Marketing Strategy of the Clothing Retailer Rue 21

Troy University Sorrell College of Business

Master of Business Administration

Rue 21: Situational Analysis

Dr. Thomas Dukes

MKT 6661 Term 2 2011

Presented by Natalie King

17November2011

Abstract

This paper will analyze the marketing strategy of the clothing retailer Rue 21. The strengths, weaknesses, opportunities, and threats will be discussed and analyzed. The current industry will be taken into account as well as the industry over the last five years to make determinations and draw conclusions on the next steps the marketing team should consider in order to keep the company profitable. Rue 21 currently operates 722 stores in 46 states. In the last fiscal quarter ended July 30, 2011 there was a 20% increase of net income, $7.7 million, over the same period last year. Net sales increased 20.9% to 172.8 million, comparable same-store sales were flat compared to a 1% decline of the precious year same period.

History and Scope of Business

Rue 21 was originally incorporated in Pennsylvania in October 1976. The company changed its name to Rue 21 in May 2003 and was reincorporated on October 30, 2009 in Delaware.1 The company's headquarters is located in Warrendale, Pennsylvania. Rue became a publically traded company in November 2009. The company is headed by president and CEO Robert Fisch.

Rue 21 is a specialty retail store that offers men's and women's apparel as well as accessories, known as the etc! shop. The company's etc! campaign includes women's intimates, men's and women's accessories and men's and women's fragrances. The company's target market is teens between the ages 11-17 who aspire to be 21.2

Current Size, Growth, and Profitability

Rue 21 has 722 store locations in 46 states as of August 4, 2011.3 The company has plans to grow physically by expanding existing stores to include etc! shops, increasing square footage of existing stores. These expansions to existing stores will increase the square footage to approximately 5,000 square feet. As of January 29, 2011 more than 70% of the store base was in the etc! layout. In fiscal year 2010 311 stores were converted and 35 more stores are on the agenda to be converted by fiscal year end 2011. 4 These stores will be considered expanded jewelry destinations. The company also plans on opening new stores in strip malls, outlet centers, and regional malls across the country. The company is also planning on focuses on increasing comparable store sales as a means of growth and also improving profit margins. To ensure growth the company uses a three-pronged strategy that focuses on diversification and growth. The components of this strategy are diversifies product, flexible real estate, and balanced growth. The company's profitably is based on sales and staying a float in the competitive retail market, Rue 21 considers any retailer that sells products of similar brands, value, and merchandise a competitor.

Competence in Various Areas

As earlier stated Rue 21 considers any retailer with similar brands, products or value a competitor. By having such a wide range of competitors the company must realize its strengths and weaknesses as they relate to the current market and its competition. The following chart lists the strengths and weaknesses of the company.

Strengths5 Weaknesses

* Compelling "fashion meets value" proposition

* Flexible, fast-fashion business model

* Attractive new store economics

* Distinct company and customer culture

* Strong and experienced management team * Does not offer multiple retail formats

* Operate out of one distribution facility

* Rely on third-party transportation for all product shipments

Strengths

Compelling "fashion meets value

Rue offers the latest fashion to guys and girls at comparably lower prices than that of competitors. The broad product dynamic allows customers to make a complete look from clothes to shoes to jewelry and fragrance. Customers who shop at Rue 21 are offered a unique and fun shopping experience that enhances the brand value proposition.

Flexible, fast fashion business model

The merchandizing model used by the company enables them to quickly identify and respond to trends and bring forward proven concepts and styles to the stores. The sourcing model is designed to achieve lower cost, faster turnaround and lower inventory levels. The vendor network is comprised of domestic importers and domestic suppliers. Markdown risk is reduced because of the relationship with vendors. The vendors allow the company to test small quantities of new merchandise in select stores before mass distributing the product.

Attractive new store economics

Because of low store build-out cost, competitive lease terms, and low-cost operating model the stores are able to generate a strong return on store investment. All of the new stores feature the expanded model that displays the store within a store etc! shop which showcases an expanded accessory option.

Distinct company and customer culture

The store culture is strongly related to the employees who are high school and college students that live in the area of the store and are Rue customers themselves. The company relies on employees that have and upbeat attitude and a certain eye for fashion and the latest trends.

Strong and experienced management team

The senior management team has many collaborative years of experience in a broad range of disciplines which include; retail industry, including merchandising, real estate, supply chain and finance. The CEO and President, Bob Fisch, has more than 30 years of experience in the apparel industry. Since becoming the CEO and President, the company has experienced consistent growth in net sales and income from operations.

Weaknesses

Does not offer multiple retail formats

The company only offers goods and services