Situational Analysis: Company: · ebags – an online luggage and travel products store was launched in March of 1999 by Nordmark, Peter, Eliott, Frank and Andy. · By 2004, eBags was largest online provider of bags and accessories with over 200 brands and 8000 products. · It had sold over 2.5mn bags and had been consistently profitable company. · Motivation:To reduce the fragmented luggage market and bring customer closer to manufacturer by making wide range of products on online store. · Current product lines: Bags, Business cases, Hand bags and back packs · Business Model: It has adopted “drop and ship model” where the inventory was managed by manufacturer and eBags receives order from customer and sends it to vendor who then ships the product directly to customer. Due to this model, holding costs have been reduced. Moreover, eBags’ offered product breadth, selection and convenience. Also started private label brand to cater to price conscious customers where it has inventory based model. · Operations Model: eBags maintained a system called “eBags partner network system” which helped in high degree of transparency between it and vendors. Inventory levels were updated on real time basis in it by vendor so that only orders can be made only for available products. Also incorporated “vendor scorecard system” that helped ine valuating vendor’s performance. Customers: · Luggage industry: In 1980s, luggage became a status symbol. In 2000s, it was seen for utility purpose as international business travel exploded in new global economy. · Footwear industry: Consumer market was divided into 3 segments: womens, men’s and children’s. Personal consumption of footwear was 15% of total apparel spending with women spending 80% more than men. In early 2000s, consumer price sensitivity increased. · European Market: Customers are craving for variety and people interest across the country varies. Like, Germans like functionality, French and Italian like style, color and seasonality, British look for mix of function, value and quality. 190mn internet users exist in Europe. Context: · Luggage industry: The US luggage industry is fragmented with wide range of products and producers. High end of market consisted of branded products. Low end of market consisted of private label and unbranded products. · Footwear Market: In 2003, footwear industry is 3 times larger than luggage and travel industry. It is also fragmented industry like footwear. The market was also seasonal with peak sales during Back-to-school, Christmas and Easter periods. · European Market: European luggage market is highly fragmented. Most European retailers are small, family run stores with limited selling hours and less diverse products. Competitors: · Luggage market: Few competitors exist with significant market shares like Samsonite, American Tourister, JanSport and Eastpak. Retail market is also fragmented with retailers ranging from department stores, discount stores and manufacturer owned stores. · Footwear Market: Nike, Jones Apparel, Reebok, Timberland and Brown shoe. Among these, no one holds market share more than 8%. Problem Definition: In the present scenario, competition has increased to due to other e-commerce companies like Amazon etc and the business is almost in the saturated form. For future sustenance, company needs to adopt a growth strategy. Now, the business is facing problem of whether to go for geographic expansion or for product expansion i.e whether to expand into European market or to enter into footwear product. Each strategy is posing with a separate set of challenges. Alternatives available for expansion: 1> Expansion into US Domestic footwear industry 2> Expansion into European Luggage Industry The Evaluation of Alternatives can be done based on the following criteria (The current business is also evaluated along with other options to establish a comparison): Criteria US Luggage business US Footwear business European Luggage business Market Size $1.28 billion in 2000 $40.7 billion in 2003 $17 billion in 2004 Industry Type Fragmented Fragmented and Seasonal Fragmented Price Competition No Yes May be yes Breadth of products requirement Yes Yes Yes Customer Loyalty - High - Any New Acquisition requirement No Need a new acquisition May be No Problem with Company Name No Yes No Challenge of acquiring Relationship with Vendors Absent Absent Present Divergence in requirements by customers Low Low High (Varies from country to country) Languauge Barrier No No Yes Online Usage Exists Exists Very High Product return rates(pertaining to the trial requirement) Low(6-7%) Very High(25%) Probably Low Comparative Data by Product Category (Exhibit 5) Product Category Avg. Purchase Frequency Avg.Return Cost(%) Sum Model Count Sum SKU Count Avg.Selling Price Avg.Gross Margin Product Life cycle Product return rate Bags(All) 1.11 14.26 4029 9305 $55.60 48.4% 3.45 years 7% Shoes 1.23 9.87 3123 92218 $68.00 48% 0.25-0.5 years 25% Calculation: Considering AverageReturn cost is calculated as a percentage of Cost : Ø Shoes: Selling Price = $68.00 Gross margin = 48% So, Cost Price = $35.36 Product return probability = 25% Cost incurred in returning back = 9.87% * $35.36 = $3.49 Ø Bags: Selling Price = $55.60 Gross margin = 48.4% So, Cost Price = $28.6 Product return probability = 7% Cost incurred in returning back = 14.26% * $28.6 = $4.07 · Though the cost of return per bag is higher, the frequency of returns is higher for footwear Way Ahead: eBags should expand its Business into the European market. Reasons why it should expand its Business into the European market: · eBags would have an edge as a first mover as most of the bag retailers were small family run stores that offered less diverse product line · International travel had increased, and customers were not satisfied – High demand available in the European market · eBags has the capacity to cater to their wide breadth and depth demand of bags in terms of functionality, design, colour etc. · Increased levels of internet users in Europe – 190 million Internet users in Europe vs the 165 million Internet users in US · The internet usage rate in Europe also is increasing at an internet penetration rate of 50% - Internet users would not drop, that increases the potential for eBags · Untapped European market space – eBags could build significant relationships with European vendors as no online retailer has done so(first mover advantage again) · This could effectively enhance their distribution channel and reduce fragmentation – an opportunity for them to gain more loyal customers in addition to better opportunities of private labeling · Challenges like language barriers with packaging and labeling, shipping requirements, brand awareness, maintaining interfaces and web page administration are all costs while a business goes global that should not been seen as a hindrance · The average gross margin is 0.4% more for expansion into Europe rather than Reasons why it should NOTgo for a product extension into footwear: · Brand name would get diluted – eBags as a company that sells footwear can confuse customers; Changing the name in accordance can dilute the brand awareness that is present for eBags currently · Footwear has high returns - This would increase their shipping and transaction costs · Higher returns could also mean an inventory pile up which is totally against eBags’s strategy – Supply chain management would get more complicated · The cost price per unit of shoes are higher compared to that of bags- The high returns that might result in inventory pile up might result in lesser flexibility in cash flows · Lesser flexibility in cash flows can hinder eBags from providing seasonal discounts and offers ( as part of cost cutting) that can attract more customers · Footwear industry is already highly competitive and fragmented – If brand is not established in terms of footwear, the brand awareness of eBags might also fall · The customers of footwear are price conscious people and those who prefer to try their shoes before buying – The result of this is high returns observed in footwear Plan B: In order to capitalize on the expected rapid expansion of online retailing in Europe, eBags planned on considering business expansion into Europe. However there are a lot of challenges involved in bringing the eBags business model overseas. Language barriers associated with packaging and labeling and currency exchange issues, shipping requirements, brand awareness, maintaining the EPN interface, and Web page administration seem to pose problems in gaining trust among customers. Although private label brand might lead to increased gross margins to the retailers it has a problem that it does not get advertised nationally and so the brand recognition might be extremely low. As a contingency plan, e-bags shall joint venture with another company who is already an established player there and therefore gain brand awareness and consumer trust with its private labels. Private labelsare generally perceived as better price/value to the consumer. The joint venture can further help in problems like taxes and other local rules and regulations, language barriers and other cultural differences that might dictate consumer tastes and preferences. Following up with the trends of the European market for a few years initially as a joint venture will help e-Bags to use the online store economics and sell bags through e-commerce in the coming years. This model would further reduce reliance of e-Bags on its suppliers of the drop ship model. Through a highly personalized value-added service, critical parts of the customer information can be stored on eBag’s database. Further, this will enable marketing correspondence and better targeting of product and service offerings.
1. Key Issue: CCD holds the largest market share of 60% in the coffee market. It majorly targets young population in the less than 30 age group. It achieves operational efficiency by keeping most manufacturing in-house and managing efficient expansion and staffing. It is no facing competition from global retail chains like Starbucks which faced a great initial response on introduction in India, with its flagship store generating twice the revenue earned but CCDs best store in spite of concentrating just top 5-7 % in terms of income. The challenges to growth: high rent, attrition, keeping customers engaged and keeping traffic throughout the day. We have analyzed the three possible next steps for CCD through the analysis of their retail strategy, 7 P analysis, STP and quantitative analysis. 2. Analysis of strategies adopted by Café Coffee Day and its competitors Retail Strategy Analysis Category and Merchandise management Café Coffee Day Starbucks Merchandise offering Cold & hot coffee and tea in different variants An equal mix of International & regional cuisines & desserts Coffee cups, t-shirts, bags etc. Cold & hot coffee and tea in different variants More of International cuisines and a few regional ones as well Coffee cups and Coffee beans only Degree of localization Relatively higher, which reflected in their menu Indianisation of Western dishes Some degree of localization in menu, still geared towards tourists and well-travelled Indians Pricing Lower than its competition, reflecting the affordable luxury image Premium-priced (Rs.125 for a sandwich at Starbucks vs Rs.85 at CCD ABV Rs.175 (2004) Rs.450-600 Store Operations Café Coffee Day Starbucks Store size & location 800-1000 sq. ft. stores in urban areas with a large youth population like, on corporate campuses, high streets, education institutions, malls etc. 1700-2000 sq. ft. stores at premium shopping locations and expensive high streets. Store aesthetics & Service-level The store itself reflected the youthful aesthetics but focused more on functionality. No as such personalization & customization in service was offered in general. Larger and Lavish stores with a chic & artsy aesthetic. Higher service levels with layers of personalization and better-trained personnel Customer loyalty Very high given the affordable price point and the brand image it had among its customers. In 2004, 60% of customers visited CCDs at least twice a week Relatively low, popular among travellers and not very affordable for average Indians to visit regularly Retail model- Company owned/Franchise Company-owned stores to maintain control and consistency in quality which can be compromised in a franchise based model Owned/Rented by the JV – Tata group and Starbucks India. Quality control to maintain very high service levels. Supply Chain management (Sourcing/logistics) Café Coffee Day Starbucks Sourcing raw materials Coffee beans procured from their own plantations (enough production that they export) Beans are majorly sourced from Tata coffee plantations (synergy of the joint venture) Manufacturing (roasting, blending) All the manufacturing activities being in-house gives good supply side forecasts and less variability Most of the roasting activities managed by Tata Group. Blending is in-house for consistent quality & taste Inventory control & flexibility Vertical integration and a huge number of stores across India give them a higher control on inventory levels. Excess inventory can be sold off as packaged beans in multiple retail formats. Flexibility & economies of scale is leveraged The focus is primarily on the revenues owing to premium pricing hence higher inventory is acceptable to ensure superior product availability across its multiple stores in major cities. Not as flexible and to enhance economies of scale the firm is looking for fast expansion (many more stores) Segmentation, Targeting and Positioning Particulars Café Coffee Day Starbucks Our recommendation for CCD Segmentation CCD has segmented the market into primarily 4 kinds of consumers on the basis of demographic and psychographic characteristics; i.e. The typical youngsters (Age 15-30), the upper middle class (Age 28-36), The no hassle consumer who doesn‟t have time for any kind of experience, and is only interested in getting good, hygienic food at an affordable price, and coffee connoisseurs with a taste for exotic coffee. Starbucks primarily looked at the upper segment of the market, mostly working professionals above the age of 25, who had higher willingness to pay, and appreciated ambience and aesthetics apart from the tangible product/service We recommend similar market segmentation for CCD. Targeting CCD targets all 4 segments by different product/service offerings. It caters to the youngsters with lower WTP with its Café coffee day cafes across different cities, whereas people who don‟t care about the ambience and want to have a quick bite are catered to by the Xpress kiosks. The upper middle class, working professionals are catered to through the CCD lounges with muted colors, better furniture, softer music etc. Further social elite were targeted through the CCD Square Starbucks primarily targets the upper middle class, who don‟t mind spending an average bill of Rs600 per visit, and who give immense value to the experience of coffee drinking. However, Starbucks is making sure that as Indian consumers are price sensitive, they don‟t overprice their products too much, and keep them as close to the WTP of their TG as possible, reducing the consumer surplus Using the 20:80 rule, CCD should focus its energies on 2 primary segments, its primary customer base, that is the youngsters, and the more privileged, working professionals. They can introduce a new brand to reposition its image, apart from being a value for money, low cost café. This would help them cater to both the consumer segments, as the lounge and square segments give them 4x-7x revenue Positioning As a value for money option for having a quick bite or meeting a friend/family, becoming a third place, after home and office As the ultimate coffee drinking experience, with personalized attention given to each customers, and a social status upliftment. For the premium segment, CCD should position itself as a direct competitor to the Starbucks experience, by further training their staff for a more personalized service and experience for their consumers. This would mean an overhaul of the entire ambience, lighting and music of the café. 7P Analysis 7Ps CCD Starbucks Product Coffee sourced from own plantations Local Coffee brand sourced from TATA Place Prime locations in urban areas along with tier „b‟ and „c‟. 1496 stores in total. Prime Locations, 11 stores currently. Price Relatively Low (Rs.66 for cappuccino) because of self-backward integration (Bean plantations to roasting). Aggressive (Rs.99 for cappuccino) to project a premier brand image. Promotion Youth-oriented promotions (Ticket selling of rocks concerts). Popular films and TV scenes filmed to target specific audiences. They sold the idea of “ A lot can happen over Coffee” Superior customer service helped in word-ofmouth publicity. They believed in selling the “Starbucks Experience” People Employees from small towns who are unable to connect to customers were trained in a residential hospitality college. Attrition rate was lower for these employees plus better training of the employees facilitated a better service for the customer Heavy investments were made in hiring of talent, including the café staff. Employees were called as Partners which gave a sense of belonging to the brand and hence the service offered by the staff at the store was excellent. Processes CCD focused more on delivering appropriate and satisfactory service to the customer. Starbucks sold a unique coffee drinking experience through its impeccable personalized service. Physical Evidence Internally Sourced furniture and fixtures. Bright red colored logo to give a jazzy and young look. Great Ambience. Earthy Pastel Colors gave the store an elegant and elite look 3. Quantitative Analysis According to Exhibit 9, 65% of Indians are in the age group 0-25. Because of this, we think it is most appropriate to focus on the youth segment for revenue growth. 4. Decision Options and Recommendation: For Coffee Day the ability to tap into youth clusters in tier-2 cities gives them an easier way to grow rapidly, multiplying their stores. For Starbucks, the clusters are much more limited, even with the TATA backing for rent contracts, the pricing and positioning is not as ideal for rapid expansion (US levels). The inability of Costa Coffee and Barista Lavazza to compete with CCD on their retail presence, even so after readjusting their pricing and menu is testament to the nature of market and where majority of potential next-gen Coffee drinkers lie. Some options are:- 1. Slight Course Correction: This would mean to continue with the current growth, fix operational issues and wait how market shapes up in future. 2. Aggressive Course Correction: Keep focus and expand CCD lounge and CCD square to compete with Starbucks and keep the status quo for young segment. 3. Create a separate brand for premium customers: Adopt a differentiating strategy and cater to both the segments i.e. premium and young. Establish a new premium brand which will include CCD lounge and CCD square to compete with Starbucks. On the other hand sustain the growth and keep on catering to young segment through original CCD cafes. These options can be evaluated on the basis of certain criteria namely - Growth in premium segment, Growth in youth segment, Customer satisfaction level, Employee satisfaction level, budget and time. In option (1), the action taken doesn‟t take any additional initiates to cater to premium segment. This may even dilute the brand image. Similarly option (2) suggests aggressive strategy for both the target segments. This may give inconsistent messages and might create a confusing message in customers mind. But in option (3), CCD can focus on both the segments simultaneously. A separate premium brand will allow CCD to compete with Starbucks without compromising the youth segment. However, the premium segment which is high-margins, lower volumes in major cities, present retailing challenges for the Indian Coffee major which needs them to rediscover their retail management strategy from its very core. Some of the changes that we propose: Innovate on the merchandize mix by introducing more youth focused drinks; As Starbucks has focused on the personalization element by writing customer names on the cups, CCD can work on drink customization to differentiate itself. To increase the ABV, while focusing on the youth segment, CCD should release bundles where drinks are packaged with food items. This is in addition to the small combo offerings they already have. The new retail outlets that focus on the premium segment, should be opened in catchment areas with high income density The store layout that can be followed for the premium lounges should be the “Free-form layout” to maintain an image of premium luxury
Study of 4 Ps for a Brand-Product combination
A report for 'Kingfisher' based on the items given below: 1.Sum-up the brand promise offered. 2.What brand elements are the most useful for differentiating 'Kingfisher' from competing brands? 3.Which aspects of product differentiation are the most valuable insetting the brand apart from its competitors? 4.How does the brand use packaging and labeling to support its brand image and help its channel partners sell the product more effectively? 5.What are the current pricing objectives of the brand and what price adaptations (such as discount allowances and promotional pricing) does the brand include? 6.How does the pricing strategy of the brand differ from its competitors? 7.What are the current distribution channels and levels adopted by this brand and does it require any addition/deletion of the channels or levels to improve its distribution strategy? 8.What are the communication objectives for this brand to reach its targeted segments? 9.What are the communication media adopted by the brand and do these match with the brand’s communication objectives? 10. What are the consumer promotion and trade promotion, if any, being offered by the brand?
Sales & distribution management - Apparel Industry
Sales & distribution management - FMCG Non eatable