“font color=”#000000″>Knock-offs of couture designs play well to today’s recessionista,
and the upstart apparel line has also cashed in on growing demand for
yoga and athletic wear, a move that appeals to both Loblaws’ core
suburban customer and its sophisticated city shopper (Lululemon-like
yoga pants: $24, a quarter of the price of the real thing)”
“font color=”#000000″>Still, with less than $400 million in sales in 2007, Joe Fresh is a
drop in Loblaw com.’s annual $30.8 billion of revenues. And the apparel
line likely won’t hit the company’s ambitious sales target of $1
billion by 2010, acknowledges creative director Joe Mimran. “I wouldn’t
say it’s not realistic,” says Mimran, who co-founded the stylish Club
Monaco fashion chain before moving on to the eponymous Joe Fresh. (Polo
Ralph Lauren, an iconic brand in its own right, acquired Club Monaco in
1999.) “But it’s a tough number. You don’t want to throw a number out
there and achieve it at any price.” .
“font color=”#000000″>It’s also a tough year. Here’s a look at five issues Mimran will be
dealing with as he prepares for the fall season—and aims for that
elusive $1-billion target .
“font color=”#000000″>”b>ONE SIZE DOESN’T FIT ALL”/b>”font color=”#000000″>”font color=”#000000″>At
its few stores in urban centres, Joe Fresh sells out of small sizes
almost as soon as they hit the shelves. But at its more numerous
suburban outlets, particularly in Western Canada, the smaller sizes can
languish while extra-larges are snapped up. In B.C., smaller sizes are
popular because of large numbers of Asian-Canadians, who tend to be
diminutively built .
“font color=”#000000″>But the chain doesn’t have a sophisticated forecasting system to
gauge individual store demand—or a customized inventory system that can
select different mixes of sizes for individual stores. For now, each
store gets the same assortment of smalls, mediums, larges and
extra-larges, meaning some sizes are often unavailable, while others
have to be marked down at the end of the season, which slices profit .
“font color=”#000000″>Loblaws needs to get the right systems in place to properly predict
demand and serve the needs of each location, Mimran says. “We can only
move as fast as the whole company moves on certain things. We still
don’t have all the tools in our bag.” .
“font color=”#000000″>”b>THE GLOBAL SOURCING DILEMMA”/b>”font color=”#000000″>”font color=”#000000″>Joe
Fresh relies on overseas sourcing to keep its costs low. But these
days, the economics of global shipments are tricky. The rapid drop in
the value of the Canadian dollar against U.S. currency can boost
sourcing expenses, since overseas purchases are made in greenbacks. And
the Chinese market isn’t as stable as it once was—some suppliers have
gone out of business, or are on the brink .
“font color=”#000000″>Already, about 5% of the Joe Fresh overseas orders aren’t making it
to Canada, or are arriving late, Mimran says. “We started to see it in
the fall. We’ve got to be vigilant to ensure we don’t have too many
gaps occurring in our production.” .
“font color=”#000000″>To shield himself from currency fluctuations, he’s looking at a
hedging program to lock in the value of the dollar for a set time.
“You’ve got to protect yourself and ensure you have the margins
necessary so that you won’t get caught flat-footed.” As well, staff
constantly use their purchasing clout to renegotiate prices .
“font color=”#000000″>”b>THE HIGH COST OF WOOL”/b>”font color=”#000000″>”font color=”#000000″>Mimran
likes wool for some fall items, but the relatively high cost of the
textile is stretching his budget. What’s more, sweater styles have
gotten bigger and chunkier, requiring even more of the pricey
commodity. Where he can, he’s switching to cotton blends, rayon or
viscose. “Even Prada will use 100% viscose, so I’m now on equal
footing,” he says .
“font color=”#000000″>Still, he’ll continue to carry wool sweaters, and will probably
raise their prices by $10, to between $39 and $49, this fall. He’ll
scale back on wool coats, which he says he would have done anyway
because they are too edgy for many suburban consumers. But he draws the
line at tinkering with his popular wool duffle and peacoats. Their
prices will remain at about $80 or $90, he says .
“font color=”#000000″>”b>THE MEN’S WEAR RISK”/b>”font color=”#000000″>”font color=”#000000″>Most
Loblaws shoppers are women, who focus mainly on themselves or their
kids. “Men always come last,” Mimran says, which makes men’s wear a
tougher sell. And Joe Fresh is only in 13th place among men’s wear
brands in Canada, according to market researcher NPD Group .
“font color=”#000000″>The chain has been experimenting with men’s wear and has tried out
some formal pieces such as pleated pants, but sales fell flat. Mimran
is still working to get the mix right, and now plans to pare down the
number of men’s items by about half, focusing on casual clothing and
the basics that have fared well: socks, underwear, pyjama bottoms,
T-shirts. “We’re really figuring it out.” .
“font color=”#000000″>”b>BACKLOGGED BACKROOMS”/b>”font color=”#000000″>”font color=”#000000″>In
some ways, Joe Fresh’s backroom operation is run more like a grocer’s
than an apparel retailer’s. Mimran thinks that with some changes, he
can raise sales productivity by up to 15% .
“font color=”#000000″>The garments arrive in the store’s stockroom in boxes, which are
loaded on skids, wheeled out onto the floor and then unpacked—much like
cereal boxes are. Mimran wants to organize the backroom and unpack
boxes there, so that if a size is missing, floor staff can go to the
back and easily locate it for a customer .
Date:3/29/2009
Source:Report on Business Magazine