ED WILLIAMS MENS WEAR

9B16A019

Lynne Ricker and Marc Boivin wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.

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Copyright 2016, Richard Ivey School of Business Foundation Version: 2016-05-26

In March 2011, Lowell Williams, the incoming owner of Ed Williams Mens Wear (Ed Williams) in Calgary, noticed that sales had not increased that year. The retail store had been profitable for 20 years but as Lowell prepared to take over the business from his father within the next 18 months, he wanted to explore opportunities for growth.

BACKGROUND

Ed Williams Mens Wear was located in the northwest sector of Calgary, Alberta. With a population of over one million, Calgary's major industry was the oil and gas business, but finance, banking, tourism, and entrepreneurship were also important to the city's economy. Due to the reliance upon the oil and gas business, the local economy experienced defined business cycles that were dependent upon the price of these commodities. Calgary had a relatively young population for a fast-growing large city (average age 35 years) and a strong entrepreneurial spirit, with many success stories in the Calgary business community stemming from employees of large firms leaving to create their own start-ups.

Ed Williams had been in business for over 20 years. Run by its founder, Ed Williams, the store had been successfully selling high-quality apparel to businessmen in the growing city. Prior to opening the store, Ed had extensive experience in the menswear business. His son Lowell had basically "grown up in business," working at the store since he was a teenager, and was becoming increasingly involved in the running of the business.

While Ed Williams had long been profitable, Ed and Lowell were considering how to meet the needs of the changing marketplace. At 64, Ed was considering stepping back from the business to a certain extent. At 32, Lowell felt ready to take on the management of the store. However, they needed to look at the options available to stay competitive in their growing market.

With growth came an increasing number of competitors. Calgary was an attractive retail environment and many new retailers considered it a very good location for expansion.

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Page 2 9B16A019 COMPETITIVE ENVIRONMENT

The menswear business was highly competitive in Calgary. Smaller independent high-quality players included stores such as James & Dickson, O'Connors, Forman's, Supreme, David Colonna, Gios, Joseph's, Umberto's, Latitude, Urban, Mansours, and Thomas Jeffrey. Major players, such as Holt Renfrew, Henry Singer, Brooks Brothers, and Harry Rosen, were also present. All carried high-quality men's attire, with many of the same brand names. While most of these competitors were located in downtown Calgary, a few were represented in the northwest sector. These included James & Dickson, located in a major regional mall about five kilometres from Ed Williams, and Mansours, located about four kilometres away in a community-planned centre.

Moores Clothing For Men, a large chain of menswear stores, was located in the same general sprawling centre as Ed Williams, only a couple of blocks away. Yet Moores had a much lower price point and quality level than Ed Williams, and was not considered a direct competitor.

Major malls in Calgary also offered a number of middle-of-the-road competitors, such as Banana Republic, Mexx, Macleod Brothers, and Tip Top Tailors. Their average price point was much lower than Ed Williams. However, since these competitors were not selling the top brands, Ed felt that these mid- range competitors were not a direct threat to his business.

Many shifts had occurred in the marketplace since 1990. "Dress-down Fridays" became popular in many workplaces, leading to fewer suit sales and more sales of upscale casual wear suitable for the work environment. Ed Williams kept pace with these changes by changing the assortment of products it offered. Products carried included suits, sport coats, leather jackets, trousers, casual slacks, jeans, shirts, sweaters, ties, and shoes. In the summer months, polo shirts and shorts were added to the collection. Ed tried to carry only high-end brands that were not widely available in run-of-the-mill stores or mass retailers. This reinforced his positioning as a specialty menswear retailer.

Calgary was home to a large number of head offices, second only to Toronto in the Canadian marketplace. The economy was vibrant. Population growth continued at a good pace in Alberta, and in Calgary in particular. A large portion of this growth consisted of younger professionals in the workplace. Further, with this growth came an increasing interest in Calgary as a destination for Canadian retailers looking to expand into Western Canada. Calgary also attracted a large number of American retailers interested in the city's positive economic forecast. Williams-Sonoma, a high-end kitchenware chain based in the United States, opened to phenomenal success in Calgary, which sparked the interest of an increasing number of American chains. It seemed clear that more competitors could be expected in the near future in the menswear business as well.

CURRENT CUSTOMERS

Ed Williams catered to customers looking for high-quality men's fashion combined with a high level of personalized customer service. Although the company's customer base ranged in age from early 20s to early 80s, the majority of customers were over 35. As was historically typical in the menswear business, customers were very store loyal. Many had been Ed's customers since he first opened his own store. Yet this loyalty had its downside as well, as the store's market was aging.

Ron Greene typified the current Ed Williams customer. Ron was a family man in his mid-fifties, lived in the northwest sector of the city, and was a successful vice-president of finance at a major oil and gas company. He wore a suit and tie to work about half the time. Other days required a sports jacket, dress

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pants, and a dress shirt, but no tie. On casual Fridays, Ron liked to dress more informally, but was cognizant of his role in the company and ensured he looked the part, wearing high-quality casual shirts and trousers. On the weekends, Ron was busy with family activities, golf, and socializing with friends and business colleagues. He needed polo shirts, casual pants, and dressy shorts for his social life.

Generally, Ron only visited the store when he needed new clothing. He was often accompanied by his wife. Since he did not particularly enjoy shopping, Ron was very open to the suggestions made by both the retail staff and his wife. He was inclined to stock up on each trip in order to reduce the need to shop to an average of three major trips per year. His wife stopped in alone several more times a year to pick out gifts and ensure that Ron's wardrobe stayed up to date.

When Ron's son Corey graduated with his accounting degree from the University of Calgary, he needed a suit and tie for job interviews. Ron brought Corey to Ed Williams to shop for these items. Corey was somewhat reluctant, thinking that clothing suitable for his father was not going to work for him. He was therefore surprised that he was able to purchase well-known, fashionable brands at Ed Williams. Although the store's prices were a bit high for Corey, he was willing to pay for the quality tailoring the store offered. An interview suit, after all, was an important purchase.

Lowell had noted that many of his customers were becoming increasingly transient. Since winters in Calgary were very cold, many customers vacationed in warmer locations, often in the United States, where outlet malls were very popular. Canadian customers frequently shopped when on vacation, especially if the deals were good. When the American retail economy was suffering, many top brands were available at substantial discounts at the outlet malls. Customers also shopped at these malls when on business trips to the United States. Lowell stated that "they would take an afternoon out of their business meetings, go to an outlet mall, and stock up on Boss suits at half price." Canadian retailers like Ed Williams simply could not compete with those prices.

With the increase in the number of competitors in retail menswear, Lowell saw more sharing of the customer base. The company's younger customers were more likely to shop at several different stores. Obviously, building a good relationship with customers increased the odds that they would return to buy from that store, even if they did buy some products elsewhere.

One of the challenges Ed William faced was its aging customer base. Younger consumers seemed to feel that the store catered to customers of their fathers' age, not them. Hence, they were reluctant to visit unless their parents brought them in to buy a suit. The brand had a very traditional feel, and although many of its product lines were aimed at casual/younger buyers, suits still dominated the store.

PRODUCTS

Ed Williams carried a typical selection of product lines for a full-service menswear store. Although most of the brands carried by the store could be found elsewhere in Calgary, Ed and Lowell tried to differentiate their store's selection from that of a typical mall store. Designer labels made up a significant portion of the product mix. Suit brands included Ermenegildo Zegna, Baumler, Biella & Biella Orange, and Pavone, as well as a number of Canadian brands, such as Coppley, Jack Victor, and Samuelsohn. The store also carried dress shirts by Jack Lipson and ties by Dion, both Canadian companies.

A large variety of brands were carried in the casual and sportswear categories. These included American and European brands, such as Alberto, Agave, Brax, Jhane Barnes, Seven for all Mankind, Signum, St.

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Croix, Tommy Bahama, Robert Graham, English Laundry, George Roth, Fred Perry, Ben Sherman, and Ted Baker of London, as well as Canadian brand Dagr.

Outerwear included European brands Torres of Spain, Milestone, Belstaff, Bugatti, and Victorinox. Leather, suede, and sheepskin products by Canadian manufacturer Yvan Leather Creations were also carried in season. Only two brands of shoes were carried: Cole Haan and Johnston & Murphy. These suppliers also provided other small leather goods such as belts (see Exhibit 1).

PRICING

The pricing strategy used by Ed Williams combined a market-bearing approach with an eye to the maintained margin, given the industry standard "keystone" margin of 50 to 55 per cent. Most direct competitors were located in downtown Calgary, so were not in close proximity to their store. This meant that consumers were less likely to "price shop," although generally, the store did keep prices in line with its direct competitors. Because it was located outside of the downtown, high-rent district, Ed Williams was able to price competitively while maintaining a good margin.

Overall pricing was done by product line. They tried to keep the number of different prices on a line, such

1

as ties, to a minimum. Ties were priced from CA$95 to $150, with suits starting at about $600.

Customers were aware of competitors' prices, but were not likely to drive downtown to save $5 on a tie or $45 on a suit.

At the end of each season, a major sale was undertaken. The January and July end-of-season sales included seasonal merchandise that needed to be moved out of the store. Some ongoing products that were not seasonal were never marked down. Occasionally, merchandise would be held from year to year if Lowell felt that they had purchased items that were slightly ahead of the fashion curve for the Calgary market. By waiting a year, the market taste would catch up to the inventory and the product could be re- introduced at full price.

Lowell understood that it was not necessarily worth it to mark a product down to a rock-bottom price just to sell it. "There comes a point where you are just dumping it on the market, blowing it out for $20 you are doing yourself a disservice because you are putting an item of clothing in your customers' closets that they are not going to wear . . . and then [they may] not buy something else from you later because they have that unworn item." Therefore, at that point, Ed Williams would simply donate the product to charity and write it off.

Instead of offering volume discounts (i.e., giving customers a percentage discount if they purchased a certain dollar value), Ed Williams was more likely to give them a free tie to go with their purchases. The company wanted to take a personal approach to the customer and maintain its image as a higher-end, higher-service retailer. However, volume discounts were offered to bridal parties purchasing suits for the groom and groomsmen.

PROMOTION

Ed Williams had relied primarily on word of mouth to attract customers. As soon as customers bought from the store, they were added to the mailing list. Direct mail went out to customers a few times a year. Normally, the store would send advertisements featuring its newer products for the fall season in

1 All prices are in Canadian dollars unless otherwise stated.

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September. Notifications of sales were also sent out a couple of times a year. While this had historically been done in print, Lowell was looking to do more email campaigns and get out of print media altogether.

Mass media, such as television and radio, were generally avoided. The cost of the media space, along with the production needed to ensure that a quality image was portrayed, did not allow Ed Williams to use these media to reach its target market successfully.

The store also participated in many charity events. Lowell felt that these were particularly successful for the store. Being small and local, a presence at charity events created goodwill, and when charity golf tournaments charged upwards of $200 to play, they attracted exactly the target market that Ed Williams wanted. For these events, a mannequin was utilized to display the store's products. Some of the staff also modelled clothing for fashion shows.

The company also had a website (ewmenswear.com), where new product introductions and sales were noted. Lowell tried to ensure the website was up to date by including a blog with bi-weekly posts. This featured commentary on happenings in the retail industry, trends, or other things customers might be interested in. The increasing importance of social media was not lost on Lowell. In addition to building the blog and website, he was also looking into expanding into sites like Twitter and Facebook.

LOCATION

Ed Williams had been at its current location since opening in 1988. Crowfoot Centre was a large planned centre comprising a number of small strip malls, larger anchor stores (such as Rona, Chapters, and two supermarkets), and restaurants. In total, there were over 240 businesses in the area, making it a major draw for northwest Calgary. Although the local light rail transit offered transit access to Crowfoot Centre, most customers drove to the store. Ample free parking was available directly in front of the store.

For most of Ed Williams' history at this location, the store next door had carried women's clothing a very complementary business for Ed. Next to the women's store was a shoe store. However, the shoe store had moved and was replaced by a skateboard shop. More recently, the women's store had closed, leaving 1,550 square feet of empty store space.

Competitors in the same sprawling centre were few. Moores, Mark's, and The Shoe Company were all located in the same vicinity, but were not direct competitors for Ed Williams. There was a children's clothing store nearby, but no other clothing stores.

STORE LAYOUT

Ed Williams occupied a 2,850 square foot store. It was at one end of a small strip mall within the larger planned centre. The store had a large window in the front and a smaller window to the side. Within the store, merchandise was carefully organized so that a large amount of product could be placed in the available space.

Casual products such as sweaters and polo shirts were placed nearer the front of the store, while suits were at the back. Dress shirts took up one wall and were organized by colour. Accessories such as ties and belts were merchandised between the suits and the more casual clothing.

There were three dressing rooms available. Located near the back of the store, the dressing rooms offered close proximity to the store's tailors. A large mirror just outside the dressing rooms allowed customers to

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view the products. This also meant that the sales associates and tailors could make immediate suggestions to ensure the fit of the product.

Various types of fixtures were used within the store, depending upon the merchandise being displayed. Basic shelves and racks held shirts, sweaters, and suits. Specialized pant displays were used for both dress and casual pants. Ties were kept in specifically designed narrow drawers with display space above.

Throughout the store, mannequins displayed the products. Originality was evident in the displays, and up- to-date combinations of clothing added interest to the store. A stone fireplace on one wall, with comfortable chairs for sitting, also added interest and provided a place for friends and spouses to relax while waiting.

STAFFING

Ed Williams employed two full-time sales associates and five part-time staff members. Some of the part- time staff were retired from other industries and were involved in retailing part-time as a way to keep involved and supplement their income. Other part-timers were younger, often students working to pay their way through post-secondary education.

When hiring, Lowell did not emphasize retail menswear experience. Instead he looked for people with outgoing personalities and qualities that would lend themselves to the job. He wanted people who could chat with customers for extended periods and feel comfortable doing so. Training was basically on the job. New employees were shown how to work the point-of-sale system, but after that they generally learned by shadowing the more experienced sales associates. Because the business was small, the team environment was emphasized. Turnover was very low. The store was flexible with work hours and tried to accommodate specific staff needs in terms of time off, hours/days worked, etc.

Employees were paid on a salary basis, not commission. Management felt this approach was consistent with the company's emphasis on building relationships with customers over time. Pressure to make an immediate sale, even if the product was not right for the customer, was thereby removed.

In addition to the sales associates, Ed Williams employed two full-time tailors. Each of the tailors had over 40 years of experience. More recently, the store had hired some younger people, hoping to train them to take over the tailoring aspects of the business.

DECISION

If Lowell wanted to grow the business, he needed to define all the available options. In the past, Ed Williams had considered opening another location; however, Ed felt he could not maintain the highly personalized level of service that the company was known for (i.e., he could not be in two places at once), and so a second location was not pursued at that time.

In addition, the size of the Calgary market had grown since Ed started the business. Depending upon the location chosen, rent would vary from $40 per square foot (a planned centre in the south part of the city) to more than $60 per square foot (in the downtown area). Leasehold improvements would total approximately $150,000. Other costs such as inventory would also need to be considered.

With sales approaching $2,000,000 per year, Ed Williams Mens Wear had been very successful (see Exhibit 2). Now the company needed to determine how to continue this success in the future.

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EXHIBIT 1: INVENTORY ASSORTMENT

MERCHANDISE CATEGORY

Sports Shirts Sports Jackets Dress Shirts Casual Pants Suits Sweaters

Ties

Knit Shirts Other

Casual Jackets Shoes

Top Coats Leather Coats Belts

T-Shirts

Source: Ed Williams Mens Wear.

% OF TOTAL INVENTORY

13.0 12.0 11.0 10.0 10.0

7.0 6.0 4.0 4.0 3.5 2.5 2.0 2.0 2.0 1.0

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Income Sales

EXHIBIT 2: INCOME STATEMENT FEBRUARY 2009 TO JANUARY 2010

Business clothing Casual wear Accessories Outer wear Special orders Other

$702,575 627,445 158,824

58,954 335,684 ____60,443 $1,943,925

$375,376 354,769 80,463 41,878 168,369 ____67,821 $1,088,676

$855,249

$41,942 11,068 399 5,726 48,608 3,945 2,970 22,472 4,755 8,625 2,648 1,600 45,851 111,706 403,278 1,080 10,978 820 4,871 8,067 10,520 $751,929

$103,320

Total Sales

Cost of Goods Sold Business clothing

Casual wear Accessories Outer wear Special orders Other

Total COGS

Gross Profit

Expenses

Advertising & promotion Automobile

Bad debts

Business license and taxes Credit card fees

Donations

Entertainment

Freight

Interest and bank charges Insurance

Maintenance Memberships Professional fees Rent

Salaries and benefits Security

Supplies

Tailoring (outside services) Telephone

Travel

Utilities Total Expenses

NET INCOME

Source: Ed Williams Mens Wear.

Authorized for use only in the course Macroeconomics at Northern College of Applied Arts and Technology taught by Shawkat Kamal from Jan 14, 2020 to Apr 11, 2020. Use outside these parameters is a copyright violation.What strategies/options are available to grow the business? Which strategy/option would you recommend? Why?