The Value Creation of Company

Things have not been good for Victoria's Secret (VS) in 2020. With revenues falling by years and the impact of epidemic, its owner Leslie Wexner, is considering a ‘potential sale’. Before that, VS had experienced two booms. The first was when its founder, Raymond, opened a store that sells women underwear to men in 1977. He earned $500,000 first year. But it did not last long, a sales bottleneck occurred. Its strategy of making men its main customers led to women could not accept it, and there were limited number of male customers. After 1982, Raymond sold VS to Wexner, VS’s sales model focuses on female customers. Wexner led VS toward luxurious and noble route. This marks the beginning of another glorious in VS. From 2016, VS reached another turning point, sales revenue become stagnate and drop, share prices began to fell and shops closed. Until scandals surfaced of VS in 2020, it has hit the bottom again.

 

One shop of Victoria’s Secret, photo’d in Nanjing

Both experienced value creation in financial data, that is, revenue over capital cost. Their value creation is more reflected in the concept they sold, get customers willing to pay for it. Raymond dared to break the traditional concept at that time, and bravely tried his own ideas when the media and public opinion were not conducive to development. His innovative ideas led to VS was unique at that time. The novelty always caught people’s eyes and attracted people to ‘witness’ it. He has also found new demand in the lingerie industry, for catering his customers, shop’s decoration style is also different from others. While Wexner aims female customers, he lets everyone was fascinated by the sexy luxury of VS. People get a new understanding that underwear can be just as luxurious. Underwear was supposed to be low-key but Wexner not, American will never forget the clip of VS show in Super Bowl ad in 1999. Women’s pursuit of luxurious and beautiful underwear is his unique point of sale, his campaign has also made women less shy about their underwear.

 

Let us look at Apple. In 1997, when Steve Jobs back to Apple, he was asked about programming by one person, plus, ‘would you personally tell us what you are doing in last 7 years?’. This is mockery that Jobs doesn’t understand much about programming and his products strategy. Jobs did not answer this question directly, but it seems that he gave a perfect answer: “you got to start with customers experiences and work backward to technology, you can’t start with technology and try to figure out where you gonna try to sell it.” People usually have this idea that ‘I am going to sell what I have’, but Jobs not. He just like a magician who can conjure up products that customers loved. This should thanks to his innovative mind: start from the customer and to understand them, and then consider what kind of products should Apple produce.

 

The value creation is not a simple manufacturing process, but a process in which both companies and customers continue to cooperate and benefit with each other. Two parties should be encouraged and rewarded so that the process of value creation can be sustained in the long term. For customers, the best way to encourage company are buying. And for companies, reflect its value, let customer satisfaction, is the best return to customers. The problem of VS seems to me is that the new generation became the main fashion consumer group, they were getting tired of the luxurious and luscious concept, VS’s products are low value or worthless in their mind. While Apple through the way of continually meet demand of customer to raise company’s value. Even though Apple’s products are getting more expensive, there are always customers willing to pay for them, value creation perfectly illustrated by Apple.

 

There is a description about Kodak: “Kodak makes the best films in the world until it went bankrupt; It didn’t do anything wrong, but the world didn’t need it anymore.” For the firms, if it cannot meet the demands, it cannot create value and is bound to be abandoned by the market.

 

Reference

Silver-Greenberg, J., Rosman, K., Maheshwari, S., & Stewart, J. B. (2020, Feburary 1). ‘Angels’ in Hell: The Culture of Misogyny Inside Victoria’s Secret. Retrieved from The New York Times: https://www.nytimes.com/2020/02/01/business/victorias-secret-razek-harassment.html

Stambor, Z. (2017, Feburary 23). Victorias Secret direct sales grow little in 201. Retrieved from Digital Commerce 360: https://www.digitalcommerce360.com/2017/02/23/victorias-secret-direct-sales-grow-little-2016/

The Associated Press. (1993, September 2). Roy Raymond, 47; Began Victoria's Secret. Retrieved from The New York Times: https://www.nytimes.com/1993/09/02/obituaries/roy-raymond-47-began-victoria-s-secret.html

The Financial Times Limited. (2020, February 2). Victoria’s Secret: not so hot. Retrieved from Financial Times: https://www.ft.com/content/97935a16-3e4f-40c6-932a-aa107ea767c4

zhihu. (2020, July 31). 97年乔布斯回归苹果，被程序员当众嘲讽不懂技术！. Retrieved 11 9, 2020, from zhihu: https://www.zhihu.com/zvideo/1272549899205656576