Retail expansion: which strategies work best?
Faced with constant pressure to expand their businesses, fashion brands and retailers have a number of choices: they can add new merchandise lines, target customers at new price points or in new geographical markets, or attempt all three.
But what is the best strategy? A new report from just-style offers advice to apparel brand managers wanting to breathe new life into existing portfolios.
The research into 'Apparel product extension: development, marketing and brand opportunities' looks at options available to retailers, with case studies on luxury goods companies, designer names, brands, and own label retailers. It also includes the results of a special survey carried out by just-style.
Extending into a new market, whether it be in the same location but at different price points, or in new locations in the same country or abroad, can be costly for any company. Other strategies may be cheaper but they may not be as effective.
One option is for a retailer to invest in new merchandise, either a new brand or an own label range instead of investing in new markets altogether. An example of this is the own label re-positioning undertaken by Sir Philip Green at Arcadia and BhS in the UK.
His goal is to have fewer but, on average, larger BhS stores, which will stock other Arcadia labels, such as Dorothy Perkins, Evans and Miss Selfridge.
But why do companies need to extend their product portfolios and expand into new markets in the first place? One answer is that is they are struggling domestically they may decide to seek new opportunities through international markets.
Last month US specialty retailer Gap said it was expanding into Africa, opening its first stores in Egypt and Morocco this October. Other companies including Coach, Abercrombie & Fitch and Saks have also eyed growth from international expansion.
just-style brand extension survey
As part of the report, a survey was carried out among just-style readers into the recognition of different fashion brands.
Readers were questioned on their perception of 26 companies, including those like Louis Vuitton and Mulberry whose apparel and associated merchandise brands include handbags and luggage; Laura Ashley, which also sells home textiles; and supermarkets such as Walmart and Tesco.
The brands ranged from apparel industry companies extending their product mix within apparel merchandise categories to other industry companies extending the product mix into apparel merchandise categories.
Burberry, LVMH and Paul Smith are seen as both luxury and high quality, Esprit was a mixture of everything except luxury, and H&M was purely value.
The survey also looks at non-apparel firms expanding into new markets including Tesco, Chanel, L'Oreal and Marlboro. With regards to brand extension into apparel, it may be difficult but it can be successful. Examples of successful brand extension include Tesco and Walmart.
Click here for more details of just-style's report on 'Apparel product extension: development, marketing and brand opportunities'.
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