Not long after delivering disappointing news about Chico’s FAS fourth quarter and full year 2018 results, it announced the launch of a new intimates product line, TellTale. It will be sold in a new way for Chico’s—online only, not in stores—and will be aimed at a new customer: younger women.
The 36-year old Chico’s needs new energy as its once highly successful fashion formula aimed at Baby Boomer women is running out of steam.
In fiscal 2018 net revenues across all brands were down 6.6%, following a 7.8% decline year-over-year in 2017. Both Chico’s, which accounts for 52% of corporate sales, and White House Black Market, 33% of sales, have lost ground since 2016.
The company’s only bright spot in 2018 was its Soma lingerie brand, which was launched in 2004 and is sold in 258 stores plus 19 outlets. The brand’s fourth quarter comparable sales rose 6.2%, driven by what the company calls “solution bras,” including a mobile app that solves for women’s bra-fit problems.
Thanks to its success in designing innovative lingerie styles, including vanishing-back bras and vanishing-edge panties, Chico’s sees TellTale as the start to fix some of its other underlying problems. The chief of which is its aging demographic customer profile.
Demographics is destiny
Chico’s core customer is 45 years and older. But the number of women in the 45-64 year age group will decline 3% from 2015 to 2025, while those over 65 years (i.e. Baby Boomers) will be the fastest-growing segment of women, expected to rise 36% by 2025, according to the latest Census projections.
The company can take credit for having tapped the Baby-Boomer fashion sensibility. It’s built a loyal base of repeat customers among that group, as the company claims over 90% of customers are members of its loyalty program.
But that is also its Achilles heel. As those women age beyond 65 years old, they simply don’t spend as much money on clothes as they did when they were younger.
Chico’s needs younger customers to grow. Where it is looking is to the 25-to-44 year old women, which will be the second fastest-growing women’s segment, with their numbers rising 9% from 2015 to 2025.
This is the woman who TellTale is aiming for. “TellTale enables us to capitalize on our intimate’s infrastructure with core, proven expertise already in place, address a true white space in a growing market,” said then-CEO Shelley Broader in an April 10 statement. Shortly thereafter, however, she jumped ship and has been replaced on an interim basis by Bonnie Brooks, who moved over from the company’s board.
Ostensibly Broader was referring to “white space” in the competitive lingerie market, but more accurately the white space needing to be filled is the gap in the company’s target market.
The internet is overflowing with digital start-up lingerie brands, notably ThirdLove, Adore Me, True&Co, Lively and Cuup, not to mention Bare Necessities which was recently acquired by Walmart.
Against the increasingly crowded digital space, Telltale also has to find traction against market-share leader Victoria’s Secret, with $7.4 billion global sales last year and rapidly advancing AEO’s Aerie brand with $646 million. Soma, by contrast, did $338 million in fiscal year ended February 2, 2019.
This was the first question I asked Kimberly Grabel, who moved over from senior vice president marketing for Soma to be general manager and SVP of TellTale. Grabel joined Chico’s in 2016 after serving in senior marketing positions with Holt Renfrew and Saks Fifth Avenue.
How will TellTale break through the noise and find its customers?
Research insights find the gap
Grabel explained that TellTale got its start from an intensive consumer research study it was conducting to drive growth for the Soma brand.
“In the middle of that research, we heard loudly from a group of highly disenfranchised women, 30-35 years, who did not feel good about the choices they had for intimate apparel. These women were so confident and empowered everywhere in their lives, but didn’t feel like there was an intimate apparel brand for them,” she shares.
Coming off the company’s success with Soma, Grabel saw the opportunity to apply that expertise in designing an underwear brand that will fit the needs and desires of those disenfranchised women. “It takes 18 months to develop a new bra,” Grabel notes.
Confident of her ability to create a brand for this woman, Grabel approached it in digital-startup mode, organizing a small team of 15 to work unencumbered by the corporate structure and to develop it under a different business model, as well.
“We basically hid ourselves behind an unmarked door at the far end of the Chico’s campus,” Grabel says. “Our mission was to build a startup that would address what we saw as the clear void in the marketplace.”
Three core ideas
The first big insight the TellTale team worked from was women’s desire for undergarments that put sensuality before sexuality. These women rejected the idea that intimate apparel was to be sexy for someone else. They wanted intimates that were more sensual than sexual.
Translating that insight into product, Grabel says the TellTale line puts a woman’s sensuality first, with attention to detail that makes her feel wonderful wearing it, not just look sexy.
For example, the line’s everyday basic cotton bra is lined with satin so that it feels sensual next to her skin. “There’s a sensuality to everything that we’ve done,” she affirms.
The second insight was women’s demand for reliable, consistent fit across the full product range. “When women shop for intimates, it isn’t first about the look or fashion. It is about fit,” Grabel shares.
Too often in the current market, women find a bra style that fits, only to discover that style has been replaced. TellTale is grounded on consistency of fit across the eight different bra collections.
“We created core silhouettes, or blocks as they call them in the industry, to provide a consistent fit. Our demi bra fit will be the same no matter the style,” Grabel says. “So when she is shopping our brand, she doesn’t have to worry about fit, but can focus on the fashion.”
And the third core idea behind the TellTale brand is women’s desire to express their individuality through fashion.
“For women fashion is fun. Every day women use fashion to tell a new story about themselves, to reveal different sides of her personality,” Grabel shares. “One day she dresses classic, the next urban and edgy, the next boho. In the crowed intimate-apparel space, we didn’t see any brand giving her those choices to self express.”
This insight became the driver for the eight TellTale collections, with archetypal names like the Creator, Innovator, Dreamer and so on. “It’s this idea that every day she wakes up and decides who she is going to be that day,” Grabel says.
To give her more ways to fulfill that need for self-expression, TellTale also offers a monthly rotating series of curated apparel and accessories from other brands, like Levi’s and BB Dakota. This is another sign of how the TellTale team was empowered to think out-of-the Chico’s box.
“We really wanted to try something new for Chico’s. We are like an incubator lab developing a whole new business model,” Grabel concludes. “We are thinking differently about coming to market, this being our first digital-first brand, for a customer who is comfortable online and likes to engage in the world that way.”
I applaud Chico’s for thinking differently about a new customer that it must engage for its future. Grabel and her team understand the pain points for women in intimates, a primary one being the need for reliable, consistent sizing across styles. They understand how women today are pushing back against the Victoria’s Secret narrative that bras and panties are primarily for the men in women’s lives.
And the insight about how women use fashion to express the many dimensions of their personality, starting with the underwear they choose each day, is powerful, but not really new. It hearkens back to the iconic Maidenform “I dreamed” ad campaign from the 50s and 60s, but brought up-to-date for today’s empowered 21st century women.
Now it is Chico’s turn to dream that the business model it is developing with TellTale has what it takes to transform itself into a fashion brand that can go the distance for another 36 years and beyond. Underwear seems like a good foundation on which to build.