Integrated Marketing Strategy

Jieli HeSona Martirosian

Christina L OresajoOguzhan Iskenderoglu

Channon Chiu

NYU MS Integrated Marketing

American Apparel is a vertically integrated manufacturer,

distributor, and retailer of branded fashion and basic apparel.

1998

Founded as Wholesale

Distributor in Los Angeles

2003 Opened First Retail Store in Los Angeles

2004 Launched E-Commerce

website

2004

Opened first stores in

Canada and Europe

2005

Opened stores in Asia, Latin

America, Australia

2008

Sales started declining

2010

Reported highest Net

Loss in company

history

2011 Listed as one of “10 Brands that Won’t Be

Around in 2012”

Company Overview

• Vertically Integrated – All operations done in Downtown Los Angeles factory

• “Made in the USA”• Use high quality fabrics

• Sawing facility ranked #1 in size and value in western hemisphere

• 53,000,000 garments produced in a year

•Fare wages and benefits for employees• “Sweatshop Free” • Average factory worker earns $12 an hour

•Environmentally friendly production• Use all residues of fabrics• Solar panels used in factory

Production

• Wide range of products• For men, women, children, babies, pets• Clothing, hosiery, shoes, bags, accessories• Wide range of colors• Produce 499 styles in 614 colors• Style - simple basics mixed with retro inspired pieces

• California Selects• Vintage clothing

• Multibrand – products by other brands that fit the culture and look of the company

• Watches by Swatch or Casio, nail polish by Nail Lacquer, water bottles by Bobble…

• Varies based on culture of store location

Product

• Retail• 285 stores worldwide• Locations in 20 countries• In metropolitan city centers

•E-Commerce • AmericanApparel.net• Operating since 2004• 10 localized store fronts

• Wholesale• Operates from Los Angeles Headquarters • Sold to 10,000+ screen printers & specialty

shops.

Distribution

• “Young Achievers “ lifestage group on the Neilson Prizm• Young, metropolitan adults • Aged 20 to 32• Culturally sophisticated • Creative• Independent-minded • Well educated -a bachelor’s degree or higher • Income between $50-90K per year• Tech savvy • Interested in world events• Fashion conscious• Shop online• Looking for well-designed, high-quality fashion essentials• Prefer companies with good corporate cultures

Target Market

Political/Legal•The National Minimum Wage Act •The Working Time Regulations•The Employment Rights Act

“The average sewer with experience at American Apparel is making about $25,000/yr, or $12 an hour, almost twice the federal minimum”

Economical•Recession in 2008

• Another factor of declining share prices (from $15.80/a share to $1.55/a share in the same year.

• Influencing shopping behavior towards apparel industry downwards by 36%.

PESTEL Analysis

Macro Environment

Social• Increased importance for consumers of the role of corporate social responsibility

•Ability to easily access and spread information about a company through social media

Macro Environment

Technological

•E-commerce has been gradually replacing retail shopping. the apparel and accessories industry will eventually lead e-commerce sales with the predicted sales gain of 20.2%. •By 2016, it will reach $73 billion of US online retail e-commerce sales.

Environmental

As if 2011, American Apparel’s cost per pound of cotton went up to $2.34, from $.40-$.50 per pound in 2010. This was due primarily to the weather conditions that affected cotton producing companies and restrictions by governmental policies.

Macro Environment

US Apparel Industry

• 100, 000 stores in total• Combined annual revenue of

$150 billion• Rapid shifts in fashion trends• Consumer demand volatility• High competitive pressure • Imports account for over 80%

of domestic demand

• Competition is based on brand image, marketing, fashion design, quality, price, customer service and store location

• Apparel products differ in function, and each product segment contributes to a certain portion of the industry revenue

US Apparel Market

Market Growth

• Industry revenue of women’s clothing stores• Annual growth of 3.4% over five years • Will reach $47.9 billion in 2017

• Industry revenue of men’s clothing stores• Increase at an annualized rate of 1% • Will reach $8.3 billion in 2017

• Store growth• 2% over the next five years • 56,879 locations.

Market Trends

• Demographic shifts • 10% increase in US population• 8% increase in population of adults between the age

of 25 and 44 • Baby-boomer generation will retire and be replaced by

younger workforce• Retail prices for clothing will continue to decrease• More consumers will shop in specialty clothing

stores• Clothing store sales increased nearly 10 percent

between 2005 and 2010• Sales at conventional department stores decreased 14

percent• Competition with international brands will increase

in the upcoming years

Wholesale Net Profit 2011

Wholesale Sales 2011

• Large customer base in mass merchandisers such as Target, Wal-Mart, and Kohl’s

• Hanes, Champion and L’eggs.

• Active wear and wholesale T-shirt : Russell and Russell Athletic

• Production takes place in overseas in Latin America.

• Marketer and globally low-cost vertically-integrated manufacturer of quality branded basic apparel

• Gold Toe and exclusive rights with Under Armor

Wholesale Competitors

• 2,500 stores in 44 Markets that offer “Fashion and Quality at the Best Price

• Celebrity clothing lines from Marni, David Beckham, and Madonna to name a few.

• Over 400 stores • Considerably lower price, point makes Forever 21 a popular retail

location for teens and young adults.

• Urban Outfitters, Anthropologie, Free People, BHLDN and Terrain• “On some days, 20% of the company’s sales came from social

media

Retail Competitors

2011 Annual Sales

2011 Net Profit Margin

Strengths Weaknesses

● Vertical Integration

● “Made in the USA”

● Sweatshop free

● Strong supplier relationships

● Product quality

● Company owned manufacturing facilities in California

● Speed to market

● High fixed costs

● Negative brand perception

● Provocative advertising

● Financial restrictions

● Rapid store expansion

● Breath of line

● Leadership

Opportunities Threats

● E-commerce

● Return to “basic” apparel (prune line offerings)

● International expansion

● Change brand perception through advertising

● Improve inventory management

● Improve financial margins

● Market Nicher

● High level of global competition

● Costs of raw materials increasing (cotton)

● Celebrity endorsements of competitive brands

● Economic market trends

● Government regulations

SWOT

Marketing Mix

ProductShirts, dresses, basics, denim, sweaters, jackets, shoes, bags, accessories, and cosmetic goods.For men, women, children, infants, and even pets.

General product design: Iconic retro and vintage imagery.

Place•Retail

• 285 stores in 20 countries, positioned accordingly to the target market. Exp: metropolitan areas and university sites.

•Wholesale• A dozen wholesalers and 10,000 screen

printers sold by call center in L.A•Online

• Americanapparel.net since 2004

PriceA competitive pricing strategy

Promotion•Increasing awareness as well as supporting acquisition, retention and growth strategies.•Utilizes digital (online), print and outdoor advertisement to support retail and online sales. (Wholesale benefits too)•Approximately, 25% of advertisement spend was cut last year.

Keeping reasonable prices despite cost of supplies and exchange rates.

ATTRIBUTES

BENEFITS

VALUES

POSITIONING STATEMENT

To the trend setting, young adult, American Apparel is the sweatshop free provider of high quality fashion basics and accessories that puts pride and value back in “Made in the

USA” fashions.

• Fashion Basics produced in the USA• Fast product turnover (vertical integration)

• Corporate social responsibility-sweatshop free• Brand Recognition

• One Stop shop• Multiple locations

• I like to layer my outfit with a bright colored T-shirt

• I do not mind paying more for sweatshop free clothing

• I am against Forever 21 they are as bad as NIKE

• I love my gadgets and must be the first to try the latest technology

• Strong Brand Loyalty • Fashion Basics (T-shirts, jeans, dresses)

• Multiple Brand Extension • International Brand

• American Clothing company• Company owned Warehouse and Factory

• Wholesaler• Retailer

• Vertically Integrated

• I support American Business • I shop in specialty stores like H&M, J Crew

and Urban Outfitters• Having the latest fashionable apparel is

important• I shop online and in store

• I value quality apparel over low prices

Brand Ladder and Positioning

Keys to Success and Key Issues

Keys to Success•Quick to Market•Relationships with Suppliers•Company Owned Warehouse•Sweatshop free clothes “Made in the USA”•High Quality products

Key Issues•Extensive product line•Provocative advertising /Negative brand perception•Difficulty repaying past debt•Declining profits•Lack of Cash flow

Marketing Objectives

•Increase positive brand awareness and recognition by 25% over two years.

•Expand E-commerce to increase online sales by 5% percent

•Increase Market share by 1% within 2 years•Position American Apparel as a Market Nicher

Market Research

• Focus groups• Current and perspective

customers• Behavior towards

marketing trends• Advertising concepts• Heart share

• Surveys• Facebook, receipts,

email blasts• Brand association• Campaign

effectiveness• Mind Share• Market share

Market Research

Objective• Reposition American Apparel as the premier fashion basic retail brand

– generating a 25% increase in positive awareness increase net sales by 5-10%

Recommendation • Year long “Back to Basics” Campaign

• Highlight the basic fashion pieces not the models• Highest quality basics that make fashion trendy, unique and versatile.

• Focusing on heart share– increase in mind share will ultimately increase the current market share of American

apparel in the next year.

Media• Print• Out of Home• Store Fronts• Digital

Revamp Brand Image

Current Advertising

In The Media

Sample Executions

Market Testing 6/1/2012 9/1/2012 Marketing Team

Creative Executions 9/1/2012 11/1/2012 Creative Team

Back to Basics Phase 1 11/1/2012 3/1/2013 Marketing Team

Back to Basics Phase 2 3/1/2013 8/1/2013 Marketing Team

Back to Basics Phase 3 9/1/2013 12/1/2013 Marketing Team

Creative Schedule

Objective: Increase Sales from E-Commerce

Recommendation:

•Increase overall presence on the Internet•Increase digital advertising• Facebook Advertising

•Grow social media presence●Increase following on social networks●Establish positive brand image in the blogosphere●Implement online only sales

•Optimize website & Facebook page for positive user experience

Increase E-Commerce

• Consumers are more likely to visit company’s social profile than website for information

•American Apparel has smallest social following and site traffic of all its competitors

Social Media

Social Media Posts

Facebook Page Improvements

Accessing American Apparel E-Commerce site:

Landing Page: Corporate Website Select Region Online Store

Recommendation:

Landing page: Online store featuring current offers.

Website Improvements

• Contact 100 Fashion bloggers with high readership• Offer American Apparel merchandise to use in posts• Include link-backs to AmericanApparel.net

Blogger Outreach

Prune Lines/ Inventory Controls

Objective: Increase cash flow in order to minimize financial obligations and allocate more marketing dollars to raise net sales by 10%.

Recommendation•Prune lines which house underperforming products

•Based on Net sales and production cost•Multibrand Brand Extension

•Improve Inventory Control System•Analyze current system•Sync sales forecasts with inventory re-order•Utilize technologies such as RFID

•Market Nicher Strategy•Focus on basics

• Break Even within 2 year on implementation

• Increase Net Sales by 17 % in two years

• Increase and maintain Advertising spend by 20% for 2 years

Financial Objectives

• The sales after campaigns would be higher than previous campaigns.

• The sales of Q4 and Q3 will be higher than Q2 and Q1, because of the holiday season, which prompts sales.

• The sales would be higher when compared to the same quarter in the last year.

• The highest profits will show in 2012 Q4 and 2013 Q1, which follow the marketing action plans, and the sales will remain the same in the following quarters because of the after effect of action plans.

Sales Projections

Because our marketing actions mainly focus on social media and advertising, we estimate that online sales will have the most rapid growth and followed by retail sales.

Sales Projections

Profit & Loss Statement

Task Start ByComplete By

Department

Marketing Plan Completion 2/7/2012 5/7/2012 Marketing TeamRecommendation 1Line Pruning Research 6/1/2012 1/1/2013

Marketing/Accounting Department

Begin Line 1/1/2013 6/1/2013Marketing Department/Sales

Recommendation 2Increase Digital Advertising 6/1/2012 12/1/2013 Marketing TeamFacebook Advertising 6/1/2012 12/1/2013 Marketing TeamIncrease Social Media Presence 6/1/2012 ongoing

Marketing Team/ Web Design Team

Blogger Outreach 6/1/2012 9/1/2012 Marketing TeamImprovements to Website 6/1/2012 ongoing Marketing/Web Design Team

Recommendation 3Market Testing 6/1/2012 9/1/2012 Marketing TeamCreative Executions 9/1/2012 11/1/2012 Creative TeamBack to Basics Phase 1 11/1/2012 3/1/2013 Marketing TeamBack to Basics Phase 2 3/1/2013 8/1/2013 Marketing TeamBack to Basics Phase 3 9/1/2013 12/1/2013 Marketing Team

Budget Allocation (Dollars in thousands)

Line Pruning $1,630

Digital Advertising $4,500

Facebook Advertising $3,000

Other Social Media Advertising $1,500

Blogger Outreaching $1,000

Improvement to Website $250

Market Testing for Back to Basics $500

Execution of Back to Basics $5,500

Total $17,880

Implementation Schedule

Monitoring & Controls

• Net Sales• Expenses• Heart Share• Mind Share• Market Share• Conversions Contingency Planning

Difficulties and Risks• Our recommendation to prune underperforming lines, runs the risk of not recouping profit or

added to cash • A substantial increase in market share amongst the niche brands will be difficult as the threat of

competition is high

Monitoring and Control

Questions