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Supply Chain Management of Intrado Inc.

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Netra Shetty
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Supply Chain Management of Intrado Inc. - January 11th, 2011

Intimate Brands, Inc. is responsible for the operation of numerous retail stores throughout the United States that specialize in lingerie, personal care products, and women's apparel. Intimate Brands is composed of the Victoria's Secret stores and catalogue, Bath & Body Works, Cacique, and Penhaligon's. Gryphon Development is another of the company's holdings, and functions as the division responsible for the creation of many bath and personal care products sold by the company. Most of Intimate Brands' over 1,600 store units are located in shopping malls throughout the United States, although Penhaligon's is based in the United Kingdom. Leading apparel retailer The Limited, Inc. possesses a majority interest in Intimate Brands, Inc. and its holdings.

Intimate Brands' Beginnings

Intimate Brands, Inc. was created in 1995 as the result of a reorganization of corporate holdings initiated by leading retailer The Limited, Inc., who owned Intimate Brands at the time. Despite Intimate Brands' relatively short history as a freestanding entity, however, the different divisions that comprise the company each possess their own history, much of which dates back many years. The company itself was slowly formed throughout the 1980s and 1990s as The Limited acquired different lingerie and personal care product retail operations and added them to its mass of retail holdings.

One of the first acquisitions made by The Limited that later became a member of the Intimate Brands division was that of the Victoria's Secret enterprise in 1982. When The Limited's chairman, Leslie Wexner, initiated the purchase of Victoria's Secret, it was made up of just six struggling lingerie stores and a successful catalogue operation. In fact, 1982 sales figures for the six money losing stores topped off at only around $7 million.

The Victoria's Secret catalogue, however, was enjoying success and achieving earnings in 1982, and Wexner believed that some potential existed for both divisions to grow and prosper if led in the correct direction. In the early years, the catalogue operation catered mainly to often-embarrassed men who were attempting to purchase lingerie as gift items. Catalogue telephone operators would lead its predominately male base of customers through their purchases, patiently helping them figure out bra sizes and the like. Despite its success in that realm, the company was not a big hit with women; Wexner, however, saw potential for a change in focus.

Wexner eventually hired Cynthia Fedus to act as the chief executive officer of the Victoria's Secret Catalogue operation. At that time, it was the company's belief that business would explode if women were targeted as the primary customers, given that women were likely to purchase underwear and lingerie items for themselves on a more regular basis than men. In order to target women, Fedus changed the catalogue's focus, ousting the steamy shots of women with men in the catalogue's photos and replacing them with those of women posing alone in romantic and seductive, yet proper, settings. After the change, catalog sales doubled in one year to more than $100 million.

While the catalogue was busy revamping its image, Grace Nichols had gained control of the Victoria's Secret Stores branch of the business, and was making moves to convince female shoppers that undergarments were actually another part of a well-rounded wardrobe. Management tried to capitalize on what they saw as a woman's desire to indulge, and offered products and marketing strategies that played on this idea.

Other Limited Additions in the Late 1980s

Meanwhile, The Limited had introduced its own private-label intimate apparel business, Lingerie Cacique, and a chain of naturally based toiletries stores called Bath & Body Works. Immediately, The Limited's management experienced a barrage of criticisms by those who felt that chains consisting of such limited product offerings would not fare well. For one thing, the Victoria's Secret store chain was already struggling. Furthermore, many critics felt that women could already purchase underwear, lingerie, soap, and shampoo at department stores, and that there was simply no need for stores specializing in those products.

Despite the doubts expressed by those outside The Limited, the company continued its introduction of new Victoria's Secret, Cacique, and Bath & Body Works store units. Wexner maintained that his new additions were not in the business of selling lingerie or shampoo, but were instead selling indulgences that appealed to its customers' narcissistic tendencies. For example, according to a June 1995 issue of Forbes magazine, "the Victoria's Secret customer buys eight to ten bras a year; the typical American woman buys two." The stores were obviously catering to a need that other businesses did not even realize their customer base possessed.

Entering the 1990s, The Limited continued its string of personal care product additions with the purchase of Penhaligon's, a business based in the United Kingdom that had over a century of experience in the marketing of perfume products. The Limited also added Gryphon Development, L.P. to its holdings, which was a producer of personal care products. Gryphon soon became the division responsible for the creation of new products for the Bath & Body Works chain.

Each of The Limited's new holdings slowly grew to become a power in its field. For example, although Bath & Body Works did not experience overwhelming success immediately after its introduction--the business posted sales of only $1.9 million in 1990--it soon grew to become one of the leading natural-based toiletry product store chains in the United States. Within five years, the stores were generating $475 million in annual sales, helping The Limited's lingerie and personal care product division achieve over $2.1 billion in sales for 1994.

The Late 1990s: Intimate Brands, Inc. Is Born

The Limited operated each of its lingerie and personal care products businesses as a portion of its massive retail portfolio until 1995. At that time, the company's holdings had expanded and diversified so much that the decision was made to restructure them into three main operating divisions. Of the three divisions that were created, Intimate Brands came to encompass Victoria's Secret stores and catalogue, Cacique, Bath & Body Works, and Penhaligon's, with Gryphon acting as the research and development arm of the personal care branch.

That same year, Intimate Brands, Inc. was spun off by The Limited, and was listed on the New York Stock Exchange. The Limited maintained a controlling interest in Intimate Brands, but the company began functioning separately on October 23, 1995 and produced its first annual report that year.

At the time of the spinoff, Intimate Brands already possessed an international presence through the existence of its Penhaligon's chain, as well as numerous Victoria's Secret and Bath & Body Works stores, in the United Kingdom. Plans to expand Bath & Body Works on the international level were focused only on further penetrating the U.K. market. Intimate Brands' largest international presence came through its Victoria's Secret Catalogue operation, which distributed intimate apparel, clothing, shoes, and other accessories to shoppers worldwide.

The new company decided against the prospect of franchising any of its businesses, opting instead to maintain corporate ownership of all of its store locations. The company also refrained from selling any of its merchandise at wholesale prices to other vendors who wished to sell Intimate Brands' items in their own retail settings. It would seem that this practice potentially limited the consumer base that Intimate Brands was able to reach, subsequently limiting the company's sales potential as well. But through strict control of the distribution and sales channels used, Intimate Brands instead ensured that its products would not fall into less than high quality retail settings. Thus, the glamorous image of each store chain and its products was maintained.

The company posted sales of $2.5 billion in 1995, marking an increase of over $400 million from the previous year. This financial success was then complemented by the company's involvement in numerous community service organizations and causes. Intimate Brands targeted a portion of its resources toward helping organizations involved in women's and children's issues, education, and community growth. For example, the company offered support to Race for the Cure, the YWCA's Women of Achievement Awards, the Children's Defense Fund, INROADS, the United Negro College Fund, the American Red Cross, and the United Way.

The company's commitment to high moral standards and to providing its employees with opportunities and a pleasant working environment was also apparent in its policies regarding the production and distribution of its products. Intimate Brands refused to do business with suppliers who did not comply with the requirements of the U.S. Customs Service and other government agencies, such as country-of-origin requirements for manufactured goods. The company also mandated that its suppliers and manufacturers provide safe and healthy working conditions, fair wages and benefits, and reasonable working hours to employees.

Intimate Brands soon began to build on the brand recognition it had already earned in the past through the production of new editions of its Victoria's Secret Catalogue. At a steady pace, the company began distributing catalogues which offered new clothing and accessory items in addition to the traditional lingerie products. Very popular were the swimwear, citywear, and country versions of the catalogue. Another marketing trend was the almost yearly introduction of special new lines of Victoria's Secret lingerie, which were accompanied by national-scale television advertisement campaigns. Examples in the late 1990s were the "Perfect Silhouette" and "Angels" lingerie lines.

As the newly formed Intimate Brands, Inc. approached the end of the century, it was working to position itself for further success. The company was opening new store units for each of its retail operations, and was projecting continued growth throughout its existing markets and in new ones. The increased offerings in the Victoria's Secret Catalogue were also acting to boost sales figures. Intimate Brands' ability to continue increasing the brand recognition of its product lines would determine its potential for further growth and profitability.
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Last edited by netrashetty; January 11th, 2011 at 12:18 PM..
   
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