Victoria’s Secret Takes One Giant Leap Forward, Followed By Two Steps Back

Victoria’s Secret has made two big announcements recently, the first I believe will set the brand up for long-term success, while the second will likely compress sales until the decision is reversed.

Victoria's Secret's first announcement was to combine the store and direct-sales (online and catalog) businesses into one formal organization and P&L.  This is a move every retailer should make as soon as possible. The move will create a more seamless omnichannel shopping experience. Consumers do not put up artificial walls between a retailer's physical stores, catalog business, website, or mobile/digital vehicles - and neither should retailers if they want to serve them effectively.  Separate organizations and P&L's create misaligned incentives to maximizing a customer's journey across channels and hence risks hurting purchase conversion, compressing basket size, and limiting the ability to drive longer term loyalty and lifetime value.

The second move was to announce the brand was discontinuing its paper catalog.  This I believe is a large mistake.  On the surface, it's easy to understand why the Victoria's Secret management team made the move.  In past years, the company has mailed up to 22 issues per year to over 15 million consumers and fans alike, which in some years likely total to more than 300 million catalogs per year.  Printing and shipping all these catalogs is no doubt quite expensive, even accounting for the brand scaling back the number of total catalogs it sent out in recent years.  In fact, according to recent Citi retail analysts estimates the company could save up to $100 million with this move.  Couple the large cost savings opportunity with the fact that sales coming directly from the catalog have likely fallen significantly over the last several years as consumers shift their spending to online and mobile channels, and its not hard to imagine how the brand completed the math to decide to eliminate the catalog.  Victoria's Secret will look to reinvest much of this savings into its loyalty program and "brand-building engagement".

Still, I believe this move to be a mistake for a few key reasons.  

• First, the catalog is an iconic element of the brand identity.  Yes, the Victoria's Secret fashion show that's televised world-wide is pure genius in terms of generating priceless media impressions, social media commentary, and brand engagement outside the point of transaction, but nothing says Victoria's Secret like it's catalog.  It is a critical element that brand leverages to reach inside of consumers' homes and showcase what the brand stands for.  

• Second, the catalog's ROI or effectiveness can no longer be measured in terms of sales it drives directly.  It's role has shifted to driving awareness and consideration, which ultimately pushes consumers to purchase online or in store.  This creates real challenges with directly measuring ROI and effectiveness, especially if the catalog has not been full optimized from a format and content style to fulfill this new role.  It is also very hard to optimize the catalog for this role or accurately measure ROI or effectiveness, when the store and direct division P&L's are split.  

• Third, digital awareness vehicles, while highly efficient from an ROI standpoint, typically reach a saturation point in terms of effectiveness (e.g., driving revenue). So I have a hard time believing redeploying the savings to digital vehicles will drive the same amount of sales either online or in stores.  

For these reasons, I believe that brand sales will suffer, at least to some degree, with the elimination of the catalog.  That said, I'm all for scaling back the catalog to some degree (both in terms of frequency of the mailings as well as the number of pages in each issue) to save costs and redeploying some of this money to digital vehicles.  I'd also potentially recommend revising the style and content to ensure it fills its new role of driving brand equity and traffic to the stores and digital channels vs. direct sales.