Department Stores Essay.
Nundies a unique brand of stockings introduced to the market fall 2006. The item to be sold at women’s boutique and specialty shops as well as 10 Neiman Marcus department stores throughout 40 states. Management problem did not seem to be the distribution of the new item in which they shipped out 11, 383 units of Nundies to stores through December 2007 and sold 2007 units online. A unit of Nundies consisted of a package of 5 liners. Nudies is a single use disposable panty that sticks to the inseam of womans pants, leggings, athletic wear, shorts, and jeans.
Management seemed to have a difficult time trying to figure out the right strategy to use in an effort to increase the overall repurchase order rate in order to increase the company objective of sales and profits for the 2008 fiscal year. As a note there are other areas that present a problem for the company as well. A.) repurchasing orders are not meeting the goals set, B.) The company also noticed that reorders were only about 10% of the total units sold, C) The online purchases were viewed as a positive, however it was not used frequent enough to measure reorder, D.
One big issue was the amount of panty liners per package, E) The staff at the retail strores thought that Nundies would sell themselves. This was a clear example of communication breakdown. E) To add to the communication issue the sales personnel were not trained to educate the consumer about the product or to even suggest trying the product. F) The other issue that seem to be of big concern was that the displays were getting lost in the stock rooms.
Nundies generated 60% of sales from their largest customer which was Nieman Marcus however low re-order. The company first focus on its marketing concept: How they were going to deliver the new product from its current product lines. The unique idea of required development capabilities into consumer based solutions primarily medical markets and the use of the item for one single use. The product cost per item was .60, One package of panty liners was set at 5per package at $15. The cost to make the plastic
container was roughly 0.45 cents.
In 2006 Nundies began to run ads in magazines, they distributed throughout New York city based retail buyers, and promotions with gift bags for women for celebrity events. In 2007 the distribution coverage among customers in boutiques and showrooms set up by manufacturer agents organization with product information. The company decided to provide a commission to the sales people at 12% on the wholesale price with a minimum order of 36 packages. The company spent $800,000 on media and print ads and online sales accounted for 385 units wich is roughly around $4275, and store purchases resulted in a minimum of 252 with net profit equaling 850,000.
Alternative Courses of Action
Nundies can continue to be developed for the women’s wear and specialty stores. The advantage for the company is cost at 14-400 the disadvantage is there was no buy in to keep the reliance on manufacturers agent organization to recruit stores through store show rooms. A second alternative would be to pursue upscale stores accounts, by doing this the company can market via ads, point of sales display and ad plans could be presented, the ability to produce and deliver product in the right quantity and document it. Centralize 300 stores and decentralize 350 stores. The disadvantage is that all the stores would have different merchandise buying practices
as well as line fees, warehouse fees, settlement fees, catalogue fees, cooperative ad allowance ( fees are based on annual sales with estimated cost of 35k to 55k). Option 3 Mid level department stores I believe a positive would be centralized (1,793), same costs per size as the 5 upscale department stores. The disadvantage would be to lower the cost via different brand names and packaging (7 per pkg with paper packaging), different price 8 for $10. The fourth alternative positive would be to using different channels by which could be a positive if the company maintains the ability to produce and deliver product in the right quantity and documented also centralize all sales across the board.
The company’s target group resulted in woman from 15-60 with an average income of 25 or more 6% of 18 year old woman surveyed ( 18-45) 84% of woman are interested. 81% yes to products that provide hygiene and benefits of a panty 36% yes to no panty lines and hygiene, 29% will use the item 2-3 times a week, while 35% 3 to 5 times, 19% would likely use the product 6 times a week 17% occasionally. The variances were really shifty when examining where would one likely shop the Nundies of those polled the stats were 38% would shop at an upscale store 49% Mid level department store, 64% Mass department stores and 28% specialty store and 41% online. This all said I truly believe price does matter and the Nundies would likely see more re-orders if they would seek a lower price point or increase the quantity per package. The other target is that Nundies as I see it would likely work well in the fitness stores.