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An Industry Leader Stumbles

For years, Chico’s FAS grew rapidly by selling attractively priced, colorful clothes, to baby-boomer women. But the company began to stumble in 2006. Its growth rate slowed and its core customers migrated to other companies’ offerings. The company’s costs rose faster than its revenues, squeezing margins.

The company stumbled by chasing after customers of other competitors, especially younger women. From the standpoint of their original core customers, baby-boomer women, Chico’s failed to deliver the products that they had come to expect from Chico’s. (See the Perspective, “Reliability: The Hard Road to Sustainable Advantage” on StrategyStreet.com.) In this case, the failure was a failure in Reliability, one of the key measures of the Customer Buying Hierarchy.

Since its failure started as recently as 2006, there is a good chance that Chico’s can recover from its mis-steps. The company searched for new customers at the expense of its core customers and threw the baby out with the bath water. (See the Perspective, “Convenience: Much Tougher than it Looks” on StrategyStreet.com.) Other companies have succeeded in search of new customers by ensuring that their core customers are well provided for before the search begins, and while it progresses.

Posted 2/2/09

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