Case Study LUXURY COSMETICS MAKER WEIGHS THE BENEFITS OF SELLING ITEMS ON TV THE FIFTH GROUP 陳尹宣 洪嘉琳 林秀薇 張志圓

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1 Case Study LUXURY COSMETICS MAKER WEIGHS THE BENEFITS OF SELLING ITEMS ON TV THE FIFTH GROUP 陳尹宣 洪嘉琳 林秀薇 張志圓

2 SUMMARIZE Eve Pearl, an Emmy-winning TV makeup artist, may try selling her high-end products on the Shop NBC channel. She established her first foundation and cosmetic product seven years ago. With sales growth slower than desired, she is considering pitching cosmetic products to a broad audience by appearing on a 24-hour TV shopping channel. A YouTube posting attracted tens of thousands of viewers and encouraged Ms. Pearl to start posting promotional videos demonstrating her techniques and products. Three years after its opening, the retail shop s overall business had turned profitable, but just barely.she handed out fliers and went to all the hotels and local businesses and offered them discounts and semi-commission bonuses. The options with prospects for growth, the third largest home shopping network had seen her videos and thought that she and her products would do well on live TV. In a 15 minutes on a network broadcast, she could demonstrate her products and techniques directly to potential customers. But Ms. Pearl had concerns about selling on a home-shopping channel that is consignment. Even worse than not selling it is getting it back in returns, because they have a 100-percent return policy. She knew of another that had deemed it best to have employees and friends call in orders and buy back its own goods and keep sales high enough to merit return appearances. Moreover, because home shopping networks squeeze their supplier companies to reduce prices, Ms. Pearl s profit margins would drop sharply. There was some risk that would damage her brand. But in order to not damage her brand, she should raise consumer awareness and increase her celebrity, increase street traffic into her store. Since cosmetics are an aspirational product, do beauty editors and beauty bloggers to review your products and expand your social networking to promote. You also need to freshen up your Web site regularly. STATE THE PROBLEM The challenge with sales growth slower than desired. The founder, is considering pitching her high-end cosmetic products priced well above department store levels to a broad audience by appearing on ShopNBC, a 24-hour TV shopping channel in the mode of QVC. The bottom line was not shining as brightly as the five Emmys on display in the boutique. Three years after its opening, the retail shop's overall business had turned profitable, but just barely. Cash flow was still a concern.

3 Walk-in traffic at the boutique remained slow. They tried all the regular avenues used by service businesses, but not much happened. Selling on a home-shopping channel. They only pay you for what they sell, and they take 60 days. You pay for the shipping, and if you're late, you can be fined. Even worse than not selling it is getting it back in returns, because they have a 100-percent return policy. Profit margins would drop sharply, and cash flow might turn even uglier. Because home shopping networks squeeze their supplier companies to reduce prices would come off top retail price for many products. SWOT ANALYSIS Strengths 1. Having the marketing style that most competitors cannot imitate. >>The exposure to the public on TV as well as the experience in the entertainment industry helps her products can be spread in a unique way. Such as she has ever appeared on the TV show, The View where she first developed foundation and concealer products, to give audience some cosmetic tips. 2. Her products contain special nutrients that can care one s skin. >> This makes the product more unique in a competitive market place. 3. The products can be seen efficiently by people from all over the world. >>Because of owning popular promotional videos on YouTube, she can advertise products fast without spending. Weaknesses 1. Her skills of planning and controlling company resources are weak. >>It makes supply chain weak and unstable. Many of her products are manufactured in Asia, therefore, they should be paid in advance and wait at least 3 months for them to be made and shipped. 2. Inappropriate trafficking branches. >>This article said that walk-in traffic at the boutique remained slow. 3. The cooperation with Shop NBC causes the negative outcome. >> Shop NBC only pays the supplier for what they sell. The supplier has to pay for the shipping, and if the supplier is late, they can be fined. What s worse, if goods were returned, the supplier should undertake all losses and costs because Shop NBC has a 100-percent return policy.

4 Opportunities 1. The image of home-shopping networks now has dramatically changed. >>Home-shopping networks may have once been considered schlocky. However, according to Bethany Karlyn, the founder of Prtty Peaushun Skin Tight Body Lotion in Sherman Oaks, many entrepreneurs now view home-shopping networks as a way to launch their products since the schlock impression has changed with high-end brands like Elizabeth Arden, Benefit, Lancôme, Vincent Longo, Lorac and Shiseido on home-shopping networks. 2. More humanized and more efficient to promote her products. With the cooperation with Shop NBC, as result, she could speak to and demonstrate her products and techniques directly to potential customers. 3. Giving her boutique location a lot of publicity. >> If Eve Pearl performs well on Shop NBC and her personality shines, she ll raise consumer awareness and increase her celebrity, which should, in turn, increase street traffic into her store. Threats 1. A risk of endangering the equity of her brand. >> Because home shopping networks squeeze their supplier companies to reduce prices with Walmart-like pressure (70 to 75 percent would come off her top retail price for many products), Ms. Pearl s profit margins would drop sharply, and her cash flow might turn even uglier. 2. Still keeping high-end products is threatening. >> The recent economic downturn has influenced the consumers shopping mentality. As consumers have economic constraints, some are still loyal to their favorite beauty brands, but some will choose the cheaper ones. 3. Her products have been similar to the other beauty companies currently. >>Because cosmetic industry now has become a saturated market, therefore, the smaller beauty companies cannot compete against their rivals; such as, L Oreal, Lancôme, and so on.

5 LIST SUITABLE OPTIONS AND DISCUSS THE PROS AND CONS OF EACH Problem: Because home shopping networks, profit margins would drop sharply, and cash flow might turn even uglier. Option1>> Offer slightly different product configurations on ShopNBC or create a diffusion line product, a step-down line extension of an existing high-end brand. Problem: Walk-in traffic at the boutique remained slow. Option2>> Endorse her boutique location by Shop NBC, as a result, lots of people will know where is her boutique located. Problem: The products are similar to the other beauty companies. Option3>> Shift the target to the new customers, male customers. Develop the cosmetics for male customers exclusive. RECOMMENDATION We pick the 2ed option as our recommended solution. Since online sales are convenient, widespread use, strong integrity, and so on, there are a lot of people enjoy shopping and marketing online. Although online sales haven t been mature currently, with the rapidly increasing in the number of Internet users and online sales, online sales are expected to be one of retail sales methods in the future.