Americans Cross The Cheap

Not long ago, in a dilapidated shopping mall in our small town, I discovered a clothing store named "s"!

The s clothing store is famous. It is said that it brings a revolutionary new business model for American casual wear management.

Its main clothing for young people is basically a brand designed by stars.

For example, there are very popular TV series "sex and the city" heroine Sarah Jessica Parker design of BITTEN brand; just win the Wimbledon women's singles champion Williams designed by the "Eleven" brand, and there are all kinds of TV stars, famous golf star sportswear designed.

In addition to the big stars joining the design, the real attraction is the price of S.

The price is cheap enough for you to jump - all clothes are only 8.98 dollars!

8.98 dollars is not just a thin T-shirt in summer, but also a dress, cotton shirt, jeans, casual suits, shoes, bags, etc.

As Sarah Jessica Parker said in her brand manifesto, "affordable fashion"!

I chose a cotton dress with a soft texture, stitch symmetry, and the whole cotton lining, made in India, or only $8.98! When I pay, I still can't believe: "is winter clothes so cheap?"

The cashier said, "all the clothes are the price, and occasionally there will be a little more expensive clothes, but not more than 20 dollars."

After I was amazed, I looked back at this clothing store. It had a total of 5000 square meters. The decoration was simple, comfortable and bright. Men's wear, women's wear and children's wear were all there.

Customer return policy is also not different from other clothing stores.

But how can 8.98 dollar clothes earn money?

Is s's business model sustainable?

After all, like a basic dress, it costs at least 58 dollars at J.Crew, at Old Navy 19.5 dollars, and Forever 21 to 15.8 dollars, even the cheapest WAL-MART is 14.92 dollars.

Today, s has set up 276 stores in the United States.

According to the statistics of the American Apparel Association, in 2007, the total consumption of American consumers on clothing and shoes and hats amounted to 370 billion US dollars, equivalent to an average of 1128 dollars per person.

The founder of St & b s believes that the size of the US market can support them to open to 5000 stores.

Although prices are generally rising in the US, especially gasoline and food, "wear" is probably the only drop in the price index on food, clothing and housing.

According to statistics, from 1998 to now, the overall price of clothing and shoes and hats has dropped by 10%.

There are two main reasons for the fall in clothing prices.

First, the production of clothing has shifted from the United States to the low cost countries. Two, fierce competition among garment retailers has led to a fall in clothing prices.

As the weather became hot, I put on the dress less than $9 and I felt it was worth it.

But in July 9th, news came suddenly that s was filing for bankruptcy protection. The company pointed out that the current bank credit crunch, the rising price of raw materials and the rise in oil prices caused the company's financial situation to deteriorate, making it unable to fulfill its obligations and unable to obtain new financial loans, and therefore filed for bankruptcy protection.

Ironically, in the current economic situation, the total sales volume of s in the first 5 months of 2008 increased by 70%, on average, the sales of each store rose by 25%.

However, the growth of sales can not bring new financing to s.

From the point of view of financial analysis, the reason is obvious.

The S's low profit margins (and probably no existence) and their extreme expansion (opening up new stores) make the company's normal operation and expansion depend entirely on lending.

It is said that the main revenue of S has been the rentals awarded by the dilapidated shopping malls to attract retail customers such as St & S.

These rental incentives are paid in advance in cash.

This money may be the most important source of cash for S.

In the era of Wall Street's rapid growth, such a business model may be a lot of applause and encouragement, but now banks are still trapped in the quagmire of subprime mortgage crisis, and banks will naturally retreat to low profit companies such as Steve & S.

TA Associates is a leading private equity firm and a major equity investor in St & B's s. Today, their $320 million equity investment has been completely "scrapped" and has become their largest investment loss to date.

As consumers, it is a pity to see a cheap and good brand entering bankruptcy protection.

However, this is the typical business model of the United States. In the good year, innovation, adventure, radicalization, and extreme expansion; once the environment changes, the fast and pparent market mechanism leads to a rapid reshuffle.