TEAM ALPHA

VERA BRADLEY MEMO

To: Professor P. Walsh
From: Team Alpha: Sara Buccilli, Mykola Budnyak, Rida Jafar, Sahibdeep Josan, Bianca
Samson, Dusan Vrljes
Date: Monday September 19, 2016
Case: Vera Bradley
What are the strategically relevant factors in the macro-environment? (PESTEL Analysis)
Economic
- General economic conditions affected the global luxury goods market, especially during
recessions and economic slowdowns. (C-189)
- Can be attributed to rapidly increasing wealth levels and standard-of-living gains in Asian
markets (Pg C-190)
Social
- Rapid fashion changes - the market for handbags & accessories is rapidly changing and
consumers are always in the market for fresh/new products. (C-194)
- Popular trends are showing that limited availability of a specific type of product proves to
be effective in building strong brands (eg. Kanye Wests Yeezys) (C-194)
Technological
- E-commerce was intended to be a key distribution channel and provide support of the
companys brand and marketing strategies (C - 193)
So what? General economic conditions like recessions and economic slowdowns can negatively
impact the global luxury goods market. Social influence has resulted in rapid fashion changes
and the development of popular trends that the industry must adapt to with technology advances
in e-commerce providing a new distribution channel and brand strategy support.
What are the industrys strategy-shaping economic features? (Dominant Economic
Features analysis)
Market size and growth rate
- Due to economic conditions, consumer spending on luxury goods decreased with .6%
annual decline between 2006-2010. (C-190)
- growth in emerging markets (China and India) allowed luxury good sales to increase by
7.8% annually through 2015. (C-190)
Technology/ R&D
- E-commerce was intended to be a key distribution channel and provide support of the
companys brand and marketing strategies. (C - 193)
- New product development processes align design, market research, merchandise
management, sales, marketing, and sourcing functions. (C- 194)
Buyer needs and price sensitivity
- Industry sales in the US were successful due to the diffusion of an accessible-luxury
category. The top 1 percent of wage earners that had incomes of over $300,000 were the

TEAM ALPHA
primary consumers, however other middle class consumers also aspired to buy products
of high quality and style. A majority of the sales were a result from the company's
promotion of conspicuous consumption. (Pg C-192)
So what?
Economic conditions globally have limited market size and sales growth except for higher
growth in developing markets like China. Technology has increased the opportunity to use ecommerce to expand distribution and to provide new products to meet the changing needs of
customers in traditional upper class markets and in emerging middle class markets.
How strong are the industrys competitive forces? (Porters 5F analysis)
Overall Industry Rating
Threat of New Entrants
Bargaining Power of Buyers
Threat of Substitutes
Bargaining Power of Suppliers
Intensity of Rivalry Among Competitors

Industry Attractiveness

Moderately
Favourable

Favourable
5
2
7

Moderately
Unfavourable

Moderate
1
1

Unfavourable
(1)
(3)
(4)

MODERATELY
FAVOURABLE

So what?
The industry is moderately attractive for companies to remain operating in the industry as the
threat of new entrants and product substitutes are low and therefore favourable but moderately
unfavourable power of buyers and suppliers moderate the attractiveness.
What factors are driving industry change, and what impact will they have? (Driving Forces
analysis)
1. Demographics- High income and middle class consumers (C-192).
2. Globalization- Vera Bradley outsourced for cheaper production and expanded facilities
(C-189).
3. Technological Change/Innovations -Expanded distribution channels with an emphasis on
outlets and e commerce and an enhanced marking approach allowed them to expand into
the global market, when the economic state in certain markets was facing a downturn (C188). Baines & Company reported that online sales were continuing to grow faster than
the rest of the market (28% annual growth) and online sales were about 5% of total
luxury sales (C-192).
So what?
Companies competing in this industry need to consider the needs of high income and middle
class consumers in traditional markets and in emerging markets while recognizing that
technology has allowed for online sales that could allow for expanded distribution locally and
globally.