Victoria’s Secret they want to keep hidden

Sorry no pictures on this one readers. You can just imagine a woman dressed in $1 worth of material that is prepared, branded and marketed to make you believe that your girlfriend or wife will actually be a super model if she wears it. That is the magic of this brand that did 5 billion last year in gross sales in 2006, that’s a lot of panties! Imagine a small idea started by a Stanford grad to make it easier for men to buy lingerie, 30 years later we have one of the most well known brands in the world.

We are unabashed bulls on outsourcing, America was founded on outsourcing. The Crown’s factory was a young hungry colony across the Atlantic. Almost all of the apparel market was shifted to American manufacturers at one point. I am sure many British manufacturers, politicians and members of the media brought up the appalling conditions and loss of jobs the Yanks were taking away from the motherland, sound familiar? Short memories are easy marks for protectionist that like to throw the good and bad into the same pot.

The ugly side of outsourcing came to light last week that is no longer Victoria’s Secret. The National Labor Committee last week put out a report on a factory in Jordan that was pretty harsh. The report disclosed their contractor paid the workers .04 cents to sew a bikini in 3.5 minutes that retails for $14 just for the bottoms.

We are big fans of outsourcing but of course under humane conditions. How they verified the conditions at the factory were never clear in their article so we leave the judgment up to you.

Link to report

http://www.nlcnet.org/article.php?id=490

The same day the National Labor Committee report was released Suzanne Kapner of Fortune magazine reported that, Limited Brands insiders are treating themselves to an early holiday present in the form of $20.6 million in company stock purchases, a bullish sign for the struggling owner of the Victoria's Secret and Bath & Body Works retail chains.

Nine insiders, including CEO Les Wexner, have purchased $7.6 million of stock in the last three trading days, and plan to buy $13 million more during the next week, according to regulatory filings.

The insider buying is unusual for the Columbus, Ohio-based company. Directors and executives have not tended to be big purchasers of Limited stock in recent years. Buying now, at a time when the company's stock is trading near its 52-week-low, is a vote of confidence in Limited's future prospects, analysts said.

"The last time we remember an insider stepping up to the plate was in 2002, when director David Kollat [bought $2.5 million shares]," wrote Todd Slater of Lazard Capital Markets in a research note to investors Wednesday. "This time around, we are witnessing a much stronger vote of confidence."

With sales per square foot close to the top dog Costco they are betting that putting athletic wear in 30 of its test stores this past fall will keep the mojo rolling.

Sales per square foot:

Costco $918

Victoria’s Secret $731

Wal-Mart $438

Nordstrom’s $369

Licensing Tip: Got a fashion idea? It’s just cloth, trade the brand up and enjoy a fat profit and don’t forget to do your homework on where you outsource your labor.

Dyson vacuum conspiracy

I came home the other day to find a piece of equipment in my living room that looked like it had dropped down from another parallel universe. My wife told me “It cleans your carpet, his name is Dyson”. Then like taking out a meat cleaver she says with an all knowing smile “Come on, take it for a spin, its European!” I felt as if the keys to a new Porsche drop top hit me in the face, she knows my weakness for highly engineered foreigners.

I don’t know if it was all premeditated, my wife is just not sneaky. I believe others were involved. She may have actually overheard a 70 year old demo lady at Costco schooling another accomplice. “If you buy the Dyson and repeat this script to your husband, your carpet days are over”.

My buddy had been talking about a Dyson for months and going on how he loves to vacuum the carpet. I figured I just did not know him as well as I thought. Well his wife played the “Mine is bigger than yours card” I think his wife said something about “Dyson is better than your truck!” Who cannot resist that kind of smack down, he fired it up and now he is dancing around the house with Dyson twice a week. It is unseemly, at least close the blinds! Conspiracy, or just a fantastic confluence of science, engineering and marketing? I took a look under the hood and I was surprised what I found.

“We're taught to do things the right way. But if you want to discover something that other people haven't, you need to do things the wrong way.”

-Sir James Dyson

Ten years to create the motor, 5,126 failed prototypes, and almost bankrupt, it worked! The world’s first vacuum that does not use a bag, centrifugal force inside the cylinder spins debris 900 mph and never losses suction. This is a man’s vacuum! And my man Dyson has some marketing bones. The focus groups said "Make the cylinder dark, people don’t want to see all that dirt", he faded the crowd and made it clear, great move. He had his product all dressed up for the party in a rented tux but nobody wanted to dance. Not one major vacuum manufacture wanted to manufacture the Dyson. Hoover later admitted they thought about buying the patent just to bury the idea. Over the past 99 years, Hoover built up quite a bag habit, replacement bags. With the vacuum manufacturers jonesing a 500 million dollar per year bag habit, a bag free cyclone machine would be a major disruptor. *Licensing tip: large old school corporations actually have more to loose from change then they can gain from new innovation. Don’t be surprised if the big boys are not jumping thru hoops to help you realize your dreams. Old factories are expensive to retrofit. The chances of being ripped off do not go down with the size of your potential partner’s payroll, it actually increases. Like a good casino, large corporations do not get where they are by playing nice and they have larger legal departments then you do. License to someone who has everything to gain, not everything to lose. Do you think destroying their old business model will really get them enamored to your idea?

In 1991 his first design won the international design prize and landed a licensee to sell the vacuum in Japan for $2,000 a pop. He took the money from the licensing revenue and created new models that really took off in the UK, in only 30 months he captured 50% market share there. Dyson became the hottest seller in 2006 in the USA passing Hoover. Hoover started in the same year the Cubs last won the World Series, the iconic postwar symbol of prosperity that every American housewife wanted to have. Today Dyson it is in the Metropolitan Museum of Modern Art, Hoover is slumming the shelves of Walmart. *Don't ever lose your premium.

In 2002 Dyson made the bold move and outsourced all the manufacturing to Malaysia. The British press slammed Dyson. We say two thumbs up from us very high and one finger to the British press. Licensing Tip: If you are reading this from the USA, you will be paid in the future for creativity, not your manufacturing skills. Despite what you may hear from the political and media salad bar, it is not an abundance of cheap foreign labor that is the biggest threat to the US work force, it is a shortage of creativity, design and execution skills that is the biggest threat. People will always get paid the best when they have the most relevant skills to offer. Today, intellectual property is the security blanket of the future. The leading companies that are swimming in high margin are the ones who can design or create software, chips, movies, music, drugs…then ask someone else from a low wage market to wrap plastic around the idea and import it right back to the USA. Look at the back of your iPod, “Designed by Apple in California, made in China”. Apple’s stock is up 70% this year, Gateway (Made your computer in a barn in Iowa remember them?) Get’s gobbled up by Acer, from Taiwan for peanuts. Wake up call franchisors, the high margin is in design, not manufacturing. Be a successful global arbitrageur by exporting your ideas, and importing finished goods, and stay out of the factory.