As a business manager of a large dept. store, where apparel sales represents over 70% of the revenue, I know that the demand for obtaining a competitive edge is of utmost in importance. My job, along with the many challenges of managing a store, also comprises selecting merchandising lines that make our store unique. Although this gives me a free hand to add or omit vendors who do not fit into our customer base, it also makes the task much more difficult as the responsibility for generating volume to justify our square footage is paramount. We have a 50,000 square foot store with overhead running at a rate of just over 30% of sales revenue. The world of retailing has changed significantly over the past few years. With the ever increasing cost of locating a store in a high traffic area, it also means paying a premium for square footage to the landlord. Our square footage rate is just over $4.00 a foot, which by retail standards is not too bad, except that companies building malls today have figured out that they play a key part in the success of a company generating huge volume; therefore, they expect a cut if the revenue exceeds a certain dollar amount. This is referred to as “override” and in our case the figure is 3% of sales that exceed $5,000,000.00. To be profitable we need to generate the $5,000,000.00 to reach what my investors called the “break-even point”. In other words, if I could manage a store to do 5 million dollars in sales, the rent factor would remain at 4% of sales and the store could be viable with the other overhead expenses which are, in most cases, fixed expenses. The pressure is on to try and find merchandise that will turnover rapidly and yet maintain acceptable margins without “swapping” dollars as markdowns normally do. In brainstorming continually about what items to add, I keep noticing that on our ROI report that I receive monthly, that one particular dept. which is not the largest in volume, keeps generating the most sales per square foot. In looking over the customer data base in our retail program, I am seeing comments in regards to our customers requesting expanded items in this area. I made a trip to the retail floor and spoke with associates in this department. They said that many customers kept asking for items that we didn’t carry. This created some excitement in me, as I wanted to discover what those items were. On the “customer want list” that was kept at each dept. in the store I saw many requests for shirts, slacks, caps, and outerwear with an outdoor theme. We call this dept. “casual wear” and it generally caught all items in the store which didn’t fit into our fashion departments. Of particular interest is fatigue slacks and shirts which we had increasing sales. Since we are not a big box store that specializes in outdoor wear like camouflage, which I always thought fit into the so called “blood sports” (hunting), I started researching this area. To my surprise, most of our customers are purchasing our outdoor apparel for bird watching. I began researching this area and discovered that bird watching, according to the U.S Fish & Wildlife Service, is an outdoor activity that generates over $35 billion in combined revenue in sales. I was also surprised that there are over 25 million birdwatchers in the United States, according to the National Audubon Society. I also discovered that the camouflage industry was a proprietary enterprise which had only two major players and that each of them generated over $25,000,000.00 in sales. Due to my findings, I will pursue this avenue of growth for our store and in so doing I will add an entire line of apparel with four basic SKU’s to begin with and then complement it with “add on” items that will create an opportunity for an easy “add on” suggestive sale. I am choosing outdoor apparel and books as the two areas that I will add to our merchandise mix. I know that these products will be feasible because we have existing space and profitability is unlimited because we will create our own design called “Birdsong” and we can Trademark the name and copyright the pattern so that it will be owned and controlled by our store. We have the opportunity to sell around the globe through our already existing web site, and will have margins with no base of comparison because we are the only store selling this pattern, is a very strong endorsement for the capital required to support this venture. I will work with our local community college art department to design a pattern that I want, copyright it as a proprietary product, and then secure manufacturing with that pattern exclusively to our store. By adding books to the department, it will be educational, informative, and will help generate additional sales as the targeted market is already in the store. The biggest competitive advantage, I think in my mind, would be that the items could be found nowhere else but at our store. Therefore customers will have to look to us as the only source of supply for the items and there would be no competition to the products. Very similar to what most major dept. stores are doing with their own private labels they sell. We will control, supply, margin, and generate unchallenged margins because no one else has the same merchandise. The profit opportunity here could be outstanding and well above other fashion clothing items which are always at the mercy of seasonal markdowns which gut our profits. As a store manager, I know that I have to mesh my marketing efforts and sales at the store level in order to achieve the turnover and profit margin that I expect from my apparel and books. I know that the sales efforts have to be subordinated to and managed by the more prestigious marketing objectives that I create. The challenge I face is to reinforce our business-to-consumer marketing because I know that our customers are influenced heavily by their perceptions and emotions. My marketing efforts have to be focused and have to target the exact customer base that enjoy recreational activities that are environmentally friendly, outdoor related, and that encompass family activities. My marketing efforts need to rely on mass media as the channel for reaching our customers. I will advertise on the radio and occasionally have TV spots that have programs of a local nature and can get good results from both. Also, our local newspaper is a strong advertising vehicle as the social pages where I placed our fashion ads have great appeal to our female customers, which represent the majority of our clothing sales. The advantages of this media is that the window of opportunity it affords me in quickly getting items advertised to the public in the surrounding counties and the rates for both were quite reasonable. My advertising budget is set at around 3% of sales which creates the necessity for utilizing and leveraging every dollar I can to generate the most sales possible. However, with the new products I will be introducing, the opportunity for expanded channels of marketing is much greater. I will contact the National Audubon Society which is a non-profit environmental organization which is dedicated to the conservation and preservation of birds. In doing so, they directed me to several top bird watchers magazines. Those included Wildbird which have several thousand subscribers, along with Birds: A Golden Guide, and National Geographic Field Guide to the Birds of North America. I contacted each for subscriptions to put in our “Birdsong” apparel department, and also to inquire as to their advertising rates to expand our mass media print advertising. They directed me to the local chapter in Denver. I found out through them that they have over 500 chapters around the country. This immediately generated ideas to broaden and tap into the social media market which we have not done. Although our store has a website which is primarily used for information in regard to store hours, product offerings and customer service issues, we now have the opportunity to generate sales through the internet by offering our very own brand of clothing offered nowhere else. There is entire new marketing strategy using the internet that will give us access to reaching customers through using Facebook, email, blogs, and through a special code on print media directing a mobile user to our website. In this way, I can utilize the easy accessibility that the internet offers and the outreach that it will afford. The internet is a center of mass media as more and more users are reading and downloading their favorite magazines, newspapers, and even watching TV feeds on line and as Tablets and other portable devices are quickly becoming the norm. The internet is extremely interactive with “3.3 billion mobile phone users and over 2 billion internet users”, according to Keegan and Green (2014). I will start advertising strongly on the social media avenues available to me through Facebook, You Tube, and even Twitter. This will link customers with the same interests and give them an avenue to discuss their similar interests, and will let me reach a targeted audience through linking my web site in to those social media outlets, with an opportunity to purchase items on line worldwide. Therefore I could channel my targeted customers’ interest and further implement strategies that will appeal only to them. The end result of linking social media and mass media through the use of the internet, will help me segregate my targeted audience and will create sales for the products I am adding. Our customer base will immediately broaden across the country and even reach customers around the world with our new products.
My pricing structure for the items I am introducing will have to be based on competition selling similar items, and this will be difficult as big box retailers have the buying power that our store does not. However, the items we create will be based around a different pattern of fabric, “Birdsong”, yet the style of the fabricated product will have to be similar as there are basic styles that the customer may wear. The items I am choosing for the apparel are a basic six pocket fatigue slack, a basic short and long sleeve shirt, a basic bomber jacket, and one accessory item which is a cap. The books I will add to the merchandise mix are books our competition does not carry, with the exception of on line retailers like Amazon. I had to figure out where our brand fit as compared to other similar brands and price points. Our segmentation studies on products I have introduced in the past demonstrated to me the clear and differentiated portraits of my customer base in regards to their wants and needs. I have confidence based upon past sales in this department of similar items help me gauge our customers affinity to a product and how likely they are to talk about it, buy it, and believe that it conveys a good sense of the emotional and functional benefits they are looking for. Although I have targeted our core customer base through mass and social media, pricing is a major catalyst in consumers purchasing decisions, and I know that we have to be competitive. As I looked over the pricing structure of our competition in outdoor apparel, it is evident that their margins, although not as high as they obtained on fashion goods, are substantial enough for us to compete. In analyzing our price points throughout the store, I will use the same logic in studying our customers’ preference for the same or similar items. I will also visit the competition of big box retailers. I know that the cost for a five pocket fatigue pant is around $16.25 and that the competition sells it at $34.99. This is over keystone markup and even when markdowns are factored in, their maintained margins would exceed 40%. Their basic fatigue shirt is retailed at around $29.95 and the cost is around 14.00. Again with markup exceeding 50%. Basic outerwear when compared to a similar item we offer retails at $44.95 and the cost is in the $20.00 range. Headwear is around $18.00 with a cost factor of $8.75. The books we are adding are sold on line through Amazon at around $24 to $30 each and in looking over the wholesale price I had requested from the publishers, it is evident that my cost will be around $14 to $18.00. While this is not the markup that can be generated from apparel, it also represents items that do not have to be marked down. Therefore my maintained margin on these products, while still being competitive, could still be over 40%. Considering consumer preferences as evidenced by my competition, I can see that my pricing structure could easily fit into what a customer expected to a similar item, and that with the added bonus of a pattern that no one else has, it will give me an inroad to a niche market with unlimited possibilities. Also, I will need to control the production of this private label and therefore can generate the fabric, and add on the fabrication at a substantial savings. An example would be the six pocket slack. My fabric cost per yard through ABC Textile who will produce it is $2.25 per yard. Fabrication cost through DEF Manufacturing is only $6.25 per unit in 300 piece batches. The hang tag costs less than a cent a piece and the label in the apparel at a cost of about 3 cents each. In looking over the pricing structure of our competition, my margins in this private label area could exceed 50%. Also, since we are not at the mercy of the real world competition due to the uniqueness of our label and design, we can avoid competing with them and having to take markdowns when they did. The big box stores around the country normally reduce inventory to very nominal levels around January when their fiscal year ends. Even though our fiscal accounting calendar is set up the same, we can survive with higher inventory levels in this department, which might reduce turnover as a percent of sales, but will also increase the overall margins in this department by as much as 10% and with the addition of leveraging sales through the internet with social and mass media, the products I am introducing have the opportunity to really boost sales, gross margins, turnover, and bottom line profit. I can gain a marketing edge over the big box competition in regards to similar, but yet uniquely different items, and I can control the margins as the product grow.

From my past experience, I know that the growth of a new product is linked directly to our store keeping our hand on the “pulse” of our customers both locally and now with the internet around the country and our sales abroad as well. I need a clear and precise understanding of our customers’ acceptance of our new products and I know that facilitating their comments, complaints and suggestions will help us to clearly achieve our objectives much faster. One advantage that already exists in our store is that we were using the Microsoft Dynamic CRM program and I have found it vital in providing real time information that I can access readily. I will need to integrate this system immediately into the new department I create with the “birdsong” merchandising SKU’s I am adding. I also know that by creating this communication tool I can track customer problems associated with our new products and immediately bring it to the attention of our “Birdsong” apparel manager on the floor to expedite customer concerns at the store level. I can easily access information from both our social media and mass media advertising efforts as inquiries are coming in as to purchase concerns and problems associated with our customer database. I know that any concerns associated with our fabric producer ABC Textile, and our fabrication supplier DEF Manufacturing can be addressed in a timely manner as well. I need to know what our customer concerns are from our customers who come into the dept. on a daily basis, and then I also need to respond to customer concerns through our internet purchases. Constant contact with sales associates on the floor is critical since they are the ones who are dealing with problems face to face as customers present them. Our Point of Service (POS) terminals allow us to put information in on a daily basis as each customer checks out. Our sales associates are trained to ask them if there are any problems, any concerns, or suggestions. If any are raised by customers they are to be notated on the computer as the customer checks out. Those reports come to me daily and I immediately address them with the dept. managers. I will apply the same principles to our internet sales. Whether it is a catalog request, a price quote, a request for a callback, or general information, I know this has to be integrated into the format that allows quick response time in order to build customer confidence in our products. This gives us a hands up approach in capturing leads that could be turned into pursuing sales opportunities. This inclusive collaboration of sales associates on the floor, dept. managers and management assures me that our efforts cover all the bases in maximizing our sales in every facet of our store.

The inherent risks of developing a new product, which seems very viable, also carries risks as well. The capital utilization to support a project comes at a high cost in both required square footage and also in budgeted dollar considerations. Having a limited budget, requires that dollars be taken from an existing product line and put into the new one. The new one offers no guarantee of success as it is unproven and will require additional advertising dollars to inform and educate our customer base as to why they should purchase it over the competition. Even though it is a different pattern on the fabric, there is no guarantee that customers will gravitate to it in lieu of purchasing a product that they are familiar with. I also know that my project will require negotiating fabric and fabrication prices since we will be handling the manufacturing of it. Since it is a proprietary product as well, I know that a great deal of time has to be spent developing the design of the pattern. I am aware of the very competitive nature of discounters who traditionally have the market share of the outdoor business. I also know that the potential for time lags in manufacturing can become a problem due to the very nature of new products. I will need to secure a proprietary license agreement with ABC Textile to produce the fabric. They in turn will have to develop a sample fabric for my approval. The printed fabric, after my approval, has to be run in 2,000 yard batches, and then shipped to the manufacturer who in turn has to fit it into their production schedule and then ship the fabricated goods to my store warehouse. There are certain unavoidable difficulties and delays or unanticipated costs that could arise with the many different factors involved. I also know there is the risk that as successful as our product might be that other larger companies might decide to get into their own private labels as well and try and knock off our own private label. I know that there is a risk that all the factors required to successfully get our new products off the ground could cost us more than anticipated due to all factors involved, but are manageable at this time

The risks associated with not launching a new product far outweigh the risks associated with the introduction of our new products to the marketplace. As I look at the ever changing horizons that are evident in today’s retail world, I know that the competition is not just waiting for others to develop a niche and failing to number crunch. Increasing costs of overhead are happening everywhere and just not in my world. The risk of not introducing new products leave the doors wide open for competition to beat us to the punch. This would leave us playing “catch up” and I know that the price of getting new customers rise daily. Not only that, but the cost of trying to get a customer base back once it leaves, can exceed the cost initially spent to acquire that customer by over six times (Coe, 2003). Not launching my new products would also run the risk of our store not being on the cutting edge of trends related to social and mass media and to the ever increasing internet market. Loss of market share due to no diversification in products could lead to no increase in sales and increasing customer lack of interest in looking at our store as a trend setter in every facet of clothing. Also, we run the risk of our customer base being minimized and eroded if they see new and different products from our competitors. Our store needs to have bigger pieces of the market share in order to offset the ever increasing costs of operating our business. The bottom line is that the risks associated with not launching our new products could create ripple effects that decrease our sales per square feet, decrease our return on investment per dollar square foot of space, increase our markdowns, decrease our margins, decrease our turnover requirements, increase our inventory, and erode our profits to a non-sustainable level. Our existence depends on us introducing these new products and growing them to cushion other areas that are struggling for sales and margins.

References
Ackerman, Elise. (2001). The World of Internet Exchanges. Detroit Free Press.

Coe, John. (2003). The Fundamentals of Business-To-Business Sales & Marketing. McGraw Hill.
Keegan, Warren, Green, Mark. (2014). Global Marketing (8th ed.).

Perreault, William Jr., Cannon, Joseph, McCarthy, Jerome. (2011). Essentials of Marketing (13th ed.).

Porter, Michael. (1998). Competitive Advantage. The Free Press.
U.S. Fish & Wildlife Services. (2014). Retrieved from http://www.fws.gov.