Tory Burch free essay sample

Introduction: The fashion industry is one of the most competitive industries in the world: sought after products and coveted brand-name garments can be â€Å"in† one season and just as quickly â€Å"out† the next. It is one of the most difficult industries for a new brand to successfully penetrate, as the top tier of respected and recognized designers have built their brand equity through many seasons of impeccable looks and styles that consumers have come to demand. Tory Burch LLC, however, made the feat seem easy in 2004 when the start-up brand stormed the women’s ready-to-wear apparel scene and introduced their luxurious, yet affordable, line of clothing. Selling out its first shipment in a matter of weeks, Tory Burch LLC set the tone for its furious rise in the fashion industry. Tory Burch, the founder of Tory Burch LLC, recognized a niche in the women’s high end fashion market for designs that are practical and easy to wear at respectable prices. She built her brand upon that concept. Four years after an initial $2 million investment to finance one freestanding boutique in lower Manhattan, Tory Burch LLC now has twelve locations across the United States. More recently, in an effort to hold down production costs and achieve economies of scale, the company added wholesale accounts including Saks Fifth Avenue, Neiman Marcus, and Bloomingdale’s. The collection, which started with a mere 20 styles, now boasts more than 1,000. After four years in business, the company’s annual sales are estimated at about $115 million. The question looming on the horizon is whether Tory Burch, LLC has the potential to become a timeless brand, or whether it is merely a passing trend in the constantly changing apparel industry. The explicit problem presents itself in the onslaught of brands vying for a share in the women’s fashion market. The already established and successful brands of Diane von Furstenberg, Theory, and Marc Jacobs offer styles and quality of products comparable to that which Tory offers. In addition, given their preexisting loyal customer base, it is questionable whether Tory Burch can continue to draw new customers, boost sales, and ultimately become a â€Å"timeless† brand. This paper will explore two of the four â€Å"P’s† of marketing which Tory has explicitly focused on to propel itself to success. The first is pricing. Tory Burch’s favorable pricing in the high-end fashion market has allowed it to experience rapid growth in the last four years. This pricing strategy may be an appropriate means to achieve continued sales growth in the niche women’s luxury apparel market. The second is product development. Tory’s product development strategies have given it a unique advantage over its competition and is one of the keys to Tory’s continued success. In addition, an understanding of how Porter’s 5 Forces affect Tory Burch within the fashion industry will lead to a series of recommendations as to how Tory should undertake to ensure its survival in the ever-fickle fashion industry and become a â€Å"timeless† brand. Chapter 1: Competitive Analysis of Tory Burch and the Luxury Apparel Industry 1. 1: Threat of Potential Entrants Although new brands are by no means guaranteed success, the fashion industry provides a relatively open space for new entrants. New market entrants offering products with similar styles and design philosophies have the potential to draw loyal consumers away from Tory. Tory has been very successful in past seasons by introducing appealing wardrobe staples, such as the extremely popular â€Å"Reva Ballet flats† that have been described as reaching â€Å"cult status. † This does not guarantee, however, that new brands entering the market will not rival the products that consumers will demand. There are two reasons why new entrants may not pose a significant threat to Tory Burch. First, designers must invest significant time to develop a unique vision upon which to build its line of clothing. Not only does a designer need significant time to design a line and produce samples, it must also take time to establish itself within the fashion industry and build its reputation with notable people and groups. Second, a large capital investment is required to fund the production and the distribution of the apparel. Funding is also required to perform extensive market research to ensure that the styles generated by the brand fit the current fashion trends that consumers are interested in buying. In today’s economic conditions, it may be difficult for new start-up designers to gain access to capital needed to enter the fashion industry. Although there are always talented and up-and-coming designers waiting for their chance to make their mark on the fashion world, it is not likely that new entrants have the potential to greatly affect Tory’s sales. The branding requirements alone to compete in the saturated luxury women’s fashion industry limit the impact of new market entry from new designers. Competition to the Tory Burch product line is most likely to come from designers of existing brands. Not only are they more likely to understand the consumers’ tastes, styles and aesthetic preferences, but they also have the required infrastructure and suppliers to produce high quality garments and accessories. However, given the current unfavorable economic conditions in the United States, it is not likely that the larger, more established brands will expand their product lines in these times. The risk of financial loss outweighs the possibility of a successful new apparel line. Therefore, the luxury fashion market is a safe place for existing brands such as Tory Burch in terms of further competition from new entrants. This leaves Tory free to focus on effective product pricing and product innovation. 1. 2: Threat of Substitutes Substitution is the ability of customers to find an alternative way to fulfill the needs that the former product was meeting. As more direct alternatives become available to the consumer, the demand for the competing firms’ apparel becomes more elastic and accordingly prices and profitability may be reduced. This is a significant threat for firms in the fashion industry due to the copious styles, designs and brands to choose from apparel from. The threat of substitutes for Tory Burch comes through price competition. J Crew, Banana Republic, and Express offer similar, yet more mainstream products, in the US market. While these brands have apparel that may be inspired by similar trends, they appeal more to the price sensitive, yet fashionable target market. While these brands are constantly promoting in-store sales and pushing their outlet locations, Tory offers her products at a consistent and higher price point. If brands like J Crew can continue to improve their brand and name recognition, loyal Tory consumers may experience less severe â€Å"switching costs† if they decide to purchase J Crew products. Tory is in the luxury apparel and accessories industry, which means that Tory faces the risk of decreased sales due to substitutes of knock-offs for real products. Corner vendors carry numerous Tory handbag look a-likes for a fraction of the price of the real thing. Consumers without the disposable income to spend large amounts of money on pricey name brand accessories, such as handbags, find these knock off’s an attractive substitute for genuine goods. The counterfeit trade industry is a major problem among the world’s most well-known and high priced brands, such as Louis Vuitton and Gucci. Counterfeiting can severely damage a brand’s overall equity, as the knockoffs are of much lesser quality and detract from the â€Å"exclusiveness† that owning goods like this provides. Ellen Goldstein, chairperson of the accessories design department at the Fashion Institute of Technology in NYC, believes that these knock off’s cheapen the products; rather than serving as a form of â€Å"flattery,† this mode of â€Å"stealing† significantly reduces sales from authentic brands. Counterfeiting of luxury fashion brand accessories like Tory can become a type of substitute good, particularly in the future as improvements in technology produce better quality fakes and better distribution outlets. The extent to which counterfeits effect Tory’s overall sales is unknown. At this point, because they are such a young company, it is unlikely that counterfeiters have seized any major opportunities to copy any of their bags. It also is beneficial for Tory that they produce over twenty handbags each season and do not have a â€Å"signature† print, such as Louis Vuitton’s brown â€Å"LV. † . 3 Buyer Bargaining Power Buyer bargaining power is defined as how easy the buyer finds it to drive prices down. In the high-end apparel industry, with a growing consumer base and a relatively constant number of sellers, buyers typically do not hold much influence over prices and thus, price sensitivity remains low. While prices are held at or around a le vel that will attract buyers, limited production of certain prints and styles allow firms to raise prices for those items. Consumers’ preferences, the availability of substitutes, and price sensitivity influence buyers’ bargaining power. However, apparel purchases are highly personal and reflect an individual’s unique tastes. Thus, the purchase of clothes also depend largely on the intangible elements such as store atmosphere and the attitude of the sales associate selling the clothes. To the extent that Tory sells at department stores, it has little control over these elements, as they have no direct control over the department stores at which they sell. However, to create a positive customer service experience, Tory has an extensive customer service department at its headquarters in Manhattan. In the traditional definition, the Buyers’ bargaining power considers the strength of the buyers’ positions, such as whether they can order in large volumes to reduce their per unit price. Because Tory most often sells directly to individuals through direct-to-consumer channels, they eliminate much of the threat that can come from a strong buyer bargaining base of power. As customers continue to gain more and more information about products through sources on the Internet, they will be able to better compare product quality and product price and differentiate between the alternatives. In the future it will be easier for consumers to find the highest quality good for the lowest price, which means they will be more willing to choose certain brands over Tory if it offers comparable styles and quality. 1. 4 Supplier Bargaining Power Supplier bargaining power assesses how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over the firm, and the cost of switching from one to another. The fewer the supplier choices you have, and the more you need suppliers help, the more powerful your suppliers are. Suppliers for the apparel industry are found all over the world, but are most frequently found in East Asian countries where the cost of labor is significantly cheaper than in the West. There was not any information available for the manufacturing strategy that Tory Burch utilizes, however I believe that the suppliers for the apparel industry and more specifically for Tory Burch have very little bargaining power. With so many suppliers to choose from in numerous countries and continents, suppliers are always trying to push down their costs so they can offer products to firms at lower prices. Offering lower prices to firms ensures that these firms will continue to place their orders with that specific supplier, which guarantees income for the supplier. Supplier bargaining power does not threaten Tory or her differential advantage over her competitors. They do not have the ability to push up prices, which will allow Tory to continue offering luxurious goods at accessible price points. 1. 5 Rivalry among existing apparel retailers Tory Burch competitors include those retailers in the industry who price similarly and offer comparable styles and fits of clothing. These competitors will also target the sophisticated female consumers looking for clothing that will fit their lifestyle and set them apart from the everyday shopper. Compared to the top line of European brands like Gucci, Louis Vuitton, and Chanel, Tory Burch is priced lower in the market of luxury apparel. While a Chanel ensemble can cost on the upwards of $5,000, a complete Tory outfit usually retails for about $1,000, a mere fifth of the price. Tory targets the mid market group in the high-end apparel industry. In this market, the three major competitors for Tory include apparel retailers Diane von Furstenberg (DVF), Theory and Marc Jacobs. These three existing brands most closely resemble the design aesthetic and product philosophy that Tory’s clothes embody. DVF is widely known and recognized for the introduction of the wrap dress, a design that has proven to be timeless as it is still in production 40 years after it was introduced. Women coveting a Tory dress one day might be seen wearing a DVF wrap dress the next. Theory offers an appealing alternate for Tory Burch consumers, as it also offers a sophisticated aesthetic that is appropriate for both the work place and in after hour city life. Finally, Marc Jacobs has built up a reputation of high quality clothing with a unique twist. This poses direct competition for Tory, as she strives to create clothes with distinctive and bold prints to set her products apart from competitors. Tory competitors who offer equally attractive products will diminish Tory’s competitive strength within the market. Suppliers and buyers can go elsewhere if they do not believe they are getting the value for their money from Tory. Tory appeals to sophisticated women of all ages who desire quality and luxury, and they need to continue to keep their eye on other competitors who may try and shift their consumer base to something more similar to Tory’s. Chapter 2: Tory Burch’s Marketing Strategy: Pricing and Product Development 2. 1Luxurious Products at an Affordable Price Point Perceiving a void in the market for a sophisticated American fashion line at an accessible price point, Tory Burch was created to offer stylish yet wearable clothing and accessories for women of all ages. This accessible price point became Tory’s main strategy for differentiating itself from its competitors in the luxury apparel industry and its ultimate strategy for building itself into a â€Å"timeless brand. † The luxury apparel market is a saturated market. Brands like Gucci, Chanel, Prada and Louis Vuiton have been around for many decades and have extremely high brand equities that have been built up over time. These brands already have earned the illustrious title of â€Å"timeless,† as they have earned consistently high sales volume over many years. What separates Tory from brands like these, beside the simple fact of Tory’s immature age, is that all those other brands offer products at extremely high price points. Their products are thus only accessible to a small percentage of consumers with a high disposable income. Tory Burch knowingly developed its competitive advantage by offering products that are luxurious enough to appeal to a wide range of female consumers, while pricing at a much lower and more accessible price point. A direct comparison between Marc Jacobs and Tory Burch offers a concrete example of the success of this pricing strategy. As previously mentioned, Marc Jacobs is a brand in direct competition with Tory Burch. Jacob’s products are perceived by consumers to have extremely high quality and fall into the same style and trend category that Tory’s clothing do. However, individual pieces and garments in Marc Jacob’s collection can retail for up to two to three times the price of an equivalent Tory Burch product (See Appendix, Exhibit 1. 1). Thus, consumers who are drawn to pieces in the Marc Jacobs collection, and yet cannot afford them, are drawn to this luxurious alternative of Tory Burch. A second example of the success of Tory’s pricing strategy can be seen in Exhibit 1. 2. This Exhibit shows two black, leather hobo handbags of similar style, quality and material. Gucci designed and presently sells one handbag and Tory Burch designed and sells the other. While one bag could easily by substituted for the other as their quality and appearance are perceived to be the same by the consumer, their prices are drastically different. The Gucci bag retails for over $1,200, while Tory’s bag retails for just under $500. Capitalizing on the void in the marketplace for luxurious and stylish apparel comparable to high end designers, but offered at a lower price, Tory is able to achieve a significant market share in the women’s apparel industry. If it continues to offer high quality products that reflect the popular trends and styles demanded by the female consumer, its strategy of pricing should propel it to a 14% growth in sales over the next five years and begin them on the path to becoming a â€Å"timeless† brand. . 2Product Development 2. 2. 1 Wearable Styles While many high-end fashion designers offer sought after clothes and accessories, many women find that these looks are often â€Å"un-wearable† in everyday life. Complaining that these looks do not reflect the size and shape of the average American woman, many consumers are restricted from buying luxurious clothing because it does n ot flatter their figure. This is the area of product development where Tory Burch excels and finds a competitive advantage over her competitors. Tory Burch blends timeless and classic design elements with modern fashion sensibilities. Picking up on the cuts and styles that flatter the shape of all sized women makes her clothing appeal to a wider range of consumers. The ready-to-wear aspect of her line draws many women who are eager to try new styles, yet are unsure if they can pull off risky trends that Gucci or Christian Dior offers. Tory Burch offers a trendy enough aesthetic that excites females consumers who are interested in fashion, while at the same time being classic enough to not scare consumers away. Exhibit 2. 1 offers a visual example of this strategy. This exhibit shows Tory Burch on the left offering a trendy, yet classic, approach to a chic, professional outfit. The picture on the right shows a Marc Jacobs dress ensemble, a designer who is direct competitor of Tory’s. The Marc Jacobs outfit is much riskier and further â€Å"out there† than the look of the Tory Burch outfit. The TB outfit, while evoking the feeling of being on the cutting edge of the new trends, still appeals to the consumer on a classical level. The yellow hat featured in the Marc Jacobs outfit is seen as not being wearable on a day-to-day basis by many female consumers, and thus reduces the sales of Marc Jacob’s products. 2. 2. 2: Bold Prints The second aspect of product development that Tory utilizes in her strategy for success is using bold and unique prints to differentiate her clothing from her competitors. In designing her clothing line, creative director Ms. Burch, draws inspiration from her favorite era—the 1960s and 1970s. She relies on such style influences as art, photographs, films, and her mother and father’s vintage wardrobes. Using these influences allows her to create unique prints that set her clothes apart from many of the solid colored tops and pieces of other designers. Exhibit 2. 2 shows the comparison between a typical Tory tunic and a blouse of one of their main, earlier identified, competitors: Theory. These bold prints are important to the design philosophy of Tory Burch, because they convey the inspiration of each season, and these prints are something that consumers have come to associate with the brand of Tory Burch. The unique prints chosen to make her clothing pieces are integral to the aesthetic of Tory Burch. CONCLUSION: Given its accessible price strategy and unique product development aspect of bold, unique prints and wearable clothes, I strongly believe Tory Burch has the potential to continually increase its market share of the women’s luxury apparel market and grow into a â€Å"timeless† brand. By sticking to these core strategies, Tory Burch will build brand loyalty among consumers and continue to increase sales at a steady rate of 8% for the next four years. Tory Burch will continue to build its brand equity, and in turn they will have the opportunity to open more freestanding boutiques as more consumers demand Tory Burch products. The following recommendations will enhance Tory Burch’s brand and name recognition, bolster growth, and allow Tory to continue on the path of becoming a â€Å"timeless† brand: 1. Develop advertisements highlighting Tory’s bold prints and unique aesthetic in top fashion publications: Vogue, Elle, Women’s Wear Daily, and InStyle. 2. Change their target market to a more focused and specific age group, rather than their current strategy of catering to â€Å"grandmothers, mothers and daughters. † This will allow Tory to more explicitly cater its prints/products to the specific tastes and trends of their target market. 3. Revamp ToryBurch. com to create a more interesting and personal online shopping experience- such as including a flash demo on the homepage, which will result in more visitors to the website and more purchasing of apparel. 4. Introduce a signature fragrance that consumers will associate with Tory Burch and incorporate the theme of â€Å"uniqueness and boldness† into the scent. 5. Intensify consumer awareness of Tory Burch by creating special promotions during the Holiday Seasons. 6. Capitalize on the â€Å"young professional† market: create a sub-collection of trendy suits and business attire for women entering the business world. . Continue to produce the â€Å"Reva Ballet Flat† with modern updates every year, so that it becomes a timeless shoe that consumers cannot live without. 8. Offer â€Å"TB T-Shirt Customization† services online: where consumers have the opportunity to pick from a pre-chosen selection of fabric prints, pick the style of tee-shirt, a nd pick their size to have their own â€Å"custom† TB garment. This will be effective because Tory will be able to keep its price point low, as the raw materials cost for tee-shirts is very low, while giving the consumer the impression of a unique and quality product. 9. Create an online community for Tory Burch shoppers to communicate, consisting of a blog where loyal shoppers can talk about their favorite trends and styles. This will build the idea of the Tory Burch â€Å"lifestyle† and will encourage consumers to buy TB products as an extension of this lifestyle. Works Cited: Agins, Teri. â€Å"The Boomer Balancing Act. † The Wall Street Journal. November 3, 2007. Agins, Teri. â€Å"How Tory Burch Found Her Stride. † The Wall Street Journal. February 1, 2008. Chanel. www. Chanel. com. Chase, Jane. â€Å"The Glory of Tory. † Connecticut Cottages and Gardens. May 1, 2008. Diane von Furstenberg. ww. DVF. com. â€Å"Goyard and Tory Bruch: 5th Avenue Style Tribe. † The New York Times. April 24, 2007. Gucci. www. Gucci. com. Karasyov, Carrie. â€Å"Tory in All Her Glory. † Town and Country Magazine. February 2008. Loomis, Rick. â€Å"There’s Something About Tory. † The Los Angeles Times. June 1, 2 008. Marc Jacobs. www. marcjacobs. com. Marx, Linda. â€Å"Tory’s Story. † The Boca Raton Observer. April 1, 2008. Mind Tools. â€Å"Porter’s Five Forces. † January 18, 2008. www. mindtools. com Moore, Booth. â€Å"Tory Burch has turned her line of Classics into a line of Must-Have Lifestyle Brand. †; http://www. newsday. om/features/lifestyle/ny-lstory0602,0,345077. story. ; The Los Angeles Times. June 1, 2008. O’Brien, Diane. â€Å"When Imposters Knock Off Profits. † December 1, 2003. â€Å"Preppy Chic Flip Flops are All the Rage This Summer. † The Houston Chronicle. June 1, 2008. Theory. www. theory. com. â€Å"Tory Burch: Targeting soccer moms and yummy mummies. † The Business of Fashion. November 6, 2007. â€Å"Tory Branches Out. † Women’s Wear Daily. May 24, 2008 Primary Sources: Interviews with: 1. Kerry Lynne Carerra. Public Relations and Marketing Director of Tory Burch, LLC. 2. Caitlin Donovan. Public Relations Assistant.