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

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Themes: Strategy
Pub Date : 2007
Countries : US
Industry : Women's Clothing

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Case Code : CSB0018
Case Length : 10 Pages
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Liz Claiborne: McComb's "Three-M's" Strategy Cont..

The way in which Liz Claiborne priced its products was different from other apparel companies that sold products at 40% mark up costs. Its products are either priced in moderate or premium categories, but the company always adhered to the same quality standards.

In 1977, Liz Claiborne had sales of $2.6 million¹⁷, by 1980 its sales increased to $79.5 million and the net income grew to $6.2million¹⁸. In 1981, the company went public and posted net sales of $116.8 million.¹⁹ In 1985, Liz Claiborne expanded into men&'s apparel and in 1986, it entered into a joint venture with Avon to sell cosmetics. Liz Claiborne acquired and launched many brands to cater to wide variety of tastes of the US customers at several price points

Since its inception, Liz Claiborne operated through large up-scale department stores. The company insisted on a new presentation format at most of its department stores where it can display its entire collection. It rejected orders of the departmental stores if they were not willing to display the collection according to its specifications.

Retailers were assisted to present collections by providing 'Claiboards' and 'Liz map diagrams' that provide instructions to the staff how to mix and match the clothing and present them on the clothing racks and display counters. In 1987, Liz Claiborne opened its first 'concept store'. Later on, it opened around 200 concept stores within the department stores. Liz Claiborne trained its sales persons who traveled around the country to help retailers in merchandise presentation and interact with the customers. In 1985, Liz Claiborne established Systematic Updated Retail Feedback (SURF) system, which provided information about its sales across the country.

In the beginning, Liz Claiborne manufactured its products in the US, but later it began to outsource its production to Asian countries. Liz Claiborne entered into contracts with suppliers situated in China, South Korea, Sri Lanka, Hong Kong and Indonesia.

In 1990, Liz Claiborne's sales began to decrease due to the sluggish US economy coupled with the decrease in consumer spending. In 1992, the company's sales stagnated and its net income declined. Its market capitalisation dropped from $3.5 billion in 1992 to $1.2 billion in 1994.²⁰ As department stores are the main distribution channels for Liz Claiborne, it was more affected when department stores faced problems to generate revenues. Most of the department store went for mergers and cut their staff. To reduce the inventory levels, department stores required fast reordering from their suppliers.

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17]Ibid.
18]Mayo Anthony J. and Benson Mark, "Liz Claiborne and the New Working Woman", Harvard Business School (Case Study), Harvard Business School Publishing, March 23rd 2007 [Ref. No.9-407-060]
19]Bower Joseph L., et al., "Liz Claiborne China", Harvard Business School (Case Study), Harvard Business School Publishing, April 10th 2002 [Ref. No. 9-301-098]
20]"Keeping Fit: The Liz Claiborne Story", http://knowledge.wharton.upenn.edu/article.cfm?articleid=137, March 1st 2000