Temple and Webster - Essay Example

Case Study Analysis: Temple & Webster Name: Course Professor’s name University name City, State Date of submission Introduction Temple & Webster is a subscription based homewares online retailer founded in 2011 with an aim of being an inspirational force in home space beautification with the best international and Australian design at an affordable price (Keating, 2015). The Company is headquartered in Alexandria, Australia. The Company offers its members access to homewares, furniture, gifts, arts, home décor and other lifestyle products. Also, the company sells a variety of collections from interior designers, stylists, design commentators and the designers themselves. The online retailer group was founded by Brian Shanahan an ex managing director at Gum tree International and a co-associate Adam McWhinney. The name “Temple & Webster” was founded from the first convict artisan William Temple and John Webster who were legends in fine craftsmanship. The vast acceptance on online shopping has facilitated a rapid growth rate over the past four years (Keating, 2015). The online shopping is focus to achieve a revenue return of USD 32 million by the end of the 2015 fiscal year and a customer capacity of more than one hundred thousand (Bloomerg, 2015). However the rapid growth rate has been impacted by a low base year, the Company’s expansion rate has remained rapid. This has been due to the gravitation of the Australians towards online space in search of household furniture. Other aspects that have influenced the rapid rise of the industry is the reduced prices, improved transaction security and that ability to easily compare the products available. Temple & Webster in its 2015 strategic plan announced its interest to major stake as a tool that would be useful in boosting its revenue alongside increasing g the number of its customers. The online furniture and homeware retailer through this approach targets to lure a cash injection that is anticipated to increase its income to USD 150 a year from the previous USD 28 in 2014 (Keating, 2015). The founders in their vision targets to match Carsales.com, SEEK or RAE Group in online shopping. Additionally, the Company has launched a strategic partnership plan in 2014 that intends to boosts the Company’s growth rate within a period of eighteen months. Through the strategic partnership plan, the Company also targets to expand its branches to new geographical locations outside Australia. The expansion plan targets China, Singapore and New Zealand. Despite the Company’s success story, it has also been faced by some challenges that impacted its customers. One of the challenges that the Company has experienced was the reduced consumer confidence in the Australian online retail market. Towards the end of 2014, online retail sales index was reported to have reduced considerably by approximately 0.2% in November when compared to the previous month (Bloomerg, 2015). This further lowered the Company’s turnover rate. Another challenge that the Company is facing is the inability to locate potential suppliers that can match the Company’s rapid growth rate and expansion. Most of the suppliers currently available have not complied with the Standards set by the Company while offer very high costs. Also most of the available Companies have not adopted the direct-to-store delivery systems. The battle with recession is another challenge that is facing Temple & Webster as the Australian market where it operates still continues to battle government debt problems and currency. External Environment The Company’s external environment is broken up into different dimensions which include demographically, politically, economically, socio-culturally, innovation in technology and global factors. In terms of the demographical aspects large populations opt to live independently in urban areas as opposed to their residential homes. Following the era of the baby boomers, huge disposable income were provided that has facilitated the downsizing of most of the living spaces as the children relocate from family homes to own individual apartments. The customers that constitute the larger percentage of the growing market segment are therefore constituted by young clients who are budget conscience and have acquired their parent’s disposable income. Additionally, it has been reported that approximately 75% have showed significant turn out in shopping for their infant’s furniture online with a lot of ease. High school graduates alongside other low cost Australian consumers are significant population that has constituted potential customers to the Company. China, Singapore and New Zealand have shown a commendable increase in their purchasing power for home furnishing due to improved standards of living as well as their disposable incomes hence are targeted by the Company in it expansion project. Politically: Temple & Webster have taken keen interest on additional taxes and duties by other countries such as China, Singapore and New Zealand on furniture imported by other foreign manufactures. Additionally, quality standards on these particulars are strictly monitored. Economically: Home furnishing industry is one of the most sensitive aspects to the Australian economic cycles. Temple & Webster have expressed their concerns about the economic cycles having any negative impact on their operations. However, since they target the low cost consumers, they have refuted the perception of such negative impacts on their operation in the region. Also the federal budget that affected the level of the consumer confidence for more than six months in the last fiscal year affected the purchasing power as most of the customers were scared and doubted the security of the online transaction. The rise in the cost of fuel has also been a threat to the Temple & Webster online retailer in managing the cost from worldwide product manufacturing firms such as the Wayfair Company (Hurley, 2013). Socio-culturally: Most of the consumers currently stress on the impact of the product they want to purchase to the environment. As a result a large number of the consumers have always settled for products that are socially and environmentally friendly as compared to others that are not (Hibbit, 2014). Also, the interest of consumers on home furnishing has shifted from the functionality aspect to fashionable aspect hence home furnishing has been tailored towards the consumers’ taste and interest. Temple & Webster reported that approximately 96% of their customers furnish their homes based on the design and style of the product. Innovations in technology: Innovation and technology alongside security of data has boosted consideration of online shopping in home furniture. The technology of supply chain and tracking has enhanced the efficiency of global operators as well as Temple & Webster in maintaining their inventory distributions. Industry standard encryption technology used during the payment process has also enhanced the customers’ dependability. Further, alternative sources of energy have always reduced the cost of operation to the Company. The Impact of the Porter’s Five Forces on the Industry The Porter’s five forces have had variable impacts on the success of Temple & Webster Company. These include threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threats of substitutes and rivalry among competitors. Threat of new entrants: Competition emerging from new entrants in home furnishing industry is very low as the investments require huge capital, an efficient mechanism of product distribution, design recognition, quality and brand. Acquisition of a reliable channel for mass distribution since the products are sometimes heavy and voluminous has always posed a substantial problem. Additionally, the industry is saturated at the global levels. Bargaining power of buyers: the intense competition alongside the variety of alternative option to choose from has contributed to a very strong bargaining power for customers (Mitchell, 2014). Temple & Webster have therefore emphasized on supplying products that are affordable to most of their customers and are of good quality and brand (Benton, 2012). This has been an effort to retain its customers and win others new customers that seek affordable pricing for their home furnishing. Further, the impact of recession on price competitiveness among retailers has attracted more customers who are not in a hurry to spend their disposable income in furnishing their homes. Bargaining power of suppliers: The suppliers of Temple & Webster have a low bargaining power since the Company has grown rapidly thus become a large purchaser within a very short period of time. Additionally, the available suppliers must also adhere to the standards set out by Temple & Webster Company for its local and international; suppliers (Mitchell, 2014). Threats of substitutes: Temple & Webster reported inadequacy of substitutes for basic products required for furnishing of homes as compared to the case of home accessories that have a lot of substitutes (Benton, 2012). Rivalry among Competitors: Home furnishing industry in Australia has become very competitive. Temple & Webster has to compete with both the small and local businesses specialized in home furnishing. Additionally, the company competes with large retailers such as Amazon, Wayfair, Hay needle, Modern furniture warehouse, Ebay and LexMod (Mitchell, 2014; Wirth, 2015). Internal Organization Analysis The resources can be categorized as both tangible and intangible resources. The tangible resources of the Company include the financial, technological, physical and organizational. In terms of financial resources, the Company in the past four years of operation has kept a strong balance sheet alongside cash flow (Waifair , 2015). This has made the company to have a very flexible financial position to support its rapid growth and project its future progress. Its organization has been based on long contractual relationships in addition to ensuring compliance to their Temple & Webster standards (Waifair 2015). The relationships have been based on the large purchases that they engage in with their suppliers both locally and internationally. In terms of technological resources the company, the Company has upheld the patent right on all its products thus abhorring their competitors from creating designs and styles that are similar to its products (Hurley, 2013). This has eliminated the possibility of creation and supply of products that could act as a substitute. The head offices of the Company are based in Sidney, Australia. Currently, the company does not have any other physical distribution subsidiary across Australia. However, the Company has majored in using the courier Companies to supply its products. Additionally, the Company recently acquired the Australian Wayfair domain (www.wayfair.com.au) to enhance its rapid growth. Similarly, the Company has intangible resources which are categorized as reputational, human and innovation (Mintel, 2010). On the reputational aspect, the Company has been known across Australia for its stylish brand that relates to the iconic designs of Brian Shanahan and Adam McWhinney. Also, the products have been pocket friendly thus conscious to their customers (Hurley, 2013). Its human resource also comprise a diverse work force with a larger percentage being women who have worked in different reputable sectors and have a vast experience in their areas of specialization (Hurley, 2013). Currently, its workforce at its headquarters in Sydney is fifty employees. In terms of innovation, the Company has launched web-based campaigns and activities that market their products (Burt et al, 2002; The Economist 2005). Apart from the resources, the company has potential capabilities that have contributed significantly towards its rapid growth. One of the key capabilities comprises its supply chain management. Temple & Webster is directly involved in the supply chain process thus allowing it to monitor all the resources that are used for manufacturing their products. Another capability of the Company involves its effective marketing strategies through its websites, facebook page and blog posts that provide its subscribers with a lot of inspiration based on their sales and events, promotions that increases its volume of sales. In terms of distribution, Temple & Webster uses courier companies and Australia Post. Its products are usually manufactured locally with unique international designs and styles. References Benton, J. 2012. Macquarie Deal Strengthens Online Retailer Temple & Webster. Retrieved from . Bloomerg, 2015, Company Overview of Temple & Webster Pty Ltd. Retrieved from . Burt, S.L.; Mellahi, K.; Jackson, T.P.; Sparks, L. (2002): Retail internationalisation and retail failuer: issues from the case of Marks and Spencer, International Review of Retail, Distribution and Consumer Research, 12 (2): 191-219. Grundy, T., 2006, Rethinking and reinventing Michael Porter's five forces model. Strat. Change, 15: 213–229. Hibbit, C. 2014. Temple & Webster to open physical space . Hurley, B, 2013 Temple of Boom: How online retailer Temple & Webster is blending furniture with media smarts. Retrieved from: . Keating, E, 2015. How Brian Shanahan helped create Temple & Webster, a $28 million online destination for homewares. Retrieved from . Mintel (2010): European Retail Handbook 2009/10. 13th Edition. London: Mintel. Mitchell, S, 2014. Will Temple & Webster take the money and run? Retrieved from . The Economist. 2005, The Future of Fast Fashion. Retrieved from Waifair 2015. Wayfair Sells its Australian-based Business to Australia’s #1 Online Furniture & Homewares Retailer Temple & Webster. Retrieved from < http://investor.wayfair.com/investor-relations/press-releases/press-releases-details/2015/Wayfair-Sells-its-Australian-based-Business-to-Australias-1-Online-Furniture--Homewares-Retailer-Temple--Webster/default.aspx >. Wirth, A. 2015, Temple & Webster announces acquisition of Wayfair in Australia. Retrieved from . Read More