Here’s How Guess Is Changing Its Positioning And Focus In The Americas
Even though its reforming strategies are showing significant improvements in Asia and Europe, Guess seems to be missing out on sales in the Americas. The company attributed the declining footfall in its brick-and-mortar retail store as one of the main reasons for this performance. The wholesale business in this region, however, showed slight growth fueled by the U.S. and Canada. Guess has formulated a few steps to improve its business in the Americas. They include closing stores, negotiating the rents for the existing stores, sourcing materials from low cost regions, creating a better balance between domestic and international businesses, and within the Americas, a more optimal balance between wholesale and retail, and focusing on an omni-channel presence. Let us explore Guess’s plans towards creating a better business in the Americas in detail:
Limiting Presence: Guess is focusing on closing more stores for the weak Guess? and Marciano brands and keeping more stores of the Factory and G by Guess brands which are performing relatively better. The focus is mostly on whether the store is generating a profit or not. In 2017, Guess will close around 60 stores in the region and it expects to close around 100 to 120 odd stores in the next year. The company currently has 400 stores in the region. So, it is planning on closing almost half its stores over the next couple of years, thus limiting its presence in the region to a significant extent at least on the retail front.
Rebalancing The Domestic And International Businesses: With a view towards improving profitability in the U.S., its domestic market, the company wants to grow abroad. So, while the comparative store sales are growing in both Asia and Europe, Guess’s focus is only to improve profitability, with a smaller presence, in the Americas. With declining footprints, Guess’ Americas business is resulting in reduced profitability, hence the focus is to make a smaller business with an improvement in footfalls.
Creating A Balance Between Wholesale And Retail in Americas: The company had a more wholesale-centric model in Europe which has been shifting balance over the recent past with ~55% of business coming from retail in Europe. However, in the Americas, where the presence of retail is bigger, the wholesale business seems to be doing better. Though it is not planning on pursuing a more wholesale-centric model in the Americas, it will surely create a better balance between the American retail and wholesale businesses to reap more benefits from this changing trend.
Managing Inventory: It was facing a problem of growing inventory in the Americas and it has been tackling this with an expectation of a better inventory position in the first quarter of this year. The inventory management will continue in sync with the store closures in the region.
Focusing On Omni-Channels: Guess is focusing on the integration of its retail and e-commerce channels and while the results have been pretty encouraging in regions like China, it is still receiving a lukewarm response from the U.S. However, the strategy of focusing on an omni-channel presence will continue in the region and the company expects better results with time.
The retail space in North America is cramped with competing businesses, and along with that the growth of e-commerce has made the competition in the retail space even more fierce. The promotional activities by brands to lure consumers have resulted in a dampening of margins. With these dynamics at play, Guess feels that reducing its presence and focusing on profitability with an omni-channel approach might be the best way to maintain its business in the region. The company is also focusing on marketing initiatives like hiring social media influencers and using celebrity endorsements to revive its American business.
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