E-Retailing Plan for Made-To-Order Athletic

E-retailing Plan for Made-to-Order Athletic Shoes

Made-to-Order Athletic Shoes e-Retailing Plan

Brand, Product and Service offering

Situational analysis

Existing plan and other information

Analysis Models

Boston Consulting Group Model

e-retailing metrics

Situational Summary

Revenue streams

Market opportunity analysis

Segmentation & Target

Brand differentiation

Market positioning strategy

Market/partner distribution strategies

Distribution

Communication

Implementation plan

e-retailing mix (7C's)

product/service offer

Pricing strategies

Distribution/supply chain

Integrated Marketing Communications

Relationship management

Organisational structure/integration

Implementation Summary

Budget

Revenues

Budget comments

Evaluation and control

Contingency plans

Monitoring procedures

Overview

The growth of mass customization as a strategy for more closely aligning product strategies with the specific needs of consumers has been shown to increase the potential for greater profits and the ability to create higher levels of customer loyalty over time. The propensity of mass customization strategies to alleviate the inhibitors to consumers becoming more loyal to companies over time is accentuated and strengthened by e-retailing and online product customization selling strategies (Salvador, de Holan, Piller, 2009). The connection between customer loyalty generated from solidly executed mass customization strategies and the success of e-retailing strategies to stay relevant to consumers over time is the basis of the analysis presented as the foundation of this e-retailing plan for a line of build-to-order athletic shoes.

For e-retailing strategies to succeed in mass customization market arenas there must be support for multiple channels, often called multi-channel management, integration of e-retailing applications flexible enough for customers to personalize yet robust enough to scale globally, and tight integration of the e-retailing systems with supply chains (Leonard, Cronan, 2003). On this last point the critical need for e-retailing systems and strategies to be supported by catalogs containing the specific product attributes of those products being customized and tight integration with pricing systems has proven critical (Ba, Stallaert, Zhang, 2007). What emerges from this plan for a line of build-to-order athletic shows is a highly synchronized series of systems that include e-retailing Web-based front end systems, catalogs and product data management (PDM) systems that serve as the foundation of the product configurator, and integration to pricing systems to ensure profitability is achieved. All of these systems working in conjunction with each other and the real time integration they require are one of the most difficult constraints for e-retailing strategies to overcome (Hofacker, 2008). Yet if this level of interprocess system, strategy and role-based integration can be achieved, e-retailing strategies have been shown to generate significantly higher levels of trust and revenue over time (Jin, Park, Kim, 2008). All of the effort in other words is worth it. Creating a line of build-to-order athletic shoes customers can order 24/7 over the Web is entirely dependent on how well an e-retailing strategy is executed and maintained over time.

2.0

Brand, Product and Service offering

Athletic shoes is an industry that continues to face significant consolidation over time, as industry leaders Nike and Adidas continually dominate this industry globally. The global recession and the resulting drop in discretionary income has forced the consolidation of this industry, and led to a fragmentation of competitors globally. Figure 1, Global Market Share by Athletic Shoe Manufacturer, provides an analysis of how fragmented industry has become with 74.5% of total sales from manufacturers smaller than Timberland, who has a 1.5% market share, generating $1.3B in revenue (IBIS Research, 2009).

Figure 1: 2008 Global Market Share by Athletic Shoe Manufacturer

Major Player

Market Share Range

Nike, Incorporated

12.0%

Adidas AG

9.0%

Jones Apparel Group, Inc.

3.0%

The Timberland Company

1.5%

Other

74.5%

Source: (IBIS Research, 2009)

As this industry is characterized by heavy price competition and intensely competitive distribution channel strategies, the use of e-retailing as a differentiated selling strategy is critical in this market. Due to intensive price cutting and the majority of manufacturers lacking innovation in their product designs with the exception of Nike, the industry has continually contracted over time. This contraction of the market is leaving many strategically important areas of the industry wide open for innovation and growth. Paradoxically the majority of manufacturers are not addressing mass customization through e-retailing, choosing instead to sell what is produced in large quantities in their manufacturing centers, often called make-to-stock inventory positions (Leonard, Cronan, 2003). This commoditization of product feature sets in conjunction with pricing being used as the differentiator of choice leads to an increasingly fragmented market that relies on e-retailing not for delivering an exceptional online shopping experience, but to push product out at significantly reduced prices. E-retailing has become a strategy for quickly moving end-of-life shoes at low prices over the Internet. This strategy, while industry-wide, leaves significant room for opportunity in creating a line of athletic shoes sold entirely over the Internet, completely customizable.

This dichotomy between the full potential of e-retailing and the uses of it today in athletic shoes is the basis of Eleftria Athletic Shoes. Eleftria will capitalize on the very large disconnect between what a mass customization strategy for shoes combined with an effective, globally-based e-retailing strategy can accomplish. By concentrating on capitalizing on this paradox, Eleftria Athletic Shoes can get beyond selling only on price and availability, and create a unique purchasing experience online for its customers instead, where each customer can customize their shoes and have them within 7 working days. Mass customization thought leaders have often commented that the e-retailing process as it applies to consumer durable products can be easily transitioned from a transaction to a purchasing experience (Pine, Gilmore, 2000). That is the essence of the unique value proposition for Eleftria Athletic Shoes, to transform the athletic shoe process online through e-retailing into a shopping experience instead of merely being a transaction.

3.0

Situational analysis

The intent of this section is to use analytical models to evaluate the potential for Eleftria Athletic Shoes to gain market share in a declining market using a highly unique value proposition and transforming online purchasing from a transaction to an experience. The most comparable program today is from Nike and their NikeID Program, designed specifically to circumvent Wal-Mart's insistence that their highest end shoes be cost-reduced to be sold through the company's over 500 stores in the U.S. And over 60 stores globally. Nike pioneered the mass customization of athletic shoes with NikeID, and today has seven different language variations of their website and e-retailing applications. English, Spanish, French, German, Italian, Chinese and Korean are all supported today on the site. This is the most formidable competitor to Eleftria Athletic Shoes today. Nike has successfully used NikeID as a site for transitioning away from competing purely on price and transactions to creating a unique purchasing experience, hence the success of the site. By allowing its customers to have a fully collaborative experience online, Nike is creating even greater loyalty than just their brand alone would provide. This aspect of e-retailing that invites a high degree of customer interaction and collaboration also signals a fundamental shift in the balance of power between consumers and manufacturers (Moynagh, Worsley, 2002).Adidas, Converse, K-Swiss, Timberland and regional shoe manufacturer Van's located in California also have e-retailing strategies in place, yet NikeID is the most comprehensive and integrated with Nike's pricing, catalog management, manufacturing, and fulfillment systems globally. Eleftria Athletic Shoes intended to focus on men's and women's casual and athletic footwear. The market positioning Eleftria will rely on is capitalizing on cross-over of shoes for casual use and also athletic use.

3.1

Existing plan and other information

As Eleftria is a start-up, there is no existing plan. The industry-wide data presented throughout this report comes from the literature review prior to its development.

3.2

Analysis Models

The Boston Consulting Group Growth/Share Matrix assess profitability of product markets by growth potential, hence its use in planning the development of the Eleftria Athletic Shoe product line.

3.2.1. Boston Consulting Group Model

Critically important to the development of Eleftria's product strategy is the development of cross-over products today, and the development of plans for enabling these strategies to succeed in the future. To concentrate purely on just athletic shoes significantly limits the market, and this can be seen using the BCG Growth/Share Matrix shown in Figure 2.

Evident from using this type of analysis is the point that for Eleftria to gain market share quickly, even in a declining and consolidating market, it needs to develop the e-retaining strategies it relies on to sell build-to-order shoes so it can manage orders from men, women and children looking for shoes aligned with pure-play athletic footwear first. Second, the greatest growth opportunities for the company are in tailoring through their build-to-order e-retailing strategy footwear for women's fitness, and also fitness and dance as well. Using the BCG Matrix it is evident these shoes are in the highest growth categories of the industry today. There is also significant growth in build-to-order tennis shoes that have the more advanced features that many tennis players, semi-pro and pro-players look for as well. Finally the highest growth area is in highly personalized shoes. Correspondingly this is a smaller market, yet a very profitable one. This market has in fact been ignored as price wars have broken out throughout the casual apparel, soccer and golf segments.

Figure 2: Using the BCG Growth/Share Matrix To Evaluate Eleftria Market Opportunities

Star Products

Question Marks

Cash Cows

Dogs

Source: (Anantachart, 2004)

3.3

e-retailing metrics

The e-retailing objectives for Eleftria Athletic shoes and their plans for attaining them are defined here. The first objective is to create an e-retailing strategy that capitalizes on multi-channel management, meaning that e-retailing site will be accessible over the Web, through specialized interfaces on Blackberries and PDAs, and also will have telephone ordering as well. The second objective is to create a completely integrated e-retailing system that connects to pricing, catalogs of shoe components, suppliers to validate the shoes being designed can be built, and shoe costs to ensure when compared to pricing the can be produced at a profit. This back-end system integration needs to be real-time as it allows for greater levels of responsiveness to the customer has a result. The third objective is to create a comprehensive dashboard of metrics to measure performance of the e-retailing plan over time.

The strategies for promoting and keeping the e-retailing plan in front of customers include the use of Google AdWords Advertising, Yahoo Overture and additional online search-based advertising strategies. In addition, there will be blogs created specifically to promote Eleftria Athletic Shoes, a Facebook and MySpace page created, and Twitter accounts also set up to promote the shoes and their customization.

Metrics used to evaluate these strategies will include click-throughs and Cost Per Click as defined through the Google AdWords programs, the level of repeat vs. new users to the e-retailing site, percentage of visitors who complete and save a configuration of their shoes, and percentage of visitors that complete the purchase of shoes online. The metrics will align with the sales funnel for these products.

3.4

Situational Summary

Using the BCG Matrix it is clear that despite the consolidating nature of the footwear market, there are still opportunities for growth. Considering the higher growth market areas and defining unique and highly differentiated e-retailing strategies will yield more positive results than competing on price or availability alone. There is also the need for Eleftria to concentrate on how to create strategies that align to each phase of the sales funnel and then measure their progress through the sales process online. All of these efforts must also be evaluated by the extent to which they provide positive experiences for customers as well (Pine, 2004).

4.0

Strategies

Eleftria's e-marketing strategy has three foundational elements and these include attracting new customers, selling them customized shoes, and providing automated service through the Web. The e-marketing strategies will concentrate on the use of social networking to generate awareness including the use of a Facebook application, MySpace page, Twitter accounts and lots of blogging to drive up Search Engine Optimization scores. The e-marketing campaigns will also concentrate on events aligned with extreme sports, as this market segment is growing. Sponsoring independent bands and events that appeal to extreme sports fans and tying these together with microsites that will lead prospects to the online configurator are all part of the e-retailing strategy of the company.

4.1

Revenue streams

The dominant e-retailing stream for Eleftria is pure-play casual footwear, as this is the Cash Cow of the entire industry. Allowing personalization of these types of shoes, in addition to women's fitness, tennis and extreme shoes will create a new market segment, all in the high growth/high market share area of the BCG Matrix. All of these segments taken together will be the foundation of the unique market Eleftria hopes to create as well,

4.2

Market opportunity analysis

Beginning with the unmet customer needs, Eleftria will concentrate on how best to deliver build-to-order athletic wear that corresponds with the highest growth market areas of the industry as shown in Figure 2. These needs can be met, even though complex can be met through the use of e-retailing strategies combined with an online configurator. The use of product configurators online specifically in these markets has been pioneered by Nike and their development of NikeID. This has validated that the combining of e-retailing strategies and product configuration to deliver build-to-order flexibility to shoe purchasers is a valid and growing market. In addition, using an e-retailing strategy to create entirely new markets in the high growth areas of this industry is possible as well.

4.3

Segmentation & Target

The target market is men and women who want to have customized casual footwear (62.5%) of the market.

Product/Services

2008 Share

Men's (includes athletic & casual) footwear

50.0%

Rubber and plastic footwear

20.0%

Women's footwear (includes athletic & casual)

12.5%

House slippers

7.5%

Protective footwear

5.0%

Other footwear

5.0%

Source: (IBIS Research, 2009)

4.4

Brand differentiation

Eleftria will seek to create brand differentiation through the unique product customization offered through their e-retailing strategy. Aligning with extreme sports events, getting customer testimonials on their website, and creating a social networking strategy will all contribute to brand differentiation. Eleftria in Greek means freedom, and much will be made of the concept of freedom to get the shoes you design for yourself.

4.5

Market positioning strategy

Eleftria will seek a higher end market positioning strategy, yet at 50% of the cost for a typical pair of shoes custom-designed on the NikeID website. This e-retailing strategy will stress the concept of value delivered being exceptional compared to the many other competitive channels for purchasing shoes.

4.6

Market/partner distribution strategies

Distribution strategies are primarily Web-based with partnerships for link sharing and also cross-banner advertising sharing programs. There is also a commitment to create more distribution outlets with the use of kiosks in malls and shopping centers, connected to the main configurator through WiFi.

4.7

Distribution

As this is an entirely online business, there is no actual distribution outlet. Partners who also have websites and provide cross-linking may lease a kiosk for use in their stores and get a percentage of all business sold on the kiosk every month. The positioning of this concept centers on providing retail customers with the opportunity to get higher-end, customized shoes while not having the retailer need to stock a completely separate product line as a result.

4.8

Communication

Te communication plan will focus on the use of social networking to attract customers online in Australia, throughout the UK and the United States. The unique positioning of Eleftria as being a company that gives you the freedom of self-expression will also be portrayed throughout all online promotions and programs. Heavy use of social networking including Facebook, MySpace and Twitter will be used as the primary means of communication.

4.9

Strategy Summary

What is evident from analyzing this market using the BCG matrix is that there is significant revenue potential for a build-to-order show provider online that relies on e-retailing strategies in conjunction with a product configurator. The strategy concentrates on clearly and empathically communicating the freedom that Eleftria's shoe buying experience providers to men and women in Australia, the UK and the U.S. As this is an entirely Web-based business, partnerships will be used to drive traffic to the site, and e-retailing will focus on event-based marketing to gain awareness and eventually customers in the extreme sports market.

5.0

Implementation plan

The intent of this section is to define the e-retailing mix, product and service offer, pricing strategies, distribution and supply chain considerations and Integrated Marketing Communications strategies as well. In addition, relationship management and organizational structure is also defined.

5.1

e-retailing mix (7C's)

Eleftria plans to provide customers with strong value across the 7Cs of e-retailing. Beginning with convenience, the reliance on an entirely Web-based experience makes it possible for them to order shoes of whatever type on a 24/7 basis. Second, the customer value of this unique approach to selling shoes gives Eleftria customers a unique statement as to who they are. Third, the costs associated with the program allow for Eleftria customers to get a price break on their shoes relative to having them entirely hand made. Fourth, by its nature build-to-order e-retailing is collaborative and invites the customer into the process. This ensures a higher degree of customer loyalty as a result (Wang, Head, 2007). Fifth, the need for very tight integration of supply chain, pricing, order management and front-end product configurator systems with the e-retailing system is critical for customers' expectations to be met and exceed. This is the essence of successful computer and category management and for Eleftria to excel this must be completed prior to launch of the company. Sixth the customer franchise of Eleftria is highly unique and concentrates on creating a shopping experience where the customer is completely in charge. This shift to customers driving the purchasing cycle often leads to higher levels of trust and loyalty over time as companies execute on the commitments they make (Dholakia, Uusitalo, 2002). Seventh, what is most critical is the need for customer care and service online to match the experiences of initially purchasing and getting the shoes. For Eleftria this means ensuring that the system integration supporting the e-retailing site and product configurator are real-time and also fault tolerant to ensure 24/7 operation.