ASHLEY STEWART An auditorium full of graduate and undergraduate students was eager

ASHLEY STEWART

An auditorium full of graduate and undergraduate students was eager to hear what James Rhee, the CEO of Ashley Stewart, the largest plus-size retailer in the United States, would have to say. How did a middle-aged Korean American man turn around a struggling brand that catered primarily to African American women? But Rhee was accustomed to such questions and ready to answer them.   Founded in 1991, Ashley Stewart was named after two distinct style icons: Laura Ashley and Martha Stewart. The founder Joseph Stint sold his shares of the company in 2000. The following decades saw some challenges, such that the company filed for bankruptcy in 2010 and then reorganized again in 2014. But by that point, Rhee—inspired by the brand’s promise and its connections to its customers—had resigned from his position on the board as an investor in the retailer to become its CEO.44 Today, Ashley Stewart maintains just shy of 100 stores in the United States and a global e-commerce platform, helping curvy women around the world find beautiful fashions that fit.   So how did a former high school teacher and hedge fund manager manage the success of a fashion brand? Industry Environment and Ashley Stewart’s Position Approximately 67 percent of U.S. women wear sizes 14 to 34; however, many companies still don’t offer efficient options in this category. Therefore, the plus-size apparel industry accounts for only approximately $20 billion of the $108 billion apparel industry. Still, it is one of the fastest-growing categories in fashion.45 Whereas once the fashion industry ignored this segment and focused almost exclusively on wearers of smaller sizes, today, retailers cannot ignore this segment. Sales of women’s plus-size apparel have increased almost 17 percent from 2013 to 2016.46   Just like every other retail setting, women’s fashions also have been influenced by the growth of the Internet. As the number of digital shoppers continues to increase, virtually every brand is seeking a space to establish itself in the digital world, to attract attention and expand its reach through traffic to either its website or its stores. At www.ashleystewart.com

customers find bright colors, and stylish models sporting the latest trends. The visually attractive looks for every season also promote web-exclusive collections to customers. But in the early 2010s, Ashley Stewart did not even have Wi-Fi at its company headquarters. Corporate decisions mostly were based on “gut” perceptions, rather than data. Its e-commerce platform was antiquated. Turnover among employees was high, and the corporate culture was described as fearful,47 leaving the brand without any real credibility. Following more than a decade of losses, the company seemingly had lost its way: Employees were angry, customers were annoyed, and investors had lost all hope. But Rhee saw something in the brand. In his own words, he “loved the brand and everything it stood for. Ashley Stewart had been founded to provide plus-size fashion for women in boutiquelike settings in urban neighborhoods across the United States. After listening to our customers, I came to realize that the brand stood for more than that— values like respect, empowerment, and joy. Despite the company’s history of failure, I believed that the brand could capitalize on several macro-cyclical trends with a reinvented business model.”48 A graduate of Harvard Law School, James Rhee had been a high school teacher and private equity investor, with no experience in the fashion industry. So he adopted a teachingoriented philosophy and applied hedge fund policies to the effort to save the brand. Rhee’s Philosophy Rhee focused on a few core principles that led to the turnaround of the company. He relied on numbers and math, sought to reinvent the company culture, adopted a central focus on the core customer, encouraged continuous innovation, and— perhaps above all—prioritized kindness.49 Rhee understood that customers would behave differently on different days, so Ashley Stewart’s business model and algorithms would have to adapt to customers’ varying behavior. Using sophisticated analytics and data, he improved the flow of goods through the supply chain, which also sped up the arrival of new fashions into stores. Furthermore, Rhee insisted on updated technology in all realms of the business, so that it could offer standardized IT and e-commerce operations. Preferring measures that could not be manipulated, Rhee focused on loyalty, returns on investment and capital, and time assessments. Moreover, “When we were re-writing all of the planning algorithms and business reports, the math and operational discipline was done at the level at which a blue-chip investment firm would operate.”50 These changes were also part of the reinvented culture, along with physical changes, such as knocking down all the walls in the corporate headquarters to encourage an opendoor policy. The company stopped using virtually all of its formal job descriptions. Instead, the goal was a culture that relied on mentoring and teaching, as well as a servicesoriented approach. In response to the radical changes, approximately 40 percent of the employees at corporate headquarters left, but those remaining were dedicated to the new culture.51 This new services-oriented culture also entailed a reinvigorated focus on the core customer, the “she” who is embodied in the very name Ashley Stewart. In every decision, Ashley Stewart considers what “she” might want and ensures it is respecting “her,” such as through enhanced customer service and customer engagement. This “she” is critical to everything associated with Ashley Stewart and part of the reason Rhee even attempted the turnaround: “If this was a business that sold widgets or old expensive neckties for rich guys, I wouldn’t have done this.”52 This brand somehow had persisted for decades, without making any consistent profits. It was able to do so simply because “she” loved Ashley Stewart, which provided “her” with beautifully merchandised stores, where each customer is greeted by “Ms. Ashley,” the store manager. Once customers found the stores, they stayed loyal to them; Rhee even recounts meeting three generations of women from one family coming together to shop in a place they felt comfortable and respected. With its segmentation and targeting focused primarily on African American plus-size women, Ashley Stewart also provided a safe space for a frequently marginalized population—another reason Rhee was drawn to the sinking brand. When he looked at customers in stores, he observed that their body language signaled more confidence, reminding him of how his mother, who emigrated from Korea, would exhibit pride and satisfaction when she walked into a Korean store. It was these emotions that he wanted customers at Ashley Stewart, the all-important “her,” to feel when they walked into any store.53 But a comfortable store is not enough to attract repeat visits by fashionable shoppers if it does not continually offer new looks. Ashley Stewart seeks to get new options in stores within six to eight weeks. Its assortment is extensive and includes clothing, swimwear, shoes, and accessories. Furthermore, noting that larger sizes were stocking out quickly, Ashley Stewart recently added more extended sizes to its collection.54 Most manufacturers charge retailers more for larger sizes, but Ashley Stewart refuses to pass on this additional cost to its customers, so the fast fashions also remain affordable for consumers. Outside the stores, innovation also is the hallmark of Ashley Stewart’s reinvented website. The brand refers to itself as a real person—that same “she” who is respected throughout the company. With this personalized phrasing, Ashley Stewart connects with other “Neighborhood Girls Gone Global,” reminding them of how someone or something local can engage communities all over the world and succeed globally, such as when it promises, “With roots based in New York, my mission has always been to inspire you. . . . I want every woman to cherish her curves. After all, they’re what make us sexy, confident, and fabulous. Ashley Stewart is a sisterhood, your best girlfriend next door. Join me—you fit in here.”55 For its 25th anniversary, the retailer hosted a Rock the Block party in Brooklyn, a fun event that garnered more than 15 million social media impressions. Its social media presence also is marked by its overriding philosophy of kindness, which Rhee calls the company’s “core strategic pillar.”56 For example, in a nationwide campaign, the #LoveYourCurvesTour, Ashley Stewart worked to connect with loyal customers by hosting fashion shows, model hunts, and shopping parties in Atlanta, Chicago, Philadelphia, Baltimore, Detroit, and New York. Encouraging women to celebrate their curves, the brand reaffirms its respect and appreciation for its customers. This appreciation also was evident in its #MOMspiration campaign, which encouraged customers to submit pictures of their mothers or daughters that depicted a meaningful memory they shared—perhaps one made while shopping at Ashley Stewart. In its philanthropic efforts, such as #ASGives, it also partners with charities that support local communities, raises money for cancer research, donates clothes and shoes, and grants need-based scholarships. Even in the midst of the company’s bankruptcy and reorganization in 2014, Rhee insisted on introducing a generous charitable program during the holiday season, to remind the company of its need to stay true to its core values. What Does the Future Hold for Ashley Stewart? By most accounts, Rhee’s efforts at Ashley Stewart have been a huge success. The corporate culture is healthier. Sales growth has hit double digits over the past few years;57 e-commerce sales account for 35 percent of total sales.58 In addition to its robust sales, Ashley Stewart is widely recognized as one of the world’s most engaging sites on social media, ranked among the top 10 in terms of its website’s active engagement with customers through Facebook. But the outlook is not all rosy. In its continued efforts to market the brand, Ashley Stewart has run up against rules imposed by Google’s AdWords against targeting customers using terms that refer to their body type. Thus, any advertisement that promotes the brand as dedicated to curvy or plus-size women would be rejected from this popular and effective advertising channel. The policy has a respectful aim, yet for a retailer that relies specifically on body type to segment its market, it creates an impossible dilemma.59 But facing an auditorium of interested students, James Rhee still predicts the continued success of the brand, as long as “she” continues to embrace the core principles that have gotten her to where she is today.

Questions 1. Describe Ashley Stewart’s retail strategy using the six Ps.

2. Who is Ashley Stewart’s target market? Could/should that target market be expanded?

3. What are Ashley Stewart’s bases for sustainable competitive advantage?