Aritzia Digital Transformation Strategy Part B

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Aritzia Digital Transformation Strategy Part B

Key Takeaways

  • On January 11, 2022, Aritzia changed its existing workflows by adopting a product lifecycle management solution (PLM) provided by Centric Software. The company wanted to reduce administrative work done by designers by streamlining and automating their workflows.
  • Aritzia has adopted a digital marketing strategy and used influencers to build followings on social platforms, such as TikTok, Instagram, Twitter, and Facebook. The company posts user-generated and brand-generated content on these platform to drive engagement.
  • According to Brian Hill, Aritzia’s founder, the pandemic led to supply chain disruptions that saw factory closures, shipping delays, and reduced production efficiency.

Introduction

A company analysis for Aritzia focusing on its digital transformation strategy has been provided in the following brief. It is noteworthy that quotes by the CEO and company executives relating to the company's digital strategies were limited in the public domain; therefore, we provided two quotes from one company executive. Further details on logic have been provided in the Research Strategy section.

Company Overview

  • Aritzia is a Canadian fashion brand established in 1984. The company is based in Vancouver, Canada.
  • Aritzia is a public company listed on the Toronto Stock Exchange. The company’s IPO was held on September 26, 2016.
  • Aritzia’s revenue for the fiscal year that ended on February 27, 2022 (Fiscal 2022) was CAD 1.5 billion, which marked a 74% increase from the previous year.
  • Aritzia has over 100 boutiques across North America. The company’s product offerings include blazers, skirt jackets, bodysuits, t-shirts and tops, shirts and blouses, sweaters, nightwear, sweatsuits, pants, denim, activewear, leggings, biker shorts, shorts, dresses, jumpsuits and rompers, skirts, jackets and coats, swimwear, accessories, and shoes.
  • In addition, the company has 12 signature brands. The brand names are Wilfred, Wilfred Free, Babaton, Tna, Ten by Babaton, The Group, TnAction, Super World, Sunday Best, Denim Forum, Auxiliary, and Talula.

Corporate Values and Mission

Past and Future Strategic Initiatives

Past Strategic Initiatives

  • On January 11, 2022, Aritzia changed its existing workflows by adopting a product lifecycle management solution (PLM) provided by Centric Software. The company wanted to reduce administrative work by designers by streamlining and automating their workflows.
  • In Fiscal 2022, the company improved its website by increasing shoppability and interacting with users about size and fit by introducing Fit Analytics.
  • In Fiscal 2022, the company “launched store inventory visibility, digital e-gift cards, SuperWorld.com, personalized merchandising, and design enhancements and improvements throughout the client journey.”
  • Moreover, Aritzia has ensured that all its eCommerce clients receive expert support in areas, such as “website design and development” and social media.
  • Aritzia has adopted a digital marketing strategy and used influencers to build followings on social platforms, such as TikTok, Instagram, Twitter, and Facebook. The company posts user-generated and brand-generated content on these platform to drive engagement.

Future Strategic Initiatives

  • Aritzia is investing additional resources in digital marketing channels with a renewed focus on social media, search engine optimization enhancements, and email marketing. The company has so far made enhancements to product descriptions, navigation breadcrumbs, and “data-driven category naming.”
  • The company is “leveraging advanced business intelligence and behavior analytics” to better understand its customers. It entails improving online operations and personalization to increase sales and customer loyalty. Aritzia has started customizing its content and merchandise based on geography and climate and plans to focus on personalized experiences in Fiscal 2023.
  • Aritzia plans to invest in personalization technology in Fiscal 2023 so that it can create content and products that are targeted as the company grows.
  • Aritzia is working on improving the digital experience on all devices to make the shopping experience seamless. The company is implementing features such as, user reviews, landing page templates, enhanced search functionality, and checkout improvements.
  • In Fiscal 2023, Aritzia plans to implement additional capabilities to its Omni Project, which stems from the company’s point-of-sale system and “investment in digital selling tools to enable omnichannel capabilities such as store inventory visibility, buy online, ship from store, and buy online, and pickup in-store.”

Quotes Relating to the Company Digital Strategy

  • According to the Director of Product Integration, Vanessa Goluboff, while addressing the benefits of Centric's Product Lifecycle Management Solution, “one of the focuses has been identifying what our product technology roadmap looks like, ensuring that we have start and finish dates of these projects, ensuring that we build the team and the bench strength to deliver.”
  • According to Vanessa Goluboff, “multipronged marketing communication takes place via various marketing channels, such as social media, email, etc. We feel like all of this combined is our competitive advantage and really helps to drive customer loyalty.”

Existing Marketing Tech Stack

  • Aritzia’s marketing tech stack includes Salesforce Commerce Cloud, Cart Functionality, Fit Analytics, Google Analytics, Appdynamics, Google Ads Conversion Tracking, Google Analytics Enhanced eCommerce, DoubleClick, Omniture SiteCatalyst, Mouseflow, Rapleaf, AirPR, Yahoo Web Analytics, Omniture Adobe Test and Target, Facebook Tag API, and Twitter Analytics.

Additional Relevant Facts

  • The company realized significant growth in gross profits, with earnings increasing from C$312.5 million in fiscal 2021 to $655.0 million in fiscal 2022, representing a 109.6% growth. Increased gross profit also resulted in a gross margin of 43.8%, more than the previous year's 36.5%. Lower markdowns, reduced operational costs, leverage on occupancy costs, and the improved performance of the Canadian dollar are some factors that contributed to the growth in gross profits.
  • The company's selling, general and administrative expenses (SG&A) increased by 56.7%. Variability in selling costs and the company's continued investment in technology, talent, and marketing initiatives were the primary causes of the increased SG&A expenses.
  • Based on forecast figures, the company expects to increase its revenue for fiscal 2023 to approximately CAD 1.8 billion due to continued business growth in the United States, business recovery by boutiques, and improved performance in its e-commerce business. It also expects the gross profit margin to decrease while the SG&A expenses to increase. However, in the first quarter of fiscal 2023, there was a 65.2% increase in net revenue, a 65.8% increase in gross revenue, and a 70.9% increase in SG&A expenses compared to the first quarter of fiscal 2022.

Corporate Challenges Faced by Aritzia

Supply Chain Challenges

  • According to Brian Hill, Aritzia’s founder, the pandemic led to supply chain disruptions that saw factory closures, shipping delays, and reduced production efficiency.
  • While Aritzia has successfully managed supply chain challenges in the past, prolonged disruptions could affect the company’s financial growth despite an increase in total revenue in recent quarters.
  • Supply chain disruptions are expected to affect Aritzia’s gross profit margins. The company anticipates “the gross profit margin to decrease by approximately 100 bps to 150 bps” in fiscal 2023.
  • According to Brian Hill, the company is heavily invested in managing the supply chain challenges to ensure that the prices of products do not increase.

Competition

  • Aritzia faces intense competition from specialty apparel retailers, athletic retailers, fast fashion retailers, department stores, manufacturers and designers of apparel, and online retailers. The business can be adversely affected if its existing competitors expand into Atrizia’s markets or new competitors emerge.
  • Atrizia does not have exclusive rights to some elements in its product and merchandise offerings. Also, a small percentage of the merchandise is purchased from third parties “on a non-exclusive basis.” For this reason, competitors may opt to emulate aspects of the company’s product and merchandise offerings.
  • In addition, competitors with high eCommerce capabilities and financial resources can duplicate Atrizia’s in-boutique experience and offerings, reducing the company’s competitiveness in the market.

Significant Business Disruptions due to COVID-19

  • In fiscal 2021 and 2022, the COVID-19 pandemic significantly affected Atrizia’s business operations. For instance, the company had to close its boutiques temporarily.
  • While Atrizia has put COVID-19-related measures in place, the company is unaware if they will change over time. According to the company, “given the continued uncertainty caused by COVID-19 and its variants, we may continue to have direct, adverse impacts to revenues and operations.”
  • It is difficult for the company to ensure that operations run smoothly due to employees contracting COVID-19. In addition, the company is concerned about workers not coming to work due to the fear of contracting COVID-19.
  • The COVID-19 situation is uncertain and continuously changing. Therefore, the company is unsure about the impact such changes may have on its business. In addition, the pandemic could affect the operations and financial condition of the business.

Research Strategy

For this research, we leveraged the most reputable sources of information available in the public domain, including company reports, social media, and industry sites, such as SEC filings, Seeking Alpha, and Linkedin . It is noteworthy that quotes relating to the company's digital strategy by the CEO were not available in the public domain. In addition, the quotes by company executives were also limited in the public domain. We looked through company reports, press releases, media, and industry sites, such as Yahoo! Finance, PR Newswire, and annual reports but to no avail. For this reason, we provide two quotes from one executive due to limited data availability.


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