Focus on core delivers growth for retailer

The Situation

A developing market apparel manufacturer and retailer, ClothingCo* began by selling basic products. The company developed a strong brand in the mainstream segment which became its core asset. Unfortunately, after years of stagnant sales and average margins, the executive team believed they had exhausted all options for organic growth and began to explore other options.

ClothingCo turned to Bain to devise a strategic growth plan. Our consumer products and retail consultants began with a diagnostic that revealed that ClothingCo's strong brand was underutilized: it was aspirational for middle class consumers and its equity did not translate to market share due to price and assortment challenges.

These results indicated that ClothingCo had significant growth opportunities if it could bring its strong brand to full potential.

Consumer research revealed that ClothingCo's brand was underutilized:

Our Approach

Bain's Profit from the Core approach provided the foundation for identifying the ways in which ClothingCo could bring its brand to full potential.

Profit from the Core stipulates that the core of a business is the cornerstone of its strategy. The core is what makes a company unique and is also the real root cause of competitive advantage. Misunderstanding, underestimating or abandoning the core limits a company's ability to achieve full potential.

In ClothingCo's case, achieving full potential with its strong brand required a new strategic vision that built off of this core asset and an understanding of the company's most profitable labels, products and sales channels: to deliver high quality, affordable fashion products to middle class consumers.

Our Recommendations

Bain made three specific recommendations to ClothingCo to create a repeatable model for continued success in this new strategy, supported by its core asset:

• Position itself as "affordable fashion" retail to expand the brand's target segment to a large portion of the market, including middle class consumers.
• Focus its multi-channel distribution and its go-to-market model with its own stores, franchises and wholesalers.
• Improve its supply chain capabilities (both cost and lead time) with flexible sourcing which combined imports from abroad with local and regional sourcing.

The Results

Bain and ClothingCo teams came together to deliver fivefold sales and profit growth while the company also experienced a more than +60x increase in its stock price. The Profit from the Core approach helped ClothingCo identify substantial opportunity for organic growth, creating value out of its strong, but underutilized, brand.

Repositioning the brand and making the requisite changes to the product assortment and price positioning expanded ClothingCo's market segment. The distribution focus expanded the company's footprint and increased awareness. Finally, the efficiencies identified in evaluating costs and the supply chain yielded greater flexibility and higher margins.