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The Problem

2008 is considered to be the year of  widespread recession, thus many retail outlets began to struggle after the unprecedented growth of the preceding years. As a result, about 6,000 retail outlets would need to be closed in the United States per that year. .

But for Ann Taylor stores this wasn’t the only problem. As early as 2004, the executives had seen that the brand was becoming ‘stodgy’ and outdated. They were concerned about this, planning to bring the Ann Taylor back to the centre of the marketplace they had once occupied.

The Situation

Ann Taylor was known as a high end specialty women’s clothing retailer. This is what they were known for and it’s both their greatest asset (people buy good quality on reputation and brand name) and their greatest danger.

There are a number of strengths in the company that need to be recognized as such and for what they can bring to the company.

They know their company ethos. The folks at Ann Taylor know what it is about; they know that Ann Taylor makes top quality women’s clothing for the workplace. Half the struggle comes when a company ‘loses its way’ and manufacture things with no real plan for where they want to go with the new product. This hasn’t happened to Ann Taylor. They know what they want to produce; these are quality women’s work wear. The people who work for Ann Taylor know the company`s objections and realize that  the best ambassadors for the company are happy employees.

Diversification

 This seems strange for a specialty women’s clothing manufacturer, but that’s exactly what Ann Taylor had done with the creation of Ann Taylor (AT) to specialize in the formal garment section and Ann Taylor (LOFT) that specialized in more informal and relaxed clothing. This has resulted in a great appeal and expansion to the point that by 2005 Ann Taylor (LOFT) had more retail space than the parent company.  This gives a diversity that the company was already enjoying the benefits of.

Owning their Factory

 Putting things simply, it is worth mentioning that if you own the factory then you have the total control over the quality of the products being sold in your stores. This is a major advantage over any competitor who has their garments made by someone else.  This is a major strength, as it has given them both control over quality and costs giving them a major advantage over competition who may not enjoy the same benefits (one who imports can only control quality by carrying excess stock for, if a shipment fails to meet standards, otherwise they will face delays if the garment needs to be replaced for any reason.

Restructure. This may be a reaction to the recession, but it is a valuable part of the ongoing renewal at Ann Taylor. They have adopted a number of measures that we need to look at separately.

Streamlining processes

 There are two retail divisions along with the manufacturing arm. Where two companies exist under one banner, there is always the opportunity for greater efficiency and cost saving. If the two retail outfits only buy their garments from the factory, then there is no real need for a purchasing department either company as they only need to notify the factory about garments, which need to be shipped. Likewise the factory doesn’t need a sales department as it only sells to the two companies. A good well interfaces computer system, backed by good quality IT and logistic people (that the companies already have) would bring dramatic savings.

Retiring underperforming stores

 Not all the stores are performing well. The plans require looking at stores that aren’t performing well and see what can be done to turn them around, if they can’t be turned round to meet targets, then there will be a need to retire these stores as seek to either re-deploy staff or let them go. This will result in a much leaner operation. But one part of it will be a downsizing of corporate compensation bonuses, but this would be offset by higher performance goals thus allowing for high performers to actually earn more.

These are the cost saving exercises. They will result in approximately 260 positions being disestablished and making saving of approx $80 million per year. The cost of implementation is $90 million over two years.

Growth

This will happen slowly over the next few years, but here are some of the plans, which may include:

Creation of factory outlets

An outlet on site at the factory enjoys the advantage of having no freight costs and can be sold at a substantially reduced rate without impacting profit. This is part of the growth strategy. This has the advantage of taking up the excess capacity that the factory now has without the expense of going into new stores and having to sell to others.

Creation of a new brand

 This had already begun in 2006. This is the celebration`s brand that is somewhat more expensive than the normal AT brand.

Creation of a Beauty brand

Creation of a brand of beauty products to fit with the apparel would be sited within the existing stores.

Possible alternatives

The company has done some extensive work in meeting the needs that have developed, but there are more that could be done. Here are a few ideas that would have minimal impact on the company, but have great potential:

  • Link with a major retail outlet. Ann Taylor is struggling to make headway in shrinking market. Some stores are struggling and may end up being closed, but those stores are in malls up and down the country. By working to link with a major outlet they get their brands onto the shelves of many more customers who may already know the name, but have no real idea of what the brand is like. By linking with one of the major retail outlets they still maintain quality control and even price control, but get their products before the eyes of a much wider audience.
  • Corporate sponsorship. By getting their products, especially their new products into fashion shows they would gain massive exposure to the emerging market, this is a largely untapped area for Ann Taylor at the moment as many of their customers are older ‘mature female workers’. They are young people who go to the fashion shows with disposable incomes.

With looking at alternatives a possible alternative plan of action emerges, the new plan does incorporate much of the old plan, but there are some vital new ideas that can make all the differences to the company. The new plan shows a vision for the future that retains much of what the company was built on but also innovates and builds for the future.

Streamlining of processes

This has been discussed before, but this suggestion is only for where the three entities overlap, with the new suggestions there will be a need for keeping some sales staff at the factory (or keeping a customer service area). The original idea called for the loss of some 260 staff, but with the new ideas this staff reduction would be kept to a minimum

Re-location of underperforming stores is not a closure, but re-locating them often in the same area that they are in with some it might be possible to work together with the larger retail chains to have a store within a larger retail chain.

 Corporate sponsorship/fashion show has a massive potential for sales to be generated. Working with a designer who wants to establish a range, or even an established designer can pay massive rewards for the company. By tapping into this market, they will be giving the company an unprecedented exposure to a market that so far has been untapped.

Staff input. Most companies pay lip service to this, but the fact is that the most valuable asset that the company is rests on the shoulders of each member of staff. It’s the brains of their staff, by tapping into the suggestions that staff make the company could unleash a resource that will potentially triple the bottom line of the company in a short period of time. Einstein was a clerk in an office, when he wrote his most famous scientific paper! By allowing the staff to have input and be seen to be acting on some of the suggestions the company will unleash their two greatest assets, staff creativity and ownership.

Factory outlets. This is a great way to take up the excess production that the factory would have. It’s also a great way for the company to begin the introduction of a budget brand that is just as good quality as the original. Factory outlets in the past have been used to sell the ‘seconds’ the garment that weren’t quite good enough to make it to the stores; this can still happen, but there is the potential for so much more.

New brands. Innovation is the key to survival, but it`s important to be  sure that they don’t lose sight of those who are the key.  New brands mean new markets.  Ann Taylor has gone some way with the introductions that they have done so far, but the reality is that with the new brands they will need to keep in mind what they are about as a company and whether the new brand is part of the core of the company. The idea of introduction of a range of beauty products may sound great, but the question remains, “is this where we want to go?”

Look for possible allies in the market. By allies, I mean looking at the market and assessing other companies in the markets that compliment, where Ann Taylor wants to go or is seeking to partner with them. There is no need to invent the wheel, e when you work with someone who has a perfectly functioning one!  Why seek to go to the expense of developing a beauty product, when a strategic partnership with a company in that area can have a dynamic synergic effect for both. Even linking with a market leader in this area and the exposure achieved by having the models wear the Ann Taylor apparel can result in increased exposure for the company.

Conclusion

These are some of the ideas for possible restructure of the company. Each of the aspects will have advantages and disadvantages. Many of them are things that the company is already doing and that is to be commended, but there is still room for improvement.

The best way to introduce change is often by increments as time goes by, but that should be the way that the staff at the company see things and not the way that senior management should work. A part of the issue that Ann Taylor has had to deal with is the fact that there has been a high turnover in senior management, and maybe the   question needs to be asked as to why this has occurred. However now when there is a senior management in place at the company, they are in a much better position to draw up a strategic plan, where all members of the management team understand where the company is going and thus giving the most vital ingredient, input and ownership. By doing this the company will go from strength to strength.

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