Hart, Schaffner & Marx Case

Although the market for separates is certainly viable given promising growth in test markets, it is not a market that makes sense for Hart, Schaffner & Marx (HSM) to compete in. The trend certainly shows a divergence in how some customers view their needs with regards to semi-formal clothing, but the firm runs the risk of diluting not only the perceived quality of its clothing, but also alienating its current client base that is partial to the experience HSM offers in its stores. This experience includes personalized expertise on new fashions, custom tailoring, and the status associated with purchasing and wearing the company’s clothes. Although data is limited to a single years sales comparison in four different test markets, unit sales for separates grew 9-15% in three of the four markets (Topeka, Utica and Columbus), and contracted by 2% in Jacksonville, Such data suggests that the product line is gaining momentum as word of mouth spreads in each market. The share of separates to overall suit sales varied at each branch, but the 20% figure in Topeka, KS suggests penetration could ultimately be a large share of the traditional suit market. Such data shows that the size of the market could be large, and increasing adoption of the separates concept could become a large portion of men’s semi-formal clothing sales. Estimated suit sales were $3.6 billion in 1979 and 2% and 20% penetration would result in separates industry sales of $72 million and $720 million, respectively. This assumes full cannibalization of traditional suit sales for incremental separates sales based on the percentage share of the unit suit market, which we view as an unlikely given the difference in needs for the traditional suit customer versus a comparable separates customer. It is important to analyze if the potential separates customer base overlaps with the traditional clothing customer. If so, a new offering of separates could result in cannibalization of traditional clothing sales.