Following an abysmal first quarter 2023 earnings report, Victoria’s Secret dropped another bombshell announcing it is expanding bra and panty distribution on Amazon. With an ongoing slide in revenues, Victoria’s Secret needs something to jumpstart sales. Yes but apparently it thinks partnering with Amazon will do the trick. So, it’s launched a branded Amazon Fashion storefront featuring over 4,000 Victoria’s Secret and Pink branded products, including bras, panties, sleep, swim, and loungewear, all available through free Prime delivery. Plus, some styles will be offered through Amazon’s Prime “Try Before You Buy” service.
Second Amazon Launch
This follows the introduction of Victoria’s Secret beauty products and some Pink selections on Amazon last year. “We have continued to expand our assortment offering with Amazon Fashion, and it remains a natural extension of our owned channels,” Greg Unis, Victoria’s Secret chief growth officer, said in a statement.
But it feels like the brand is jumping from the frying pan into the fire. It may get some additional sales by entering the “Everything Store,” but more than transactions, it needs to drive demand for the Victoria’s Secret brand. That takes brand building, not transaction loading. What has Amazon ever done to build a brand other than Amazon?
Tough Sell
Victoria’s Secret has had a rough ride since May 2021 when it went public as an independent company. Full-year Fiscal 2021 sales were down 9.6 percent compared with 2019, dropping from $7.5 billion to $6.8 billion. Then it dropped another 6.5 percent in fiscal 2022, to $6.3 billion. First-quarter 2023 continued the downward slide with its reported $1.5 billion revenues off five percent and even more alarmingly, net income down to $1 million from $81 million same quarter last year. Based on that result, it revised its full-year 2023 forecast to flat or down low-single digits in revenues and adjusted operating income in the five to six percent range, about half of what it was in fiscal 2021.
“The first quarter continued to be a volatile macro environment for our customer, and as the quarter progressed, business became more challenging,” CEO Martin Waters said in a statement, observing, “Sales performance was particularly challenging in our core categories where there was significant decline in the overall stores and digital intimates market in North America.” But he remained optimistic about the future: “We recognize we are on a journey, and our brand repositioning efforts will take time, and while the environment creates some turbulence, we remain confident in our repositioning efforts and our strategic plans for growth.”
Languishing In Store
More telling than the topline numbers is what sales-store sales reveal. Consumers are not all that enthused about shopping at Victoria’s Secret. Same-store sales dropped 11 percent in first quarter 2023 and 14 percent for brick-and-mortar stores only. This followed an eight percent same-store sales decline in 2022, specific to company-operated North America, as well as its 72 China stores operated under a partnership.
One bright note in the first quarter was direct sales rose 10 percent, up from $420 million previous year to $465 million in 2023. But online direct sales only account for about one-third of its total, and its store sales were off nearly 16 percent. Plus, direct sales didn’t help the company last year when they were down some 13 percent, from $2.1 billion in 2021 to $1.8 billion. It’s safe to say Victoria’s Secret has yet to find the secret to unlocking its growth formula, and I’m pretty sure it isn’t with Amazon.
Backstory
During the company’s investor presentation last October, Unis took the stage to share the company’s growth initiatives, starting with international expansion, where it sees a long runway. In 2022, just under $600 million or less than 10 percent of total revenues were made outside North America. Internationally, it leverages strategic franchise partnerships to “go where the customer is and market like a local,” he explained.
That led to a brief – exceedingly brief – discussion of the company’s goal for channel expansion and wholesale, or as he said, “growing outside our own four walls.” He further described two filters the company would use to choose new channel partners: its promise to bring in new customers and to enhance the brand’s appeal. In a call to VS&Co, it declined to make a comment.
Regarding its early appearance on Amazon, Unis said it proved successful in acquiring new customers through its launch of a beauty assortment and Pink apparel. As for brand enhancement, Amazon may be a good fit for beauty and a secondary brand like Pink, which presents a different image and targets a different customer than the aspirational flagship Victoria’s Secret brand.
In the luxury space, Gucci sees no benefit to opening itself up on Amazon; however, it does offer entry-level perfumes and sunglasses on the site. And luxury-leader LVMH won’t even go that far. “We believe the business of Amazon does not fit with LVMH full stop and it does not fit with our brands,” declared CFO Jean-Jacques Guiony.
All Mixed Up
Victoria’s Secret brand needs to transform its image, to make it hot again. Robin Lewis had much to say about that in his recent piece, “Victoria’s Secret: Is a Turnaround Possible?” observing that the company “has many different siloed business lines that are unaligned, which is confusing … or misleading, to say the least.” Amazon has become another one of its sales silos but a dangerous one. On Amazon, other intimate brands are already mixed into the VSC platform, many of which are look-alike copycats at cheaper prices. In no way does that enhance the brand’s image.
Brand Dilution, Not Brand Elevation
By launching on Amazon, Victoria’s Secret is trading short-term gain for long-term brand building, which is better done through its proprietary channels, especially its stores, and website. “Doing business on Amazon is like putting a band-aid on a bullet wound. It won’t stop the bleeding,” said Paul Friederichsen, founder of advertising and marketing agency BrandBiz. “Sure, it may result in an immediate sales spike, but it’s temporary at best. A brand like Victoria’s Secret can’t sell its way to success on Amazon. That’s a ticket to brand oblivion and commodity hell.”
One thing Unis said in his presentation, which is undoubtedly true about the Amazon marketplace, “Consumers are shopping for solutions, not brands.” But his solutions-first insight applies to challenger brands, not market leaders like Victoria’s Secret where the brand must come first.
What will unlock growth for the company is to be the first and only brand that customers think about for their intimates solutions. Exposing itself on Amazon surely won’t help accomplish that. Exposing itself on Amazon surely won’t help accomplish that.