The Merchandising group reports to the Finance Team. About 60% of the products are basic (all year round). Panties. Launch Strategies are devised by the marketing Team. The goal of the effort was to come up with a multiple annual view of the growth of sub brands and categories within the sub-brands (Bras. Sleepwear) in cognizance with the merchandise growth strategy. The Merchandising Team thus has a Final Edit Meeting beyond which a Buy Meeting is organized. Physical store inventory is done once a year in Victoria’s Secret.
Mast is the organization within Limited Brands used by all subsidiaries to efficiently source material. APART FROM THE INNOVATIVE MARKETING AND WEB PRESENCE. THE PROCESS MENTIONED HERE SHOWS THE COMPLICACY IN THE WORKING IN RESPECT TO THE ORGANIZATION STRUCTURE SHOWN IN APPENDIX B. EFFICIENT MANAGEMENT OF THE SUPPLY CHAIN BY MANAGING THE LIMITED AND VICTORIA’S SECRET SIDE HAS BEEN THE MAJOR CRITERIA FOR VICTORIA’S SECRET’S SUCCESS MANAGEMENT OF CHANGE GROUP 2 REPORT Page 9 . Chico’s and Triumph. Production & Sourcing. the Limited Logistics Service (LLS).August 22. 2012 VICTORIA’S SECRET TO SUCCESS PRODUCTION & SOURCING 80/. LOGISTICS The logistics of delivery to stores/ Direct Sales is handled by the Logistics division of Limited Brands. The LLS operates on a Shared Service Model in which a service level agreement (SLA) is used as a contract between businesses and LLS. The CEO of Mast holds the title of Senior Vice President. The LLS acts as a third part when it comes to transactions as the model is similar to what it would be if the service was outsourced. of the merchandise sourcing and manufacturing for The Limited Brands is handled by Mast. (a completely owned division of the Limited Brands). This results in keeping a portion of the margins within Victoria’s Secret. About a quarter of Mast’s revenue comes from non-Limited Brands transactions like Abercrombie and Fitch.
he is the current CEO of Limited Brands. It went bankrupt in 1986. He committed suicide in 1987 from the Golden Gate Bridge MANAGEMENT OF CHANGE GROUP 2 REPORT Page 10 . Wexner has popularly quoted Victoria’s Secret as not being a lingerie brand but more of an indulgence brand GRACE NICHOLS NON-EXECUTIVE BOARD. Director of Marketing for Limited. two years later.000 USD. a retail store for children. and was one of the chief architects of the highly successful Forenza and Outback Red private label brands. LIMITED BRANDS A graduate from UCLA. 2012 VICTORIA’S SECRET TO SUCCESS APPENDIX A KEY PEOPLE LESLIE WEXNER CEO.August 22. She is however famous for her stint as EVP from 1986 to 1992 where she too significant measures build people’s trust in Victoria’s Secret as quality issues had been raised EDWARD RAZEK CEO. Razek joined Limited Brands in 1983. as Vice President. ROY RAYMOND FOUNDER. he founded Victoria’s Secret with a funding of 80. Marketing Limited Stores. LIMITED BRANDS Majored in Business Administration from The Ohio State University. he started My Child's Destiny. he was promoted to Vice President. LIMITED BRANDS Mr. At the age of 74. In 1993. After selling Victoria’s Secret. VICTORIA’s SECRET A graduate from Stanford. She was the Victoria’s Secret Direct Sales CEO from 1992 to 2007.
August 22. 2012 VICTORIA’S SECRET TO SUCCESS APPENDIX B ORGANIZATIONAL STRUCTURE Updated 2002 The organizational structure illustrated above is updated as per 2002. The three divisions are shown above. Victoria’s Secret has a single CEO now to whom the 3 major divisions report. This is primarily due to emergence of Victoria’s Secret as a major subsidiary under Limited. Hence a lot of Limited Brands divisions work to support the Victoria’s Secret infrastructure. The major marketing initiatives are under Limited Brands Control MANAGEMENT OF CHANGE GROUP 2 REPORT Page 11 . However significant changes have undergone in the last 10 years.
August 22. 2012 VICTORIA’S SECRET TO SUCCESS APPENDIX C SUPPLY CHAIN STRUCTURE MANAGEMENT OF CHANGE GROUP 2 REPORT Page 12 .
919 1.364 9.607 1003 694 2006 5. Store Size (sq.523 3678 5489 1110 4.604 1020 620 2007 5.August 22.018 1.139 998 731 4463 5941 1081 4.081 1.307 1043 581 2008 5.043 -- -- MANAGEMENT OF CHANGE GROUP 2 REPORT Page 13 .ft (USD) Sales per Avg.208 1.723 1.557 3886 5892 889 4.416 10. 2012 VICTORIA’S SECRET TO SUCCESS APPENDIX D FINANCIAL PERFORMANCE 2011 Revenue (in Billion USD) Stores Sales per Average Sq.520 1040 663 2009 5.502 3356 5830 868 3.564 1.613 8.388 3480 5727 589 4.ft) Operating Income (MUSD) Stores Revenue (BUSD) Direct Revenue (BUSD) Limited Brands Revenue (BUSD) 6. Store (1000 USD) Avg.632 9.121 1028 754 2010 5.399 3698 5111 1176 3.
2012 VICTORIA’S SECRET TO SUCCESS APPENDIX E CURRENT VICTORIA’S SECRET ANGELS Adriana Lima (2000present) BRAZIL Alessandra Ambrosio (2004present) BRAZIL Miranda Kerr (2007present) AUSTRALIA Doutzen Kroes (2008present) NETHERLA NDS Lily Aldridge (2010present) UNITED STATES Candice Swanepoel (2010present) SOUTH AFRICA Erin Heatherton (2010present) UNITED STATES Behati Prinsloo (2009present) NAMIBIA Lindsay Ellingson (2011present) UNITED STATES Chanel Iman (2010present) UNITED STATES MANAGEMENT OF CHANGE GROUP 2 REPORT Page 14 .August 22.
August 22. 2012 VICTORIA’S SECRET TO SUCCESS APPENDIX F ONLINE INTERACTION WITH CUSTOMERS Source: Original Research MANAGEMENT OF CHANGE GROUP 2 REPORT Page 15 .
Krishanu Rakshit (Ongoing) Victoria’s Secret Fashion Show (2005 – 2012) Wikipedia www.August 22. Alice Lin.limited brands. Charlene Mak (28 May. MANAGEMENT OF CHANGE GROUP 2 REPORT Page 16 .victoriassecret.com www.com . 2012 VICTORIA’S SECRET TO SUCCESS REFERENCES Limited Brands Annual Reports 2009-2012 “Supply Chain Strategies in the Apparel Industry: The Case of Victoria’s Secret” by Sumit Kumar (June 2005) Case #6-0014. Tuck School of Management (2002) Victoria’s Secret: Uncovered: Kristia Morabito The Silky Strategy of Victoria’s Secret: Chelsea Chi Chang. 2004) Original Research: Ajitabh Chaudhuri under Prof.
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