There are various economic forces that affect apparel retailers. Consumer confidence is the most important; people don't shop when they are not feeling good. Unemployment also has an effect, in that fewer women out in the workforce means less disposable income for high-end quality clothing. Thus, the large discounters (Target, Sears and Wal*Mart) are now working with top designers to bring designer apparel to the masses. Although they can't compete on quality, their continued development of the trend could have a direct impact on retailers who sell designer clothing during tough economic times.
Fortunately, the luxury goods market, of which De Kliek is a part due to the high-end brands it will carry, has remained recession-proof, as clearly indicated by the successful 2003 results for Coach, Tiffany and Saks. According to Women's Wear Daily, luxury firms forecast a strong 2004, particularly for accessories and footwear. However, the strong Euro and slowdown in wealth creation are big concerns and managing a balanced quality-price ratio is the key to success for luxury retailers.
"Fashion is a requirement for those who are high in their success." -Luxury Consumer
In the luxury market, luxury consumers (defined as "affluents" who have household incomes of over $100K) spent more in 2003 than 2002.  Based on focus groups, United Marketing believes luxury consumers see apparel and accessories as more of a necessity than a luxury. This is good news to boutique retailers. There are over 800 clothing boutiques in the LA Area; approximately 19 percent of these generate over $500K in sales. In fact, women's clothing stores in Los Angeles have a 62% higher sales growth rate than the national average; this can be attributed to the fact that the average household in Los Angeles is considered affluent.
1) Luxury Market Report, Unity Marketing, 2003
2) Local Marketing Research Profile of LA, Bizminer, Jan. 2004.
If you were to overhear women talking in a dressing room, you would more than likely hear them comment on something they've tried on and question how they should wear it or what it will go with in their closet. Research has shown that women are stressed, have little time to shop, and would generally like help in determining the right clothes and styles to wear. With over 61 million U.S. women between the ages of 25-54 spending over $34 billion in apparel each year, there are sure to be some mistakes made in clothing choices. Television shows such as BBC's "What Not to Wear" and Style's "Fashion Emergency" clearly speak to a woman's confusion about what looks best on her. Even women who can afford a professional stylist feel helpless and often jokingly request that their stylist come to their home every morning to help them get dressed.
"Within a decade, the companies that do the best job of marketing to women will dominate every significant product and service category." -Faith PopcornOne gender in particular influences the majority of the retail marketplace: women. Women comprise 51% (145 million) of the U.S. population  and control or influence 81% of all household purchase decisions.  Women are now earning more college and master's degrees than men, which translates into more senior positions & higher pay.  Overall, women represent 47% of the total U.S. civilian workforce and as that continues to grow, demands for their time also increase. Balancing work and family are the #1 concerns for women and almost half "hardly ever" take care of their personal needs; one out of five women would like to have time to do a little shopping! 
Research indicates that women approach retail shopping uniquely by evaluating purchases based on product and company information derived from both personal and expert sources. Additionally, surveys consistently reveal that women buy based on the relationship they forge with a brand. ,  Statistics, studies, and our own personal experiences show us again and again that excellent customer service lowers customer attrition rates, fosters excellent word of mouth and most importantly, increases sales. The table below shows that out of the ten characteristics consumers find important in deciding where to shop, four were attributed to customer service.
Top Ten Factors in Deciding Where to Shop: 
1. Has reasonable prices
2. Treats customers with respect
3. Carries quality merchandise
4. Doesn't pressure me to buy anything
5. Convenient store hours
6. Handles merchandise returns fairly
7. I can always find what I want
8. Carries a wide variety of items (e.g. colors, sizes)
9. Has outstanding customer service
10. Makes it quick and easy to shop
 Statistical Abstract of the U.S., 2002; Bureau of Labor Statistics, June 2003
 BusinessWeek "The New Gender Gap," May 2003
 Northeastern University Center for Labor Market Studies
 Jones NY Sponsored Survey of FT Working Women, Self, May 2003
 Kim T Gordon, "Chick Magnet," Entrepreneur Magazine, March 2, 2002
 Connie Myers, "What Do Women Want? Marketing," Utah Business, Sept 2002
 Yankelovich Monitor, "Getting the Goods," May 2003
Los Angeles is rated amongst the top U.S. markets in economic and educational achievements. At an average age of 40, the Los Angeles professional is highly affluent, with an average family household income of $180,903 and a median home value of $622,170. Close to 50% have a bachelor's degree and 40% of these professionals hold a postgraduate degree.
De Kliek customers will learn about the boutique through the following sources:
The Primary Customer 
The primary De Kliek customer is a professional woman with a household income over $100K. Her main characteristics are listed below:
- Professional woman (ages 30-55)
- Household income over $100,00
- Lives in a higher-income LA neighborhood
- Looks for bargains (seasonal fashion) but willing to spend money on quality, core items
- Would like more time or help in understanding what clothing is right for her
- She wants to look her best because she wants to feel good about herself as well as make a good impression at her job
- Listens to NPR
- Supports the Arts
- Reads Vogue, New Yorker, Bon Apetit, Lucky
- Watches Bravo, BBC, HBO
- Internet savvy
- Travels, owns a passport
- She enjoys eating out as well as taking time for herself at the spa or getting a mani-pedi
Clothes Shopping Behaviors
- Spends over $2,500 for clothes each year
- Shops at Boutiques, Nordstroms, and Banana Republic
- Wears a size 6, 8, or 10
- Buys mostly tops and pants
- Looks for classic, basic items each season, with 1-2 trendy items
- She cares about how she presents herself, enjoys fashion, and looks for quality over quantity
Customer needs, expectations and buying patterns 
The De Kliek customer loves to shop and enjoys going to boutiques. She is knowledgeable about designer fashions and tends to shop for seasonal wardrobes twice a year plus picks up various fashion and basic pieces throughout the year. Many times she shops to "browse." By offering fashionable accessories and wardrobe organization items, De Kliek will be able to grab a larger share of her wardrobe budget. She is used to coming into the store and browsing through the clothing items and trying on what interests her. She expects a warm and comfortable environment and nice dressing rooms. She enjoys being left alone but also enjoys the special touches of personal shopping assistance and having the ability to special order items. She wants fun and catered shopping events in the evening and also enjoys receiving special notices on sales and participating in trunk shows to garner more savings. She is also at a Director to CEO-level job and could potentially be reached through her office for personal shopping services or through her own personal stylist who is a member of AICI.
 "Why People Buy," Pam Danziger, 2003
 Valley profiles; De Kliek Shopping Behavior Research of LA Women, Oct 2003
De Kliek is considered a luxury boutique within the Women's Clothing Store Industry (NAICS 448120 or SIC code 5621). Women's Clothing Store sales represent 20% of the Clothing Store Industry Group, which translates to $27.2 billion during 1997, and $34.4 billion in 2002.
The retail sector is the second-largest industry in the United States, both in number of establishments and number of employees. It is also one of the largest industries worldwide. The retail sector employs over 23 million Americans and generates more than $3 trillion in retail sales annually. Retail sales usually see a 2-5% growth each quarter. Although 2003 was difficult, sales have slowly grown from 1.4% in Q1, to 3.1% in Q2 to an estimated 5.8% in Q3 according to the NRF. Overall retail sales account for two-thirds of the nation's economic activity, and the holiday season accounts for 20-40 percent of total retail sales. 
The Clothing & Accessories Stores subsector of Retail has seen sales growth of 19% over the last five years from $137.6 billion in 1997  to $171.8 billion in 2002 . Businesses in the Clothing and Clothing Accessories Stores subsector sell new clothing and clothing accessories merchandise from fixed point-of-sale locations. Establishments in this subsector have similar display equipment and staff that is knowledgeable regarding fashion trends and the proper match of styles, colors, and combinations of clothing and accessories to the characteristics and tastes of the customer.
Although the holiday season is the key indicator of retail health, according to the National Retail Federation, the holiday season accounts for only 15% of total apparel sales. A good holiday season is typically followed by a good economic year and analysts predict retail sales will rise a total of 4 percent in 2004. Total sales for 2003 were up 3.2 percent. Additionally, online holiday shoppers spent a record $18.5 billion during the holiday season  -- a 35 percent increase over the $13.7 billion spent in 2002. Luxury retailers and upscale department stores were the unexpected market leaders during the 2003 holidays with Nov-Dec sales up 15 percent. Analysts state that as consumers see their investments increase, they spend more.
|U.S. Retail Industry |
|Women's Clothing Store Industry |
la Area Facts 
|The 2002 average for shrinkage is 1.1%, with .7% being attributed to employee theft and .4% attributed to shoplifting. ||There are 888 women's clothing store establishments in the Los Angeles area|
|Highly fragmented||One out of every three small business clothing retailers fail|
|Many have highly seasonal sales and therefore seasonal inventory levels||Average small business sales: $245,378|
|Average retailer has one store with less than $1 million in annual revenue||25% of women's clothing retailers generate sales over $500K|
|May operate stand-alone stores in urban locations or from leased space in shopping centers||Small business clothing stores employ on average, 3 employees|
|Retailers often have high gross margins, close to 40 percent in many businesses||Clothing store startups in LA are 5 percentage points below the industry average|
|Wages are relatively low||Average annual inventory turn for boutiques is five times|
|Employee turnover in the retail/wholesale industry is very high, as much as 30 percent||LA Clothing Stores have a higher than average growth rate with a sales index of 1.62 - 62% higher than the industry norm|
|Merchandising - buying goods that will sell - is the main preoccupation of most retailers||-|
The outlook for sales and earnings in 2004 is bright, with especially strong results expected in the first quarter . Two trends should dominate retail fundamentals in 2004: Strong first quarter sales due to an estimated $60 billion in tax refunds and lower taxes hitting consumers' pockets in March and April, and a potential slowing of sales in the final three quarters of 2004 against the tougher comparison of 2003. Additionally, industry experts predict growth in the specialty store segment of which De Kliek is a part.
Economic, Cultural and Environmental Conditions
Weather, seasonal events, holiday shopping, competitor marketing, LA tourism, the Bay Area economy and the strength of the dollar can all affect the performance of De Kliek. On a macro-economic level, consumer confidence, interest rates and inflation rates all have an effect. Rising unemployment, political concerns and deflation also pose risks.
|Clothing Industry||Impact on De Kliek|
|Very low interest rates||Cost of financing low|
|Easy availability of consumer credit||Higher ticket sizes on credit card purchases|
|Relatively low unemployment, and very low inflation||Stable employees & businesses|
|A relatively low personal savings rate||Increased consumer spending|
|(Positive side of:) Significant continued layoffs at larger corporations require job migration||Higher-educated employees|
|Clothing Industry||Impact on De Kliek|
|Weakening consumer confidence (influenced by global terrorism, tension & uncertainty)||Decreased sales|
|Strong Euro||Lower margins|
|Slowly increasing unemployment||Value and sale shopping (can also be positive impact)|
|Decreasing levels of consumer household wealth due to stock portfolios and 401(k) plans that have seen huge losses||Continued "cocooning" by customers|
|Consumers with record high debt levels are defaulting on credit card balances, home mortgages & loans at an alarming rate||Increase in returns|
|(Negative side of:) Significant continued layoffs at larger corporations require job migration and lead to large numbers of consumers employed as temp workers||Reduction in working women who can buy luxury items|
 National Retail Federation trade group, Women's Wear Daily, 9/17/03
 U.S. Economic Census, 1997
 2003 Holiday Survival Kit, NRF
 eSpending Report from Goldman, Sachs & Co., Harris Interactive and Nielsen/NetRatings, Jan 2004
 BizMiner, December 203, Bay Area Women's Clothing Store Data, 2001-2003
 2003 National Retail Security Survey, NRF
 Daniel Barry, Merrill Lynch Senior Retail Analyst/Broadlines
De Kliek has stiff local competition with the many wonderful boutiques in Los Angeles. Direct competitors include those boutiques that carry some of the brands that De Kliek plans on carrying or could move easily into carrying, and are located in the Valley. Indirect competitors are those boutiques in LA that focus on a different target market or do not carry lines that De Kliek will carry, in addition to well-known boutiques in other metropolitan areas.
De Kliek's own comparative analysis of 15 boutiques in Los Angeles reveals that very few are successful in delivering high-quality customer service, as browsers are routinely ignored. It appears that if you don't look a certain way or show that you have money when you walk in, you are immediately disregarded. Dressing rooms are typically small and have curtains that don't guarantee 100% privacy. Clothing sizes tend to run small and items tend to be overpriced. Even with a lot of focus in the media and among fashion retailers on what to wear, not one boutique in town is a member of the Association of Image Consultants - a very prestigious professional organization whose members work with and train clients in developing their image. There are some retailers who do get it right - they have strong customer relationships, carry the right mix of merchandise, are knowledgeable in fashion - and the profits show.
From a "look & feel" perspective, as well as consideration of designer lines that De Kliek will carry, Dish in Hayes Valley is considered the main competition. The following is a comparative analysis of Fish and De Kliek:
Open Mon-Sat 11-6, Sun 12-5
Plenty of places in Los Angeles cater to the well-heeled, but this area also reaches out to the adventurously heeled -- and dressed.
Open Mon-Fri 11-7, Sat 10-6, Sun 11-5
The location for De Kliek has not been confirmed but top targets are areas in which the target market lives and/or shops.
|Fish's collections largely come from American designers such as Nanette Lepore, Lauren Moffat, Vince and Katayone Adeli|
De Kliek will carry sophisticated, quality lines from European and American designers such as Herr Frau, Weekend MaxMini, Hocken, Vince and Catherine the Great.
|The owner of Fish is fashionable and knowledgeable. She is considerate of her customers and allows them the space to shop on their own (a very important aspect for women!)||De Kliek will provide quality customer service including alterations, gift wrapping, Style Assessments, trunk shows and special workshops.|
|Sleek and modern interior with a warehouse feel. There are three dressing rooms with linen curtains that pull a bit from the walls so privacy is not 100% guaranteed.||De Kliek's interior will reflect a minimalist look, yet be accommodating and warm so that all products are featured appropriately. The dressing rooms will have wood louvered doors to maintain privacy and will have chairs outside for friends to sit down.|
Competitive Benchmarks 
The competition in the Valley does provide some good benchmarks for projecting sales and understanding customer expectations. In the Valley, Ambivalence, a junior/contemporary boutique, averages sales that top $1,300 per square foot which totals more than $900,000 in sales annually. Nearby, Ennui generates annual sales of $1.3 million with approximately 800 square feet of selling space; that translates to more than $1,600 per square foot. However, it is important to note that not all of Ennui sales are generated from the selling floor; a considerable amount of sales come from special orders. With these successful Los Angeles retailers as benchmarks, De Kliek will continue to monitor them for best practices. Additionally, there are a few very successful boutiques in San Francisco, New York and Florida that are worth mentioning as benchmarks for successful retailing and merchandising.
 Women's Wear Daily
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