What Kills a Great Company? Victoria’s Dirty Secrets

Victoria’s Secret is dying. The operating income dropped more than 80% from 2015 to 2023. And the margins keep dropping. The former owner of Victoria’s Secret sold the company in 2020 because he thought he couldn’t handle it anymore.

This is mainly because the company’s top management couldn’t see that change was coming and failed to handle it.

Victoria’s Secret was founded by a guy named Raymond, he made the company’s sales 6 million a year, but then it was sold to a rich guy Wexner for only $1 million because the company was making losses. In 10 years Wexner made it a big company with sales of $1 billion every year. The company was growing very fast. Raymond, the founder who sold Victoria’s Secret, was so depressed that he jumped off the Golden Gate Bridge.

Then in 2016, suddenly the sales increase stopped and profits decreased significantly. Consumers’ minds seemed to change immediately. The company’s unique selling proposition (USP) became obsolete and not applicable anymore.

When Raymond first made the company, the USP was like this (if you want to know more about USP analysis, please read my Toys’R’Us article):

Target: Men (not women, even though the actual users are women) who want to present sexy lingerie to their girlfriends or wives (men want women to wear the lingerie to make sex more exciting; it is more like a present for themselves).

Problem: When Raymond went to department stores and tried to find women’s underwear, clerks saw him like a pervert. A very uncomfortable situation. Also, there was only lame underwear, not sexy at all.

The solution: Make very sexy lingerie stores that welcome men. Leather couches, black wallpaper – the shop was for men.

The store was kind of successful, selling $6 million per year, but costs exceeded revenues, making it a loss-making business. It became difficult to continue, so he sold the company to the rich guy Wexner.

Wexner shifted its target to women, the actual users. So, the target changed to: Women who want to feel sexy and seduce men by making themselves closer to men’s ideal. The new solution: The shop changed color to brighter tones – the sexy lingerie store was now for women. Buying boring normal underwear in a boring store, or sexy underwear in a cool store – which would you choose?

And he made the company very big and profitable. When they heard “sexy underwear,” everyone related it to Victoria’s Secret. But suddenly the situation changed in 2016.

2016 aligned with broader cultural trends of body positivity, feminism, and women prioritizing themselves. Consumers’ minds changed. They realized prioritizing the male-oriented “male gaze” perspective of women as objects of desire was just a stupid idea.

Of course, minds had changed way before it became apparent, but Victoria’s top management couldn’t see the change coming, mainly because they were not the target consumer (I mean Wexner is a man, not a woman who wants to wear sexy lingerie). Although the CEO was a woman, she was a hired CEO and couldn’t confront the chairperson Wexner.

A company’s top leaders have to know what the target market is feeling and thinking very well. I think it is insanely difficult for an old man to understand what young women are thinking right now. That is why it is preferable if the leader is similar to the target, or the target itself.

When thinking about the target, there are ‘actual users’ and ‘persons of influence’. Persons of influence provide significant influence when actual users buy a product. In this case, the actual user is a woman, and the person of influence is like her boyfriend. Victoria’s Secret targeted the person of influence, not the actual target women.

Although the company was aiming at women, the women’s preferences were largely influenced by men’s opinions about what men want, so the company was essentially aiming at women whose tastes were shaped by men’s desires rather than their own authentic wants.

Aiming for the actual users themselves often brings better results. For example, Lululemon targeted women directly, not a person of influence, and prioritized women’s tastes – what women think is cute or cool and their own comfort. In 2018, Lululemon’s sales growth accelerated to 24%, while Victoria’s Secret’s sales growth completely stopped. Athleisure wear like Lululemon became a substitute for Victoria’s Secret.

Lululemon became a $40 billion main player in the apparel industry, while Victoria’s Secret sunk to only a $1 billion minor brand barely surviving.

To survive the situation, the company has to focus on a tiny niche again, even though it reduces sales volume, stop selling cheap, and pursue cash flow, not sales. Becoming a comodity is the worst.