Liz Claiborne: The US Apparel Retailer's "Three-M's" Strategy

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US Apparel Industry: The Landscape Cont..

<< Previous By the turn of the century, the US apparel industry encountered changing trends that include consolidation, diversification, pressure to minimize time to market and quota driven sourcing. In 2001, the apparel sales in the US declined from $179 to $166 billion over the previous year. The economic downturn (inflected by dotcom bubble burst) coupled with September 11 terrorist attacks hit the apparel sales. This economic instability resulted in decline in consumer spending on apparel. The decline in margins forced apparel companies to rethink their business style. Most apparel companies consolidated and developed mega brands to serve a wide variety of customers with their diversified product lines. Apparel companies maximized the operating efficiency, streamlined inventory management systems and reduced their excess manufacturing capacity. To derive operations of scale, firms began to enhance volumes through mergers and acquisitions. Removal of the quotas, through North American Free Trade Agreement and Africa-CBI13 bill, further benefited the companies. This made sourcing cheaper and faster, improving their turnaround time and profitability.

During 1990s, with increased penetration of Internet, retailers started expanding beyond physical stores and increased their online presence. Chad Doiron of Kurt Salmon Associates, opined, "The retailers who are going to win are the ones that have visibility online and product in the store."¹⁴ Apart from these operational changes, apparel companies resorted to new strategies to improve brand experience provided to the customers through multiple channels across segments. Phillips-Van Heusen initiated multi-brand, multi-channel and multi-price point strategy that helped the company to increase its revenues. Allen Sirkin, president and chief operating officer of Phillips-Van Heusen, explained, "We design and market substantially all of our products on a brand-by-brand basis, targeting distinct consumer demographics and life styles .Wemarket our brands atmultiple price points and across multiple channels of distribution. This strategy enables us to provide product to a broad range of consumers, while minimising competition among our brands and reducing our reliance on any one demographic group, merchandise preference or distribution channel."¹⁵ Liz Claiborne adopted 'Three M's strategy' to improve its profitability by widening its brand portfolio and increasing its presence through various channels

Liz Claiborne: McComb's "Three-M's" Strategy

Liz Claiborne Inc. was established in 1976 by Liz Claiborne (Claiborne), a dress designer with her husband, Arthur Ortenberg (Ortenberg) and partners Leonard Boxer and Jerome Chazen. Claiborne started the company to serve the expanding niche of working woman, as she commented, "The goal was to clothe the working American woman. I was working myself, I wanted to look good, and I didn't think you should have to spend a fortune to do it. Only a couple of companies were catering to that emerging woman - both in traditional, suited ways. I feltwe could do better."¹⁶ Initially, the company manufactured a single brand - Liz Claiborne - sold primarily in department stores across the US. Claiborne was able to attract more customers as her designs provided perfect fit, unlike designs of other fashion houses.

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13]In May 2000, Africa-CBI (Caribbean Basin Initiative) Countries Law was passed by the US for tax exemption to US imports of products using US-made materials from Saharan- African countries and Central American countries.
14]Wagner Mary, "Pressures on stores could spell more online retailing", http://www.internetretailer.com/internet/marketing-conference/95911-pressures-stores-could-spell-onlineretailing. html, October 1st 2006
15]"Strategy and Operation", http://www.pvh.com/annual_pdfs/pdf_2006/StrategyandOperations.pdf
16]Guzzardi Walter, “THE NATIONAL BUSINESS HALL OF FAME”, http://money.cnn.com/magazines/fortune/fortune_archive/1990/03/12/73165/index.htm, March 12th 1990