How to Improve Profitability - Coursework Example

How to Improve Profitability Retail stores are increasingly turning to the Internet to reach more customers and improve profitability (IBT, E-Quad, JupiterResearch, Jones). Using processes already in place with Smith Nursery retail stores, Smith can open an online store to provide a bigger customer base with plants and seeds offered in our real-world locations. The Marketing Team sees several problems and opportunities for the successful startup of this online venture. The support of the Executive Management Team is vital.

Outside consultation will be needed to start the venture and to transition to Smith’s Marketing Team. An Online Sales Department must be created, and staff at the retail stores must be trained. Clear communication, responsibilities, and timelines must be established. We must be sure our inventory lists are up-to-date, and that shipping channels are established so orders can be delivered in a timely manner. We must use processes already in place to support the online venture. As with opening a real-world store, there are costs associated with an online venture.

Once the online store is established, however, costs drop to a very small percentage of profits generated, because fixed costs are almost nothing to maintain an online presence. With careful planning, clear communication, and proper training, an online Smith Nursery outlet can be an excellent profit center for the company. Expanding the Smith Nursery Market Online The Executive Management Team of Smith Nursery has asked the Marketing Team to put together this report to discuss problems and opportunities for Smith in expanding its retail market into online sales.

We members of the Marketing Team think Smith should expand its sales centers to online markets, and this report will make several recommendations concerning this proposed venture and how to make it successful. Smith Nursery has an excellent opportunity to increase its profit centers by offering a select line of plants and seeds to online customers. Because Smith Nursery has major retail store locations in Decatur, Omaha, and Ft. Worth, and satellite stores in those surrounding areas, we can offer shipping from any of these locations to customers all over the United States.

Problems and Opportunities The support of the Executive Management Team is vital. Clear lines of communication must be established and maintained among all the team members, and each person must adhere to responsibilities. Starting a virtual location is much the same as starting another retail location, with a few differences as will be discussed later. Outside help will be needed to start the venture. The current Marketing Team does not have all the knowledge necessary to build the online store, optimize the website, and design and maintain an online catalog and customer email system, and we will need to hire an outside consultant.

This consultant should be knowledgeable in online sales, website optimization, customer service, and online marketing. We will engage this person in planning and executing the startup, and he or she will help the Marketing Team and Online Sales Department to transition. An Online Sales Department must be created, and staff at the retail stores must be trained. The Online Sales Department should consist of a manager and at least two employees to start, with the ability to expand as future orders dictate.

This Department would be ideally located at Smith’s main offices in Decatur, with two additional trained contact people at each of the main retail stores in Omaha and Ft. Worth. The Online Sales Department will handle orders through the website and look up inventory lists to best fulfill the order. A dedicated Customer Service representative should be available by telephone during business hours to handle customer questions and complaints, and to answer emails from customers. Clear communication must be established among team members and the Executive Management.

Timelines and responsibilities must be established to make the creation of the startup as smooth as possible. We recommend holding roundtable discussions on a regular basis (weekly at first, then dropping to monthly after the venture is established). Use current infrastructure and processes. It’s best to use processes already in place to support an online store (MoreBusiness.com). Smith’s current computerized inventory lists can be accessed to fulfill orders from the ideal location and to control inventory.

Shipping accounts should be established with the United States Postal Service and FedEx. There should be limits on the size of online orders to keep inventory levels stable and to deliver the best customer service possible to online and retail store customers. Successful Online Marketing Campaigns Online marketing and real-world marketing should work together to get the most out of advertising dollars. The website address must be printed on all retail store communications and business cards, and in all newspaper advertisements.

The website and online store become the “storefront” of the online sales venture. Online marketing can be accomplished through website optimization so people searching for products can find the Smith website; using Google AdWords to create small text ads shown to people searching for products through search engines; an online catalog emailed to interested people describing products available from Smith Nursery (ConstantContact.com, Emerson); and designing marketing properly to appeal to an online shopper (2CreateaWebsite.com, Gehl).

Costs Incurred for the Online Retail Outlet Starting an online venture is similar to building a new retail store location, without the excessive building costs, rents, permits, and overhead. Startup costs for establishing and maintaining an online store include equipment (IBN), website hosting, building and optimizing the website, building an online storefront, regular maintenance, and training Smith staff to take over maintenance. We estimate it will cost $35,000 to obtain computer equipment, and to establish the website and maintain it for a year.

Maintenance costs will drop to less than $1,000 per year after the first year, because the Online Marketing Department will assume the duties of the outside consultant as part of their job descriptions. Overhead costs will be minimal as the project progresses, with equipment updates needed every 3-5 years. A more complete breakdown of costs and budget can be determined after the planning phase. The staff needed to run an online store is minimal compared to the staff needed for a retail outlet.

The Online Sales Department can consist of three people to start. Managers and employees at the three retail stores can assume responsibility for assisting the Online Sales Department as part of their regular duties. As the volume of orders dictates, more staff can be hired to grow the starters offered in the online store, but that is in response to increased profitability and doesn’t count as a cost for the venture. Increased Profitability As with any venture, profitability is determined by advertising and customer base.

Virtual and real-world marketing work together to increase exposure to the customer base, and an email catalog keeps those customers “thinking Smith” on a regular basis. Order limits and realistic delivery promises help keep inventory under control. We can estimate sales projections for the first year, and adjust inventories in future years, just as we do with real-world sales. Recommendations 1. Engage an outside expert in online sales to help the Executive Management and Marketing Teams plan the venture. 2. Engage the manager of the future Online Sales Department so he or she can participate in planning and startup. 3. Hold roundtable discussions, and establish communication loops and timelines. 4. Determine final budgets and costs, based on planning discussions. 5. Train Customer Service Representatives and Online Sales staff. 6. Build a website and online store. 7. Establish marketing channels through a well built website and online store, Google AdWords, local real-world advertising, an electronic catalog, and any other channels the outside expert recommends. 8. Begin taking and fulfilling orders for customers.

References 2CreateaWebsite.com (2008). Building an online store. Retrieved 12 Jan 2009 from http://www.2createawebsite.com/money/build-online-store.html ConstantContact.com (2008). Why you need an e-newsletter for your company. Retrieved 12 Jan 2009 from http://www.constantcontact.com/aka/docs/pdf/why_email_newsletters.pdf IBN (Internet Business News) (30 Oct 2006). Johnny’s Selected Seeds uses IBM discovery software to help increase online sales. Retrieved 12 Jan 2009 from http://www.allbusiness.

com/technology/internet-technology/3908734-1.html IBT (International Business Times) blog (18 Jul 2008). Revolution in store as online retail sales soar. Retrieved 12 Jan 2009 from http://www.ibtimes.com/articles/20080718/revolution-store-online-retail-sales-soar.htm Emerson, Jim (20 May 2005). Catalogs and the web: a beautiful friendship. Direct online magazine special report. Retrieved 12 Jan 2009 from http://directmag.com/exclusive/specialreports/2005_05_20_especial_report/ E-Quad News (1 Dec 2005).

Online retail strong, store sales falter. Retrieved 12 Jan 2009 from http://www.e-quadnews.com/index.php/m/articles/id/118 Gehl, Derek (26 Jul 2005). 12 ways to increase online sales. Entrepreneur.com online magazine. Retrieved 12 Jan 2009 from http://www.entrepreneur.com/ebusiness/ebusinesscolumnist/article79002.html MoreBusiness.com blog (24 March 2008). How to increase retail sales. Retrieved 12 Jan 2009 from http://www.morebusiness.com/increase-sales-in-your-retail-store Jones, K.C. (8 April 2008).

Online retail expected to grow, regardless of economic climate. InformationWeek website. Retrieved 12 Jan 2009 from http://www.informationweek.com/news/internet/retail/showArticle.jhtml?articleID=207100283 JupiterResearch.com (9 Jun 2008). JupiterResearch finds that online retail sales will continue to increase during the 2008 holiday shopping season. Retrieved 12 Jan 2009 from http://www.jupiterresearch.com/bin/item.pl/press:press_release/2008/id=08.06.09-holiday-postmortem.html Smith Nursery: Expanding Online Markets Report From the Marketing Department of Smith Nursery Your Name Professor’s Name Date Table of Contents Executive Summary 1 Expanding the Smith Nursery Market Online 2 Problems and Opportunities 2 Successful Online Marketing Campaigns 3 Costs Incurred for the Online Retail Outlet 4 Increased Profitability 5 Recommendations 5 References 6