The Limited was the biggest success story in the history of retailing. Throughout the 1980s, The Limited grew at an unprecedented rate. Sales rates and stockholder equity climbed at a rate of 46 percent per year, with earnings increasing 63 percent annually. In 1984 The Limited sold over
200 million garments, which averages out to three for every woman between the ages of fifteen and fifty-five. By 1985 The Limited controlled 5 percent of the $50 billion per year women's clothing business. So what happened to this retailing giant? Rapid expansion and market saturation, combined with poor-quality products and lack of brand image, eroded the customer base.
Leslie Wexner was studying to be a lawyer at Ohio State University in 1961 when he decided he would rather work at his family's store in Columbus, Ohio. Wexner's father, a Russian immigrant, had been a manager for the Miller-Wohl clothing store chain when he decided to open his own store, which he named Leslie's, after his son. Wexner and his father consistently disagreed on how to run the family business. Wexner wanted to focus on women's sportswear, which sold faster than career wear or formal wear. Wexner's father believed a clothing store needed to have a diverse range of products to survive. Two years later, Wexner borrowed $5,000 from his aunt and opened his own store in Columbus which offered a "limited" selection of clothing. The Limited carried only moderately priced women's sportswear. Sales the first year were $165,000, vastly surpassing his father's business. His father closed Leslie's, and joined his son as chairman of The Limited and, in 1969, with six stores, the company went public.
In 1970 Wexner's first annual report predicted that "The Limited would become the largest retailer of women's specialty clothing in America." By 1976 Wexner was on his way to realizing that boast with 100 stores. Wex-ner was one of the first businessmen to engage in niche retailing. The Limited marketed to the emerging baby-boom generation with moderately priced jeans, pants, skirts, and tops. As his customer base aged, The Lim-ited's merchandise mix began to incorporate career clothing. The Limited was also one of the first vertically integrated stores. Vertical integration allowed Wexner quickly to produce private-label goods inexpensively through a network of foreign manufacturers. The rapid response inventory and distribution strategies developed by Wexner allowed The Limited to respond to changes in fashion trends faster than their competition. The third key to The Limited's success was store presentation. The design of the storefronts and merchandise display reflected the brand image Wexner wanted to project. The Limited store interiors were modern, captivating, and glamorous.
The Limited's success in the 1980s came from their product development philosophy: "We don't set the style, we follow it. We try to be fast followers (Edelson)." Wexner traveled the world looking for hot products and fashion trends which could be knocked off at lower prices and sold in large volumes. The pivotal product in The Limited's success was the Forenza sweater of 1984. Wexner noted that the "preppy look," which had dominated women's fashions for the past two years, was reaching a saturation point, but what would be next? The status-conscious 1980s was a time when Americans craved the sophisticated, sleek, modern look of European products. Wexner invented Forenza, an Italian sounding word, and decorated the interiors of his stores with Italian flags and slogans. He declared Forenza "official. . . accept no substitute." And women agreed. The shaker-knit Forenza sweater became the most successful sweater in American retailing history, selling more than 3 million units at $29 a piece. By 1985 The Limited appeared to be "limitless" in its market domination.
With The Limited installed as the dominant retailer in the twenty-to-thirty-five-year-old women's sportswear market niche, Wexner was ready to capitalize on other marketing niches. In 1980 Wexner added a new division to The Limited, Inc.: Limited Express. Express was targeted at females from fourteen to twenty-five, who wanted fashion-forward looks that mirrored the latest runway trends. The stores were bold and bright with whimsical fixtures. Express was another success for Wexner, and within three years the division had opened 161 stores. In 1982 Wexner purchased the clothing chain Lane Bryant. Lane Bryant, a leader in plus-size fashions, had lost touch with its core customer. Wexner revitalized the chain by upgrading the apparel to moderately priced fashionable sportswear targeted to the younger plus-size customer. Wexner's next acquisition was the 800-store Lerner New York chain in 1984 from Rapid-American Corporation. The store carried a vast assortment of budget-priced merchandise targeted to women between the ages of twenty and thirty. The capstone to The Limited, Inc., women's business came with the 1985 acquisition of the prestigious Henri Bendel department store. Henri Bendel was originally founded in 1896 as a hat shop, but later became an upscale retailer of women's bridge and designer fashions. The Bendel acquisition put The Limited, Inc., on the same playing field as Bergdorf Goodman, I. Magnin, and Neiman-Marcus.
In 1988 Wexner began to expand The Limited, Inc., into menswear. Abercrombie & Fitch, the first menswear acquisition, was positioned to compete with Ralph Lauren, Tommy Hilfiger, and Calvin Klein. The division was so successful that Wexner offered Abercrombie & Fitch as an IPO in 1996. In 1991 The Limited opened Structure, a chain of men's retail stores which provide moderately priced, contemporary, Armani-inspired looks for casual work environments. Next, Wexner expanded The Limited into the sporting goods market, dominated by Patagonia, L.L. Bean and Eddie Bauer, by purchasing the majority interest in Galyan's Trading Company in 1995. Galyan's, opened in 1982 in Indianapolis by Patrick Galyan, provided sporting goods and apparel targeted to the outdoor sports enthusiast.
The Limited also acquired Victoria's Secret, Cacique, White Barn Candle Company, and Bath & Body Works during the 1980s and 1990s and spun them into a separate division in 1995 known as Intimate Brands, Inc. Of the four divisions in Intimate Brands, Inc., Victoria's Secret has experienced the most phenomenal success. Victoria's Secret boldly positioned itself in malls, with seductive window displays that declared it acceptable for women to purchase sexy, romantic lingerie. In 1999 The Limited created one last spin-off from their company, The Limited, Too. The Limited, Too, Inc., is a 321-store retail chain of trendy girls' clothing. However, unlike the Intimate Brands, Inc., and the Abercrombie & Fitch spin-offs, The Limited, Inc., does not hold ownership interest in The Limited, Too.
By 1985 The Limited consisted of 2,500 stores. The expansions of the late 1980s and early 1990s seem to position The Limited for continued increases in market share and profits. As the 1980s drew to a close, The Limited consisted of 746 stores, Express of 751, and Lerner of 877. In 1990, when other retailers were struggling with the economic recession, The Limited doubled their stock prices and increased earnings by 15 percent to $398 million on $5.25 billion in sales. However, as early as 1987, there were signs of trouble for the women's divisions. The Limited had never developed a strong product development or branding strategy. Throughout the 1980s and 1990s, the company continued to merchandise the stores by knocking off hot sellers, instead of developing brand-specific product lines. Virtually identical products appeared simultaneously in each of the four women's divisions. The identities of each division became confused. There was no consistent design direction. Price points went up and down. The product line switched from sportswear to career wear and back again. The divisions were also plagued by poor-quality merchandise. Boredom and monotony settle over The Limited, Inc.
By 1993 sales at The Limited fell 25 percent, net income dropped 14 percent, and stock prices remained at the 1987 rate. The 5,600-store chain which encompassed thirteen retail divisions was still the largest women's specialty retailer in the United States, but it was suffering from extreme growing pains. To save its core business, The Limited, Express, and Lerner, Wexner decided to close down poorly performing stores, sell off select divisions, and spin off others with IPOs. Between 1995 and 1999, The Limited, Inc., closed over 750 stores from The Limited, Express, Lerner New York, and Henri Bendel divisions. Abercrombie & Fitch, Intimate Brands, and The Limited, Too, were all spun off through highly successful IPOs. Cacique was shut down in 1998, and the majority interest in Gaylan's Trading Company was sold in 1999.
Next, Wexner had to refocus the brand identities of each of the divisions. In 1997 The Limited, Inc., formed a new design studio to redefine the target market for each division and concentrate on cohesive product development. In 1999 The Limited, Inc., devoted considerable resources to advertising their redefined brands. As a company, The Limited, Inc., has never utilized advertising to drive traffic to its stores or differentiate itself in the marketplace. Finally, The Limited, Inc., established new standards for product quality to regain trust with consumers.
In 1999 the Express division of The Limited, Inc., began to see an increase in earnings, while The Limited's sales were flat. Lerner New York, Lane Bryant, and Structure all continued to experience losses. As of 2000, The Limited, Inc., has been reduced to nearly 3,000 stores which generate approximately $4 billion in net sales. From its peak growth of 750 stores, The Limited has been reduced to 443. Despite the long-term brand strategies currently in place, many question whether The Limited division of The Limited, Inc., will survive. The Limited, Express, and Lerner New York continue to canabilize each other's customer bases, and without clearly defined niches, there may not be room in the marketplace to operate all three. See also: Ralph Lauren; Tommy Hilfiger; Calvin Klein. Website: http://www.limited.com
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