Distribution Program of
Rusty Lopez’s Men’s Leather Shoes in Sweden

Submitted By:
Adrian Mikhos A. Crispo
Miguel Pio C. De Ocampo
Charlene N. Singson

Submitted To:
Dr. Esmeraldo Dimaculangan, Jr.

Date Submitted:
April 10, 2016

INTRODUCTION
This section initially explained the reasons for choosing Sweden as the target country to export Rusty Lopez Shoes. Historical demand for men’s leather shoes in Sweden from 2011 to 2015 was analyzed and demand forecasted for the next five years. The market for men’s leather shoes in Sweden was then examined by identifying all players in the shoe industry, tabulating each company’s 2015 total sales and average price per pair. A more thorough study was made on the Top 2 players (Vagabond and Reebok) product, price, distribution, and promotion strategies. From the Top 2 players’ game plans, our group identified our target market and chose a positioning which could give Rusty Lopez Company a strong market position. We also developed a tagline to make the brand name stick to the consumers’ minds. Taking into consideration the opportunities we saw in the Swedish market and the strengths and weaknesses of Rusty Lopez Company, the group set a market share objectives for the next 5 years and translated these into peso and sales objectives.

TARGET COUNTRY
Sweden is the country that we chose to export products from Rusty Lopez. There are four main trends continued to shape the performance of apparel and footwear specialist retailers in 2015. First, economic landscape in Sweden was improving, lingering uncertainty and skepticism remained, resulting in increasingly price-sensitive consumers seeking economy-positioned alternatives. Second, Swedish consumers are also very conscious of quality, and in order to balance the aspiration for higher quality with price-sensitivity, the increasingly frequent sales periods gained significance. Many Swedish consumers purchase a large proportion of their clothing during the annual winter and summer sales, when they often opt for more premium alternatives which are heavily discounted. Recent new events in Sweden, such as Black Friday, further fuelled this trend. Third, the share of apparel and footwear internet retailing within overall sales of apparel and footwear continued to grow at a rapid pace. The online channel is becoming exceedingly important, resulting in virtually all the leading players establishing an online presence. Lastly, the majority of trade sources have stated that a multi-channel or cross-channel approach, where a physical store acts in symbiosis with an online and mobile presence, is essential for future survival.

Source: Euromonitor International. (2016, February). Men’s Leather Footwear in Sweden. Retrieved from Passport database.

HISTORICAL DEMAND (2011-2015)
Sales of men’s leather shoes in Sweden has constantly increased from the year 2011-2015. The computed annual growth rate from year 2011-2015 is at 1.25%. YEAR | 2011 | 2012 | 2013 | 2014 | 2015 | SALES IN PHP. | 132,241,331.44 | 134,036,861.2 | 136,850,987.12 | 138,492,936.96 | 140,708,552.92 | AGR | | 1.36% | 2.10% | 1.20% | 1.60% | SALES IN UNITS | 65,248,400 | 66,292,400 | 70,964,800 | 71,209,600 | 71,233,600 | AGR | | 1.60% | 7.05% | 0.34% | 0.03% |
Table 2.1Historical sales of men's leather shoes in Sweden for the year 2011-2015

Forecast sales of men’s leather shoes in Sweden is expected to grow from Php. 143,100,334.08 of the year 2016 to Php. 149,839,781.64 of the year 2020. It is seen that there is a sluggish growth due to maturing and intense competition from internet retailers. The computed annual growth rate is at 0.92%. YEAR | 2016 | 2017 | 2018 | 2019 | 2020 | SALES IN PHP. | 143,100,334.08 | 145,248,194.2 | 147,034,689.84 | 148,651,795.92 | 149,839,781.64 | AGR | | 1.50% | 1.23%9% | 1.10% | 0.807% |
Table 2.2 Forecast sales of men's leather shoes in Sweden for the year 2016-2020
.

Source: Euromonitor International. (2016, February). Men’s Leather Footwear in Sweden. Retrieved from Passport database.

SALES OF COMPETITIVE BRAND
Table 3.1 shows 13 major brands of footwear products that are sold in Sweden. All of which have varying product line but our top 2 competitors have entered new markets and are now selling leather shoes namely Reebok and Zara. Reebok is sports related brand which has entered new markets when they introduced their new products. Zara is a fashionable brand who are known for their garments but has introduced their own set of high-end footwear both for men and women. COMPANY NAME | 2015 COMPANY SHARES (%) | 2015 SALES IN PHP. | 2015 SALES IN UNITS | Average Price per pair in php in php | Nilson Group AB | 4.8 | 6,754,010.54 | 3,419,212.8 | | Vagabond International AB | 3.8 | 5,346,925.01 | 2,706,876.8 | 6000-8000 | Puma Nordic AB | 2.9 | 4,080,548.03 | 2,065,774.4 | | Reebok Jofa AB | 2.6 | 3,658,422.38 | 1,852,073.6 | 3500-5000 | VF Corp | 1.5 | 2,110,628.29 | 1,068,504 | | Seichmann Sko AB | 1.5 | 2,110,628.29 | 1,068,504 | | Scorett Footwear AB | 1.5 | 2,110,628.29 | 1,068,504 | | Bjorn Borg AB | 0.9 | 1,266,376.98 | 641,102.4 | | Blanco Footwear Sweden AB | 0.7 | 984,959.87 | 498,635.2 | | Ruralmed SL | 0.5 | 703,542.76 | 356,168 | | Flippa K AB | 0.4 | 562,834.22 | 284,934.4 | | Zara Sverige AB | 0.3 | 422,125.66 | 213,700.8 | 4000-5000 | North Face Inc. | 0.2 | 281,417.11 | 142,467.2 | | Others | 46.2 | 65,007,351.45 | 32,909,923.2 | |
Table 3.1 Sales of competitive brand for the year 2015

| Reebok Jofa AB | Zara Sverige AB | Product | Zara manufactures the products like clothes, shoes, cosmetics and some accessories for men, children and women, rugs are also a part of zara productions. At present company exceed the clothes with new sizes similar to Americans. Annually Zara produces almost about 11000 different products | Reebok offers a wide range of Footwear, Clothing and Accessories for both Men and Women. In the footwear product mix it offers in Athletic, Casual and Court in a color range like black, brown, grey, white, blue and pink. The footwear mix is offered both in men and women. In the clothing, Reebok offers like jackets, tops and bottoms for both men and women for activities like yoga, tennis, walking, fitness and training. Accessories like bags, sippers, caps. | Place | Zara is present in almost about 30 countries and atprivate location of these countries there are 600 commercial stores but now Zara is selling its services through out the world. Zara has 40 stores scattered all over Sweden. | Reebok shoes are carried by multi-brand stores and the exclusive Reebok stores across the globe. Reebok sells its product to about 20,000 retail accounts in almost 200 countries around the world. In the international markets, Reebok sells its products through independent distributors, licensees and subsidiaries. It could be established in Pondicherry to the urban areas as making it available in showrooms and outlets. | Price | As the concept of Zara was to provide its products to the less cost earning people so its prices are very reasonable that every person can afford. The prices of Zara are different for its different products. | Reebok follows the common pricing strategy. Their aim is to survive and grow in the market but as such, Reebok follows maximum market skimming strategy. Whenever Reebok unveils a new technology in the market they set a high price and then slowly drop prices over time. As Reebok can sense that whenever they launch a product they have sufficient number of buyers for that product and Reebok keeps the price high so that they are able to control the demand, earn more profit and communicate to buyers with high price that the product is superior. | Promotion | Zara started campaigns in different countries with decency and simplicity to attract the customers, deals them with great manners to attain their loyalty. For the promotion of the company they start focusing on the internet searches and spend more time on that because net is the best way to advertise in minimum cost | Reebok provides great deals on quality footwear, apparel, and fitness equipment for women, men, and kids. Reebok sports and lifestyle products are built on a strong heritage, commitment to creativity, and the desire to constantly challenge the status. The company uses various promotional tools to bring awareness among its customers. It offers discounts, vouchers, coupons and custom made sneakers on their products. Apart from this, there are celebrity endorsements, road shows, sponsorship events, television commercials, print ads, billboards, alliance events.Reebok had separated 15% of its sales for its advertising and promotion activities. |
Table 3.2 4P's of top 2 industry players

TARGET MARKET
Our target market are men ages 28-38, from Stockholm, Sweden with a population of 467,000. These Swedish men appreciates good design and has a clean, minimal aesthetic, which is the trend now.

Source: Euromonitor International. (2016, February). Consumer Lifestyles in Sweden. Retrieved from Passport database.

PRODUCT POSITIONING
We will position our product on a low-priced men’s leather shoes but can offer high standard quality. Not only does it offer high quality but also up to date designs. Our tagline is “From casual to formal, from outdoor to corporate, you’ll surely find what you need in Rusty Lopez.”
COMPANY SALES TARGET
Our company’s objective is to get a market share of 4%, or Php 1,498.397.82 or 745,884 units, for our 5th year of operation. This will be done by starting on caputing 2% of the market then as year goes by the market share increases until it reached 4%. We decided to target 4% because we wanted to surpass our top competitor, that is Vagabond International AB, that has a market share of 3.8%. This is enough to gain a 0.2% increase over the leading company. YEAR | 2016 | 2017 | 2018 | 2019 | 2020 | SALES IN PHP. | 2,862,006.68 | 3,631,204.84 | 4,411,040.68 | 5,202,812.84 | 5,993,591.28 | AGR | | 26.88% | 21.48% | 17.95% | 15.20% | SALES IN UNITS | 1,442,624 | 1,814,490 | 2,202,204 | 2,592,324 | 2,983,536 | AGR | | 26% | 21.37% | 17.71% | 16.53% |
Table 6.1 5 years sales objectives in Php. and units.

DISTRIBUTION PROGRAM

DISTRIBUTION OBJECTIVES
Our distribution objective is to be able to place our product to 50% of outlets in Sweden. Our penetration rate for the first year until the fifth year is 100%, this is because we are distributing our products to big outlets in the country. The distribution channel we used is indirect, we will have a sales agent to distribute our product to retailers.

FLOW OF DISTRIBUTION
Our product will be exported to Sweden by a cargo ship. From the Sweden port, all the supply would go directly to a sales agent under Solar Sverige AB. Our sales agent would be paid depending on the reached sales in a year, 30% of total sales. Our sales agent would then distribute the supplies in a display shelf of the top 3 department stores in Stockholm, Sweden. Stockholm’s top 3 department stores are NK, ICA Maxi, and Ahlens in descending order. Our sales agent would also develop a website for Swedes to make purchases online since e-commerce is emerging fast in Sweden. Figure 2.1 Flowchart of distribution

PLACEMENT AND DISTRIBUTION
Our target commercial areas in the country are Stockholm, Uppsala, Malmo, Gothenburg, Jonkoping, Helsinborg, Huddinge, and Vasteras. There are 12 store-based retailing outlet and 25 non-store retailing outlets in Sweden. Our target is to distribute and place our product to 50% of all store-based outlets in Sweden by the end of the year 2020. These outlets are Nordiska Kompanient or NK, ICA MAxi, Covths, Coop Extra, Anneli Edgren, and Åhléns. Our placement and distribution strategy for 5 years is at follows: OUTLET | TYPE OF DISTRIBUTOR/RETAILER | Nordiska Kompanient (NK) | Store-based Retailing | ICA Maxi | Store-based Retailing | Systembolaget | Store-based Retailing | Covths | Store-based Retailing | Coop Forum | Store-based Retailing | Coop Extra | Store-based Retailing | ICA | Store-based Retailing | IKEA | Store-based Retailing | Anneli Edgren | Store-based Retailing | Jula | Store-based Retailing | Åhléns | Store-based Retailing | Netto | Store-based Retailing | Netonnet | Non-store Retailing | App Store | Non-store Retailing | H&M | Non-store Retailing | El Giganten | Non-store Retailing | Komplett | Non-store Retailing | Cdon | Non-store Retailing | Ellos | Non-store Retailing | Apoteket | Non-store Retailing | Siba | Non-store Retailing | Adlibris | Non-store Retailing | Nelly.com | Non-store Retailing | Bokus | Non-store Retailing | Gymgrossisten | Non-store Retailing | Webhallen | Non-store Retailing | Dustin Home | Non-store Retailing | IKEA | Non-store Retailing | Apotea | Non-store Retailing | Digital Inn | Non-store Retailing | Lensway | Non-store Retailing | Bygghemma | Non-store Retailing | Cdon | Non-store Retailing | Nelly.com | Non-store Retailing | El Giganten | Non-store Retailing | Ellos | Non-store Retailing | Webhallen | Non-store Retailing |
Table 3.1 Table of the total number of outlets in target country broken down by type of retailers/distributors

For our distribution strategy, for the first year of operation, we will distribute our products to Stockholm. The outlets that we will have our products placed are NK, ICA Maxi, and Ahlens. For the second year of operations, we will distribute our products to Uppsala and Malamo. The outlets that we will have our products placed are ICA Maxi, Coop Extra, and Ahlens. For the third year of operations, we will distribute our products to Gothenburg. The outlets that we will have our products placed are NK, ICA Maxi, Covths, Anneli Edgren, and Ahlens. For the fourth year of operations, we will distribute our products to Jonkoping, Helsinborg, and Huddinge. The outlets that we will have our products placed are ICA Maxi and Ahlens. And for the fifth year of operations, we will distribute our products to Vasteras. The outlets that we will have our products placed are ICA Maxi, Covths, and Coop Extra.

Table 3.2 Table on placement and distribution Gantt Chart for 5 years

Source: Euromonitor International. (2016, February). Men’s Leather Footwear in Sweden. Retrieved from Passport database.

LOGISTICS

Order Processing
Our order processing starts with pallet picking, this is the simplest systematic method in picking. Next is sorting, we will separate items according to destinations, that is on what department store the items will be delivered. Next is the pre-consolidation or package formation, this where we weight, label, and pack each item. And lastly, consolidation, the is where we gather packages into loading units for transpiration, control, and bill of lading.

The order lead time is usually 2 months, from the port in Manila to the port in Sweden to the delivery of items to assigned department stores. Usually, our competitors takes around 2 ½ to 3 months of order lead time. We wanted to cut it to 2 months to cater the demand of consumers. The minimum size of order is twice the number of the nventory assigned for each month, that is discussed on the latter part of the paper. Our delivery is once every two months. Again, to cater the demand of customers and lessen the logistics expenses.

YEAR | 2016 | SALES IN PHP. | 2,862,006.68 | SALES IN UNITS | 1,442,624 |
Table a.1 Total deliveries in units and in Php.

Inventory
Our strategy is to produce to inventory for the reason that we wanted to maximize efficiency and reduce cost in producing outputs. With this, it will allocate funds that were tied up in inventories to other expenses. Defect rates are reduced, resulting in less waste and greater customer satisfaction. And, throughout time is reduced, resulting in greater potential output and quicker response to customer.

The inventory level to be maintained monthly is 120,300 SKUs. This is to meet the target number of sales for the first year.

Warehousing
The size of our warehouse is 2,000 square meters, this is to accommodate the required number of units to be distributed in Sweden.

Transportation
We will use three large trucks that have a length of 24ft and can hold 6500 lbs, 1400 cubic feet. Every truck can carry up to 450 medium sized boxes, at least 225 shoe boxes per medium sized box inside the truck. These large trucks will be designated to two commercial areas each with one truck having three destinations. They will deliver new stocks every 4 months to their destinations. Our trucks will be bought and it would minimize cost of deliveries in the long-run.

Service
Our company will provide the following value added services: * Bundling and packaging. put together desirable packages, purchasing levels and a series of added benefits that are significant in value and are, themselves, a whole lot more valuable than simply the product is by itself. * Frequent buyer programs. This is tied into the concept that the more someone buys from you the more valuable service, pricing, benefits and related items they receive. * Qualitative preference. We will assign dedicated account people to handle your customer’s accounts personally. * Speed of service and delivery. One of the ways to differentiate us is to guarantee some sort of on time or faster delivery. It is very well known and accepted that on time delivery is a key component for charging full or maximum pricing. It is also a component as it relates to providing value-added services and products. * Insider Information. We will consider a regular newsletter (electronic or printed) that updates customers on a regular basis as it relates to very key and important information that they have to have.

Merchandising
Our product will be displayed at the men’s leather shoes section of the department store. We will be setting up a dapper-esque section to the department to incorporate what we are selling, that is leather shoes.

Illustration 4.1. Plan-o-gram