Victoria Secret

Victoria Secret, a subsidiary of Limited Brand LTD, began its operations in the United States in the 1970’s. The company has faced many uphill battles and many successes. Victoria Secrets American operations are head quartered in Reynoldsburg, OH. Currently the successful lingerie and beauty product store has more than 16,000 employees domestically and operate over a thousand retail stores domestically. To accurately measure the success of Victoria Secrets operations domestically the company’s economic indicators will be reviewed and discussed. An economic indicator is defined by the Economics and Statistics Administration (2012) as, “The Economics and Statistics Administration (ESA) releases 12 monthly and quarterly Principal Federal Economic Indicators collected by its constituent bureaus: the U.S. Census Bureau and the Bureau of Economic Analysis (BEA). Businesses rely heavily upon these indicators to make decisions every day. In their public comments, the Secretary and ESA’s Under Secretary and Chief Economist put the indicators into a national and global economic context (About Economic Indicators, par 1).

The economic indicators that will be examined are: advance monthly retail sales; manufacturers’ shipments, inventories, and orders; personal income and spending; inflation or the customer price index, currency strength, and corporate profits. Advance monthly retail sales is a report of the actual value based on the dollar a range of good and services is worth. The advance monthly retail sales report is relevant to Victoria Secret because it gives a fair measure of both the goods Victoria Secret offers compared to competitive offerings of lingerie products. It allows Victoria Secret to see how the competitions pricing is influencing the market and possibly enticing customer’s that are cost conscious to buy their products. By using the advance monthly retail report Victoria Secret can review the competition offerings and analyze how business is affected by prices offered by the competition. Victoria Secret can use the information to create a campaign or offer a promotion to keep loyal customers that may be swayed by lower prices offered by the competition.

The next indicator that will be examined is manufacturers’ shipments, and orders. Michelle (2008) states, “Victoria Secrets supply chain starts off with raw materials chosen by their designer’s which then gets shipped from China for a cheaper price. This helps the company with price especially because the quality is high quality material” (Supply Chain, 2008). The supply chain is relevant to Victoria Secret because without the raw materials to make the products, the demand presented by the consumers will not be met. The company can ensure the supply chain and the raw materials are present by ordering based on a market analysis of the demand and keeping inventories stocked by not excessive. In Victoria Secrets case, the raw materials are purchased from an international country and Victoria Secret must ensure a contingency plan is in place to get the materials from another source in the event the original source is not able to produce the materials. Victoria Secret has both retail locations to stock inventory for and a Direct Sales division.

The company must make sure both have sufficient inventory while keeping the depreciation effect of an extended self life of goods in mind. The next economic indicator is personal income and spending. Victoria Secret offers goods that are considered luxury items. If the economy is slow and consumers are feeling pressed with commodity items and other items necessary to live, the company may experience a decline in sales. This economic indicator also has political influence because based on the policies of the United States, such as healthcare spending, people may have less and less to spend on luxury items. However if the economy is stimulated with such things as an increase in currency, Victoria Secret may experience a spike in sales. Victoria Secret must keep a close what on both the economy, consumer spending and consumer behaviors in order to stay abreast of changes and create new innovative products that will keep the company competitive while keeping loyal customers by showing them the value in buying Victoria Secrets products over the competition.

Along with personal income and spending, Victoria Secret must consider the effects of inflation on consumer spending and on the economy in general. Piana (2001) states, “High and variable inflation makes economic price forecasting more difficult and decision-making processes may be negatively affected”. If price level increase less money is circulating in the economy and therefore the demand may grow but people may not have the funds to pay for the goods or services that are considered luxury items. Inflation is relevant to Victoria Secret when pricing is set or changed for the products based on the economies performance, Victoria Secret must adjust their prices to make a profit while still minimizing their impact on the economy and inflation. When evaluating the economic indicators, currency is a large indicator of how a product or service is viewed both domestically and globally based on the value of the dollar. Often prices are different based on the market and the target audience for the same products.

The value of the dollar is very relevant to Victoria Secret because the company is based domestically but the majority of the raw products needed to make the product is purchased internationally from China. The rate of currency is important to ensure that Victoria Secret is paying a fair price for the raw materials based on the current value of the dollar and the currency exchange rate. If the value of the dollar decreases and the strength of currency is not strong, Victoria Secret which purchases raw goods from China due to the cheap price may pay more due to the exchange rate and the strength of the dollar. The final indicator is corporate profits. If the company’s involved in supply Victoria Secret supply chains are not profiting, they may increase the price of the raw goods causing Victoria Secret to pay more for the same products. This can affect the company because the profits of the company can be affected if the raw materials are costing more but the retail prices can not be increased in order to keep customers purchasing the products.

Overall Victoria Secret can respond to all the economic indicators by having good market research, a strong business plan that includes a contingency plans for obtaining raw materials from more than one source, and measuring inventories to keep a balance between the supply and the demand. A goal Victoria Secret may wish to put in place to maximize revenues for the years ahead will be to continue to create products that are innovative and based on the target markets wants, interests and needs. The company may need to expand into the plus or extended size segments to keep business at the high producing rate it current is at. One goal that would help increase Victoria Secrets profits and ensure revenues continue to be high are to expand the target market to include plus size women. This is a market that is growing consistently. The company can do a brand extension into a plus size brand that will cater to this population set but the fact is that this is an underserved market that desires to have lingerie and beauty products customized for the sizes and figures.

References

About Economic Indicators. (2012). Economics and Statistics Administration (1) par 1. Retrieved on November 30, 2012 from http://www.esa.doc.gov/about-economic-indicators Michelle. (2008). Victoria Secret. Supply Chain. Retrieved on November 30, 2012 from http://victoriasecretgrp5.blogspot.com/2008/11/supply-chain.html Piana, V. (2001). Inflation. Economics Web Institute. Retrieved on November 30, 2012 from http://www.economicswebinstitute.org/glossary/inflat.htm