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Harrington
Collection

Case Analysis

Trent Halverson, Aaron Kinning, Erin Moller, Alyssa

Nelson
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Internal Analysis

 Overall
Objective: To provide preeminent brands for
women desiring elegant, high-end fashions.
 Overall Strategy: Differentiation
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Internal Analysis

 TargetMarket: Affluent, fashionable, college-educated,

professional women ages 25-60.
 Each division focused more narrowly on a specific TM.

 Positioning: Lifestyle branding strategy, wearing the label

is a sign of status
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Product

 Objective: To provide the highest quality clothing that

offers a lifestyle of prestige and status
 Strategy: Product Differentiation
 Tactics: All
4 divisions include: Harrington Limited,
Sopra, Christina Cole, and Vigor. No private label brands.
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Price

 Objective: To increase market share and profit margins

 Strategy: Skimming
 Tactics: Offer premium prices to support status of brand.
 Harrington Limited: $500-$1,000
 Sopra: $400-$800
 Christina Cole: $300-$700
 Vigor: $150-500
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Promotion

 Objective:
To provide convenience to retailers, and help
them obtain and sell the brand
 Strategy: Push
 Tactics:Retail sales force well trained; Offer channel
partners more support and incentives than most
manufacturers; Offer retailers valuable inventory and
sales advice.
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Channel

 Objective:To provide convenience to both retailers and

final consumers by offering the Harrington collection at
only the best retailers or directly through e-commerce
 Strategy: Dual channel strategy
 Tactics:
Company owned retail stores (20% sales);
upscale department stores (60% sales) and specialty stores
(40% sales); e-commerce
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Performance

Sales
 $2,433,900,000 in retail sales
 Total revenue: $1,344 million
 Manufacturing Group: $538 million
 Retail Group: $806 million

 Total Profit before tax: $118 million

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Performance

 Market Share:
 2007 women’s apparel industry = $133 billion in retail sales
 Harrington Collection held approximately 1.83% share of total
women’s apparel market in 2007

 Trends (CAGR):
 Average Growth Rate in U.S. retail sales of women’s apparel 2002-
2007: 4.66% (ex 1, p 240)
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External Analysis

 Political/Legal/Regulatory: Textile import quotas from

China eliminated in 2004.
 Economic: The economic downturn that began in the
early 2000s significantly impacted the industry for U.S.
women’s apparel. Consumers had become very price
sensitive- half of all apparel purchases were sold “on
sale.”
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External Analysis

 Technological: E-commerce.
 Social/Cultural:
Women were buying more casual
clothing. More dollars were being spent on technology
products, home design, and leisure-activities. Fast
changing fashion product life cycles—consumers’ tastes
constantly changing.
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Competitive Analysis – Porter’s Five
Forces
Macro (5 forces)
 Threatof New Entrants: High- Due to the ease of
outsourcing production, low barriers to entry
 Bargaining Power of Buyers: Moderate- Manufacturers
integrating forward with company-owned stores; but
department store mergers gave more bargaining power to
suppliers
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Porter’s Five Forces (cont.)

 BargainingPower of Suppliers: Moderate- willing and

cheap labor overseas. More retail outlets integrating
backwards (providing margins of about 10-20% higher).
 Threatof Substitutes: High- easy to imitate designs at
lower costs
 Intensityof Rivalry: High- many brands competing for
shelf space and market share. The industry was
moderately concentrated.
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Competitive Analysis

Micro
 Leading brands: Jones Apparel Group, Liz Claiborne due to their
diverse portfolios
 Both outsource production of apparel overseas
 Both involved in design, marketing, wholesaling, and retailing of
women’s apparel
 Jones: 396 specialty retail stores
 Brands include: Jones New York, Nine West, Anne Klein, Gloria
Vanderbilt, Kasper, Bandolino, Evan-Picone, Energie, Enzo
Angiolini
 Claiborne: 338 retail stores around the globe (201 in US)
 Brands include: Liz Claiborne, Mexx, Juicy Couture, Lucky Brand
Jeans, Ellen Tracy
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Market Segments

Women’s apparel products could be divided into six general

categories based on quality and price:

1) Haute couture

2) Designer

3) Bridge

4) Better

5) Moderate

6) Budget
+ Market Analysis
Division Product Product Retail Target Competition Market
Line Focus Classificatio Price Customer Share
n Range
Harrington Designer Designer $500- Sophisticat Donna 20%
Limited collection 1000+ ed Karan, St.
Elegance; John
women
35-60
Sopra Evening Bridge $400-800 Status Diane von 5%
Wear, Seeker; Furstenberg,
Dresses women Kay Unger
and suits 35-60 New York
Christina Career Bridge $300-700 Office Tahari, Dana 8%
Cole wear Chic; Buckman
women
30-55
Vigor Career Better $150-500 Trend Theory, 7%
Wear Setter; BCBG Max
women Azria
25-50
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Market Analysis
Channel Retail Sales

Percent of Women’s Apparel Retail Sales

3%
8%
11% Other
Discount or Mass
19% Merchandisers
Specialty Stores
Department Stores
Warehouse Clubs and
Supercenters

59%
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Case Brief

Problem: How should Harrington Collection put

forth their new active wear line?
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Alternatives

• Option A: “Better” pricing with same channels

• Option B: “Moderate” pricing and expand channels

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Criteria

 Maintain sophisticated, high-class status

 Increase margins
 Break even in first year
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What is a unit?

 Since active wear is sold as separates, the ratio of hoodies

to tee-shirts to pants was not equal.
 Therefore one “unit” = ½ hoodie + 1.5 tee-shirts + 1 pant
+ Evaluation of Alternatives
Option A

“Better” Pricing, same channels

 Break Even = 269,255 units ($25,579,186.45)

 Profit Margin = 18%

 Brand image = High quality, fashionable merchandise with status

branding ($220/unit)

 Assumptions
 Higher prices consistent with desired brand image
 Smaller Market Size
 15,000,000 X .4 X .07= 420,000 units
 Less distribution outlets (less promotion costs)
+ Evaluation of Alternatives
Option B
“Moderate” Pricing, more channels

 Break Even = 390,069 units ($31,205,504.04)

 Profit Margin = 15%

 Brand image = Prestigious brand image at risk with lower prices

($187/unit)

 Assumptions
 Larger market size
 15,000,000 units sold X .6 X .07= 630,000 units
 Higher fixed costs
 More competitive market
 Might not receive 7% market share

Contribution
Wholesale price "Unit"
Less total Variable cost per "unit"
Contribution per "unit"
Breakeven:
Fixed annual costs
÷Contribution per "unit"
Breakeven "Units"
X Wholesale price per "unit"
Total Breakeven Dollar Sales
Profit Margin:
Revenue
Less fixed annual costs
Less total variable costs
Profit before tax
Profit margin before tax
Option A
$ 95.00 ($220 Retail)$
$ 46.57
$ 48.43
$ 13,040,000.00
$ 48.43
269255
$ 95.00
$ 25,579,186.45
$ 39,900,000.00
$ 13,040,000.00
$ 19,765,200.00
$ 7,094,800.00
18%
Option B
80.00 ($187 Retail)
$ 46.57
$ 33.43
$ 13,040,000.00
$ 33.43
390069
$ 80.00
$ 31,205,504.04
$ 50,400,000.00
$ 13,040,000.00
$ 29,647,800.00
$ 7,712,200.00
15%
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Recommendations

 Overall Objective: To introduce a brand new active-wear line in the

Vigor division to increase margins and break even in the first year

 Overall Strategy: Differentiation

 Target Market: Women 25 to 50 seeking fashionable and comfortable

active-wear
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Product

 Objective: To provide comfortable and fashionable active wear with

superior styling, fabric, and fit to consumers

 Strategy: Product Differentiation

 Tactics: Hoodie, Tee-shirt, and Pants

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Price

 Objective: To increase margins to 18% and portray high quality

active-wear via prices

 Strategy: Price Skimming

 Tactics:
 Hoodie = $100 retail
 Tee-Shirt = $40 retail
 Pants = $80 retail
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Promotion

 Objective: To increase awareness of the new product line with both

retailers and final consumers

 Strategy: Push

 Tactics: Personal selling, fashion shows

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Channel

 Objective: To introduce the new active-wear line in Vigor’s current

retail outlets

 Strategy: Direct and Indirect

 Tactics: Department Stores, Specialty Stores, Company Owned

Stores, E-commerce site
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Evaluation and Control

 Product Perceptions:
 Measure: With each receipt of an active-wear purchase the consumer will
be asked to fill out a survey about the product. Six months later they will
receive a follow-up survey of performance
 Implement: Based on the results adjust accordingly for next product
offering

 Margins:
 Measure: Overall profit margins for the first year
 Implement: If margins are not at 18%, look to decrease production costs
and increase sales training. If margins are above, consider expansion of
line into new colors and styles and increase promotional efforts
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Evaluation and Control

 Awareness:
 Measure: Survey TM consumers about product knowledge
 Implement: If awareness is low, consider placing more emphasis on
promotions and personal selling. If awareness is high, continue
promotional efforts and consider cutting back

 Retail outlets:
 Measure: Measure sales in each outlet.
 Implement: When sales are high with a certain retailer, consider expanding
into similar stores and vice versa.
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