PEST ANALYSIS OF VICTORIA’s SECRET
Victoria's Secret is a retail brand of lingerie and beauty products, owned and run by the
Limited Brands company. Victoria’s Secret generates more than $4 billion in sales a year. It is
the fastest growing subsidiary of Limited Brands and contributes 42% of corporate profits. More
than 1000 Victoria's Secret retail stores are open in the United States. Products are also available
through the catalogue and online business, Victoria's Secret Direct, with sales of approximately
Victoria’s Secret was established by Roy Raymond in the San Francisco area
during the 1970s. Raymond saw an opportunity in taking “underwear” of the time and ...view middle of the document...
Will Victoria’s Secret face a similar challenge? In Europe, the lingerie
industry is certainly fragmented with more than half a dozen brand names that are as prolific as
the brand names of fashion attire. Thus, the lingerie industry should be able to support multiple
firms. There is still room for entrants in Victoria's Secret's market. How has Victoria's Secret
been able to protect its market position? How can an entrant enter the lucrative lingerie market
and steal profits away from Victoria?
Victoria’s Secret’s Success
Starting from Raymond’s six stores, Victoria’s Secret has grown into a giant in the
lingerie business. It has virtually no competitors in the women’s elegant lingerie market. In the
more general category of all underwear, Victoria’s Secret’s sales also tower over the sales of all
other underwear brands. Exhibit 1 in the Appendix compares the annual sales of Fruit of the
Loom and Victoria’s Secret for the past four years. Fruit of the Loom is one of the major U.S.
underwear brands. Victoria’s Secret’s success is evident in the numbers. Not only does
Victoria’s Secret dominate in its own market, it has also become the fastest growing branch in
the Limited family. Exhibit 2 in the Appendix reflects Victoria’s Secret’s sales in relation to the
total sales of the Limited family. Victoria’s Secret’s growth is phenomenal; by 2003 it already
accounted for nearly half of Limited Inc.’s total sales.
To understand the success of Victoria’s Secret, it is necessary to look at the forces in the
lingerie industry. First, a range of complements contribute to increasing demand. Complements
range from Britney Spears and MTV to perfume, basically anything that is sexually suggestive.
The acceptable boundary for sexuality have with these complements been raised higher and
higher. Along with this, the media has elevated the position of intimate apparel in our society.
Magazines like Cosmo and Glamour advise women to pamper themselves with nice underwear
as one of life’s secret survival tips. As for substitutes, besides going commando,1 there are no
real substitutes for bras and panties. Bras and panties are commodities that need to be replaced at
a modestly frequent level. Therefore, there is no concern for the intimate apparel industry of a
decline in demand.
The industry is not rivalrous either. Bras are priced over a fairly broad range with high
markups. Firms in this industry have very high profit margins. Furthermore, neither the buyers
who are women shoppers nor their husbands who are buying gifts have much bargaining power.
Suppliers for the intimate apparel industry similarly have very little bargaining power because of
the large number of manufacturers and few big buyers. Supermodels who can be considered
suppliers in the highly-advertised lingerie business certainly do not have bargaining power,
especially when it comes to Victoria’s Secret. Most models consider it a prestigious honor to be