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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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  • Number of pages: 2

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Situation Analysis

2015 finally saw optimism in the retail environment after a period of economic troubles that severely affected the performance of specialty retailers. A 3% predicted  increase in retail sales was the largest since 2011. While luxury retailers and value-oriented retailers saw improvement, specialty stores were hit heavy. Ann Taylor is one of these retailers. However, while most were regaining their footing, ANN's revenues in the third quarter of 2015 were down over 4% from the previous year. This was largely due to weak mall traffic, distribution errors, margin compressions, and a weak brand for one of their two lines Ann Taylor. Ann Taylor, target at the upscale sophisticated woman, could not keep up with LOFT, the division of ANN for the more casual but chic woman. Consumers saw higher value in LOFT merchandise and and the division surpassed the struggling Ann Taylor. Offices were becoming more laid back and not requiring the same dress code requirements. The target market was also made up of women in their 30's and 40's who are not impulse shopping and are more likely to be more conscious of pricing especially after economic struggles. Kay Krill, CEO of ANN, attempted to internally restructure the management with ANN. None of which appeared to gain momentum. ANN omnichannel retailing, introducing e-commerce and factory outlets in addition to brick and mortar stores for both Ann Taylor and Loft. Various initiatives to make Ann Taylor a total wardrobe store included a cosmetic line, shoe line, and a children's line. However, the momentum of these initiatives never gained strong footing and were scaled back or eliminated by 2015. Lou and Grey was introduced as chic activewear to appeal to the younger and older clientele. They opened their first Lou and Grey store in Connecticut in 2014.

Problems Identified

ANN's organizational structure was experiencing too many changes creating an unstable internal environment, not equipped to make decisions as consumer behavior was changing and the economy was still unable.

ANN had difficulty branding Ann Taylor and remaining relevant compared to ANN's second division LOFT, which surpassed Ann Taylor in sales. They need to find a way to revamp the legacy of Ann Taylor and it's long standing brand image, in order to meet changing consumer demands.

ANN must find a way to align itself with changed external pressures in competition and the relatively unstable economic environment.

Strategic Analysis

SWOT Analysis of ANN

Strengths

The omnichannel retail strategy allowed for ANN to reach an increased market by introducing online retailing which saw an increase of over 37% for Ann Taylor and 29% for LOFT between 2011 and 2012. Online retailing allowed ANN to reach the international market. They were able to add stores in Canada, Mexico, and Puerto Rico.

ANN had a significant brand extension for the younger professional woman through LOFT.

ANN had an in house design and development team for both Ann Taylor and LOFT with a total wardrobing strategy.

Ann Taylor had a long established history with recognition in well respected magazines such as Women's Wear Daily.

Weaknesses

Lack of consistent internal structure resulted in an inability to have a strong vision for the company.

Competition internally between Ann Taylor and LOFT that caused cannibalization

High price of Ann Taylor merchandise

Failures in attempted extensions which comes across as erratic

Opportunities

Growth of the baby boomer market and their purchasing power

The already established Ann Taylor positions ANN to be able to introduce additional extensions that reasonably fit

Increased use of technology in the older market segment which can be used to better reach target markets

Threats

Economic downtown created an uncertainty in the retail market specifically in specialty retailers with a more specific product focuses.

Changing consumer behaviors and lifestyle that resulted in less of a need for sophisticated clothing

Negative cash flow inhibited ANN from growth

Competition introducing brand extensions as ANN discontinued or scaled back multiple extension attempts

Porter's 5 Forces Model

Threat of New Entrants

The threat of entrants is moderate. Prior established retailers that have captured loyal consumers have discouraged new entry into the market. Talbots, Chico's, and Coldwater Creek have all have developed a history in the marketplace and account for a majority of the market share.  The single product focus with many varieties of these specialty stores decreases eagerness to entry into the market. They have struggled with branding as they seek out new markets. However, the hardships of long existing companies in the market may encourage new entrants with a fresh perspective to enter. Talbots and Coldwater Creek have both been bought out by private equity and the shifting environment leaves room for entries.

Threat of Substitutes

Ann Taylor had a low threat of substitutes due to its in house exclusive design and development team. Due to the fact that it is a specialty store, Ann Taylor and Talbots focused solely on professional higher end womenswear. Department stores do not have this ability as they are selling many different types of products for many different target markets. Coldwater Creek, Talbots, and Chico's all have similar target markets but slight different variations and purposes of what they offer.

Bargaining Power of Buyers

Buyers have a moderate to high power in the marketplace. Shifting lifestyle and behavior resulted in forced branding changes. Companies followed the consumer demands in an attempt to increase sales especially in mid tier stores such as Ann Taylor. Consumers were more price conscious especially in the target market of Ann Taylor. With introduction of LOFT, consumers were able to find similar chic clothing that falls in line with their new laid back lifestyles for 30% less of the price.

Bargaining Power of Suppliers

Bargaining power of suppliers is low. Retailers were educated on their products as it is their specialty. With new supply markets in Indonesia, India, and Vietnam, retailers no longer needed to look solely to China for outsourcing in order to find lower prices for merchandise. There was less of a threat of forward integration as these outsourced manufacturers do not have the ability to take on the large established retailers such as Ann Taylor.

Competitive Rivalry

After weak periods in the retail industry, the four main competitors were all striving to rebuild their companies and increase performance. The current competitive rivalry is moderate as their is a small number of established retailers on the market. However, while there is some product differentiation, they all offered clothing for the same target market. Brand loyalty decreased with changes in the economy, increasing competition. Ann Taylor's major issue was refocusing their branding to attract consumers once again.

Alternative Solutions

Ann Taylor first needs to built internally in order to further refine and refocus. They have the option to either implement one president for both Ann Taylor and LOFT or two seperate presidents. With one president there is an ability to maximize ANN as a whole. One distinct leader with an understand of both Ann Taylor and LOFT allows for an unified team that is looking for best interest of ANN as a whole instead of divisions. Two seperate presidents and teams could indicate a divide in an ANN. It also provides for a more consolidated team making higher level decisions which could spread the process and allow for more flexibility in a shifting market. Two presidents however could lead to the differentiation between LOFT and Ann Taylor. Issues with a lack of clear branding for Ann Taylor could be solver with specific focus on the brand as opposed to one president who would have to focus on LOFT's momentum as well as rebuilding Ann Taylor. Individual leadership for each brand could result in a more differentiated strategy between the two to decrease cannibalization.

Ann Taylor's upscale branding lost respect among consumers due to shifting lifestyles. How can they stay relevant when women are dressing more casual? Ann Taylor could remain at a high price point and sell clothing that reflects their history of sophistication and prestige but increase marketing in order to better reach their target market. Ann Taylor should conduct customer research in order to understand customer problems that need to be solved. They can then tailor creative marketing strategies through new channels. Technology offers a new mechanism to directly reach the target market. On the other hand Ann Taylor could decrease prices to become more competitive while still keeping chic business professional clothing as their specialty. This would require shifts in the supply chain in order to lower the cost of merchandise but would appeal to the increasingly price conscious target market. However, this could take away from the prestigious aspect to the brand and alter its legacy. But is it time for its long standing values to be altered as it is no longer performing?

With a higher threat to entry, ANN can increase international presence. With their e-commerce, ANN was able to show that it is able to reach a larger market. They have already moved into Canada, Mexico, and Puerto Rico proving that they have the potential to expand even further. However, with negative cash flows ANN may not have the ability to invest in international expansion and with uncertainty in the domestic market for ANN it may not be wise to cast out even further and risk lost profits. ANN could further develop the Lou and and Grey brand. The product is differentiated from current ANN brands while reaching a wide target market. While competitors are introduce new extensions, this brand is differentiated while also falling in line with changing consumer behaviors. As consumers become more laid back, they are looking for fashion conscious athleisure. However, after many failed attempts and extension initiatives, does ANN have the ability to take on another extension at this point in time? Another failed attempt could demonstrate instability in their company.

Recommendations

ANN should have seperate presidents for their two divisions as they attempt to serve two differentiated brands with distinct target markets. This will allow both brands the specialized focus they need to grow by providing tailored strategies.

Ann Taylor should remain higher priced with sophisticated merchandise. This continues the established reputation. Through investing in increased consumer research they will be able to better understand their target market and can adjust creative marketing strategies to better reach their market.

ANN should focus on growing Lou and Grey. With the introduction of a brick and mortar store and considering their past with discontinued extensions and seemingly erratic decisions it is important to remain consistent with the new brand. It is aligning with external consumer behaviors that poses growth in the wider market segment.

Conclusion

While ANN and specifically Ann Taylor are experiencing significant problems amongst internal and external shifts, their already established name allows for potential to rebuild and regrow. Their loyal customer base is there it just needs to reconnect after economic changes that were out of the hands of ANN. However, in order to have this reconnection after external changes, ANN must make internal adjustments that have been lacking in recent years. With distinct strategies in a clear consistent restructuring internal issues can be solved, allowing ANN to look achieve growth.

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