All About Barbara: Delia's

Managerial Science Classes (MGRS)

Delia's Case Analysis

Presented by: Barbara Schiwart, Sean Marler, Jennifer Mehlhaff, Date October 10, 2001

HOW SHOULD dELiA*s BALANCE ITS RESOURCES AMONG ITS THREE SALES CHANNELS?
On July 23, 2001 Delia announced its newest member to its family. Hilary Chasin was appointed to the position of Executive Vice President of Marketing of dELiA*s Corp. It was expressed by Andrea Weiss, President of dELiA*s Corp that they "are excited to bring Hilary's substantial marketing expertise to the dELiA*s brand, and are confident that she will play a key role in overseeing its ongoing development and expansion across all of their channels" (http://coporate-ir.net/ireye/ir_site.zhtml, 2001). It was further expressed by Andrea Weiss that "Brand Building" was their primary focus for dELiA*s continued growth.

In 1993 dELiA*s only outlet for sales was through the use of catalogs. Over the past 8 years dELiA*s has expanded its marketing tools to include retail outlets, and the newest addition as of 1999 was expansion of sales through the Internet. Catalog, Retail stores, and Internet services are dELiA*s current three sales channels. As mentioned above by Andrea Weiss, president, dELiA*s primary focus to continue growth is through the increase of brand building for the company as a whole. Andrea further explained that the company will not be necessarily be focusing on one main sales channel to achieve this primary goal, but rather they will be expanding across all three of their sales channels combined. But does, or will this necessarily work?

Currently (2nd Quarter findings, 2001) dELiA*s has over 800,000 "e-customers" according to an on-line audio conference. Of these 800,000 customers 40% account for direct orders made through dELiA*s (http://delias.com, Investors Relations). This leaves 60% of 'other' customers accounting for the retail outlet for direct orders. As of the end of Q2 (Quarter 2), "multichannel sales have increased by 8% to $25.7 million from $23.8 million in the prior year" (http://www.corprate-ir.net/ireye/ir_site.zhtml, 2001). From reading this one sentence it appears that dELiA*s is thriving. But lets look a bit deeper into this issue.

For the retail market alone sales increased by 25% to $11.1 million from $8.8 million one year ago. Yet when you take a look at the productivity for the Internet the only information given was that they are continuing to see "negative sales" (http://delias.com, Investors Relations). Overall the loss of Internet Business for dELiA*s has been a whopping $4 million from last year. It was further expressed in the handout of the case that Internet operations for dELiA*s is a drain on resources for the company. The problem dELiA*s is having is that their infrastructure is costing more than the company is receiving in sales. In short the costs of operating over the Internet exceed the benefits for dELiA*s.

WHAT WE NOW KNOW:
1. Amanda Weiss, President's Objective: Ongoing growth and development across all of their sales channels.
2. Amanda Weiss, President's Foundation of Growth: Brand Building
3. Retail Sales continue to grow (Up 25% compared to last year)
4. Internet Sales continue to fall (NO concrete statistics given)
5. 800,000 Internet customers account for 40% of direct sales.

WHAT IS GOING ON?
If you were to look on www.delias.com and preview their press releases you would see how fast dELiA*s continues to expand. It seems as though every three months they introduce one or more store opening in a new location. This could be beneficial to dELiA*s. As reported above the retail sales channel is seeing increasing revenues year by year. The Census report stated that dELiA*s will continue to grow over the next five years by 28.8%. Currently there are 44 retail stores in operation across the eastern coast of the United States. If this number where to increase by 28.8% dELiA*s would have an additional 12.6 stores a year which equals a possibility of introducing 63.3 additional stores to the dELiA*s family over the next five years. If dELiA*s continues to see an increase in their revenues for the retail outlets this could benefit them greatly. On the other hand, if the economy continues to fall and the price of major up-front investments in leases, furnishings, inventory, and sales personnel continue to grow dELiA*s could be building too much too fast.

The second issue to address is the fact that dELiA*s has numerous web sites. They have contentsonline.com, droog.com, and dotdotdash.com, just to name a few. All three of these web sites do not target dELiA*s target market. It was stated in the case that dELiA*s market girls ages 12 to 24-years-old. Contentsonline.com is a home furnishings web site that targets families looking to buy furniture. Droog.com is a boy's web site, and dotdotdash.com is aimed at 7- to 11-year-olds. Our question is why would dELiA*s invest time and money into these web sites that target a completely opposite market than they desire?

Third issue to focus on is cost vs. benefits. Is the use of the Internet benefiting dELiA*s? From observing just numbers it is clear to see that the Internet is having a negative effect on dELiA*s overall revenues. In 1999 only 3 to 4 percent of dELiA*s sales were made over the Internet. In 2001 40% of direct sales are made over the Internet. This would prove that the Internet is of some value to the customers who purchase dELiA*s products, but it not of any concrete (revenue) value to dELiA*s as an organization at this time.

PROBLEM DEFINED:
1. Fickle Target Market
2. Internet Sales are not doing as well as Delia hoped.
3. Retail stores have high startup costs.
4. They are trying to do too many things too fast.
5. Delia has standard retail problems. (low sales markdowns

THREE ALTERNATIVE SOLUTIONS:
1. Concentrate solely on retail and catalog sales. Which means that they would have to eventually phase out the Internet outlet.
2. They could concentrate on the websites that make them more appealing, easier to use so that people would be more inclined to use the website; thus, generating more sales.
3. Or they could tend to the growing market (that is the market that is getting older). These people have been faithful customers all along why wouldn't they; be faithful at an older age?

OUR RECOMMENDATION:
We recommend that Delia's Co. phase out the unneeded outlets such as their numerous websites. It is a known fact that their customers don't use the website to purchase their products anyway (these people probably don't even have credit cards to buy the products on line). If they do decide to keep the website outlet, they need to market the websites more towards parents because they are the ones who are using the websites as a means of purchasing.
The other problem that they have is their aging market. Currently, we believe that Delia is spending too much time and energy worrying about capturing or recapturing this market. In our opinion, this market is gone and there is nothing that he company can do about it unless it changed its entire image. They need to focus on their current market (girls ages 12 to 24) even though this market continually changes it also continuously replenishes itself. The right thing to do would be to constantly be in the "loop" of this market. Delia needs to change images/products as the market changes on the year-to-year basis.