The Re-launch of Heelys India

Transcription

IRF RISING STAR CHALLENGE
Case study on Heelys Inc
By Team ISB Stars
Ankita Singh Pallavi Saxena Sangeeta Som
1|P age
CONTENTS
Executive Summary............................................................................................................................................. 4
PART I: Background ............................................................................................................................................ 4
Heelys Inc ..................................................................................................................................................... 4
Product Development .................................................................................................................................. 6
Distribution .................................................................................................................................................... 6
Marketing Strategy ....................................................................................................................................... 7
International Expansion............................................................................................................................... 8
Heelys India .................................................................................................................................................. 9
Market Analysis – Indian Footwear Market ............................................................................................ 11
Growth & Forecast ..................................................................................................................................... 11
Retail Organisation .................................................................................................................................... 13
Buyers .......................................................................................................................................................... 14
Suppliers ..................................................................................................................................................... 14
Competition ................................................................................................................................................. 14
Threat of New Entrants ............................................................................................................................. 15
Market Segmentation ................................................................................................................................ 16
PART II: Business Plan for the Proposed Re-launch ............................................................................... 17
Vision and Objective .................................................................................................................................. 17
Analysis of Original Business Strategy ................................................................................................... 18
Creating a competitive advantage ........................................................................................................... 18
Issues faced and Key Factors Behind Lack of Success ...................................................................... 19
Landing cost ............................................................................................................................................... 19
Revised distribution and pricing strategy................................................................................................ 20
Pricing .......................................................................................................................................................... 21
Lack of Support from Heelys Inc.............................................................................................................. 22
2|P age
Marketing and promotion .......................................................................................................................... 23
People .......................................................................................................................................................... 24
Low penetration of internet shopping ...................................................................................................... 24
Cultural factors ........................................................................................................................................... 25
Limited market research and identification of Target customers ........................................................ 25
Recession ................................................................................................................................................... 26
Proposed Strategy for the Re-launch...................................................................................................... 26
Marketing..................................................................................................................................................... 26
Operations................................................................................................................................................... 27
Supply Chain .............................................................................................................................................. 28
Distribution ChannelL ................................................................................................................................ 28
Data Collection ........................................................................................................................................... 28
Organising Training & Sales Meet ........................................................................................................... 29
Human Resources ..................................................................................................................................... 29
Financials .................................................................................................................................................... 30
Porter’s Analysis of the India strategy .................................................................................................... 32
3|P age
EXECUTIVE SUMMARY
In 2007, Heelys Inc. (“Heelys”), a US maker of branded roller shoes, entered the
Indian market via an independent local distributor, granted exclusive distribution
rights across India. The distributor, an entrepreneur from Chennai, purchased an
initial stock of 500 pair of shoes from Heelys and hoped to successfully introduce his
distinctive product to the growing Indian market.
The reality of retail in India – negotiating with large Indian retailers on one hand;
customer price expectations and resistance; and import duties, among other factors,
all combined to offset the initial progress made and in 2009, after having sold just
400 pairs of shoes, the Indian operations was shut down.
This paper examines why the combination of a seemingly attractive market and a
proven product did not result in a winning formula for the Indian market. It goes on to
offer a re-structured strategy which Heelys could use should they decide to pursue
the Indian market again. With the slowdown in US consumer spending over the last
three years and a subsequent drop of 19% in consolidated (national and
international) profits, it is timely to explore options in emerging markets again.
PART I: BACKGROUND
HEELYS INC
Heelys is in the business of designing, marketing and distributing branded and
patented wheeled footwear, which incorporates a single removable wheel in the
heel. This allows the product to facilitate walking, running and rolling (see Exhibit 1
overleaf for selected images of the product and its functionality).
4|P age
EXHIBIT 1: HEELYS: THE PRODUCT
5|P age
According to Heelys:
“We believe our products appeal to a broad range of young, active consumers
around the world who enjoy wheeled sports activities. The primary market for
HEELYS-wheeled footwear is five to fourteen year-old boys and girls.”1
PRODUCT DEVELOPMENT
The idea for a shoe with a wheeled heel was conceived by psychologist, Roger
Adams, who, at the age of 9 months had entered the Guinness Book of World
Records for becoming the youngest person to learn how to skate. It was not until the
age of 47, however, while watching children skate along the beach that he was
struck by the idea to create a shoe which could turn into skates by shifting body
weight.
By 2004, the company had eight US and international patents to mitigate the risk of
copycat products. In 2005, it earned a place as the ‘Best Skate Sneakers’ in the
second annual Reader’s Digest “America’s 100 Best” list.
Heelys introduced a number of sub-brands. In 2002, it took over the Soap shoe
brand, a product which allows wearers to slide along surfaces via replaceable plastic
soles and re-launched with Heelys signature colours and style. It also introduced
hybrid between Soap and Heelys and sold it under the Axis brand (now defunct).
Currently, Heelys classify its products under Classic Heelys, Hx2 (with two
removable wheels tow provide extra stability and Nano (with an inline footboard to
facilitate tricks).
DISTRIBUTION
After successful creation of a prototype, Adams founded Heelys Sports Limited in
2000. The product was a success from the initial launch and it sold out within hours
of its first display in small retail outlets. In 2001, Heelys secured distribution at two
1
Heelys 2010 Annual Report
6|P age
large retail chains – Mervyns, a department store with 187 stores in 10 states and
Sports Authority, America’s largest sporting goods retailer with 400 stores in 45
states.
To this day, Heelys follow a strategy of offering their product through selected
distribution channels comprising full-line sporting goods retailers, specialty apparel
and footwear retailer. They also sell online exclusively via amazon.com and
zappos.com.
MARKETING STRATEGY
From the beginning, marketing spend has been limited and instead Heelys has relied
on a universal marketing strategy of controlled distribution and growth to create an
exclusive, trend-setter, brand. It had deliberately avoided mass retailers such as
Walmart, which would be inconsistent with its brand goal to maintain some
exclusivity and mystery around its product. Accordign to Heelys 2010 annual report:
“Our marketing strategy is to position our products and the HEELYS brand to
represent a lifestyle that allows our consumers to have Freedom and Fun with
the sense that they are Fearless, providing them a sense of excitement and
individuality.”
Despite being targeted at children and teenagers, Heelys chose a high price
bracket of 90-110 USD initially and marketed the product as sporting equipment
rather than kid’s shoes. Prices have come down since then and Heelys now retails in
the range of $40-$85 in the United States.
To compel customers to purchase at this price, Heelys bet on the trend setting
network effects among teens. It relied on grassroots marketing, an approach which
emphasizes customer’s personal experience with the brand. Heelys formed ‘Team
Heelys’ composed of hand-picked teenagers such as athletes. The company paid
them to wear and give demonstrations of the product in typical places where
teenagers hang out such as shopping malls, concerts and sporting events. The
interest this generated coupled with limited availability of the product enhanced its
7|P age
desirability. Bystanders were even able to purchase the shoes on the spot from the
performers, if they so desired.
Since the use of Heelys needs some practice, the demonstrations helped overcome
many reservations about ease of use.
Other marketing mediums, such as selected TV ads on kids’ channels, were used in
complement. The limited marketing budget also guided focus of the initial marketing
efforts to the sunny states of California and Florida where skating was more popular,
and later built up along the East coast and other states.
Other marketing activities happened without any planning on part of the company.
For example, the R&B singer Usher wore a pair of Heelys in his music video ‘U don’t
have to call’. A number of media outlets such as CNN and Sports Illustrated ran
features on the product, all of provided free publicity.
The power of the brand was such that it gave rise to a new sport – heeling.
Impromptu demonstrations of one’s skills in heeling could be seen on street corners.
INTERNATIONAL EXPANSION
Following the domestic success of the brand, Heelys were quick to move into
international distribution, first entering the Japanese market. They currently have a
presence in over 50 countries across the continents. In 2010, domestic sales
generated 28.4% of net sales.
Since they could not afford their own subsidiaries, Heelys opted for a distribution
model whereby they grant exclusive geographical rights to a local independent
distributor. These distributors generally use Heelys global marketing strategy but
made autonomous decisions on the specificities such as form and medium of
advertising, website content and events.
It was in Japan that Heelys encountered copycat cheaper versions of its product. To
combat this, Heelys introduced its own lower price sub-brand, exclusive to the
Japanese market, called Cruz.
8|P age
Over the past few years they have started to exert greater control over international
distribution. In 2008, Heelys set up a wholly-owned subsidiary in Belgium to serve as
a head office for managing operations in Europe, the Middle East and Africa and to
work more closely with distributors. In 2010, Heelys terminated its contract with its
Japanese distributor and formed a wholly owned subsidiary for the Japanese market.
HEELYS INDIA
In 2007, Heelys was approached by an entrepreneur from Chennai, at the time
working in Deloitte Consulting in New York, who was looking to introduce the product
to the Indian market as their distributor.
Since Heelys had followed similar strategy to expand in other countries, Heelys
asked for a formal business plan from the entrepreneur. Even though he did not
have direct relevant experience in wholesale distribution in India, Heelys were sold
on the Indian growth story and convinced by the high quality nature of his business
plan.
The plan outlines his vision for Heelys in India:
“The plan is to make Heelys the first mover for sports shoes and roller shoes
throughout India. I would like to help Heelys gain market share in apparel and
shoe industry across all the major metro cities in India”
“The overall approach is to capture 1% of sports shoe and apparel market in
the next 5 years”2
Three potential market penetration strategies to develop the Heelys Brand were
outlined in the business plan as shown in Exhibit 2
2
Business Plan submitted to Heelys Inc., 2007
9|P age
EXHIBIT 2: HEELYS INDIA MARKET PENETRATION STRATEGY
OPTIONS, 2007
Expansion Model I – Mid Size Retailing
This model involves an in-depth retail trends analysis followed by short-listing
potential retailers. The actual expansion is broken down into 3 phases.
•
Phase I – Bangalore: This would be the pilot phase of the project. Given
Bangalore’s burgeoning middle class with an immense buying power and
sizeable disposable income, Bangalore was considered the ideal location to
launch.
•
Phase II – Metro Cities: This phase would involve distributing shoes to
individual retailers in the metro cities: Chennai, Mumbai, Delhi and Calcutta.
•
Phase III – Secondary Cities: The final phase would involve distributing shoes
and apparel to individual retailers in the secondary cities: Coimbatore,
10 | P a g e
Gurgaon, Pune, Noida, Chandigarh, Ahmadabad, Cochin, Hyderabad,
Bhubaneswar, etc.
Expansion Model II – Large Size Retailing
Large retail conglomerates have entered India in a big way in the recent past. The
idea would be to partner with such large conglomerates. The advantage of such an
approach would be the mass exposure gained right away. However, this does not
give Heelys and the distributors the required flexibility to expand to untapped regions
across the country.
Expansion Model III – Independent Retailing & Tie Ups
This model involves setting up independent retail stores for Heelys and tying up with
existing large independent chains. Cross promotion of this sort has proven to be very
effective, for example, Reebok’s tie up with Bata to sell Reebok’s footwear in Bata
stores. While this is an effective model, the lack of quality retail space at
economically viable prices is a clear deterrent to this model.
Heelys granted him exclusive distribution rights with the intention to pursue
Expansion Model I. Heelys India was set up in December 2007 with the intention to
sell the initial stock of 500 pairs before purchasing more. The product was launched
in January 2008 in Bangalore.
MARKET ANALYSIS – INDIAN FOOTWEAR MARKET
GROW TH & FORECAST
The Indian footwear market has seen a growth of 18% in the recent years (20032009). This market is estimated to be over 250,000 Million Indian Rupees (MINR).
The forecasts look promising given other factors such as favorable government
support for investment, export & import conditions. It is expected to reach 500,000
MINR by 2015. The growth trends are as shown in Exhibit 3.
11 | P a g e
The Re-launch
launch of Heelys India
EXHIBIT 3: INDIAN FOOTW
WEAR MARKET SIZE (IN MUSD)
Source: AM Mindpower Solutions
With increase in brand awareness amongst ccustomers,
ustomers, the demand for organized
organi
footwear retail is on an upward swing.
The household income India varies largely due to unequal wealth distribution.
distribut
A
large population of India lies in the lower and middle class. These are households
earning less than 2 lakh INR per annum. However there is a growth in the Indian
disposable income. However, the expected growth in the number of households in
the higher
gher income bracket is expected to be much bigger compared to the growth in
the number of households in the lower income brackets. The growth in the number of
households earning 4.5 lakhs per annum is estimated to be 27% from 2011 to 2012
whereas growth in the number of households earning less than 0.5 lakhs per annum
is estimated to be 2% in the same period. (Exhibit 4)
12 | P a g e
The Re-launch
EXHIBIT 4: HEELYS: HOU
USEHOLD INCOME DISTRIBUTION IN IN
NDIA
Source: Yousigma
RETAIL ORGANISATION
The footwear outlets in India range from small dealer shops to big retail chains. The
small dealers stock local brands and few well known mid range brands such as Bata,
Liberty etc. Such dealers are common in small towns and metropolitan cities.
A few brands such as Reebok, Bata etc have multiple company owned stores in
metropolitan cities.
Multi-brand
brand outlets such as Dec
Decathlon,
athlon, Planet Sports (they also have online
shopping) cater to sports footwear and other sports accessories for all age groups.
Retail outlets such as Lifestyle, Shoppers Stop, Reliance footprints also sell sports
footwear.
13 | P a g e
Brands such as Lilliput, Disney cater to the kids segment and have their own range
of footwear.
BUYERS
Though footwear is a daily necessity, the range of products available in the market
empowers the customers to choose from a wide variety. This renders the bargaining
power of buyers to be moderate.
SUPPLIERS
Owing to cheap labor and manufacturing costs, footwear manufacturing costs are
quite low in India. They also lack differentiation in designs when compares to
western counterparts. This weakens the power of suppliers.
COMPETITION
The footwear retail in India is highly fragmented and unorganised mostly. A few big
players do exist. The Indian sports footwear is dominated by brands like Adidas,
Nike, Reebok etc.
A few leading companies:
Adidas
Adidas includes the brands Adidas, Reebok and TaylorMade Adidas Golf. Their
offerings include sports footwear, apparel and accessories for various age groups.
They have specific products for popular sports like tennis, running, basketball etc.
They also cater to fashion conscious customers by releasing special designer wear
from time to time.
14 | P a g e
Under the Reebok brand, they offer sports, fitness and casual footwear, apparel and
equipment.
The TaylorMade Adidas Golf brand offers a range of golf clubs, accessories,
footwear and apparel.
Adidas outsources most of its manufacturing activities to Asian countries to maintain
low costs.
They have endorsement contracts with celebrities from various sports.
Adidas sells through company owned stores and multi brand outlets such as
Lifestyle, Shoppers Stop, Reliance footwear etc.
Bata
Bata India Limited is a manufacturer and marketer of various types of footwear,
products related to footwear, accessories, garments, sports goods and other
merchandise for various age groups. Bata India recorded revenues of $205 million in
the fiscal year 2008.
Bata sells through distributors and dealers.
Liberty
Liberty offers footwear offers footwear, leather accessories, travel accessories,
watches, sun-glasses and jeweler through distributors, company owned showrooms
and multi brand outlets.
THREAT OF NEW ENTRANTS
Though fixed costs in the retails sector are lower compared to other industries, the
existence of big players exploiting economies of scale deters entry of new players.
However, the emergence of specialist footwear allows new entrants to start off well.
In segments such as sports footwear, there are established big players such as
adidas, nike etc. Hence threat of new entrants in such sectors is quite low.
15 | P a g e
The Re-launch
MARKET SEGMENTATION
Men’s footwear accounts for nearly 60% of the Indian footwear market. The kid’s and
women’s footwear market is about 25% and 15% respectively. (Exhibit 5).
).
India has the 2nd largest population in the world. It is the 11th largest economy in the
world and is one of the fastest growing economies, ssecond
econd only to China. The
population of kids in the age group 10 to 19 is close to 250 million in India. (Exhibit 6)
The kids segment in the footwear retail sector has a good growth potential given a
large available base and lack of kid specific footwear brands that ha
have
ve made it big in
India. A growing demand for branded footwear further helps the situation.
Overall, the probability of a well marketed quality product, targeting the right
customer base has a high probability of being successful in the given Indian setu
setup
for kids footwear.
EXHIBIT 5: INDIAN FOOTW
WEAR MARKET SEGMENTATION
16 | P a g e
The Re-launch
EXHIBIT 6: INDIAN POPUL
LATION DETAILS (AGE 0-44)
Source: AM Mindpower Solutions
PART II: BUSINESS PLAN FOR TH
THE PROPOSED RE-LAUNCH
VISION AND OBJECTIVE
The vision is to make Heely’s a leading kids’ footwear brand in India known to make
the most innovative cult and cool sports shoes. We seek to make Heely a sought
after kids’ brand by having an aura of coolness around its unique design and hence
being different
ferent from other brands.
The mission is:
•
To re-launch
launch Heely’s in India as a joint venture with an existing
footwear retail chain through a scalable & profitable business model.
17 | P a g e
To create a ‘Heely ’ buzz as part of the initial awareness and marketing
campaign.
•
To offer innovative footwear designs targeting young ambassadors in
the age group 8 to 16 & associate Heely’s with their ‘happening and
cool’ moments.
•
To maintain an exclusive Heely experience by making the product
available in select stores and Heely’s online shopping portal
ANALYSIS OF ORIGINAL BUSINESS STRATEGY
CREATING A COMPETITIVE ADVANTAGE
An “innovative and differentiated product” and “exclusive distribution rights across
India”, allowing reach into untapped secondary markets, were the two key ways in
which Heelys India hoped to establish a competitive advantage.
The distributor hoped to overcome challenging industry forces by:
targeted distribution through high end/profile retail outlets;
appealing directly to customers and their willingness to buy through creating
excitement about the product;
trying to skim the top layer of Bangalorian society through portraying the
exclusivity of the product and
gradually rolling out the product across other metros and secondary cities.
Before the strategy could be implemented, the distributor faced a big roadblock in
obtaining an import export license, particularly because he did not have prior
professional experience of working in India and navigating such regulations.
Eventually, it was only when the distributor, out of frustration, barged into the custom
Officer-In-charge’s room after being repeatedly denied a meeting that he managed to
obtain the license.
18 | P a g e
In the end, the above constraints led to a value chain which was not coherent with
the strategy to capture 1% of the Indian market for sportswear and apparel over 5
years. Customers were essentially priced out of the market and the product did
not manage to capture share of mind, share of voice and share of distribution
as envisaged.
Additionally, he was not able to reach the break-even point and did not recoup his
initial investment of $20,000.
The full timeline of events is shown below.
ISSUES FACED AND KEY FACTORS BEHIND LACK OF SUCCESS
In addition to the navigation of the import regulations, we have identified the
following factors which hindered the Heelys brand taking off in India, some within the
control of Heelys and its Indian distributor and some outside.
LANDING COST
On top of the $20-25 wholesale price at which Heelys sold the product to the Indian
distributor, $20-25 in import duties increased the landing cost by almost 100%. This
19 | P a g e
level of import duties meant the picture of the cost/price projections in the business
plan was skewed.
REVISED DISTRIBUTION AND PRICING STRATEGY
The plan to launch the product in selected high end/profile footwear showrooms was
in sync with the overall nature of the chosen product and with Heelys universal
distribution strategy. To this effect, Heelys India set about meeting retailers like
Reliance, Lifestyle, Pantaloons, Metro and Westside. This was one of those places
where translating the business plan to reality was not as simple as it seemed.
Since the distributor was acting independently of Heelys Inc. he faced a big hurdle in
convincing the retailers, over the phone, to take a meeting.
Talks with Reliance and Metro, which were challenging to arrange in the first place,
came to a standstill after the retailers insisted on a 40% retail margin. With the
sourcing cost from US close to $ 40-50, the expected margin would have taken the
total cost price up to $75. This was comparable to emerging findings from Heelys
India’s market research that most children’s shoes were priced at a maximum retail
price of Rs 2,500 ($55). Thus, even though Metro offered to place the product in
showrooms across India, the margins were not feasible.
The distributor had no option but to divert from the original path and he started
approaching the smaller skating retailers and sports shops for stocking the products.
They had an asking margin of 25-35% and although they did not offer the same
reach and publicity as the large retailers, he had no options but to stock his product
in such outlets. He convinced several smaller specialized retail outlets to stock the
product – Coles, a sporting store in Bangalore, and skating stores in Mumbai,
Chennai and Ludhiana.
He was also successful in dealing with The LOFT, a large scale retailer,
headquartered in Mumbai with a good presence in the Bangalore area. Later, Loft
also introduced Heelys in their Banjara Hills showroom, a high end area of
Hyderabad.
20 | P a g e
These smaller stores did not offer the same reach and publicity as the large retailers
and were out of sync with his idea to reach the growing middle and upper class
customers in large numbers.
PRICING
As mentioned, the Indian distributor was severely constrained in the pricing of the
product since the combination of cost from Heelys and import cost came out to be
$40-45. The chosen retailers asked for a margin of 25-35%. Since Heelys has a
market in 50 countries and most places the price ranges between $100-125, it was
decided to keep the prices at par.
However, market research done by visiting stores and noting prices found that in
India the high end of the range for most kid’s shoes are Rs 800, with a maximum of
around Rs. 2500. Customers do not want to spend much on kid’s shoes as children
outgrow their shoes frequently. Only adult shoes such as Adidas and Nike came to
the price range of Rs 5000.
This was like a red flag but since the distributor was already dyed-in-the-wool, he
went ahead with the plans and priced the shoes in the range of Rs. 3500-6500 [$75$145].
“I was optimistic, thinking there is no real market but we can create one.”3
Based on this analysis, we have calculated Heelys India needed to sell 1,333 pairs
of shoes in order to breakeven on his investment (Figure C below).
3
Interview with the distributor, August 2011
21 | P a g e
EXHIBIT 7: CALCULATION OF BREAK-EVEN POINT
H
Heelys Selling Import
Price
Duty
Indian Entre-
Retailer’s
preneur’s Margin Margin
Initial Investment
$
Indian Entrepreneur's Unit
Profit per pair
No. of units to break even
$
nos.
Heelys Selling
Import Indian Entre-
Retailer’s
Price
Duty
Margin
preneur’s Margin
20,000
15
1,333
LACK OF SUPPORT FROM HEELYS INC
Heelys did not provide any financial support to the distributor. Their modus operandi
was to wait until an international distribution business had been established for at
least three years before thinking about taking any equity. In some instances e.g. in
France, they had taken over the distributor to improve margins.
To go for Joint Venture model, Heelys asked the distributor to achieve sales target
which looked farfetched. Aside from the absence of any financial support, sales and
marketing support was also not forthcoming from Heelys Inc.
22 | P a g e
The entrepreneur had to put all capital from his personal resources and borrowing
from his family – a total investment of $20,000. This was not sufficient to undertake
the scale of market research and promotions he had envisaged in the business plan.
MARKETING AND PROMOTION
Nevertheless, Heelys India set about creating hype about the product and reaching
directly to customers. One of the cornerstones of the India strategy was creating
Heelys.in – distinct from the global website to tailor marketing to Indian customers
and allow them to shop online. Heelys India website was considered to be appealing
in appearance and ease of use – in our opinion, better than the parent website. He
held a launch in Garuda Mall, Bangalore – the biggest mall in South India. The
LOFT, however, did not have an outlet at the mall but instead a few blocks away
closer to MG/Brigade road. Heelys India page snapshots on social platforms of
facebook and Twitter (see Exhibit 8) are below.
EXHIBIT 8: HEELYS INDIA FACEBOOK AND TWITTER PAGE
23 | P a g e
PEOPLE
The organizational structure was informal and most of the primary work was initially
kept within the family. A full time marketing person was hired who would also double
up doing day-to-day work like receiving orders on the phone. A PA was there to deal
with the administrative and financial aspects of the business. While this may have
been a relatively informal approach, it was very early and in our opinion, the
organizational set-up was not a critical aspect of the entire venture. In fact, being
relatively restrained and spartan in hiring was a positive point. However, the team’s
lack of experience and contacts in retail distribution, which affected credibility, did
serve as a hindrance.
LOW PENETRATION OF INTERNET SHOPPING
The website, which allowed online shopping was an innovative idea, only a little
ahead of its time since online shopping was less proliferate in India compared to
countries like the UK, where this channel had been successful. Additionally, buying
shoes online does not allow customers to try it on first, which is more of an issue with
shoes as compared with apparel.
24 | P a g e
CULTURAL FACTORS
Indian customers proved not to be as risk taking as European or US customers. The
roller skating culture is not common in India and Heelys India was not able to create
this culture with his limited resources. More crucially, Indian customers are
notoriously price-sensitive – most find it difficult to comprehend the amount of money
to be spent on footwear which the kid is going to outgrow very soon. The upper
middle class also essentially has the same thinking process and thus the pricing was
a crucial factor in the decision not to purchase.
LIMITED MARKET RESEARCH AND
CUSTOMERS
IDENTIFICATION
OF TARGET
After securing the agreement to purchase the initial stock from Heelys, the distributor
started work on the market research and strategy he had outlined in the business
plan. Soon, Heelys was pressurizing him to place the order he had agreed to and the
purchase was completed before retailer margin expectations and import regulations
had been worked out. Additionally, and as a consequence of the dearth of financial
support from Heelys, there was no budget to undertake proper market research or
promotional activities.
While children up to the age of 14 are the primary target in the US, older teenagers
(high school and college students) in India were also taking an interest in the
product. But because of the pricing issue, only the upper middle class would be able
to afford the product, which represent a fraction of the Indian customer base. There
was also the possibility that these upper class people were not really dependent on
getting these shoes from Indian market as they had access to original US market
where these products are available for a lower price.
The eventual strategy was not positioned to capture a large customer base.
25 | P a g e
RECESSION
When the business started in 2007-2008, global slowdown had already hit and India
was simultaneously affected. This, while not affecting the business directly, this may
have brought a sense of caution in splurging on expensive goods. It affected the
budgetary prudence of Heelys Inc. and the support they could offer.
PROPOSED STRATEGY FOR THE RE-LAUNCH
This section presents the team’s tactics on a revised strategy which Heelys Inc.
could use to re-enter the Indian market. We believe this will provide for a more
successful venture than last time and establish the Indian market for Heelys.
MARKETING
TARGET SEGMENT: Kids and teenagers from 8 years to 16 years
AIM: To create an aura of “coolness” around the product.
Marketing Activities
PHASE I: Create awareness about the brand.
We as a team strongly believe that the best way to sell these products is to create a
buzz about them. To ensure that the product gets noticed by target customers we
will try to position it in:
-
Kids games shows and TV serials where we intend to pay the producers to
show characters using our product and mentioning the brand name ( very
subtly)
-
Place our product in a movie or music video.
-
Kids’ video game character wearing Heely!
26 | P a g e
The Re-launch
PHASE II: Create awareness about the product. This would include teaching people
how to use Heely and trying to ensure that there enough opportunities available for
kids to learn how to roll using these shoes
shoes,, starting with the Delhi and Mumbai
Mumbai.
Schools
Summer Camps
Shopping Malls
- Sponsor the annual sports
days for top 3 schools in
the town
- Organize classes in
summer camps whrer
kids are taught how to
glide using heely !
Put together a Team Heelys
of youngsters and have
them wear wheely around
malls
- Organize wheely race as
a part of annaual sports
day in schools
- Sponsor summer
schools camps where kids
come and learn various
sport.
Organize weekend stalls in
the malls with a ramp
where kids demonstrate
how to
PHASE III: To build a positive connotation with the product we will try to associate
ourselves with organizations like CRY
-
Try sponsoring kid’s education.
OR
-
Try sponsoring young talented ki
kids
ds who get through Olympic and other
international sports competition.
OPERATIONS
This project would be a joint venture between Heely and an Indian retailer like Planet
Sport. In terms of Operations we would set up a structure as desccribed in the
following sections.
27 | P a g e
SUPPLY CHAIN
-
The stock would be stored in a central warehouse hub. The warehouse
should be situated in the city which has the head office/ operations base for
the brand.
-
We will tie up with a courier service to pick up our stock from the port of arrival
and take it to the stores.
-
Stores will be regularly replenished with stock from the warehouse. The stock
will go to stores via road.
-
We plan to have RFID chips on all the shoes to track them.
DISTRIBUTION CHANNEL
The distribution channel is one of the most important factors that shapes brand’s
perception and impacts its image. We would like to retail our product via specialized
stores dedicated to retail of sportswear. For example:-
Planet Sports
-
Decathlon stores.
DATA COLLECTION
-
As a small new brand we would like to manage our operations by collecting
and analysing data via simple tools like excel. Each product will have a style
code and a bar code.
-
All the stores will be required to send weekly sales updates. Replenishments
and stock call backs would be done based on these weekly sales updates.
28 | P a g e
ORGANIZING TRAINING AND SALES MEETS
The success of any organization depends on its employees. Hence it’s crucial that
every single member of the organization should share the vision of the company and
enjoy being a part of it. Every single person should be conferred with the
responsibility of conveying the value and ideals of its brands to the people around.
Hence the company should arrange for meetings where everyone gets a platform to
speak and voice their opinion about how to reduce wastage/increase sales.
HUMAN RESOURCES
These are undoubtedly the most important aspect of any organization. Our team will
consist of:
BACKEND
Merchandising: People with strong analytical skills. They will keep track of
the stock ordered for a season. Merchandise available in the warehouse as
well in the stores. They’ll be responsible for chasing the sell through of various
stores and ensuring that adequate replenishments are done , inter stores
transfers are done bases on individual stores requirement etc.
Retail: A team of aggressive sales people. Retail team will be responsible for
creating sales targets for various stores and assist the store staff in achieving
these targets. They will serve as a bridge between the front end sales team as
well as the back end merchandising and marketing team and help liaison
between the three. The end purpose if to equip front end with resources so
that they can achieve their targets.
Marketing: The marketing team will use their creative genius to increase
brand awareness and visibility.
29 | P a g e
FRONT END
Regional Managers: Their major task would be recruiting and training sales
assistants. Getting people with the right attitude and spending time and
energy to aptly train them would be their primary job.
Sales Assistants: Young enthusiastic people who will grow up to become
store managers. These are the people who directly interact with customers
and hence must have complete knowledge about the product.
FINANCIALS
FINANCIAL
Since we intend to launch this project in a joint venture with Planet Sports Retail the
initial retailing would be done through their stores. Since Heely is not a mass product
we intend to not open any exclusive outlet and retails through few Planet Sports
stores till the time we are confident that the product’s awareness in the country had
reached a substantial level.
Cost, Margins and the Final Sales Price
The product is manufacture and imported from China. The average cost price of the
product is around $15.
India imposes around 35% import duties on sports footwear imported into the
country.
Hence the landing cost for all these products would be $21. The retailing the
company will do a markup of around 100% which of which 60% will go to Planet
Retail India and 40% to Heely (60:40 ratio). Hence the final Retail price of the
product will be around $38.
30 | P a g e
Both the companies would be expected to pitch in for creating successful marketing
campaigns for the product. We would expect them to contribute around $20,000
each for creating a two year marketing programs which would include creating teams
for grass root marketing.
EXHIBIT 9: FINANCIAL PROJECTIONS
1st year
2nd year
Total
Value in Dollar
(in Rs.)
(in Rs.)
(in Rs.)
( in $ )
Sales and Marketing
5,00,000
6,00,000
11,00,000
24,444
Merchandiser and Planner
400,000
450,000
8,50,000
18,889
Events
300,000
200,000
5,00,000
11,111
Sponsorships
250,000
225,000
4,75,000
10,556
29,25,000
65,000
Human Resources
Marketing and Sales
Training
Total
14,50,000
14,75,000
%
Contribution Amount
Contributed by Planet Sports
60.00%
39,000
Contributed by Heely
40.00%
26,000
First year sales
Second year sales
31 | P a g e
1100
1995
Per
piece
Earning
($)
12.6
8.4
Break
Even
(2 years)
3095
3095
Assumptions
-
The project would be headed by the existing country manager/CEO of Planet
Sports.
-
There is no fixed cost associated with the project. The company will operate
out of Planet sports existing office
-
The initial focus would be on recruiting the right team and creating a buzz
about the product with marketing.
With these projections the investment made by both the companies will break even
in two years time.
PORTER’S ANALYSIS OF THE INDIA STRATEGY
ORIGINAL STRATEGY
32 | P a g e
REVISED STRATEGY
33 | P a g e

The Re-launch of Heelys India

Transcription

Similar documents

Heelys Play Book

THE HEELYS playbook

GRUPO GARVALIN - International Shoes Garvalin, SL Ptda

Integration of the Footwear Design and Development Area in the

let`s make great strides together!

4. Brantano UK - Macintosh Retail Group

FormaLogix Brochure

temptation 510 s1 - Honeywell Safety Products

PE Happenings - September 2016