Secret of Victoria – penetrating new markets

In economic models, innovative companies try to maximize economic profit, but long run economic profit is always driven to 0. This is may be a microeconomics theory, but it is highly relevant in today’s society.

Victoria’s Secret became the largest lingerie company in the world by actually being the first to enter the lingerie business. In the 1970s, many failed to see the profitability in a lingerie business concept. It was Roy Raymond who expressed entrepreneurial qualities and created a cozy, inviting store for women to feel secure shopping in. It is interesting to see how they have suppressed strong conservative attitudes in the past and brought forth an entirely new industry based on sexy visuals.

However, as the Victoria’s Secret profited, many new competitors entered the market to steal profitability. Victoria’s Secret has recently announced an expansion into Canada, combating competitors such as La Seneza. This indicates the intense rivalry faced within the lingerie industry nowadays. In fact, Victoria’s Secret is invested into the openings of over 600 retail shops. Such a sum of money is impressive all by itself.

It also highlights the success and power of visual marketing. Through using highly controversial catalogs and fashion shows, Victoria’s Secret was ultimately able to grab the attention of the consumer and create a market on their own. A similar example may be FCUK, which is rumored to be started because an exporter in Hong Kong mis-spelled the word in in a business letter to a French trader.

Economic profit is not precisely 0, but Victoria’s Secret ultimately has reduced profits as from before when they had a huge proportion of market share. Now holding on tight to their customers, we’ll see how they do in Canada.