US Insights

The Limited suffers fate of all undifferentiated retailers

Nigel Hollis

Chief Global Analyst

Retail 01.19.2017 / 14:00

Limited

The Limited becomes the first retail casualty of the new year.

Another year and another retailer bites the dust.

The Limited, a women’s fashion store, announced that it would close all its brick and mortar stores in the USA. Chalk up another victim to the growth of e-commerce and a failure to differentiate. Unfortunately, The Limited may be the first of many stores to capitulate to these forces.

In this post from a couple of years ago examining the factors that led to the demise of Nokia, I reviewed the data that found dying brands lack differentiation relative to their competition. Differentiation is driven primarily by innovation, but marketing has an important role to play in highlighting innovation and helping to make it meaningful to potential customers.

I suggested that most brands die because they lack an effective innovation strategy and concluded that that brands need to do everything they can to avoid getting into the death spiral where chasing volume lowers profits, and in turn undermines investment in R&D. Following on from comments made by Ciju Nair in response to my previous post, there is no doubt that this rise of e-commerce has pushed many brick and mortar retailers to the brink. The holiday season saw a 20 percent increase in online shopping in the U.S. with a similar percentage increase reported in the UK

While a large proportion of The Limited’s woes can be attributed to the impact of e-commerce, I believe the ultimate problem is too many similar retail offerings competing for too few customers. A retail store has to be a destination in its own right these days. People will visit if they believe that they can get something that they cannot get elsewhere, particularly online. The difference might not need to be what is sold but how. Thanks largely to Amazon, it is easier and usually cheaper to shop online, but no matter how convenient the actual experience is usually lack luster. Great customer service, a compelling experience or adding food and drink options have allowed some brands to separate themselves out from the crowd.

Back in 2007, BrandZ found The Limited in much better shape than it is today. Relative to its competition the brand was liked and was seen to meet people’s needs, even if it was not that well differentiated or salient. Since then the brand has struggled to stay salient and the brand’s Power score, the indicator that people are likely to buy from the brand, has halved. If lack of perceived differentiation is a harbinger of doom, then there are quite a few retailer brands measured in BrandZ that should be worried. Old Navy might tough it out on the basis of range and low prices, but smaller brands like American Apparel which filed for bankruptcy in 2016 will likely succumb to market forces unless they can figure out how to stand out from the crowd.

Can you think of a bricks and mortar retailer that has managed to survive the shift to e-commerce? How did they do it? Please share your thoughts.

 

Source: Kantar Millward Brown

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