Op1: Scrutinize your category and come up with a better solution, and you can grow and gain market share even while the economy and category are going down

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One apparel retailer is beating the economic downturn by cutting its business from a different cloth.

Chico's FAS-as in Chico's Folk Art Specialties, the business it started with in 1983-continues to rack up sales and profits by eschewing the dictates of Seventh Avenue. It's succeeded thanks to marketing innovations that address head on an issue that traditional department, specialty and discount stores, and other apparel retailers prefer to keep in the closet-the angst women often face when shopping for clothes.

By truly innovating, Chico's need not resort to slashing prices and stepping up promotions in a downturn to move uninspired goods from uninspired stores.

Chico's solutions, such as new sizing sets, highly trained staff to guide accessory purchases and ready-to-assemble ensembles in easy-care fabrics, go a long way toward alleviating some of the dressing-room terror detailed in comic strips such as "Cathy." "They have added a dimension to apparel sales that attracts market share from others dumb enough not to understand what [Chico's is] doing-innovating in the art of fashion retailing," said Kurt Barnard, president, Barnard's Retail Trend Report, a forecasting firm.

That's also allowed the company to thrive-and stick to its formula-despite a weakening economy. Sales at stores open for a year or more are at the top of the retail chart-up 34.3% for the 53 weeks ended Feb. 3. More telling, Chico's sales for the four weeks ended May 5 rocketed 68.5% to $32.1 million from the four weeks ended April 29, 2000, during the boom economy. Comparable store sales for the period were up a remarkable 32.5% from the same period the previous year.

A major innovation at the chain, which has 259 stores in 40 states, is its more international, "softer" way of sizing its clothing, putting clothing into four groups, size 0 (which translates into a traditional size 6 to 8) to size 3 (a traditional 14 to 16). "It removes the stigma," said Mr. Barnard. The sizing system helps not just with marketing but with managing inventory.

Chico's isn't afraid to cater to an audience many fashion retailers shun-women 30 and older, currently 20 million households strong, said Jim Frain, VP-marketing. Also setting Chico's apart is its selection of casual to dressy skirts, dresses, vests, jackets and pants, priced at up to $128 per item, designed in a less season-dependent style, and made from easy-care fabrics. And in a unusual move, Chico's designs clothing with a sense of continuity; new items coordinate easily with clothing purchased in previous seasons.

Chico's not only knows fashion, but fashion marketing. In 1999, it put the focus on its Passport Club, a loyalty program giving customers who purchase a total of $500 a 5% discount on future purchases. Passport members spend $135 on average per visit, according to the company, compared with $82 for nonmembers. And active Passport members shop two to four times more than nonmembers.

The retailer has stepped up advertising, handled in-house, with a $10 million budget. Print runs in more than a dozen magazines. A TV test began six weeks ago on shows including "The Today Show" and "Oprah."

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