Retail Industry for Eyewear and Its Dynamic - Essay Example

? Strategic Marketing 2 Table of Contents Table of Contents 2 Bright Eyes 4 Marketing Overview 4 Financial Overview 5 External Analysis 6 PESTLE 6 Political 6 Economic 7 Social 7 Technology 7 Environment 8 Legal 8 Vietnam’s Eyeglasses Industry 8 Retail Industry for Eyewear 9 Industry Dynamics 9 Primary (Urban & Semi Urban) 10 Secondary (Rural) 10 Tertiary (Tourists) 10 Marketing Mix 11 Product 11 Price 12 Conclusion 14 Bright Eyes “Bright Eyes” is a manufacturer of glasses/spectacles based in Singapore. The company was founded by Henrik Skagen in 1977. Presently Sandra and Lars Skagen are running the company. In the initial years Bright Eyes made and sold prescription glasses but soon they diversified their product portfolio and entered non-prescription glass market. Presently the company operates with 40 staffs. The company started competing with branded glass manufacturers from early 1990s and cemented their position as premier glass manufacturers in Singapore, Malaysia and Hong Kong. Sales growth for the company slowed down during the period of 2003 due to external factors. In the initial years Henrik Skagen used two types of marketing strategy to increase sales revenue. Henrik Skagen used trade shows to promote glass product and increase brand equity among customers. Internal sales force was used to explore retail channel sales. New generation of Skagen family have changed the traditional product strategy of the company in order to fillip the growth of the company. Sandra and Lars Skagenby extended product portfolio by including items such as reading sun-glasses, non-prescription reading glasses, sports goggles and glass cases. Marketing Overview Product Reading sun-glasses, Non-prescription reading glasses, Sports goggles and Glass cases. The company uses Nordic style of strong lines and bold colours in their offering. Price Retail price of reading glasses is between $35-$85 while retailer sells a pair of sunglasses at $35-$140 Place The company sells their product through distribution channel complemented with accessory shops, department stores and sports outlets Promotion The company uses trade shows and in store sales promotion to create awareness among customers Target Market Seventy percent of sales are contributed by consumers over the age group of 40 while sports products are targeted for young people Target Country Singapore (company owned retail shops), Malaysia & Hong Kong (franchise business model) Marketing Challenge The company wants to expand their business in South Asian Market and Vietnam has been selected for their future business expansion Financial Overview Sales Revenue (2011) $58.6m Operating Profit $5m Sales Revenue (Country & Product category wise) Singapore Malaysia Hong Kong Sunglasses $7.7m $12.4m $5.1m Spectacles $5.3m $11.7m $6.7m External Analysis Bright Eyes needs to conduct macro environment audit such as PESTLE of the country in order to explore business opportunities of the country (Elearn, 2012, p. 75). PESTLE PESTLE analysis helps companies to get a picture in terms of macro environmental perspective (Henry, 2008, pp. 51-56). Political CPV or Communist Party of Vietnam has recently changed their industrial policy and has taken progressive approach for industrial development. The government is also supporting foreign players to invest in the country hence Bright Eyes will get support from government to expand their business. Country trend suggests that CPV has not faced any major threat from opposition party in recent times hence from the view point of political stability the country is going strong. Economic The country is suffering from high inflation rate hence overall GDP growth is slow for Vietnam (Tucker, 2010, pp. 194-195). Foreign players are investing in developing industrial park in the country. Vietnam has attracted foreign players to invest $271m in industrial projects last year. Government has sanctioned nine FDI projects worth of $112bn for next three years (Pham, 2004, pp. 69-97). Economic situation of the country is positive for companies like Bright Eyes to expand their business. Social The country has a young population in comparison to other age groups. People of the country enjoy religious freedom. Distribution of age group in the country can be analysed in the following manner using CIA fact book. 0-14 years 25% 15-64 years 70% 65+ years 5% (CIA, 2012) Median age of the country is 27.8 years which means 50% of population in the country is under the age of 28. Bright Eyes has the opportunity market sport products to young people of the country. Technology The country is going through technology drought season for last three years. High piracy rate is cause of concern for companies relying heavily on research and development. Although Bright Eyes is not research and development intensive company but they still need to protect their brand from counterfeits. Environment Vietnam has tried to save endangered genus of plants but until now their effort has not produced much success. The country lacks in environment awareness program hence there is very less probability for Bright Eyes to face any environment issues in coming years (Ham, 1992, pp. 221-222). Legal Property registration in the country is easy in comparison to other South Asian counterparts. According to World Bank’s Doing Business report starting business in the country requires 57 days while property registration contributes only 0.6% of total cost of operation for foreign companies planning to expand business in the country (World Bank, 2012, pp. 93-129). Vietnam’s Eyeglasses Industry Eyeglasses market of the country is steadily growing but major portion of the market is paralysed by cheap Chinese import and low end domestic product. Total market valuation is estimated as annual 7 million eyewear pairs while the market is growing at a rate of 9.5%. Market share of two top category of eyewear is explained in the following table. Market Share Sunglasses 85% Spectacles 14% Contact Lenses 1% Contact lenses market is significantly small due to dusty condition of the country. Research report published by RROV Ltd shows that readymade reading spectacles contribute 5% of total market volume. Retail Industry for Eyewear Retail channel for eyewear industry is complemented with optical stores, ophthalmologists, spectacle wholesalers and independent retailers. Majority of eyewear companies are located in Hanoi and Ho Chi Minh City. Retail price for local eyewear products varies in the price band of $10 to $20. Cheap quality Chinese imports have retail price in the range of $1 to $3. Premier companies are selling their branded glasses at a price range of $150 to $180 (Red River Optical, 2011). Industry Dynamics Industry is fragmented due to absence of large companies capable of market consolidation 90% of manufacturers focus on making sunglasses The industry lacks in technological aspect of eyewear manufacturing Low priced Chinese imports have dominated the market by taking help of government tariff policy In the major cities of the country availability of eye care professional is far less in comparison to other North East and South East Asian countries. 45% of Vietnamese earn less than $1.00 per day hence for them purchasing branded eyewear pricing in the range of $35-$85 is difficult. Target Market Eyewear marketers have the opportunity to serve three types of target market such as urban, tourists and rural. Primary (Urban & Semi Urban) Study conducted by AC Nielsen shows that approximately 4.5 million customers can get benefited by good quality, stylish and low cost eyewear. Almost 50% of the population belong to the age group of 20-27 hence they are the target customers for sunglass segment of Bright Eyes. The company can expect a market penetration rate of 4%-5% for next three years in urban market. Secondary (Rural) 12 million rural people are the secondary target for the company due to their low purchase power parity. Complex economic situation of rural people decreases the market penetration rate of Bright Eyes in next three years. Tertiary (Tourists) Foreign tourists visit the country every year due to its cultural inheritance. Study shows that almost 2, 00,000 foreign tourists visit the capital city Hanoi and other important cities every year. They can be the target market for reading and sun glass segment. Marketing Mix Product In the initial phase Bright Eyes needs to place same product to all three target market in order to understand pulse of the market. Study shows that Vietnamese prefer sunglasses with Nordic style has the company has no need to change style statement of their products (Ashby, 2005, pp. 442-445). The company should launch only two category of eyewear such as sunglass and reading spectacles in the initial phase. Sunglass needs to have following features. Product diversification can be termed as a growth strategy for the company (Aaker, 2011, pp. 200-241). Mould injected plastic frame and in some cases metal veneer is needed in the exterior portion Colourful, bended and stylish look UV filter is needed in the interior portion of the glass used in the sunglass Reading spectacles need following features. Wooden external coating, metal injected frame in Silver, Gold or Black Recyclable carrying case which can fit inside shirt’s pocket (for urban customers) Glasses complemented with spring action hinge and scratch proof acrylic coating Packaging and printing of the products should be made with environment friendly ink in order to maintain sustainability and also helps to increase customer loyalty (Jeffery, 2010, pp. 93-95). Stylish packaging is needed in order to reflect superiority of the product in comparison to low priced Chinese imports and local products (Paul, 2008, p. 503). Price Sales Channel Product Price Customer Price Margin Non Optical Retailers $20-$60 $40-$80 33% Optical Retailer Sunglass $30-$60 $40-$80 33% Franchisee $15-$55 $38-$75 36% Non Optical Retailers $10-$30 $20-$40 33% Optical Retailer Reading Spectacles $10-$35 $20-$40 15% Franchisee $8-$28 $18-$40 42% (Source: Author’s Creation) Place Retail Channel Distribution Agent Frequency of Distribution Point of Purchase Local Distributor Staff of the distributor Monthly replenishment is required Not Applicable Non Optical Retailers Appointed sales agent of the company Monthly Retail outlet Optical Retailer Appointed sales agent of the company and mobile sales agent Twice visit of sales agent is needed in a month Retail outlet Franchisee Franchise owner and counter sales agent Monthly product replenishment is needed Retail outlet Ophthalmologists Appointed sales agent of the company and mobile sales agent Monthly visit is needed Doctor’s Chamber Place Bright Eyes should focus on a promotional strategy of creating awareness about health and style benefits of sunglass and spectacles. The company should distribute free educational material regarding eye care issues of Vietnamese people in order to create awareness and decrease involuntary churn (Kumar & Petersen, 2012, p. 18). Point of purchase display in the retail outlet will help the company to increase brand visibility among customers (Koekemoer & Bird, 2004, pp. 305-307). The company should use the value expectancy model to increase market penetration (FitzGerald & Arnott, 2000, p. 107). Appointing local doctors for free eye check-up will definitely create positive word of mouth among local people. The company should various sales promotion techniques such as discounting, free gift offering and free sample distribution as a potential way to boost the bottom line (Belch, 2003, pp. 522-525). Conclusion Bright Eyes needs to decide their marketing strategy after doing proper research on customer life time value or CLV (Kotler, 2009, p. 127). Customer life time value can also be calculated using model proposed by Sunil Gupta (Gupta & Lehmann, 2008, pp. 255-265). Reducing service maintenance cost will help them to offer product portfolio in a cost effective manner (Hill & Jones, 2009, pp. 161-165). They have the opportunity to fillip the index of industrial production of the country (Taubadel & Akimova, 2002, p. 149). References Aaker, D. (2011). Brand relevance: Making competitors irrelevant. Hoboken, New Jersey: John Wiley & Sons. Ashby, M. F. (2005). Materials selection in mechanical design. Oxford: Butterworth-Heinemann. Belch, G. E. (2003). Advertising and promotion (6th ed.). New York: McGraw-Hill Education. Central Intelligence Agency. (2012). People: VIETNAM. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/vm.html Elearn, I. (2012). Business environment. London: Routledge. FitzGerald, M., & Arnott, D. (2000). 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