What Is North America's Swimwear Industry

A Study of the Swimwear Industry in North America

Table of Contents Page
Ø Introduction q Mission 2 q Briefing 2
Ø Historical Timeline of the Bathing Suit
Ø Secondary Data Search q The North American Swimwear Market 4 q Influential Factors of Demand 5 q Swimwear Industry 9 q Brands 10 q Manufacturing 13 q Distribution 13 q Retailing and Advertising 16 q External Factors 17
Ø Strategic Assessment q Changes in the Past Five Years 18
Ø Future q Increasing Obesity 20 q Increasing R&D 20 q Sunbathing-Related Health Concerns 21
Ø Primary Research
q Interview 22 q Independent Local Market Study 23
Ø Recommendations 25
Ø Limitations 26
Ø Conclusions 26
Ø Appendix 27
Introduction

Mission
The intent of this study is to become well informed of the North American swimwear industry, to discover opportunities that have not been exploited, and even try to determine where the industry is heading. This information is very beneficial to one of our group members, Andree-Anne, who presently designs her own swimsuits and is very interested in opening a new type of retail store. She sees a potential in creating swimwear that blends element of fashion and competition to extend its utility, durability, and comfort. The new retail concept would also have a made-to-fit order policy to provide the best fit for every woman's body type. This industry study will hopefully give her greater insights and help bring these ideas to reality.

Briefing
We begin with the history of the swimsuit industry, followed by an extensive secondary data search. This section contains the bulk of the factual findings, such as sales, demand factors, and channel conditions. It includes a detailed analysis of the major competitors, how swimwear is branded, distribution channels, and promotional efforts. This section gives an overview of all the internal and external factors and how they translate to the industry's strengths, weaknesses, opportunities, and threats. A strategic analysis examines the past and current trends in the swimsuit industry, while the Future section examines research and development, obesity and the potential harm of UV exposure.

We then include all primary research, such as interviews with Yves Lepine, and an independent local market study.

Finally, we conclude with recommendations and limitations of this study.

Historical Timeline of the Bathing Suit
· 300 B.C: First recorded use of bathing apparel was in Greece. Togas were worn when swimming and bathing reached the height of its popularity in the ancient world.
· During the 18th century men and women began to engage in public bathing in French and English spas, though a typical swim was very brief. Suits were cut to preserve modesty and resembled a "bathing gown." Theses first suits were far from practical or comfortable; ladies went as far as sewing lead weights into the hem of the "bathing gown" to prevent the dress from floating up and exposing her legs.
· The first swimsuits consisted of bloomers and black stockings. Around 1855, drawers were added to prevent the problem of exposure. Women still refrained from swimming too much, as it was not generally accepted until the end of the 19th century, when swimming had become an intercollegiate and Olympic sport.
· The beginning of the twentieth century marked a new daring era in swimwear for women. In 1907, Australian Annette Kellerman caused quite a stir, when she was arrested in the United States for wearing a loose, one piece suit that became the generally accepted swimsuit for women by 1910. After that swimsuits began the trend of becoming lighter, briefer and more stylish. During the "Roaring 20's" an appreciation for recreation and leisure time was increasing dramatically. In May of 1916, the first annual "Bathing Suit Day" was held at Madison Square Garden in New York City. Swimwear was now becoming skimpier, slimmer, sexier, and very athletic.
· The 20th Century began the swimwear revolution, brought about by the major increase in recreational sports oriented activities and the influence of the exotic cuts of French swimwear.
· The 1930's lead to swimwear garments that were functional, sleek, and streamlined. The 1934 swimsuit hugged the body and was constructed to allow shoulder straps to be lowered for tanning. By the end of the decade, molded-fit suits were introduced, featuring the "nude look." The "panel suit" was also popular, retaining a small skirt.
· The 1940's had bathing beauties, pin-up girls, glamour girls wearing high heels, and jewelry to accessorize their bathing attire. The most exciting was on July 5, 1946, designer Louis Reard introduced a 2-piece creation called the "bikini" at a fashion show in Paris. The suit was named after a few small South Pacific islands called Bikini Atoll. It was proclaimed to be the smallest suit ever and helped comply with the war fabric rations.
· In 1951, bikinis, perhaps seen as an unfair advantage to the wearer, are banned from beauty pageants after the Miss World Contest. The tasteful one-piece reigns supreme. As late as 1959, a woman caught wearing a bikini on New York's Rockaway Beach could be fined $5.
· The 1960's were a daring time. Rudi Gernrich came out with his monokini (the topless swimsuit). In 1960, Brian Hyland sings "Itsy Bitsy Teenie Weenie Yellow Polka Dot Bikini," triggering a bikini-buying spree among American teens.
· In the 1970's in Europe, Rio and St. Tropez produce the Tanga suit-- also called the Thong, the string bikini or "dental floss."
· In 1983 Carrie Fisher, as Princess Leia, wears an ornate version of the bikini in "Return of the Jedi." When Reard, the bikini creator, died in 1984, the bikini made up almost 20% of all swimwear sales in the United States and Canada.
Due to side effects of plastic surgery and implants, many women in the 1990's have returned to suits with intricately engineered wires, silicone inserts and other fiberfill push up devices. In 1993: the "sports bikini" in the form of a hugging halter-top design becomes the rage, thanks to Volleyball queen Gabrielle Reece and MTV. In 1997, designer John Galliano created a maillot made of satin and jewels, priced at $25,000.

Secondary Data Search

The North American Swimwear Market

General Sales Characteristics
The total North American swimwear market has experienced significant growth during the past decade, and as of 1999 the American swimwear market was approximately $2.2 Billion. Between 1993 and 1999, the total market had the following characteristics:
· The total market grew 37% in terms of sales.
· During the same time, it experienced an 18.1% growth in the number of units sold.
· This translates to an increase of 15.9% in the average unit price: from $16.65 to $19.3. (refer to Appendix, Exhibit 1).

The total market can be divided into swimwear for sports apparel and logo (brand name). Between 1993 and 1999, the swimwear for sports apparel market had the following characteristics:
· A growth of 59.8% in terms of sales.
· An increase of 37% in the number of units sold.
· This translates to an increase of 16.2% in the average unit price: from $16.87 to $19.61.

While the logo market had the following characteristics:
· A growth of 164.6% in terms of sales, and almost doubling as a percentage of total sales: from 16.2% to 31.3%.
· An increase of 111.7% in the number of units sold.
· This translates to the greatest increase of 26.7% in the average unit price: from $15.22 to $19.29.
Gender Differences
There is a large disparity between the market size for men and women. Women spend much more on swimwear than men due their higher participation in water activities, greater quality requirements, but most importantly because of the hope of looking sexy and the fear of looking saggy.
· Women outsell men 2 to 1 on a unit basis.
· In 1999, swimwear expenditures by women accounted for 78.1 % of total sales.

Although the women's market is much larger than the men's, and growing more quickly in absolute terms, it is becoming smaller in term of percentages.
· The total market grew by 37% between 1993 and 1999, yet women's expenditures decreased as a percentage of the whole, from 80.3% to 78.1%.
· During the same time, the women's market grew by $444 million, and the men's by $166 million (refer to Appendix, Exhibit 2).

Household Income
Since swimwear is purchased for leisure activities that are related to disposable income, swimwear expenditures vary greatly by household income.
· Between 1993 and 1999, swimwear purchases by all households earning under $70,000 decreased as a whole from 83.1% to 58.2% of total sales (see Appendix, Exhibit 1).
· This segment not only experienced a decrease as a percentage of total sales, but also an actual decrease in absolute terms of $54 million.
· During the same time, only the spending by households earning over $70,000 increased, from 16.9% to 41.8% of total sales.

Regional
As would be expected, swimwear sales increase as one goes further south in North America (for our purpose this is only Canada and the US). However, swimsuit expenditures appear to be quite uniform throughout all of North America.
· Between 1993 and 1999, only the North Central US experienced an increase of 4% as a percentage of total sales, yet this gain was offset evenly by the other 4 regions.
· All regions account for 19% to 32% of total swimwear sales.

Influential Factors of Demand
The market for swimwear within North America is influenced by such factors as tourism to warm beach destinations, water sports and other water related activities.
Swimming and Other Related Activities
North American participation in water sports, such as swimming, water polo and diving, is being increasingly adopted by individuals of all ages. In fact, as of 1998, swimming was the fourth most popular sport in Canada.
· Approximately, 1,120,000 people over the age of 15 participated in swimming events in 1998.
· 61% of these individuals (approximately 688,000) are female.

Figures for North America also show the growing popularity of swimming as both a leisure sport and a frequent means of exercise.
· In 1999, 57,900,00 North American participated in swimming activities.
· 3,800,000 were frequent participants of water sports, swimming at least 100 days out of the year.

The increasing popularity of swimming can be seen in the rise of many leagues throughout North America. The official Canadian league, Swimming/Natation Canada, is the governing body of competitive swimming.
· The league is comprised of 50,000 competitive swimmers, in more than 350 clubs.
· It also has over 75,000 recreational swimmers as
members.

Gender and Age Considerations
As females represent a larger proportion of participation in water sports; swimsuit manufacturers have provided them with a wider selection of suits than those available to their male counterparts.

Throughout North America, female participation in swimming activities varies greatly according to age.
· In 1999, women between the ages of 35 and 44 represented the largest percentage of swimmers
· Girls between the ages of 7 and 11 followed this group closely.

Tourism
The tourism industry has been experiencing rapid changes throughout the past two decades. Vacationers have more destinations to choose from and are planning vacations with more frequency and variation.
· As of 1998, only 11% of adults preferred to relax at home while on vacation.
· 27% wanted to relax away from home
· 44% wanted to get away and do many things.

These vacationers increasingly prefer to take 2 or 3 shorter vacations to different destinations rather than one long vacation. Instead of choosing between a weekend in the mountains or one at the beach, they will do both. This translates into higher expenditures on accessories for each trip experience; swimwear for beaches, skis for mountain regions, camera lenses for eco-tourism, etc.

Since travel is closely related to people's disposable income, a prolonged downturn in the economy could cause North Americans to take fewer, shorter trips, and spend less. However, according to new projections from the Travel Industry Association of America, travel expenditures should continue to grow for at least the next two years. Expenditures will not approach the 63% growth experienced between 1991 and 2000, but an annual growth of rate of 5.5% will still keep destinations and travelers moving at a brisk pace.

Destinations
As of 1994, beaches were the most popular summer vacation destination for Americans, according to the Travel Industry Association. It was the most common destination among those aged between 25 to 34, and the second most popular for those over 65 years of age.

Total 18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 Over 65
Ocean or Beach 31.1% 31.5% 38.1% 28.2% 29.0% 34.2% 23.1%
Mountain area 10.3% 12.7% 7.3% 12.5% 7.6% 8.6% 12.3%
Lake area 7.3% 3.8% 6.9% 10.6% 8.5% 6.8% 5.7%
City 16.3% 25.8% 14.9% 10.8% 13.4% 26.1% 15.9%
State or National Park 7.9% 5.7% 7.9% 10.1% 10.3% 3.2% 5.1%
Small town 15.3% 16.3% 13.6% 13.8% 14.9% 10.9% 25.6%
Amusement Park 6.8% 4.2% 9.1% 9.8% 6.1% 4.1% 4.0%

Due to Canada's geography and weather (and lack of data) it is difficult to approximate the nature of trips made by Canadians within Canada. However, Canadians did make 17.6 million trips to the top 15 country destinations, 80% of them to the US. Categorizing these 15 countries, and the top 15 US states, as beach or non-beach destinations provides an approximation of the number of such trips (refer to Appendix, Exhibit 4, 5).
· Approximately 25% of all trips by Canadians were made to beach destinations
· 48% of all nights spent were at beach destinations.

Senior Tourism
According to a recently published research paper, 64% of adults over 50 consider themselves to still be in good health and more than 75% of them equate tourism with physical well being. Although seniors' top destinations are small rural towns, beaches are a very close second. But seniors have been re-defining retirement and how they want to live it. The southern US has seen a boom in retirement communities, particularly those near beaches in Florida. So while seniors don't travel as much to the beach as do other age groups, it is because so many of them live near or on the beach. This is encouraging considering that seniors will represent the largest age group within North America in 10 years.

The Cruise Industry
The cruise industry may be an indicator of changing vacation preferences. It competes with other vacation destinations, such as traditional beach resorts, eco-tourism, lake resorts, mountain regions, large cities and small rural areas. Cruises, especially those to the Caribbean, do divert tourists away from traditional beach destinations, but their increasing affordability is also drawing more tourists from other vacation destinations who previously could not have afforded warm-weather destinations. Cruise is the fastest growing major sector in the worldwide tourism industry.
· It has experienced an 8% annual growth since 1980, almost twice the overall growth of tourism.
· The North American market, including the Caribbean, is the largest one. In 1997 it had a growth rate of 8.6% for a total of 5.05 million North American cruise passengers.
· The cruise industry is expected to increase its capacity by at least 50% by the year 2002, surpassing the number of land hotel rooms in the Caribbean.

The growth of this industry is in part due to its expansion out of the traditional upper and upper-middle class customer base and into the middle class.
· Presently, the mass-market, contemporary and budget categories account for about 53% of passenger capacity.
· The upscale premium category accounts for another 36%.
· Over the past decade, the average age, from 56 to 44, and average income of cruise passengers have fallen steadily, particularly as baby boomers have taken up cruising.
· Top managers of cruise companies agree that with the popularization of cruises within younger tourists, the market for cruising is just beginning to
develop.

These figures show that both Canadians and Americans have a strong attraction to the beach and other warm-weather destinations. Beaches are already the favorite vacation destination and with the rapid growth of the cruise industry they are becoming even more affordable and popular. Although beaches are the second favorite vacation destination of those 65 and over, their popularity will not decline dramatically as they start to become the largest demographic group. They will prefer to travel to small country-inns rather than beach destination, but many of them will need swimwear year round as they move to warm, sunny, coastal Florida and other Sunbelt States. All this equates to a very good outlook for swimwear demand through all age groups, whether it is high or low end, tailored or mass-market.

The Swimwear Industry

The following section outlines the four segments that brands are categorized into. These are just brand segments and therefore do not dictate the manufacturing, design or ownership of the brands. 1) Designer Swimwear
This first category simply carries the label of a fashion designer in two possible ways:
1) The swimwear line can be an extension of the designer's general apparel brand.
2) The swimwear can be the designer's only line.

Designer swimwear is a very competitive market segment, as there are a vast number of general apparel brands that extend their line to swimwear. This segment is positioned at all premium price-points to keep in line with the general brand's image.

2) Competitive Swimwear
This category of swimwear is comprised of manufacturers dedicated to providing athletes with top-notch, high performance swimwear. These companies invest in R&D as well as state-of-the-art technology to ensure that their products are innovative and up to par with world-class athletic competition requirements.

3) Swimwear for the Average Swimmer
This third category is sold mostly to the mainstream consumer. This category is affordable and used for leisure purposes. The suits can have several special design features, but none that will inflate the price to a premium level. It consists of two possible segments, just like designer swimwear:
1) Solely as a swimwear line.
2) Swimwear line shares its brand name with general apparel line.

4) Imported Swimwear
This final category is fully manufactured overseas in developing countries, and usually sells for under $20. This category benefits from cheaper labor in the manufacturing process but is of very poor quality, often not lasting more than a single season. They are usually branded and sold in discount stores such as Zellers, K-Mart, and Wal-Mart and Target.

Brands
Speedo
Speedo was previously part of the Warnaco Group, a manufacturer of many apparel brands. It was then purchased by one of Warnaco's board of directors and is now, along with other brands such as Catalina, Anne Cole and Cole of California, part of Authentic Fitness Corp.

Speedo is by far one of the most recognized brands in the swimsuit industry. It is best known for its one-piece men's racing suit that is now known as the "Speedo". The brand used to consist mostly of very simple swimsuits at first, but then started becoming more fashion oriented, following the direction of the industry. It has extended its expertise in the competitive swimwear market into the leisure swimming market. Speedo is also used for branding complementary accessories for swimmers, such as goggles, swim caps, kickboards, towels, sandals and bags. This branding move was permitted by the Authentic Fitness Corp's decision to open exclusive "Speedo Authentic Sports" stores nationwide. These stores have seen great sales success and completely revitalized the brand. Speedo started making a wide variety of swimsuits to meet the needs of all consumers. In the past, Speedo's target market was swimmers of all ages who participated in swimming as a sport. As swimming became more of a recreational sport, they started targeting a much wider market of swimmers.

At present, Speedo manufactures swimsuits to meet the needs of all swimmers, regardless of their skill level. They manufacture performance swimsuits for lifeguarding, racing, triathlons, general swimming and aquatic sports. It is perhaps the only company that manufactures swimsuits for every need, every sport and ones that can fit almost anyone.

Speedo devotes a large part of its resources to research and development. Their new line of swimsuits using the patent fabric called ‘fast skin' is the latest and most advanced in performance swimsuits. The new fabric is based on a shark's skin that reduces frictional drag and allows the body to slip through water more smoothly. New test methods have been conducted worldwide with independent experts in fluid dynamics, biomechanics, textile technology, garment engineering, sports science and swim coaching. Their testing involved professional swimmers, such as Olympic champion Jenny Thompson of USA. This kind of extensive research and development has given Speedo an edge over all other competition swimsuit manufacturers. Its success as a brand has given Speedo 21% of the men's swimwear market and 61% of the competitive swimwear market.

Speedo products are available at:
· The majority of sports shops
· Through 74 of its own "Speedo Authentic Fitness" stores, along with other related apparel
· Leading department stores, like The Bay
· www.speedo.com and other online stores. The online channel serves Speedo very well because Speedo users are very brand loyal and know the fit very well. They do not have as high a need to try-before-you-buy as for leisure swimwear.

Adidas
Adidas is a household name when it comes to sporting equipment. The brand is well known for its footwear and sports apparel, and sponsoring a number of world-renowned sports teams and athletes. Adidas primarily manufactures performance swimsuits for athletes and general swimmers, and full-body suits for high-performance swimming needs. The product line also includes swimming accessories.

Adidas swimsuits are available in all major sports shops, department stores and other retail channels that carry the brand's apparel. Adidas has an online shop for Internet orders and they can be found on a number of other online stores.

Nike
Nike is perhaps the most valuable brand name in the sports industry. Nike's Swoosh label dominates the market of almost every sport in the world. It manufactures apparel, footwear and equipment.

However swimming is one of the few sports that Nike has not yet been able to leave its mark on. It first entered the competitive swimsuit market in 1993 but was a complete failure. Since then, it has again entered the market, this time along with Jantzen, the industry's second largest manufacturer. Jantzen is the manufacturer while Nike only provides the brand name. Nike swimsuits are found in sports shops and online stores that carry its products.

Shan
Shan is a Montreal based company that specializes in the design of swimsuits, coordinated garments and beach accessories for men and women. Established in the high-end design and high value-added market, Shan collections are recognized throughout North America and Europe for their high quality and style. Aside from being sold in Shan stores, its products are also available in reputable retail outlets such as Neiman Marcus and Selfridges.

San Francisco Maillots
San Francisco Maillots is Quebec's premier retailer of sportswear and active wear. Aside from an in-house collection, the stores feature some of the best names in swimwear that Quebec and the world have to offer. In 1999, the company acquired 37 Bikini Village stores, bringing the total number of its retail outlets to 59. The company expects to open an additional 10 Bikini Village stores in Ontario, which would position it as the national leader in swimwear retailing in Canada.

Baltex
In 1983, Baltex opened its doors for business in Montreal. As the company grew, Baltex moved to larger premises and began distributing its swimsuits to most department stores and specialty boutiques in Canada. On the strength of its Canadian success, Baltex expanded into the United States. Today, most North American retailers carry its products, as the company has become one of the fifth largest swimwear manufacturers in North America, with over 500 points of sale in Canada and about 4000 in the U.S. In fact, almost 70% of the company's total sales are exports to the United States. Baltex currently holds approximately 7% of the U.S. swimwear market. As demand for its products continues to increase, Baltex has begun to modernize and computerize its manufacturing facilities to maintain the highest quality standards, even with volume production. A new laboratory ensures that fabrics comply with strict standards. In 2000, Baltex produced over 7 million pieces of swimwear which sold in numerous retail outlets for $40-$80.

Designer Swimwear
There are a vast number of designer labels in the clothing and apparel industry all around the world, many of them manufacturing swimsuits. One of the most popular is Calvin Klein (CK). CK makes a variety of swimsuits aimed towards the needs of women. They make performance as well as fashion swimsuits but their main concentration is on fashion swimsuits.

Other big names in the designer swimsuit market include:
-Anne Cole -Liz Claiborne
-Cole of California -Ralph Lauren
-Anne Klein -Polo Sport RLX
-Baltex -Shan
-Cazimi -Christina
-Nautica -San Francisco Maillots

These designers produce mainly fashionable swimwear that keeps in line with the general brand's image in terms of price, quality and distribution. Only a few of these designer labels have swimwear that can be worn for athletic activities.
· Designer swimwear is premium priced to keep in line with the brand's image and reputation, ranging in price from $60 to $90 USD.
· Designer swimsuits are available at department stores that carry the same brand's general apparel, as well as specialty swimwear stores like "Bikini Village".
· They can also be bought online from stores that sell the same labels.

Manufacturing
Producing swimwear to be sold at the final retail store requires three main elements; design, manufacturing, and branding. These can be fully done in-house or outsourced depending on the company's size and capabilities. Large and popular brands may have the resources to perform all three steps themselves, but the plethora of small, local brands do not have the expertise, financing or assets to design and manufacture their own swimwear lines.

These smaller brands, which dot the entire country and are most common in California, buy their designs from other companies, whether the manufacturers or other larger brands. The purchased design is then altered in terms of fabrics and patterns to give the brand its differentiation. The final design is then manufactured domestically or overseas depending on quality considerations. There, the swimwear is branded and shipped to the retail stores.

Manufacturers vary greatly in their production types and output quality. They may specialize in strictly producing swimwear or a variety of apparel lines, from nightgowns, to socks, to swimwear. This breadth of production, the level of automation and skilled labor all have a large impact on the manufacturer's output quality and dependability. Compared to overseas manufacturers, domestic manufacturers produce higher quality swimwear because they use less manual labor and invest heavily in streamlining operations through automation. The qualities of stitching, and general durability are much higher than that of overseas swimwear, but also cost more.

Because the manufacturing process is so asset-intensive and requires expertise much different from that of retailing, most brands, whether large or small, tend to outsource production. In this way they benefit from the manufacturers' economies of scale, expertise, and distribution services. Although larger brands may have the financial capabilities of integrating the manufacturing process, they still lack the expertise. For this reason, only very few large brands do their own manufacturing, yet most of them do their own designing. This puts the manufacturer in a position where they are the sole supplier of the brand, of many brands.

Regardless of price or quality considerations, all swimwear is branded to benefit from image, awareness and recognition. They may be independent of each other, or owned collectively by a single company, have original and exclusive designs or be exact copycats of other brands.

Distribution
Swimwear, like clothing, is sold through seven main retail channels;
· Department Stores
· Discount Stores
· Women's Apparel Stores
· Women's Independent Stores
· Specialty Stores
· Outlet Stores
· Direct; Online Stores and Catalogues

Although swimwear is sold online, it only accounts for less than 2% of total sales. This value is insignificant compared to the traditional retail channel, especially since it has been declining for the past 6 years. This is probably due to most swimwear being purchased for an appropriate fit, as much as for design. Online ordering does not allow the consumer to try on several models as they would in a traditional retail store. The online channel also presents retailers the problem of returned orders and health concerns. Returned swimwear cannot be re-sold by law due to the uncertainty of having been in direct contact with the skin and sanitary reasons related to this issue. This has actually created unforeseen inventory problems and significant financial inefficiencies. There are ideas being developed to solve this problem, such as adhesive covers that protect the swimwear from direct skin contact, and can be replaced when returned. Percentage of Total Sa les Units Dollars %Dollar/%Unit Under $20 $20-$39.99 Over $40
Department 36.3% 38.8% 1.07 19.8% 41.2% 39.9%
Discount 28.8% 16.4% 0.57 68.9% 29.3% 5.3%
Women's Apparel 15.5% 20.0% 1.29 3.4% 14.6% 24.0%
Women's Independent 7.1% 10.4% 1.46 2.2% 4.9% 13.6%
Other Specialty 2.5% 3.9% 1.56 0.0% 1.3% 5.4%
Other Outlets 9.8% 10.5% 1.07 5.7% 8.7% 11.8%
Total 100% 100% Total 100% 100% 100%

Catalogues
Catalogues face the same try-before-you-buy problems as online stores but are more frequently used. This channel, representing 10% of total swimwear sales in 1999, is taking considerable market share from department and women's apparel stores.

Department Stores
· Have the highest sales in terms of units and dollars, but not the highest average unit value.
· 30% of their unit sales are over $50.
· Only 1% of their unit sales are under $10.

With profit margins for swimwear at about 60%, compared to 30-40% for general apparel, swimwear was the largest profit maker for department stores. But under pressure from catalogues and brand names at discount stores, margins at department stores are now 30-35%. They are also starting to discount swimwear earlier in the year, providing an explanation for why almost 60% of all swimwear is bought on sale. This discounting by department stores puts great pressure on the manufacturer to lower prices and offer other incentives. Department stores can charge large stocking and exclusivity fees due to the sheer numbers of brands and stiff competition for floor space.

Discount stores
· Have the lowest average unit value, almost half of the next highest retail channel.
· Represent almost 70% of all under $20 unit sales.
· Only 5.3% of over $40 unit sales.
· 70% of their unit sales are between $10 and $30.

Discount stores have been eroding market share away from department stores with the introduction of house-owned brands and exclusive contracts with premium brands.
· K-Mart has seen great success in the launch of its Cathy Ireland line of women's swimwear, capitalizing on her Sports Illustrated modeling career and likable personality.
· Target has recently purchased the Mossimo line of premium sports apparel, including swimwear. The brand had a strong image but suffered financially from rapid over-expansion and was rescued from bankruptcy.
· The Warnaco group has exclusively introduced Catalina, the chaste swimsuit of Miss America, to Wal-Mart. This strategic move recharged the brand's sales, which had been slumping at department stores.

Specialty stores
· Only sell 5.4% of all over $40 unit sales, yet this is a significant amount considering they are less numerous and sell less volume than discount stores.
· Have the highest average unit price.
· 54% of their unit sales are over $50.
· Only 6% of their unit sales are under $20.
· Specialty stores sell almost exclusively swimwear and other related accessories.

Women's apparel stores
· Sell a quarter of all over $40 units, and one sixth of $20-$39 units.

Women's independent stores
· Sell mostly over $40 and very little under $20.
· Have the second highest, average unit sale.
· These stores are very fragmented and differ in product quality and pricing. They are smaller than other stores, yet numerous.

The distribution of swimwear could very well hold the key to the success of a brand. All seven retail channels have strengths on a price range, a customer type or the breadth and depth of merchandising. Stiff competition between the vast number of brands and the promise of large margins put increased pressure on them to find the right retail or direct channels.

However, brands should not be confined to the way distribution has been done traditionally. For example, the Warnaco Group has opened its own chain of stores, named Speedo Authentic fitness, to sells its Speedo line of swimsuits and an expanded line of related sportswear and accessories. These stores allow Speedo to sell at a higher premium than before and at a much larger volume. The line is also no longer discounted at any time of the year, as excess inventory is sold at its California outlet stores where demand is year-round. The Warnaco Group is also testing the sale of swimsuits door-to-door with Avon, on Rupert Murdoch's Asian Star TV channel and inside Bally's Health Clubs.

Retailing and Advertising
It is quite obvious that the swimwear industry is highly cyclical, especially for fashion swimwear. Uncontrollable forces, such as seasons and weather, prevent many retailers from fully committing themselves to swimwear. Future sales are forecast based on historical sales information, projection of trends from suppliers and the intuition of merchandisers. Retailers then place orders approximately 8 months before the season starts.

Factors such as weather can have a large impact on swimwear sales. A particularly warm summer will increase sales significantly from the previous year, while a cool summer will negatively affect sales. As a result, retailers experience difficulty in predicting sales for the upcoming year.

To further complicate the retailer's situation, the swimwear-selling season is relatively short. Retailers introduce the newest styles in February, while complete exposure occurs in March and April. Sales tend to peak in May when swimwear is given the most floor space in order to maximize sales. While discounting used to begin in late June, retailers are now beginning to start discounting much earlier in the season, around late May. Due to the short selling season, retailers must work hard to achieve their sales goals in less than five months. This means that inaccurate sales projections may harm a devastating effect on overall sales performance.

However, advertisers and retailers have found that sales do increase when advertising campaigns are implemented later in the year. Starting the advertising campaigns in February and early March instead of January has had a positive effect on sales as women see the suits at a time when they would actually wear them. Increasing promotional expenditures has been successful for retailers as they are more able to control demand needs and appropriately prepare the floor space.

Although advertising expenditures for swimwear have been increasing, Anne Cole has seen success with a much different approach. The strength of the company's advertising is in its consistency and not frequency. The modest print campaign is executed less frequently than other brands, but its elements are carried from the previous years' campaigns. This consistency in the message gives consumers the impression of having been exposed more frequently than in reality and creates strong brand recognition.

External Factors

Materials & Suppliers
The fabrics used for swimwear manufacturing are expensive, ranging in price between $11 and $18 USD per yard. Although as expensive as fabrics for designer dress gowns, approximately three dollars worth of fabric will be used on the average bathing suit.

But manufacturers are increasingly using more Spandex, $14 per pound, and less of the cheaper Lycra, $2.6 per pound, because of its higher quality and durability. The more highly engineered suits use up to three times more Spandex than the traditional ones. This is good news for Dupont, the world's largest supplier of Spandex, yet prices are expected to remain stable or even decrease. The German chemical giant Bayer AG has entered the Spandex manufacturing market and become the world's second largest supplier. While Dupont has kept its prices stable, Bayer is undercutting their prices by 10-20% and offering better support from their mills.

Currently, most Canadian fashion swimsuit manufacturers import their materials and other supplies, such as labels and fabrics, from Europe. They feel as though the Canadian textile industry is unable to produce fabrics and labels similar to the ones imported from Europe and prefer European fabrics to Canadian fabrics for the following reasons:
· Canadian textile producers do not produce small quantities of high quality swimwear fabrics, which are necessary to create samples for a new swimsuit collection.
· Canadian textile manufacturers cannot guarantee swimwear manufacturers the exclusivity of fabrics
· The minimum order size is 500 meters of fabric
· Canadian textile manufacturers offer a very limited variety of swimwear fabrics to choose from
· The quality of the Canadian swimwear fabrics is not uniform
· The printed fabrics are not up to par with the current fashion trends.

The European swimwear fabric industry, on the other hand, provides Canadian swimsuit manufacturers with many more possibilities and advantages:
· They can guarantee companies fabric exclusivity
· It is possible to order between 10 and 50 meters of fabric for the production of samples for the creation of new swimsuit collections
· Order quantities for production can be as small as 35 meters of fabric, or any other quantity in increments of 35
· European textile producers offer a considerably wider selection of higher quality swimwear fabrics
· They produce other fabrics identical to their swimwear fabrics for the confection of coordinating beachwear
· The quality of European swimwear textiles is substantially greater than that of Canadian textile producers.

Government Regulations
The importation of fabrics and labels from European countries is a highly regulated issue. The federal government has implemented strict regulations regarding imports of fabrics and other supplies necessary for the confection of swimwear, mainly to protect Canadian textile manufacturers from foreign competition. More specifically, the government holds specific regulations regarding:
· The amount of fabric one can import within a given period of time
· The number of times one can import fabric during a one year period
· The number of labels one can import at a given period of time
· Governmental taxation on all imported materials and supplies

Weather
Swimwear sales can also be significantly affected by weather conditions. The wet and colder than usual weather caused by El Nino in North America in the summer of 1993 caused swimwear sales to be lower than usual for the first six weeks of the summer season, but as the weather warmed up, sales increased significantly.

Although nothing can be done to control the weather, weather climatologists can now make forecasts with a much greater degree of certainty than in the past, including which regions are likely to be warmer, cooler, wetter or dryer than normal. These "insights" on long-range weather trends are available from numerous sources, including private weather forecasting services, as well as university and government agencies.

Presently, merchandising programs use historical sales information, projection of trends from suppliers and intuition of merchandisers. Although weather insights should not be taken at face value, it can still be valuable as an additional tool for merchandise planning.

Strategic Assessment

Changes in the past 5 years
There have been three noticeable trends within this industry in the last half-decade. The emergence of new fabrics has raised the quality and the price of bathing suits. It has also given both customers and designers greater versatility when choosing or making suits. In addition, new labeling systems have been designed to make it easier for women to find a well fitting suit from such variety of possibilities. New styles have been created to provide greater differentiation and new fit for varying body types. All these changes are detailed below.

New Fabrics are making quite a stir. Many of the major manufacturers are coming out with new fabrics that offer longer life, better fit and increased speed for performance suits.
· Dupont's new polyester-based Lycra offers greater durability (30 hours of wear before the suit started to bag, extended to 100 hours). It also inhibits mildew.
· Globe Manufacturing offers chlorine and mildew resistant fiber S-17 B and UV and oil/perspiration resistance by using special additives in its polyester-base spandex.
· Aquatic Designs Inc. VapourFlex uses 10% Dorlastan in a stretch, weather-tough amphibious fabric to increase stretch durability.
· The Miracle Suit Collection by Miratex, features a fiber that is said to deliver three times the holding power of regular swimsuit material.
· Some companies are using neoprene in conjunction with Nylon and Lycra. Neoprene keeps its shape for a long time, often longer than its companion fabrics do. Neoprene has to be constructed like a wetsuit - darts or princess seams are the only way to accommodate a large bust, so in strategic places it can act like a girdle.
· Speedo launched Fastskin, made of Lycra and polyester super stretch fabric that compress muscles reducing drag and muscle vibration. The suit is supposed to reduce resistance by 7% and increase performance by 3%. (Barker)

However the new fabrics are increasing the prices charged for suits. Fashion and performance suits can now be priced between $80-$100. The full body Fastskin suits cost upwards of $400 per suit. Critics are now discussing the ethics behind these suits. Brent Rashall, professor of exercise and nutritional sciences at the San Diego State University, writes in the Swimming Science Journal, "No costume should give one swimmer a competitive advantage over another…If this is allowed then it will not be long before races are won by the swimmer who has sufficient money to buy the most enhancing suit available." The critics are concerned that the rising costs for the technologically advanced suits will lead swimming performance to become based on money rather than on skill.

Other recent trends are new labeling systems that make shopping easier for women. The system allows women to search for suits by suggesting various solutions to a number of body problems. The six choices are:
1. Bust Minimizer
2. Bust Maximizer
3. Full-Cup Support
4. Tummy/Midriff Toner
5. Long Torso
6. Hip/Thigh Minimizer

Numbers and colours then categorize the suits into style benefits based on shapes and sizes. Introduced by Dupont Lycra and The Swimwear Manufacturers Association, the name of the new system is Suitable Solutions™. The idea is to create a standard that all manufacturers will use which will, in turn, simplify the swimsuit buying process.

As the economy improves, people are treating themselves to more frequent vacations in warm destinations. This trend is spawning a large number of new styles. Like many other designers, Nautica introduced a line of mix-and-match suits. As Robert Wolf, Spokesman for Nautica Swimwear says " We are no longer living in that fantasy where a women with a size 8 top wears a size 8 bottom." Women can now customize various shapes, styles and sizes for the top and bottom. This trend has lead to the introduction of styles such as the tankini, bandini, and the camikini. These styles mix bikini bottoms with a tank top, bandeau top, or a camisole respectively. The tankini now accounts for 30% of bathing suit sales.

As the creator of the Anne Cole line of bathing suits and the widely acknowledged creator of the tankini, Cole has been selling bathing suits for years. When asked how women have changed in the last 50 years, Cole says "The average size was a 12 to 14… Now when I go to Bloomindales, the 6,8,10 sizes sell out first." She attributes this change to the ‘exercise era'.

Future
We can expect three main changes to take place over the next five years. Firstly, the increasing size of many North Americans will impact various aspects of the swimsuit industry. Secondly, the performance industry will become more focused on research and development in order to remain competitive in the market. Thirdly, health concerns related to sunbathing will increase and potentially cause a drastic redesign of the bathing suit.

Increasing Obesity
The size of the average American is rapidly increasing, as shown by the following facts:
· 63% of men and 55% of women over the age of 25 are overweight.
· Nearly one-quarter of these individuals are clinically obese.
· Obesity rates are climbing around the world--from 8 percent to 13 percent in Australia and Brazil.
· The U.S. Center for Disease Control and Prevention (CDC) states that only 10% of adults get enough physical activity from workouts, which means that even an hour at the gym may not be enough to stave off extra pounds.
· Steven N. Blair, P.E.D., senior scientific editor of the U.S. Surgeon General's 1996 Report on Physical Activity, estimates that we are expending about 800 fewer calories per day than our parents did.

What this implies for the swimsuit industry is that the suit sizes are getting larger. As well as inspiring systems similar to the Suitable Solutions, the increasing size of the population makes the bathing suit buying process harder as women become self-conscious about their increasing body size. As swimsuit shopping is already something that most women dread, in order to remain competitive, swimsuit companies must find ways to make shopping simpler and easier. Aside from Suitable Solutions, many numbering or style divisions will be created to hasten finding a flattering suit. In order to aid with fit, more companies will sell the tops and bottoms of two-piece suits separately, so that women can choose sizes accordingly.

In addition, the more popular styles will become those that can cover flaws. This includes suits such as the tankini, which covers the stomach but is still a two-piece, or the boy short style that covers the legs. Features such as tummy tucking material, padding in the bra and other contouring methods will also increase in popularity.

Increasing R&D
In the next several years it is expected that high-performance brands, such as Speedo, will create more technologically advanced suits as well as accessories.
· Their latest technological development for elite swimmers is the Speedo SpeedMask. The alien-like Mask smoothes out the turbulence created by the head when moving through the water. The mask is intended to take the place of a cap and goggles.
· Independent testing at MIRA (The Motor Industry Research Association) shows that the SpeedMask reduces drag around the eye socket region by 53%.

The MACH1 swimsuit, designed in Italy by Diana, a professional swimmer, is a perfect example of one of the new technologies that will soon penetrate the market. The line of swimwear, targeted towards competitive swimmers, does not use traditional fabrics or construction methods. The MACH1 is a water-repellent swimsuit made out of silicone, which avoids all water absorption, thus improving performance.

The major players in the swimsuit industry will invest highly in efforts to discover the most efficient drag-reducing suits and accessories. High-level performance swimming is expected to become even more expensive as swimmers are forced to pay $400 for suits in order to compete satisfactorily.

The large amounts spent on R&D will raise the boundaries to entry by necessitating higher investment in fixed assets. Smaller companies that cannot afford these investments will lose market share, face the risk of bankruptcy and probably end up being bought out by other companies for their valuable brand names. Under the new company management, these small brands will be revitalized and used to target smaller niche markets.

Sunbathing-Related Health Concerns
Since the first reports of the thinning ozone layer in the early 1980s, North Americans have become more aware of the health threats related to sunbathing. The thinning of the ozone layer, and the large holes over the poles, allow more of the sun's harmful ultra-violet (UV) rays to enter our atmosphere. The worsening of this situation could potentially have a very significant impact on North American's attraction to the beach and other related activities that require swimwear.
· Problems such as skin cancer, premature aging of the skin, cataracts, and immune system suppression may force people to spend less time sunbathing.
· The incidence of skin cancer in the United States has reached epidemic proportions. One in five Americans will develop skin cancer in their lifetime, and one American dies every hour from this devastating disease.

Since fashionable suits are mostly used to sunbathe, only 40% of all swimwear ever gets wet in its lifetime, a decline in the time spent by the pool or sea would cause the number of fashion suits sold to drop.

Being beach lovers as they are, North Americans will be torn between their health and enjoying their lives. To counter this health phenomenon, the industry will have to seriously consider a major redesign of swimwear, a move that may actually more closely resemble swimwear of the 1930's. In a decade, we may see recreational swimwear that completely covers the body, even the face. The fabrics used will be very thin, flexible and comfortable, yet offer extreme UV protection. They will allow the skin to breathe, feel the soft breeze, water and sand. Prints and patterns will be designed to flatter the individual, hide the tough spots, and yet accentuate the best. North Americans will not prefer wearing these suits over the traditional ones, but unfortunately they might have to if they want to keep enjoying the pleasures of the sun.

Primary Research

INTERVIEW
We held an interview with Yves Lepine, an Industrial Technical Advisor for the Ecole Superieure de Mode de Montreal at CNRC.

When asked about the future, Lepine commented, "the swimsuit industry is currently booming". He continued to say that sales have been increasing significantly on a yearly basis, and that new styles and fabrics have increased the range of swimwear available to consumers. So many different styles have encouraged consumers to buy several swimsuits per season to take advantage of the many possibilities that are offered.

In addition, recommendations from manufacturers that encourage the consumer to let bathing suits ‘rest' between usages, allowing them to regain their proper shape, have increased the number of suits bought per season. Buyers often purchase several suits in order to alternate between them, hoping that they will last longer as a result. However due to the variety mentioned above, Lepine claims that with "the assortment and the new trend towards separates, consumers often buy another top or bottom to go with their previous purchases, in order to update their swimsuit wardrobe.

Different companies are producing very focused swimwear developed for a specific segment or use. He says that, "depending on the use intended by the consumer, they will have different selection criteria. Those searching for recreational suits place a high importance on style, colour and fabric texture. More importantly, they expect the suit to enhance their desired features and camouflage their flaws. On the other hand, an athlete will select something that is geared towards performance, placing the actual look of the swimsuit fairly low on their priority list".

He also said that performance suits would gain increasing importance as a tool for competition. Their capability to shave a few seconds off the race time will become more important as the suits and accessories become more advanced. When we mentioned the Barker article to Lepine, he agreed with the predictions of future swimmers depending more on high-tech equipment. "Since races are often won by such small time increments, races will increasingly be won based on small advantages that can be gained from their equipment rather than their abilities." His final comment was that "although the industry trend is leaning towards higher R&D expenses, one new innovation in performance swimwear can lead to a small company gaining an important share of the performance market."
Independent Local Market Study
Last semester, Andree-Anne conducted research on swimsuits for a Marketing Research class. Their purpose was to "investigate the feasibility of a swimsuit company with a new philosophy: catering to as many women as possible by having stores that carry samples of a large variety of swimsuit styles and implementing an order policy. This order policy would allow the stores to carry a smaller inventory while increasing the likelihood of female customers finding a swimsuit that fits them correctly." Although the purpose of that research is a bit different from the purpose of this industry study, there are still several relevant findings that can be applied.

Focus Group
The target market was comprised of females between 18 and 24 years of age, with a monthly disposable income of at least $100 and classified as recreational swimmers. A focus group of eight participants revealed that they considered three factors when purchasing a bathing suit: quality, price and style, and were willing to pay between $30 and $70 for a stylish swimsuit.

Quality is the first characteristic that individuals consider when purchasing a swimsuit. Most people will first check the quality of the fabric by touching and feeling it closely. Then they check the quality of the stitching by examining the rows and doing a stretch test. Stitching that becomes apparent during a stretch test is considered to be of poor quality and would not be purchased on that basis.

Respondents defined style in two ways. The first related to the design and cut of the swimsuit, while the second reflected the swimsuits "sliming" capabilities. In either case, they overwhelmingly preferred a swimsuit made of Lycra due to the material's resistance to chlorine, durability and long-lasting elasticity. They seemed to be well knowledgeable regarding the quality of materials and could spot poor construction easily.

Half of the participants preferred a dark colored swimsuit because they never went out of style and therefore did not have to purchase one every year. They preferred more classic prints such as stripes or dots. The other half preferred bold colors and more outgoing and flashier prints as a form of self-expression. They all agreed that flashier colors are more appropriate for the summer season. Consumers are not brand loyal when purchasing a swimsuit because they never find one that fits them perfectly. They are very willing and likely to consider any brand that meets their quality, price and style needs.

Personal service is also an important characteristic of the swimsuit industry. Respondents felt that salespeople should be there to guide customers to the right styles based on their needs. However, customers want to be left alone afterwards to make the purchase decision by themselves.

Questionnaire Findings
· Slightly fewer than 50% of respondents would like to try a direct order policy, 5% are very willing and 12% are indifferent to such a policy.
· 65% would be willing to wait between 1 and 2 weeks for their bathing suit, yet only 13% would wait between 2 and 3 weeks.
· 41% would be willing to pay between $30 and $50, and 37% would be willing to pay between $50 and $75.
· The longer customers have to wait for their product, the less likely they are to purchase it from this type of store.
· There is no difference in the level of quality desired between those willing to pay $30 and those willing to pay $100. There is only a difference between those who want to pay less than $30 and those of other price ranges.

Although the characteristics of this test market are not representative of the market as a whole, we can still use these findings as a guide and make some preliminary conclusions.
· Female customers are generally willing to try this retail store concept, willing to pay within the higher price ranges and wait between 1 and 2 weeks for product delivery.
· For the store to be successful, its products would have to be well made with strong, durable materials, high quality stitching and a varied selection of colors and patterns.
· Considering how strongly women desire a well-fitting and accentuating swimsuit, a store that can meet these needs could very probably have a very loyal customer base.

Limitations of Independent Local Market Study
Of course this study had several limitations and further research is necessary. The researchers had time, monetary and experience constraints, but most importantly a limited test market. To fully determine the potential of this store concept, further research needs to be done from both the supply and demand sides.
· The next research efforts should use a fully representative test market taking other factors other than age and disposable income into consideration.
· It is also extremely important to research the logistics of such an operation. The research should examine manufacturers, and distribution channels for pricing, delivery and quality issues. This is of utmost importance considering this order concept is unique in the industry. If the product cannot be provided within tolerable levels, meeting the needs of each woman, then the store will not be successful.

Recommendations
After a thorough investigation of the North American swimsuit industry, certain suggestions may be proposed to a company planning to enter this particular industry.

· Target a specific need: With swimwear being available in all retail channels, in all price ranges, a new store model will need to target a very specific need and do it better than other stores. Whatever that market need may be, the store must find new, unconventional ways to fulfill it. If the store loses its differentiation, then it will not be as successful against much larger and powerful retailers.

· Blend elements of fashion into performance swimsuits: There are presently no companies that market fashionable performance suits, but there is a need in the market. Women that buy performance suits because fashionable ones do not fit them properly are confined to uninspired patterns and colors. Adding such features to performance suits would make them more attractive to women, and competitive teams.

· Offer wide range of styles: A store must allow women to choose from many different styles, mixing and matching them to create the perfect suit. Giving women this ability to design their own outfit could create store loyalty, even if there is very little brand loyalty.

· Consider custom designs: No two woman's bodies are alike. Custom designed bathing suits may be of very high value to women who have demanding body types. They seem to be willing to wait a moderate time for a suit that will fit them properly, rather than buy an expensive one that does meet their needs.

· Strive to use the latest fabrics: Although a small retail store that designs its own lines may not be in a financial position for fabric R&D, it should still be aware of the latest advances made by manufacturers such as Dupont. The designers should at least consider incorporating these fabrics into new lines, or even creating lines around the fabrics' strengths.

· Consider selling the design to other brands: A small private brand with a great design may not achieve its greatest potential due to distribution limitations. Selling the design to other brands that have well established distribution channels and target different markets allows for larger in the early years of existence. This strategy allows for higher cash flows during the most difficult first five years, and increases the probability of success.

· Create affiliations with swimming leagues and teams: As swimming clubs throughout North America continue to grow, manufacturers and retailers are being provided with the opportunity to target a huge numbers of swimmers, with relatively little difficulty. Employing B2B strategies to outfit entire swim teams allows to sell more suits at one time, attaining free publicity, and securing future sales with contracts. Satisfied competitive swimmers are also likely to purchase leisure swimwear from the same store.

· Focus efforts on brick and mortar, not online: Considering how important and specific fit can be to every woman, the online model is just not practical. A small brand or retailer cannot afford to lose money by having an online store. To give the online store all the tools necessary for women to purchase a suit that fits them just right, huge investments in hardware, and software have to be made. A small brand or retail store cannot afford those costs, and would achieve a much better return through a real storefront. The online channel should only be considered after the store has achieved a considerable share of the market and has a large client base that knows the brand's fit very well.

Limitations
A number of limitations arose in the collection of data for this industry study. As we relied heavily on the Internet as a main source of secondary data, we had difficulty in acquiring specific information regarding the North American swimsuit industry. Many companies had little, or no information, regarding their annual sales and other details of the company.

Financial information was particularly hard to obtain because most brands are small and therefore privately owned. Those companies that are public also could not provide any significant information because they design, label or manufacture many brands including general apparel. Their financial reports were aggregates of all their different product lines.

In terms of finding statistics on the North American swimwear market, we had to rely on studies that were outdated. We were also not able to find specific data, such as the number of swimming pools in North America, or even how many brand exist in this industry. Information on the actual manufacturing of swimsuits was also difficult to acquire. A number of companies we found outsourced the actual manufacturing of swimsuits, for example Nike swimsuits are made by Jantzen.

As we only had three months to complete the paper, a fully detailed, comprehensive study could not feasibly be completed. A comprehensive study usually comprises over 200 pieces of secondary data, however, our time and budgetary constraints acted as a major inhibitor in collecting a vast database.

Conclusion
There seems to be a need for stylish perf