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Victoria’s Secret is an American retailer of lingerie, women’s wear and

beauty products. It is the largest subsidiary of Limited Brands with sales

over 6 Billion USD. The brand has been very creative in keeping itself

relevant to customers and redefining the category as such.

AAQUIB AL HOSSAIN

ABHISHEK BHATIA

AJITABH CHAUDHURI

ANIKET PATKI

Candice Swanepoel

Victoria’s Secret Angel

Victoria’s Secret Fashion Show 2011

August 22, 2012 VICTORIA’S SECRET TO SUCCESS

MANAGEMENT OF CHANGE GROUP 2 REPORT

WHY

VICTORIA’s SECRET?

“It’s amazing what they can do with a pair of bra

and panties”:Doutzen Kroes (Supermodel and

Victoria’s Secret Angel)

On November 9, 2011 in New York City, the

annual Victoria’s Secret Fashion Show was

telecasted across America over the prime time

channel CBS. The show, unofficially termed as

the largest fashion event in the world was seen

by over 10.3 million people. To understand the

value of the number, one should know that the

average number of viewers for one of the

highest rated sitcoms aired over CBS, How I Met

Your Mother, garners only around 6-7 million

viewers in the prime time slot. Established only in

1977, Victoria’s Secret has blossomed over the

last 3 decades to become the fastest growing

subsidiary and largest contributor to its parent

company Limited Brands with a revenue over 6

billion USD.

Victoria’s Secret was initially a brand

established for women’s lingerie. With some

innovative marketing, distribution and supply

chain strategies, the company has currently the

largest share in the lingerie market in US. The

company has over 1000 stores across different

parts of US. It is also renowned for its popular

brand ambassadors famously termed as the

Victoria’s Secret Angels, who are usually among

the top supermodels in the world and they have

helped Victoria’s Secret earn a tremendous

following from the American teenage girls and

young women. Victoria’s Secret Facebook page

has over 20 million users and its website has a

very high Alexa ranking (one of the highest

visited corporate sites.)

Although enjoying a great status now, when

Victoria’s Secret entered, the market was

cluttered, and women’s lingerie was just

considered as an aide for comfort (or as

Victoria’s Secret would term: “Boring”). To have

grown in an industry which was not openly

discussed, Victoria’s Secret has performed

exceptionally well to change the way the

category is perceived and also employ a

strategy which differentiates itself significantly to

keep it as the market leader.



BREAKING

THE CLUTTER

ORIGIN OF A MULTI BILLION DOLLAR IDEA

The story of Victoria’s Secret’s origin is an

interesting one. Roy Raymond, a Stanford

graduate found it highly embarrassing to shop

for lingerie for his wife in austere surroundings.

Raymond thus founded Victoria’s Secret in 1977

with the vision of creating an appealing shop

with a welcoming stylish décor inspired by the

Victorian era. The shop’s design was meant to

make men comfortable while shopping for

lingerie with or in absence of their better half.

The lingerie was also offered in a variety of

designs and styles to provide choice to women

while shopping and boost sales. Raymond also

popularly introduced a mail order catalog in

the following year to sell the lingerie under the

Victoria’s Secret brand.

The response to Raymond’s idea had been

positive and Victoria’s Secret had earned

$500,000 in its first year of operations. It had 5

stores under its name and its 42 page mail

order catalog was earning 6 million USD per

year by 1982. It was at this time that Raymond

sold the company for 4 million USD to Leslie

Wexner, CEO of Limited Brands (Hoovers)

UNDER LIMITED BRANDS

Leslie Wexner carried forward the Victoria’s

Secret idea and invested money in the concept

to create a power brand. More stores were built

on similar lines with Victorian era design and

wooden paneled walls to make the décor

inviting for men. Wexner also strongly believed

in the catalog business of Victoria’s Secret.

Wexner thus hired CYNTHIA FEDUS and made

her the chief executive officer of the Victoria’s

Secret Catalog operation. This was the genesis

of the two separate divisions: The Catalog

(Present Day Victoria’s Secret Direct) and The

Stores (Present Day Victoria’s Secret Stores).

CYNTHIA FEDUS’ VISION FOR VICTORIA’S

SECRET CATALOG

Cynthia Fedus as the chief executive of Catalog

Division pushed for Customer education and

brand identity building.

Popularity of the brand amongst men was high

as Victoria’s Secret provided them a welcoming

environment to buy and also educated them

about lingerie and how to make a choice. Thus

Fedus believed in importance of customer

education and built a telephone operating

team to cater primarily to embarrassed men who

were attempting to purchase lingerie as gift

items for their wife/ girlfriends. The catalogue

telephone operators were trained to be patient

and helpful to the male customers who formed a

sizeable portion of the customers calling for

help. However, this concept had not taken off

with women although being a hit amongst men

To develop the brand following amongst

women, focus was shifted to building Brand

identity, Fedus changed the focus in the

catalog from steamy shots of men and women to

that of women posing alone in romantic and

seductive, yet socially acceptable settings. The

change led to doubling of catalog sales within

a year to a value exceeding a million USD.



Hence Fedus’ move to focus on women and

increase revenues had paid off. In fact the same

theme has carried onto present day catalogs.

GRACE NICHOLS: THE SAVIOUR

In the nineties, the Company had begun to face

issues with quality. Victoria’s Secret was a

premium lingerie brand and quality was one

feature that could not be compromised upon. In

the beginning stages, Victoria’s Secret had

mostly made use of designs which were knock-

offs from other popular brands. Later on,

Victoria’s Secret sourced designs from various

vendors. The marketing strategy had worked

effectively to establish a premium image,

however the quality did not back up the

message

Grace Nichols was the executive Vice President

of Victoria’s Secret Stores and held the position

from 1986 to 1992. When complaints regarding

quality of the lingerie upon washing came under

question, Mrs.Nichols known for her outgoing

nature, took the problem head on. She

identified two reasons for the lack of quality. The

first being poor vendor choice and the second

being lack of quality testing. These

functionalities were weak in Victoria’s Secret as

the two primary divisions were catalog and

Stores whose prime responsibility and core

competency was selling designs.

Victoria’s Secret before Nichols had a 5

member team in the Stores division who were

responsible for obtaining merchandise. To

ensure quality, Nichols developed relations with

reliable vendors such as Vanity Fair and Hanes.

She convinced these major suppliers to remove

their tags and name them as Victoria’s Secret by

assuring them considerable sales, which

although the suppliers were reluctant about,

they were convinced later with the results.

Nichols hence started the system of truly

developing the quality private label of

Victoria’s Secret. Nichols also appointed a

person from Marks and Spencer for quality

management.. The person was responsible for

assuring quality work by suppliers as per the

contractual agreements.

Having obtained the right vendors, Nichols next

step after laying the building blocks for private

label creation was to create the image of

Victoria’s Secret lingerie as an extension to

wardrobe. Having developed the supplier

database, Nichols pushed for increase in Stores

and communicating the message. Nichols went

on an average of creating 50 stores every year.

Nichols achievements during her stint as an EVP

took Victoria’s Secret in the top 10 apparel

brands in the US.



PIONEERS OF THE INDUSTRY

Victoria’s Secret could not have become a 6

billion dollar brand just by having a clutter

breaking concept. The company is known for its

extensive innovative marketing and one of the

best adopters of e-commerce in the industry.

The key to Victoria’s Secret Success has been

its adaptability and ability to set trend and

make them traditions.

VICTORASSECRET.COM THE ONLINE PIONEERS

Victoria’s Secret entered the online medium

through www.victoriassecret.com in 1998. The

web group was headed by KEN WEIL, a veteran

from an Internet professional services firm

(Proxicom). The website was launched with two

goals

Strengthen and support the Victoria’s

Secret brand

Increase Sales goals.

Amazon.com was established in 1995 and

Victoria’s Secret made its first online sale worth

39 dollars only three years later. The new web

group was here to stay and it was directly

incorporated into Victoria’s Secret Direct

instead of being made into a different division.

The company felt that this would ensure better

communication and customer service and

generate lesser confusion.

The division has become an essential part of the

Direct Division and has a budget of over 10

million dollars annually with a size exceeding 40

members. The website has accomplished what it

was established for and has grown to become a

great interaction medium between the company

and its customers. The e-commerce of Victoria’s

Secret has been profitable too.

Ken Weil attributes the success to his following

moves

Developing an in-house content

management and database management

capability called WENDI. The in-house

system helped Victoria’s Secret in easier

customization of its look and also enabling

changes on a very short notice, thereby

keeping the website interesting and

dynamic.

Ken was able to utilize the call centre

support of Catalog division (now the Direct

Sales Division) and he successfully digitized

the catalog.

He enabled live streaming of Victoria’s

Secret fashion events in the mid-nineties,

and the experience at that time was

phenomenal for the customers. Victoria’s

Secret parties and events had gained a

great reputation, and since the customers

weren’t able to gain access to the same,

the online viewing made the site very

popular.

Development of the website also helped in

a demographic and historic analysis of

buyers. Customized e-mails were sent to

cater to the customers as per their likes. The

same could not have been imagined with

mail catalogs.

The success of the online medium was truly

phenomenal with sales increasing from near zero

http://www.victoriassecret.com/



in 1998 to over 200 million USD in 2001. Infact,

Victoria’s Secret in 2000 beat Amazon and

Paypal to win many e-retailing awards.

The web presence has also taken Victoria’s

Secret directly to the customers. The importance

of the medium for Victoria’s Secret can be

gauged from Appendix F. Although webcasts

are common now, its impact in 1998 is tough to

gauge but was a remarkable feat which helped

make the brand more popular

PACIFYING CATALOG AND WEB

The web medium inspite of being a success was

under the Direct Sales division whose Catalog

Sales department had a proud legacy and had

basically spearheaded its revenue up until now.

Hence merging the two channels did bring up

issues regarding resource allocation and

appraisal calculations.

The web was also blamed for cannibalization of

sales from the other channels. Irrespective of a

definite cost advantage over mail catalogs, the

web still drew some flak as its returns and

necessity of existence as additional brand

builder tool was questioned.

SHAREN TURNEY, the current CEO of Victoria’s

Secret Megabrand was named Chief Executive

Officer and President of Victoria’s Secret Direct,

in May 2000. In midst of the problems

mentioned, her thoughts were clear about the

necessity of the catalog and e-commerce arms

to exist together. With extensive experience in

retail, her major actions to reduce the tension

were

Align incentives for the management with

perks and bonus dependent upon divisional

performance rather than channel

performance

Not calculating Channel profitability but

releasing Divisional sales and profitability to

enhance collective responsibility.

Develop the RFM (Recency, Frequency and

Monetary Value” System totrack customer

behavior so as to mail catalogs

accordingly in proportional volumes to

more profitable buyers as mail catalogs

costed more than web catalogs.

THE VICTORIA’S SECRET

FASHION SHOW ED RAZEK: THE MAN BEHIND THE ANGELS

With the increasing contribution of Victoria’s

Secret to Limited Brand’s revenue, it was

deemed necessary to develop the brand with a

unified marketing effort across the distribution

channels. Hence in 1993, the marketing efforts

of Victoria’s Secret were brought under the

Chief marketing Officer of Limited Brands,

Edward Razek (popularly called Ed Razek).

Before this, the Direct Sales and Stores Division

took their own marketing initiatives and this

sometimes confused the customer as they were

not always aligned.

Ed Razek introduced two of the most innovative

and unique features of Victoria’s Secret; they

were the Angels and the Annual Fashion Show.

Ed Razek is also popular for the eye-catching

and creative Victoria’s Secret Commercials

aired on TV.

In 1995, Ed Razek organized the first Victoria’s

Secret Fashion Show. The show was organized

on a budget of 120,000 dollars and was in

Razek’s opinion, more of a learning experience

as they had no idea of the future of the

concept. However the show was termed by

media as the ‘lingerie event of the century’ and

thus, a potential brand building tool was

discovered. The show was since, held annually

except in 2004.



In 1999, the show was also featured through a

live webcast which received viewership of

almost 2 million. In 2000, the show was aired

over television for the first time in the ABC

network. Since 2001, the fashion show has aired

on the prime time slot of CBS network.

With the success of the fashion show, Ed Razek

introduced the concept of Angels, where some

of the top supermodels became the brand

ambassadors for Victoria’s Secret, and famously

walked in lingerie during the annual fashion

show. The Angels initially introduced for the

glamour factor were soon used to enhance the

positioning and create role models for the

target audience.

The Fashion Shows and Angels have in the

current day become unanimous with the brand

and have resulted in huge popularity for the

brand. Ed Razerk infact has a team of 200

people assisting him to manage a marketing

budget of 250 million USD, one of the highest in

the industry. The fashion shows now hire the best

of the designers and have a much higher

production value with the one in 2011 having a

budget of 13 million USD.

A still (left) from the

Victoria’s Secret

Fashion Show 2011.

The Fashion Show had

major star

performances by Nicki

Minaj, Kanye West, Jay

Z and Maroon 5. The

star value is an

indicator of the high

production value of

this event



KEEPING

THE BASICS RIGHT

SUPPLY CHAIN: THE LIFELINE

Victoria's Secret consists of several sub-brands

(PINK, Body etc) with each conveying a

specific theme or targeting a specific audience.

Each of these sub-brands is offered in various

styles (push-up, lace etc) and various materials

(cotton, satin etc). Forecasting and delivery of

these goods in an efficient manner hence

becomes a major factor for an excellent

customer experience

In terms of determining the ideal source, the

products are classified into Launch Fashion,

Non-Launch Fashion and Basic Products. About

60% of the products are basic (all year round).

Fashion Products are those which are marketed

for specific seasons and Launch items are those

on whose introduction, a significant investment is

made. Almost 25% are Non-Launch fashion and

15% are Launch fashion products.

The critical processes that make up the

Victoria's Secret's supply chain are: 1) Product

Design and Product Launch; 2) Merchandise

Planning, Allocation and Forecasting; 3)

Production & Sourcing; 4) Logistics; and 5)

Store Operations/Delivery. A design idea, from

conceptualization to delivery is termed as

"Concept-To-Market".

PRODUCT DESIGN AND LAUNCH

Victoria’s Secret has its design office in New

York (Victoria’s Secret Design: VSD). There is

also an enterprise-wide design department

called the Limited Design Studios (LDS) in New

York. However the ideas for new products may

come from third party designers too. The new

products are market tested in the Henri Bendel

store in New York to decide the positioning.

Based upon the initial market test, Launch

Strategies are devised by the marketing Team.

MERCHANDISING PLANNING AND

ALLOCATION

The Chief Executive Officer (CEO) of the brand,

the Executive Vice President (EVP) of Planning,

and the General Merchandise Manager (GMM)

together formulate a merchandise growth

strategy creating a roadmap with a three year

planning horizon. The goal of the effort was to

come up with a multiple annual view of the

growth of sub brands and categories within the

sub-brands (Bras, Panties, Sleepwear) in

cognizance with the merchandise growth

strategy..

“A design Ratio is determined in which the

various different sub-brands would be chosen

specifically depending upon their potential. The

Merchandising Team thus has a Final Edit

Meeting beyond which a Buy Meeting is

organized. The Buy Meeting is organized to

finalize upon the purchase orders The orders

decided upon are passed by the Victoria’s

Secret Production Group.

The Merchandising group reports to the Finance

Team. All brands including Victoria’s Secret go

through a quarterly review process with the

Chief Financial Officer to decide upon the

value for the next buy period. Physical store

inventory is done once a year in Victoria’s

Secret..



PRODUCTION & SOURCING

80/, of the merchandise sourcing and

manufacturing for The Limited Brands is handled

by Mast, (a completely owned division of the

Limited Brands). The CEO of Mast holds the title

of Senior Vice President, Production & Sourcing.

About a quarter of Mast’s revenue comes from

non-Limited Brands transactions like

Abercrombie and Fitch, Chico’s and Triumph.

Mast is the organization within Limited Brands

used by all subsidiaries to efficiently source

material.

LOGISTICS

The logistics of delivery to stores/ Direct Sales is

handled by the Logistics division of Limited

Brands, the Limited Logistics Service (LLS). The

LLS acts as a third part when it comes to

transactions as the model is similar to what it

would be if the service was outsourced. This

results in keeping a portion of the margins within

Victoria’s Secret. The LLS operates on a Shared

Service Model in which a service level

agreement (SLA) is used as a contract between

businesses and LLS.

THE PROCESS MENTIONED HERE SHOWS THE

COMPLICACY IN THE WORKING IN RESPECT

TO THE ORGANIZATION STRUCTURE SHOWN

IN APPENDIX B. APART FROM THE INNOVATIVE

MARKETING AND WEB PRESENCE, EFFICIENT

MANAGEMENT OF THE SUPPLY CHAIN BY

MANAGING THE LIMITED AND VICTORIA’S

SECRET SIDE HAS BEEN THE MAJOR CRITERIA

FOR VICTORIA’S SECRET’S SUCCESS



APPENDIX A

KEY PEOPLE

LESLIE WEXNER

CEO, LIMITED BRANDS Majored in Business Administration from The Ohio State University. At

the age of 74, he is the current CEO of Limited Brands. Wexner has

popularly quoted Victoria’s Secret as not being a lingerie brand but

more of an indulgence brand

GRACE NICHOLS

NON-EXECUTIVE BOARD, LIMITED BRANDS A graduate from UCLA. She was the Victoria’s Secret Direct Sales CEO

from 1992 to 2007. She is however famous for her stint as EVP from

1986 to 1992 where she too significant measures build people’s trust in

Victoria’s Secret as quality issues had been raised

EDWARD RAZEK

CEO, LIMITED BRANDS Mr. Razek joined Limited Brands in 1983, as Vice President, Marketing

Limited Stores, and was one of the chief architects of the highly

successful Forenza and Outback Red private label brands. In 1993, he

was promoted to Vice President, Director of Marketing for Limited,

ROY RAYMOND

FOUNDER, VICTORIA’s SECRET A graduate from Stanford, he founded Victoria’s Secret with a funding

of 80,000 USD. After selling Victoria’s Secret, two years later, he started

My Child's Destiny, a retail store for children. It went bankrupt in 1986.

He committed suicide in 1987 from the Golden Gate Bridge



APPENDIX B

ORGANIZATIONAL

STRUCTURE

The organizational structure illustrated above is updated as per 2002. However significant

changes have undergone in the last 10 years. This is primarily due to emergence of Victoria’s

Secret as a major subsidiary under Limited. Hence a lot of Limited Brands divisions work to support

the Victoria’s Secret infrastructure.

Victoria’s Secret has a single CEO now to whom the 3 major divisions report. The three divisions

are shown above. The major marketing initiatives are under Limited Brands Control

Updated 2002



APPENDIX C

SUPPLY CHAIN

STRUCTURE



APPENDIX D

FINANCIAL

PERFORMANCE

2011 2010 2009 2008 2007 2006

Revenue

(in Billion

USD)

6.121 5.520 5.307 5.604 5.607 5.139

Stores 1028 1040 1043 1020 1003 998

Sales per

Average

Sq.ft (USD)

754 663 581 620 694 731

Sales per

Avg. Store

(1000

USD)

4463 3886 3356 3480 3678 3698

Avg. Store

Size (sq.ft) 5941 5892 5830 5727 5489 5111

Operating

Income

(MUSD)

1081 889 868 589 1110 1176

Stores

Revenue

(BUSD)

4.564 4.018 3.919 4.081 4.208 3.723

Direct

Revenue

(BUSD)

1.557 1.502 1.388 1.523 1.399 1.416

Limited

Brands

Revenue

(BUSD)

10.364 9.613 8.632 9.043 -- --



APPENDIX E

CURRENT

VICTORIA’S SECRET

ANGELS

Adriana Lima

(2000-present)

BRAZIL

Alessandra Ambrosio

(2004-present)

BRAZIL

Miranda Kerr

(2007-present)

AUSTRALIA

Doutzen Kroes

(2008-present)

NETHERLANDS

Lily Aldridge

(2010-present)

UNITED STATES

Candice Swanepoel

(2010-present)

SOUTH AFRICA

Erin Heatherton

(2010-present)

UNITED STATES

Behati Prinsloo

(2009-present)

NAMIBIA

Lindsay Ellingson

(2011-present)

UNITED STATES

Chanel Iman

(2010-present)

UNITED STATES



APPENDIX F

ONLINE

INTERACTION WITH

CUSTOMERS

Source: Original Research



REFERENCES Limited Brands Annual Reports 2009-2012

“Supply Chain Strategies in the Apparel

Industry: The Case of Victoria’s Secret” by

Sumit Kumar (June 2005)

Case #6-0014, Tuck School of Management

(2002)

Victoria’s Secret: Uncovered: Kristia Morabito

The Silky Strategy of Victoria’s Secret:

Chelsea Chi Chang, Alice Lin, Charlene Mak

(28 May, 2004)

Original Research: Ajitabh Chaudhuri under

Prof. Krishanu Rakshit (Ongoing)

Victoria’s Secret Fashion Show (2005 – 2012)

Wikipedia

www.victoriassecret.com

www.limited brands.com

.

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