Victoria's Secret rises to top by thinking beyond the thong

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When you make good money selling thongs, why sell fragrance?

Because you can sell an awful lot of fragrance, too. It's the reason Victoria's Secret has earned the title of "mega-brand" at the $9 billion Limited Brands retail empire.

It is also why Les Wexner, a CEO known to be an obsessive micro-manager, isn't willing to give up control just yet of the lingerie brand. Despite an unprecedented corporate overhaul earlier this year that changed the longstanding model of direct reports to Mr. Wexner, the company's founder and only CEO retains day-to-day leadership over the lingerie business.

It's no wonder. The Victoria's Secret brand is credited by analysts and industry watchers for the transformation of the Columbus, Ohio-based company from a largely apparel-based business to what the company now refers to as the personal care, beauty and lingerie businesses.

Just 10 years ago, apparel made up more than 70% of its sales. Today that ratio has flipped entirely-with non-apparel business sales at 70%. Just consider this: For every square foot of selling space at Victoria's Secret, sales ring in at $648, compared to $331 in apparel brands The Limited and The Express.

"Victoria's Secret is without question the dominant name and brand in the world for lingerie," said Ed Razek, its chief marketing officer. "There may be other businesses that sell a lot of underwear, but that brand resonates as strongly and clearly as any brand you can name."


Despite recent missteps (Victoria's Secret Stores posted weak comparable-store sales in both March, up 1%, and April, down 3%, compared to an 11% jump the same month last year) the brand has served as the foundation of a myriad of product extensions and launches, from the retailer's undeniably strong foothold in the fragrance market to the emergence of Bath & Body Works as its fastest-growing division, posting $2.2 billion in sales last year, up 12% from 2003.

The brand can retain this supremacy as long as the culture at The Limited Brands remembers one key point, according to Mr. Razek: "We are not in the business of selling need."

Staying in "lockstep" and close to the consumer is critical. Fail on either count and Victoria's Secret may go the way of the moribund Limited store concept.

But creating more desire is just what Victoria's Secret continues to do. More than three years ago, Mr. Wexner, seeing what he referred to as "white space" for younger, more casual lingerie, tapped Marie Rao, president, Limited Design Services, to develop Pink. Combined, Mr. Wexner has said he expects the total lingerie group-Victoria's Secret, Pink and Bendel-to exceed $7 billion in sales over the next five years.

Mr. Razek admits, though, that challenges remain, especially in reaching an increasingly overwhelmed consumer bombarded with far too many ad messages a day. That reality is what's behind the appointment this month of MDC-backed Media Kitchen to handle planning, after a yearlong review. The move splits planning duties once housed entirely at Interpublic Group of Cos.' Initiative, which has retained buying duties for the company's estimated $60 million account.

"The media market gets more fractured all the time. There are more channels and the work is more subtle on a continuing basis than ever," he said. "That additional layer of planning is what we thought we needed."

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