Business Model for Esprit Holdings Limited - Assignment Example

Company analysis of Esprit Holding Limited and Mind Factory AG s I. Business Model for Esprit Holdings Limited Esprit Holdings Limited is a manufacturer of footwear, housewares, clothing, accessories, and jewellery under the label Esprit that is publicly owned. The firm has its headquarters in Ratingen, Germany and Kowloon, Hong Kong. Since the firm is located in Germany, after the United Kingdom and France, German firms are considered as to be the third largest group online retailers. The firm is a division of a "brick and mortar" retailer, with the parent company being Esprit Retail B.V & Co. KG. It was founded in 1968 by Douglas Tompkins and Susies Tompkins Bell. The Current CEO is Jose Manuel Gutierrez. The firm has John Gunn as the president, Tobias Valdenaire as the Co-CEO, and Juergen Michelberger as the E- Commerce manager. When the firm was being formed, Susie assumed the creative role, while Doug assumed the financial role. In October 2013, the firm appointed a new chief product officer, Rafael Pastor Espuch, who had 18 years of experience in the fashion industry while at Inditex. The vision of the firm is to inspire the spirit of the organization and create a sense of cooperation and community. On the other hand, the mission statement of the firm is, “Be informed, be involved and make a difference’ (Esprit Holding Limited , 2014). So as to ensure proper running of the firm, Esprit came up with an executive board. The company has six members in the executive board with two members being female; Susie and Hansen. The managers who are on the executive board had prior experience working in start-up as well as working as executives in the non-retail companies. Esprit is a fashion retailer that operates more than 1000 directly managed bricks-and-mortar stores. Besides, it has more than 10,000 wholesale retailers globally as well as an e-commerce site. The firm operates more than 770 retail stores globally and also distributes products to an estimated 5, 000 wholesale locations across the world. Furthermore, in more than 40 nations Esprit has 1.1 million of retail space. The Group also operates more than 800 directly managed retail stores internationally. This implies that it has a large employee base. As of June 2012, the firm had employed 12, 400 people (MarketLine, 2014). Esprit offers twelve (12) product lines including collection of business clothing for men, women and children: casual sportswear, urban clothing for the young women, children’s clothing who are aged up to seven (7) years, sports wear, accessories such as shoes, bags, and swimmer for women, kids and men. The firm also deals in the online selling of furniture, wallpaper, carpets, bathrooms, and other interior décor products. Lastly, Esprit’s kid’s world sells toys, buggies, maternity wear and nursery furniture. Internationally, the firm sells its products in Albania, Belarus, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Lithuania, Netherlands, Norway, Poland, Russia, Spain, Switzerland, and the United Kingdom. Since the 1990’s, the firm has tremendously grown through licensees, the flagship stores feature both the licensee products and Esprit’s products under one roof. It has more than 30 license holders, for instance Falke (stockings and socks) and Coty (scents). In that respect, the online retailer sells products that are branded with its retail brand. In 2011, the firm began a long-term brand revitalization program to re-establish the retailer as an inspiring fashion brand that has a clear identity and also sustainable profitability. It targets consumer groups include middle income and high income earner. This has been attained through product differentiation, whereby all the consumers’ tastes and preferences were met. The firm’s prices were slightly lower as compared to the competitors such as Inditex, thus ensuring that its strategy of low pricing attracts more customers. Esprit uses various differentiation factors such as online retail brand, product brands, product scope, product design, product innovativeness, product exclusivity, product scarcity, increased shopping experience, ease of transaction, and reduced delivery cost. With regard to customer service, the online retailer has a customer center and the contact hours that handles all the customer’s requests and complains. It also has an estimated shipping period of four days, as well as free shipping return. Since the firm has grown internationally, it also offers international shipping of apparel products and accessories. The customer service division also has updates on online shipping, order confirmation, order status, pre-paid labels, return policy, shipment tracking and an outlet centre. For those who are with the Esprit Friends, they receive a welcome gift, exclusive offers, and a 3 percent discount on every purchase and birthday surprise. The firm has two country domains; Germany and Hong Kong, even though it has one website. The firm’s website is available in eight languages. It is also available on apparatus. The website is also customizable. The channels for customer interaction include use of various social network sites with Facebook having an estimated 817, 259 likes, 864 followers on twitter, among many others (Kantar Media Compete, 2013). Besides the online networks, Esprit Holdings also interacts with its customer through television. In 2013, the firm realized web sales worth €184,739,040 and $235,052,472 (€179,330,805) and $219,383,850 (€169,500,000) in 2011 and 2010 respectively. In 2011, the company as valued at $ 1.5 billion, while the Esprit brand was valued at $ 3.4 billion (Esprit Holding Limited, 2014). Furthermore, interaction is enhanced by making use of 5 logistic providers with the delivery time being four days. Pick up, express shipping and free returns are also available. Esprit uses the following payment systems: ACH, American Express, carte bleu, diners, direct credit, PayPal, Paybox, Visa, Moneybookers, Mastercard, Ukash, Giro, Western Union Quickpay, and store value cards (Kanter Media Complete, 2014). About customer relations, the firm has a customer service desk that can actually be reached using either email or service hot-line. There is also the existence of loyalty programs, customer reviews, integration of the social media such as Facebook and twitter, and customer rating products. However, there is no integration of shipping advice. So as to ensure the product reaches a wider consumer base, conducting a promotion is conceived as a better strategy. It makes the consumers be aware of the product. Therefore, the firm offers internet sales and rebates with no limited hours, sweepstakes and gift with purchase. In relation to e-mail marketing, Esprit has a monthly email program with one monthly e-mail campaign (Kanter Media Complete, 2014). For an online company, efficiency is inevitable. The sources of efficiency in Esprit Holdings Limited comprise of the following: reduction of costs so as to gain competitive advantage, selection of the product range, reduction in asymmetric information, increase in transactions, increase in the speed of transactions and generation of the economies of scale. On the other hand, the sources of novelty include providing new and innovative apparel products and accessories, utilization of innovative ways to produce and deliver the firms products and services, as well as involvement of new parties such as vendors and the parent company. About key resources, activities and partners, the following value chain steps are very significant in Esprit’s business model: product sourcing, managing inventories, acquiring customers, procuring order, full filling order, and after sale services. The orders are procured by building and managing technology and infrastructure, determining merchandising, managing order, carrying out user analytics, and collecting online payments. As part of encouraging the customers to flock back the business, the after sales services at Esprit entail a customer support call center, emails and hotlines. This ensures customers can contact the firm anytime in case of any problem. Inventory is managed by making proper warehouse locations in countries of operation, making decisions on the storage scheme, implementing inventory management system, and transporting goods to the distributor. Except for Austria and Switzerland, the firm has warehouses, retail distribution centers and sales organizations in Benelux nations, Eastern European nations, France, Germany, Italy, Scandinavian nations, Spain, Portugal and the United Kingdom. The firm also uses some outsourcing policy in its warehouses and distribution centers. In the delivery section, the firm outsources almost all activities in this area. With regard to after sale services, Esprit exclusively performs all the activities in this area. The firm sells it products at a competitive rate. This has enabled it to gain competitive advantage over the apparel companies. This is because the firm does not change its prices very often too. Besides, rebates are also provided (Bloomberg News, 2011). The other profit formula that Esprit Holdings uses is minimum order. The minimum order is also extended for free shipping for orders that are above $19.99. Moreover, they are also discounts provided for first order. The subscription based sales, personalized shopping recommendations, promotion of complementary products, links to other businesses that are owned by the parent company, links to external partners, integrating third party vendors have been used by the firm to increase profits. This model has enabled the firm to follow a generic business model. It is very simple, thus ensuring the firm security through the parent company, relationship with the suppliers as well as the brand name. II. Reflection Esprit Holdings was founded by Douglas Tompkins and Susies Tompkins Bell, with the current CEO being Jose Manuel Gutierrez. Esprit Holdings has made its mark in the apparel industry since it targets several market segments in the society including kids, men and women products. The strength of the firm involves marketing and promotion, creativity and innovation, networking, and IT management. Esprit makes it easy for consumers to find products by providing a wide range of apparels and other related products. There is also adequate information provided on the product. This makes the consumer to be updated on the product availability and shipment. As a result of its size, the firm can reduce costs. This attracts customers to purchase due to low prices. The online retailer allows third parties to sell products online that could not do well offline. Esprit continuously introduces new features to its website in order to improve its website. With regard to the role of lock-in to the business model, the firm makes use of loyalty programs so as to retain the customers and encourage additional purchases. There were a few challenges that I encountered during data collection. The data collected at that particular time may vary in the next few hours, for instance, the stock market. It was also time consuming to collect, organize and describe the data. As a consequence, the information was presented basing on depth rather than breadth. Besides, there was minimal information regarding the management of Esprit Holdings Limited. This made it very hard for adequate analysis of the firm’s management. I noted from the data that consumers want transparency around data that was collected by the online retailer. When this is not provided, this will erode their trust in the brand thus reducing sales for the firm. I. Business Model for Ming Factory AG Mind Factory AG is a German computer and electronic retailer. Just like Esprit, this German firm reaffirms the dominance of German firms in the online retail market. Mind Factory is headquartered in Wilhelmshaven, Germany. It has Petra Clemen as its Chief Executive Officer. The chairman of the supervisory board is Fred Mielimonka (Mind Factory, 2014). In its executive board, they are five people with only two being female to ensure gender parity in their managerial positions. The average age of Mind Factory’s executive board members is 45 years. All the board members have experience in online selling. The firm sells products such as laptops, software, video equipment, household appliances, cameras, computers, and games. Besides to the private-end users, the firm also manages industrial companies, resellers and public institutions. The business model is built around a fast changing product portfolio (Mind Factory, 2013). The Mind Factory Limited was originally founded in 1996 as Software Vertriebs GmbH and Mind Factory Hardware commencing its operations as a simple retail store in Wilhelmshaven. The firm continuously rose from 1997 to 1999, to occupy more commercial space and increased the number of employees (Waterlow New Media Information, 1999 ). In 2000, it was renamed by the GmbH into a stock corporation. In 2001, Mind Factory Community Forum was founded. In the following year, the warehouse space was expanded in the main building to process the continuously increasing order deposits. As a result, an increase in sales of 50% was obtained. A second warehouse was put into operation to ensure a faster logistical processing in 2003. By 2006, Mind Factory was certified by Euro-Label as a certified online shop. In 2013, the firm had a stock market quotation. Currently, the firm has more than 16, 000 M2 of commercial space that is usually available to bring more than 25, 000 shipment weekly on their way to the receivers. Due to its extensive operations, as of 2008, the firm had 200 employees (Mind Factory, 2014). Every firm needs to have a financial strategy. About its financial status, the firm posted €105,344,280 in 2012, €99,229,630 and €92,000,000 in 2011 and 2012 respectively. This implies that the percentage growth of the firm in 2012 was 6.16 percent. As cited by Kuhn (2004) in 2003, the firm attained a turnover of 118 million euros. The firm has a communication of the vision and mission statements which are aimed at promoting its aims and objectives in technology enhancement. This includes creating and innovating products that will suit the tastes and preferences of the consumers. Mind Factory’s website has 3D product views, alternate views, customer reviews, guided navigation, online gift certificates, enlarged product view, product ratings, RSS feeds, wish list, registry, product ratings and product recommendations. The firm stays in touch with its customers through social networks such as Facebook, Twitter, Google +, My space, blog, and a forum. On the homepage, the customers can actually click on the large icons that are found on the right hand side to be able to access any of these social media sites. In addition, there is also the customer ratings section, job center, call back form, and information centre (Kuhn, 2004). The firm sells its electronic products in the following nations: Bulgaria, Czech Republic, Finland, France, Germany, Italy, Netherlands, Norway, Poland, Portugal, Spain, and the United Kingdom. Its products target high end consumers such as public institutions and authorities. This has made Mind Factory sell its products at a much higher price compared to the other inline retailers. Due to the nature of the firm’s products, the firm does not target any gender, unlike Esprit which targeted mostly women since they love fashion most, besides men and children. Therefore, in relation to its customer service, the firm has a provision for order confirmation, order status, account status, and order status. To the firm’s value proposition, the firm has made a significantly strong emphasis on product brand, segment focus, product design, product scarcity and security. However, the company did not make emphasis on ease of transaction, sustainability and speed of transaction. The customers are not involved in product customization and creation. Online retailers project their growth basing on the number of visits on the website. Mind Factory experiences about1, 500,000 website visitors in a month (Mind Factory, 2014). The firm does not employ the services of vendors, even though the firm uses e-commerce platform and e-mail marketing. Similar to Esprit, the firm has a monthly email program, with one monthly email campaign (Kantar Media Complete, 2013). In order to ensure a product reaches a wider consumer base, conducting a promotion is conceived to be very crucial for any operating business. Mind Factory has embraced promotion by means of using social networking sites such as Google+, Facebook, Twitter, and blogs. The firms Facebook page has 12, 604 likes, its Twitter page has 1, 943 followers. It has one country and website name. Although the website is developed in German language, it is also available in four other languages. Additionally, Mind Factory uses television media to interact and communicate with its customers. The company site is always available, with the response time having a rating of 3.87. The website is hosted by Deutsche Telekom. The firm receives 1,500,000 website visitors monthly (Mind Factory, 2014). With regard to promotions, the firm has no limited hour specials, rebates, gift with purchase, and sweepstakes. The firm offers mostly digital products. The offering is a bit stable overtime. As a consequence, it offers a limited number of product categories, electronics and entertainment. The payment systems for these digital products include debit card, carte bleu, master card, visa, paybox, and paypal (Mind Factory, 2012). After making payments, the delivery time takes five (5) days. Pick up, express shipping and free returns are also available. Although the firm does not have loyalty programs, it does have integrated shopping advice and social media. There are also provisions for the clients to rate the products and customer interaction. Just like Esprit, the firms rates product sourcing, managing inventories, acquiring customers, procuring order, full filling order, and after sale services activities very highly. These operations are the ones that have enabled the firm to show some growth in the last decade. Except for managing inventories, Mind Factory has shown average resources and capabilities in product outsourcing, acquiring customers, procuring orders, fulfilling orders and after sale services. As a result, the firm only sells in Eastern European nations, France, Germany, Italy, Spain and the United Kingdom. It also has distributing centers and sales organizations in similar nations of operation. This worldwide distribution network enable the firm to deliver its products to the customers in various nations. With regard to outsourcing, rapid technological changes have generated labour market problems. The increase in the speed of technological changes has significant effects on the labour market, thus the need for outsourcing. The firm has an outsourcing policy on warehouses, delivery and distribution centers. However, the firm performs all the activities in the provision of after sale services such as installation of desktop computers, software and games. A firm can establish itself in the market using a pricing strategy. Mind Factory has its prices slightly higher since its target market is higher consumer groups who usually want to have value for their money. However, it also has products that are affordable for the lower-end market. In order to increase profits, the firm has minimum order and provision of free shipping for the minimum orders. Unlike Esprit, Mind Factory has additional recurring revenue as well as subscription. Besides, the firm has links to other businesses that are owned by the parent company, similar to Esprit. Although Esprit promotes the utilization of complementary products, Mind Factory does not. The firm’s business model’s uniqueness and protection is that, in relation to the level of standardization, the firm is highly standardized, and it follows a generic online retail business model, similar to Esprit Holdings Limited. It also has innovative features such as the social networks icon. Its measures of protection are with brand name and the parent organization. On its internal competence, a SWOT analysis indicates that the firm has significant strengths in research and development, creativity and resource leveraging. Despite its weakness being in the management of the supply chain, the firm has noted opportunities in adopting technology in the supply chain. The company has also gained competitive advantage in the sector through product service quality and innovative leadership. On the contrary, the firm does not involve itself in low cost operations. This can slightly affect its revenues since the low-end market plays a very crucial role in the realization of increased revenue. Mind Factory entered the online retail business so as to develop a direct distribution channel. In relation to efficiency, Mind Factory offers an array of electronic products that customers can find easily. It also offers adequate information of the entertainment and electronic products it provides. About, complementarities, the online retailer offers after sales services. It also sells its customer complementary products. Besides, it also benefits from the synergy with ‘offline’ businesses that are owned by the parent company. In relation to the the lock-in, similar to Esprit, Mind Factory makes use of technologies that cannot be copied by competitors because of legal protection. Since the firm handles public institutions and other high-end clients, it usually customizes the webpages for some of its customers. Since the firm thrives on novelity, the firm offers new and innovative products to its consumers. It also provides products that are hard to buy on other websites such as software. Mind Factory, since it deals in technological products, it needs to develop products that are up to date such as laptops and software. This translates to continuously introducing new features to its website in order to improve the overall growth of the business. Therefore, the firm operates on a business model that is based on novel products. This implies that it comes up with innovative products by keeping up with technology. II. Reflection From the collected data, it is evident that Mind Factory AG is a German computer and electronic retailer. It has its headquarters in Wilhelmshaven, Germany. It has Petra Clement as its Chief Executive Officer. The firm operates on a business model that is based on novel products such as laptops, software, video equipment, household appliances, cameras, computers, and games. Even though the waiting period for shipment is a little extended, most consumers prefer the buying from the firm due to its low and competent prices for quality products. Besides, it offers extensive customer care services for its products. Its website has an impeccable navigation widerrum. Mind Factory makes use of technologies that cannot be copied by competitors because of legal protection. Mind Factory sells its products in Eastern European nations, France, Germany, Italy, Spain and the United Kingdom. It also has distributing centers and sales organizations in similar nations of operation. This worldwide distribution networks enables the firm to deliver effectively its products. Challenges: When collecting data, I noted that Mind Factory is faced with the problem of coping with scale and growth. Since the firm consistently found new and interesting products to sell, as well sourcing for enough inventories of these products to meet the ever increasing demand, it was difficult to collect comprehensive information about the company at that particular time. Another challenge is that at some pint the firm suspended its to carry out maintenance. This greatly affected the reliability of my data. The other challenge is that it was also time consuming collecting and analyzing the information on Mind Factory. Lastly, the firm’s reliance on in-store signs and messaging as sole channels for creating awareness on products limited data availability on product awareness. Reference List Bloomberg News. (2011, September 28). Esprit’s 68% Discount Signals Cheapest Apparel Buyout: http://mobile.bloomberg.com/news/2011-09-28/esprit-s-68-sales-discount- signals-world-s-cheapest-apparel-lbo-real-m-a. [Accessed April 22, 2014]. Esprit Holding Limited . (2014). Esprit Holding Limited : https://www.google.com/finance?q=HKG:0330 [Accessed April 22, 2014]. Kantar Media Compete. 2014. Internet Retailer estimate. Monthly average by Internet Retailer estimate based on avg. daily visits from comScore Inc. http://www.top500guide.com/company/profile/?id=3842[14.03.2014 09:30:51] [Accessed April 22, 2014]. Kuhn, W. (2004, April 04). Online retailer Mind Factory increases turnover to 118 million euros:http://translate.google.com/translate?hl=en&sl=de&u=http://de.wikipedia.org/wiki/ Mindfactory&prev=/search%3Fq%3DMindfactory%2BAG%26client%3Dfirefox- a%26hs%3DHXJ%26rls%3Dorg.mozilla:en-US:official%26channel%3Dsb[Accessed April 22, 2014]. MarketLine. (2014). Esprits Holdings Limited: Company overview: http://www.datamonitor.com/store/product/esprit_holdings_limited?productid=0BC7F0B 8-0CB4-439E-BE14-4DF38C351D0C. [Accessed April 22, 2014]. Mind Factory. (2012, April). Cash and shipping of mindfactory.de: http://www.idealo.de/preisvergleich/Shop/5400.html. [Accessed April 22, 2014]. Mind Factory. (2014). Mindfactory. de: http://www.mindfactory.de/. [Accessed April 22, 2014]. Mind Factory. (2014). Mind Factory AG: http://www.xing.com/companies/mindfactoryag. [Accessed April 22, 2014]. Waterlow New Media Information. ( 1999 ). NewMedia: Companies. Lower Saxony: Waterlow New Media Information. Read More