There are various economic forces that affect apparel retailers. Consumer confidence is the most important; people don't shop when they are not feeling good. Unemployment also has an effect, in that fewer women out in the workforce means less disposable income for high-end quality clothing. Thus, the large discounters (Target, Sears and Wal*Mart) are now working with top designers to bring designer apparel to the masses. Although they can't compete on quality, their continued development of the trend could have a direct impact on retailers who sell designer clothing during tough economic times.
Fortunately, the luxury goods market, of which De Kliek is a part due to the high-end brands it will carry, has remained recession-proof, as clearly indicated by the successful 2003 results for Coach, Tiffany and Saks. According to Women's Wear Daily, luxury firms forecast a strong 2004, particularly for accessories and footwear. However, the strong Euro and slowdown in wealth creation are big concerns and managing a balanced quality-price ratio is the key to success for luxury retailers.
"Fashion is a requirement for those who are high in their success." -Luxury Consumer
In the luxury market, luxury consumers (defined as "affluents" who have household incomes of over $100K) spent more in 2003 than 2002. [1] Based on focus groups, United Marketing believes luxury consumers see apparel and accessories as more of a necessity than a luxury. This is good news to boutique retailers. There are over 800 clothing boutiques in the LA Area; approximately 19 percent of these generate over $500K in sales.[2] In fact, women's clothing stores in Los Angeles have a 62% higher sales growth rate than the national average; this can be attributed to the fact that the average household in Los Angeles is considered affluent.
4.1 Market Segmentation
4.1 Market Segmentation
"Within a decade, the companies that do the best job of marketing to women will dominate every significant product and service category." -Faith Popcorn
One gender in particular influences the majority of the retail marketplace: women. Women comprise 51% (145 million) of the U.S. population [1] and control or influence 81% of all household purchase decisions. [2] Women are now earning more college and master's degrees than men, which translates into more senior positions & higher pay. [3] Overall, women represent 47% of the total U.S. civilian workforce and as that continues to grow, demands for their time also increase. Balancing work and family are the #1 concerns for women and almost half "hardly ever" take care of their personal needs; one out of five women would like to have time to do a little shopping! [4]
Research indicates that women approach retail shopping uniquely by evaluating purchases based on product and company information derived from both personal and expert sources. Additionally, surveys consistently reveal that women buy based on the relationship they forge with a brand. [5], [6] Statistics, studies, and our own personal experiences show us again and again that excellent customer service lowers customer attrition rates, fosters excellent word of mouth and most importantly, increases sales. The table below shows that out of the ten characteristics consumers find important in deciding where to shop, four were attributed to customer service.
Top Ten Factors in Deciding Where to Shop: [7]
Reason | 2000 | 2002 | Change |
1. Has reasonable prices | 78% | 85% | +7 |
2. Treats customers with respect | 66 | 74 | +8 |
3. Carries quality merchandise | 66 | 72 | +6 |
4. Doesn't pressure me to buy anything | 61 | 70 | +9 |
5. Convenient store hours | 61 | 68 | +7 |
6. Handles merchandise returns fairly | 60 | 66 | +6 |
7. I can always find what I want | 61 | 65 | +4 |
8. Carries a wide variety of items (e.g. colors, sizes) | 57 | 64 | +7 |
9. Has outstanding customer service | 55 | 63 | +8 |
10. Makes it quick and easy to shop | 53 | 61 | +8 |
4.2 Target Market Segment Strategy
Los Angeles is rated amongst the top U.S. markets in economic and educational achievements. At an average age of 40, the Los Angeles professional is highly affluent, with an average family household income of $180,903 and a median home value of $622,170. Close to 50% have a bachelor's degree and 40% of these professionals hold a postgraduate degree.
De Kliek customers will learn about the boutique through the following sources:
- LA Neighborhood Storefront
- Friends & Customers (word of mouth and email)
- Personal shoppers and stylists
- Women's Fashion Magazines articles and reviews such as W, Lucky, Marie Claire and Vogue
- Local press mentions & ads
- Travel and shopping books and websites
The Primary Customer [1]
The primary De Kliek customer is a professional woman with a household income over $100K. Her main characteristics are listed below:
Demographics
· Professional woman (ages 30-55)
· Household income over $100,00
· College-educated
· Lives in a higher-income LA neighborhood
Psychographics
· Looks for bargains (seasonal fashion) but willing to spend money on quality, core items
· Would like more time or help in understanding what clothing is right for her
· She wants to look her best because she wants to feel good about herself as well as make a good impression at her job
Leisure Activities
· Listens to NPR
· Supports the Arts
· Reads Vogue, New Yorker, Bon Apetit, Lucky
· Watches Bravo, BBC, HBO
· Internet savvy
· Travels, owns a passport
· She enjoys eating out as well as taking time for herself at the spa or getting a mani-pedi
Clothes Shopping Behaviors
· Spends over $2,500 for clothes each year
· Shops at Boutiques, Nordstroms, and Banana Republic
· Wears a size 6, 8, or 10
· Buys mostly tops and pants
· Looks for classic, basic items each season, with 1-2 trendy items
· She cares about how she presents herself, enjoys fashion, and looks for quality over quantity
Customer needs, expectations and buying patterns [2]
The De Kliek customer loves to shop and enjoys going to boutiques. She is knowledgeable about designer fashions and tends to shop for seasonal wardrobes twice a year plus picks up various fashion and basic pieces throughout the year. Many times she shops to "browse." By offering fashionable accessories and wardrobe organization items, De Kliek will be able to grab a larger share of her wardrobe budget. She is used to coming into the store and browsing through the clothing items and trying on what interests her. She expects a warm and comfortable environment and nice dressing rooms. She enjoys being left alone but also enjoys the special touches of personal shopping assistance and having the ability to special order items. She wants fun and catered shopping events in the evening and also enjoys receiving special notices on sales and participating in trunk shows to garner more savings. She is also at a Director to CEO-level job and could potentially be reached through her office for personal shopping services or through her own personal stylist who is a member of AICI.
4.3 Service Business Analysis
De Kliek is considered a luxury boutique within the Women's Clothing Store Industry (NAICS 448120 or SIC code 5621). Women's Clothing Store sales represent 20% of the Clothing Store Industry Group, which translates to $27.2 billion during 1997, and $34.4 billion in 2002.
The retail sector is the second-largest industry in the United States, both in number of establishments and number of employees. It is also one of the largest industries worldwide. The retail sector employs over 23 million Americans and generates more than $3 trillion in retail sales annually. Retail sales usually see a 2-5% growth each quarter. Although 2003 was difficult, sales have slowly grown from 1.4% in Q1, to 3.1% in Q2 to an estimated 5.8% in Q3 according to the NRF. Overall retail sales account for two-thirds of the nation's economic activity, and the holiday season accounts for 20-40 percent of total retail sales. [1]
The Clothing & Accessories Stores subsector of Retail has seen sales growth of 19% over the last five years from $137.6 billion in 1997 [2] to $171.8 billion in 2002 [3]. Businesses in the Clothing and Clothing Accessories Stores subsector sell new clothing and clothing accessories merchandise from fixed point-of-sale locations. Establishments in this subsector have similar display equipment and staff that is knowledgeable regarding fashion trends and the proper match of styles, colors, and combinations of clothing and accessories to the characteristics and tastes of the customer.
Although the holiday season is the key indicator of retail health, according to the National Retail Federation, the holiday season accounts for only 15% of total apparel sales. A good holiday season is typically followed by a good economic year and analysts predict retail sales will rise a total of 4 percent in 2004. Total sales for 2003 were up 3.2 percent. Additionally, online holiday shoppers spent a record $18.5 billion during the holiday season [4] -- a 35 percent increase over the $13.7 billion spent in 2002. Luxury retailers and upscale department stores were the unexpected market leaders during the 2003 holidays with Nov-Dec sales up 15 percent. Analysts state that as consumers see their investments increase, they spend more.
U.S. Retail Industry Key Facts | Women's Clothing Store Industry la Area Facts [5] |
The 2002 average for shrinkage is 1.1%, with .7% being attributed to employee theft and .4% attributed to shoplifting. [6] | There are 888 women's clothing store establishments in the Los Angeles area |
Highly fragmented | One out of every three small business clothing retailers fail |
Many have highly seasonal sales and therefore seasonal inventory levels | Average small business sales: $245,378 |
Average retailer has one store with less than $1 million in annual revenue | 25% of women's clothing retailers generate sales over $500K |
May operate stand-alone stores in urban locations or from leased space in shopping centers | Small business clothing stores employ on average, 3 employees |
Retailers often have high gross margins, close to 40 percent in many businesses | Clothing store startups in LA are 5 percentage points below the industry average |
Wages are relatively low | Average annual inventory turn for boutiques is five times |
Employee turnover in the retail/wholesale industry is very high, as much as 30 percent | LA Clothing Stores have a higher than average growth rate with a sales index of 1.62 - 62% higher than the industry norm |
Merchandising - buying goods that will sell - is the main preoccupation of most retailers | - |
