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BURT'S BEES: CASE STUDY
Burt's Bees was all set for tremendous success in 1997 when it was making around $6-$8 million in revenues each. The product line had been efficiently pruned in 1994 to keep only the skincare products in order to be able to compete in one niche market. The company had already made an entry into foreign markets of Europe and Japan. The company had been making sales through direct sales. For examples in 1996, one show on QVC helped Burt's Bees make $30,000 in short 30 minutes. With 70 earth friendly products, which were all natural, Burt's Bees had found success in the niche market of natural personal care products.
Despite its tremendous success with only 20 employees in 1997, Burt's Bees had one big dilemma to resolve. Should it enter the retail market? And if not, how can it bridge the gap to reach $25 million so the business could be sold to a serious buyer some time in future?
The retail experiment had not looked very promising to Roxanne Quimby, the president of Burt's Bees. She had tried to open a store in North Carolina only to find that a whole day's work had resulted in only $400 in sales. The company had made $30,000 in 30 minutes through QVC. Quimby believed that retail experiment could allow the company to stay in closer touch with the end users of the products. But if retail did not allow room for another entrant in natural personal care products. Burt's Bees could face major problems.
Quimby knew that retail market was already well saturated in personal care sector. There was no serious dearth of natural personal care manufacturers including such big names as the Body shop, origins, Bath and Body works etc. All these companies had been working hard to win greater market share and they all claimed to be "all natural." This left Burt's Bees with very limited choices.
If it chose to stay in manufacturing alone without retail experience, Burt's Bees still had very tough competition to face from very big names in personal care manufacturing namely Jergens. Johnson and Johnson, Amway etc. As they had been making products that were all natural in order to maintain their market dominance.
The reason Quimby wants to increase sales is because it needs to reach the target of $25 million in annual revenues because if it doesn't reach that mark, no one would be interested in buying the business which is eventually what Quimby would want to do. The company had been making significant profits as its margin was 35% of the sale price. But in order to reach the $25 million mark, Burt's Bees needed to do something new and find some new sales avenue since it had already exhausted the channel of direct sales.
When it came to departmental and super stores, there was no room for a new entrant or at least that's how it appeared because stores appear to have no shelf space left for new products. The main competitors have either gone the departmental or super store route or the more exclusive ones have their own retail stores in malls.
Every other mall in the country has an Origins and Bath and Body works store which shows how these competitors have selected the retail route to increase their sales. They are now well established in the retail business as well. Burt's Bees on the other hand still has to carve an alternative sales route for itself in order to improve sales. The main problem now is which route is the best one if it's not retail and if retail is the answer, how Burt's Bees will beat the competition?
Burt's Bees wants to go beyond direct sales so it can improve its sales. It has the following alternatives available:
a. Website and Internet
It is true that website is indeed another avenue for direct sales but it has much wider appeal and approach than conventional methods like television shopping networks. Internet can be easily accessed by even those who are at work or busy with other daily activities. They can come online anytime they want instead of at a particular hour and place an order. Emails can be regularly sent to those who choose to subscribe.…[continue]
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