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How Victoria's Secret Can Save Itself

Here’s what the frustratingly out-of-touch lingerie label needs to do to reverse its cultural — and commercial — decline.
The 2018 Victoria's Secret Fashion Show in New York | Source: Getty
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  • BoF Team

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NEW YORK, United States — In some ways, it was back to basics for Victoria's Secret. For the first time since 2015, the mega lingerie retailer staged its annual and infamous runway show in New York City.

In other ways, it was a new reality. It's been a year since the Harvey Weinstein news broke and since the #MeToo movement took hold. Victoria's Secret, which for years has been scrutinised for its objectification of women and for the unrealistic ideals it presses upon the masses, has never felt so out of touch, especially when it comes to its fashion show, where its famous Angels — mostly white, all thin — strut in elaborately designed outfits that have often been called culturally insensitive and occasionally grotesque.

The fact that the show is still staged weeks before it actually airs on television, with all that social media amplification lost, just underscores how out of touch the entire operation looks.

This year, in its own way, Victoria’s Secret attempted to address some of the criticisms. There was talk of "empowerment," a wider range of models in terms of race and ethnic background, absolutely zero Native American-appropriated headdresses and the introduction of a capsule collection created in collaboration with the British designer Mary Katrantzou, whose signature kaleidoscope prints rendered in lingerie offered a new lens on sexy. As a precursor to the catwalk performance, the show began with a black-and-white video with models talking about empowerment in vague feminist speak. The crowning quote? "We should be sexy for ourselves, not because a man told you to be."

And yet, Victoria’s Secret still feels as though it’s stuck in a time capsule: an era when it was okay, even expected, to openly project the male gaze on women’s bodies, when uncomfortable push-up bras with air pumps were viewed as innovative, when people still shopped at the mall. This season's show felt like an homage to itself. Between set changes, archival footage played in the background.

Challenged by competing brands aiming to rewrite its staid definition of sexy — including American Eagle’s airbrush-free Aerie and body-positive plus-size brand Lane Bryant’s “I’m No Angel” campaign — as well as direct-to-consumer startups such Lively, ThirdLove and True&Co, which also promise a more modern shopping experience, the L Brands-owned Victoria’s Secret is simply no longer relevant.

That's because a woman in control of her body is what's sexy now. One need look no further than the success of Rihanna's tantalising Savage x Fenty lingerie line — which, with its XS-3X size range, is inclusive and body-positive and also unabashedly sexual — to see that Victoria's Secret is losing market share.

In the fiscal year ending February 3, 2018, net sales at Victoria’s Secret were $7.4 billion, down 5 percent from $7.8 billion a year earlier, despite having an extra week of sales on its 2017 financial calendar. Sales at stores open at least one year were down 8 percent. While sales in China were on the up, the UK business — once a major growth lever for the brand — was down. In the second quarter of fiscal 2018, earnings per share were $0.36, compared to $0.48 during the same period in 2017.

L Brands, which also owns cloyingly scented, if wildly popular, soap-and-candles store Bath & Body Works, is run by 81-year-old Leslie Wexner, the executive behind the rise of VS, as well as Abercrombie & Fitch, Express and other mall staples. In his twilight years, Wexner has turned to pruning his portfolio in order to eke out more shareholder value, closing department store Henri Bendel and looking for a buyer for La Senza, a Canadian lingerie brand. (In 2017, Wexner shut down L Brands’ namesake, The Limited, closing 250 stores.)

But none of that will fix Victoria's Secret. It is the lingerie world's version of Gap: too big and too complacent not to fail. Unless Wexner and his team make significant changes to the company' strategy, it will continue to shrink. However, in public statements, Wexner has made it clear that he doesn't agree with this assessment and has shown no indication of changing course. His longtime deputy, creative director Ed Razek, confirmed this in a recent interview with American Vogue.

“It’s like, why doesn’t your show do this? Shouldn’t you have transsexuals in the show? No. No, I don’t think we should. Well, why not? Because the show is a fantasy,” Razek said. “It’s a 42-minute entertainment special. That’s what it is. It is the only one of its kind in the world and any other fashion brand in the world would take it in a minute, including the competitors that are carping at us. And they carp at us because we’re the leader. They don’t talk about each other. I accept that. I actually respect it. Cool. But we’re nobody’s third love.... We’re their first love. And Victoria’s Secret has been women’s first love from the beginning.”

Wexner’s opinion still carries weight: he and his wife currently owns 17 percent of L Brands shares, according to the company’s website.

Maybe there's hope Wexner will change his mind. In September he "quit" the Republican party, of which he was the wealthiest supporter in his home state of Ohio, after publicly criticising president Donald Trump, saying that he "won't support this nonsense."

It is surprising that L Brands hasn’t become more of a target for activist investors, given that it is still, after all of this, the dominant player in the space. The global lingerie market was valued at about $38 billion in 2017, according to Zion market research. Victoria’s Secret makes up about one fifth of that.

However, Victoria’s Secret must make significant changes to its strategy before it’s too late. Here are some recommendations:

End the fashion show altogether. Yes, the runway show still reaches a lot of people. (Last year's show in Shanghai was seen by some 1 billion people in 190 countries, a 45 percent jump from 2016, according to Vogue.) But television ratings are plummeting — half of what they were less than a decade ago — and it generates more press bad press than good, with rival brands and educated consumers staging protests on the regular. L Brands spends millions of dollars producing the show — its 2016 Paris effort cost more than $20 million. Those dollars could be used for sentiment-shifting online marketing and other fresh activations.

Bring in new voices to figure out what the modern Victoria's Secret should be. Right now, most marketing around underwear is about comfort and self-acceptance. At its core, Victoria's Secret is about being sexy. But what does sexy mean in 2018? Here is where Victoria's Secret must be careful. If the brand claims to embrace body positivity without projecting an authentic point of view, it may experience even more backlash. Sweeping changes to the brand's longtime identity would be difficult to implement smoothly. That's why Victoria's Secret needs a new creative team to re-imagine its image in a way that won't entirely alienate its current customer. Hiring more diverse models would be an honest first step.

Revamp the in-store experience. Like many mall brands, the company's in-store experience has not been updated in years. The garish decorations, heavily scented boudoirs and pushy salespeople — some of whom don't even know how to conduct a bra fitting — leave consumers feeling uncomfortable in an era when they value hassle-free, independent shopping.

Focus on fit. One of the reasons Victoria's Secret has maintain such dominance over the years is that bra construction is hard. But in recent months, a swell of customer complaints about declining product quality at the brand has flooded social media platforms. "Within the last 6 months the quality of their merchandise and their customer service has really went down the gutter! What happened to the brand I loved!?" one customer recently wrote on its Facebook page. That sort of sentiment — whether justified or not — spreads quickly.

If all else fails, start from scratch. Victoria Secret's little sister brand, Pink, is also struggling. But it offers a lesson in how to change the narrative. (After all, it was launched to bring in younger customers the main brand couldn't.) What may be more prudent is to launch a new concept, with its own set of codes and ethos, that could begin to pick up slack where these two labels fall off. At this point, it's going to take a revolution to save Victoria's Secret. For a company so set in its ways, starting over may be the only way forward.

THE NEWS IN BRIEF

BUSINESS AND THE ECONOMY

Hermès store | Source: Shutterstock

Hermès sees no slowdown in Chinese sales. The luxury house reported strong third quarter sales momentum, with its leather goods division performing well. Revenue came in at €1.46 billion ($1.67 billion) in the July to September period, rising 9.7 percent from a year ago at constant currencies. However, it marked a slowdown from the 11.6 percent comparable growth from a quarter earlier. Chief executive Axel Dumas played down fears of a slowdown in China, saying such worries were groundless for now.

Farfetch sales jump in first results since IPO. Sales on the online marketplace rose 53 percent to $310 million in the third quarter, outpacing overall luxury spending. The company credits the addition of new brands and strong growth in key emerging markets, including China, Mexico and the Middle East. The results surpassed most analysts' expectations for Farfetch's first earnings report since going public in September.

Michael Kors misses quarterly revenue estimates. The American brand is still struggling to gain a stronger foothold in Europe, as its European retail stores fell nearly 10 percent during the quarter that ended in September, leading to total retail revenue of $643.9 million. The result missed analysts' average estimate of $661.1 million. Quarterly net income attributable to the company fell to $137.6 million from $202.9 million a year earlier. The miss was the first since the quarter ended December 2016.

Adidas hikes profit guidance, trims sales outlook.  Third quarter sales rose a currency-adjusted 8 percent to €5.87 billion, compared with analysts' forecast of €5.92 billion, while net profit from continuing operations jumped 19 percent to €656 million, beating consensus for €619 million. While Adidas has been taking market share from rival Nike in North America, it warned that sales in western Europe were likely to stay flat in the second half of the year after the company failed to focus enough on the launch of more products.

Ralph Lauren tops revenue estimates. The New York-based brand returned to growth in North America in its second fiscal quarter thanks to its strategy to intensify marketing on social media. The company said it spent about 30 percent more on marketing in the three months ending in September, compared with a year earlier. Revenue overall rose 1.6 percent to $1.69 billion, better than analyst expectations of a 0.9 percent fall. Net income rose to $170.3 million or $2.07 per share, from $143.8 million or $1.75 per share a year earlier.

Hugo Boss expects strong year end after weather dents profits. Group sales were flat at €710 million ($810 million), while EBITDA before special items fell 12 percent to €126 million, both missing average analyst forecasts. The brand said the fall in profitability was mainly due to markdowns to respond to the late start to sales of higher price fall and winter garments due to the long summer in Europe, as well as negative currency effects of €5 million.

Marks and Spencer may close more stores than planned, CEO says. The troubled British retailer said it may step up store closings as it reported another decline in sales. After announcing plans in May to shut about 100 of its large stores selling food and clothing, M&S chief executive Steve Rowe said that the number is only a "first stage" in the company's turnaround plan. Looking ahead, M&S has pinned part of its future success to growth in online sales of home goods and clothing.

Zara launches online sales in 106 new countries.  The launch means apparel from the clothing retailer will be available online in 202 countries. Parent company Inditex has said it aims by 2020 to have all its brands, including Massimo Dutti and Bershka, available online worldwide. Orders will be filled from the online platform in Spain. Online sales at Inditex jumped 41 percent in 2017 to reach 10 percent of group net sales, although it is still behind some of its rivals.

PEOPLE

Gigi Hadid in 'Redux Grunge' | Photo: Juergen Teller

Marc Jacobs re-issues famous 'grunge' collection. For his Resort 2019 collection, the designer has reproduced his famous Spring/Summer 1993 grunge collection for Perry Ellis, which was lambasted by critics and ultimately got Jacobs fired. More than 20 looks from the line have been replicated exactly — in the original prints, fabrics and embroideries, down to the shoes, jewellery and accessories — for a capsule that Jacobs is calling "Redux." They will be available for purchase November 15 online and in Marc Jacobs stores. A campaign shot by Juergen Teller will also debut in December.

Serge Ruffieux leaves Carven. Following the acquisition of Carven by China's Icicle Fashion Group in October, the French fashion house is moving in a new creative direction. Its impending relaunch will now be undertaken without Serge Ruffieux, who is leaving his role as creative director after only three seasons. He joined in February 2017, overseeing all ready-to-wear and accessories. The house did not present a collection for Spring/Summer 2019. Despite Ruffieux's departure, Icicle has said it would keep all other structures and employees in place.

Vanity Fair Italia announces new editor-in-chief. The Italian title has appointed Simone Marchetti as its editor-in-chief. He will begin his new role in December. Marchetti, whose intelligent fashion reporting has cemented his place as an authority on the industry, joins the publication from La Repubblica and will be replacing Daniela Hamaui.

MEDIA AND TECHNOLOGY

Zalando seeks to counter return problems and smaller orders. Europe's biggest online fashion retailer is working to counteract a fall in average order size after it reported the slowest sales growth since launching a decade ago. Third-quarter sales rose 12 percent to €1.2 billion ($1.37 billion), missing average analyst forecasts for €1.22 billion, and well below the 20 to 25 percent annual growth it has targeted for years. About half of the products Zalando sells are returned, with most of them processed and resold.

Alibaba and JD.com battle for luxury goods market. From Hugo Boss to La Perla, the online shopping giants have recruited dozens of labels since launching their rival luxury sites in mid-2017. But some of the most prized names have so far remained aloof and the race is on to attract the likes of Louis Vuitton: a brand notorious for only selling its handbags and other wares through its own stores and websites. Both are banking that even elusive outsiders will tire of trying to fly solo in China, where potential clients shop far more by mobile phone apps than in the US or Europe, and those in smaller, far-flung cities are hard to reach.

Black Friday goes global. More than 70 percent of consumers plan to get involved in Black Friday this year, according to a new report by McKinsey & Company. In Europe, just 19 percent of UK respondents had participated in Black Friday retail back in 2015, compared with an impressive 54 percent in 2017. It was a similar story in Germany, with 9 percent of consumers getting involved in 2015; that figure jumped to 43 percent in 2017. In Canada, consumer participation during the period has shown similar impressive gains, growing from 26 percent in 2015 to 48.5 percent in 2017.

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