The Re-launch of Heelys India
Transcription
The Re-launch of Heelys India
The Re-launch of Heelys India IRF RISING STAR CHALLENGE Case study on Heelys Inc By Team ISB Stars Ankita Singh Pallavi Saxena Sangeeta Som 1|P age The Re-launch of Heelys India CONTENTS Executive Summary............................................................................................................................................. 4 PART I: Background ............................................................................................................................................ 4 Heelys Inc ..................................................................................................................................................... 4 Product Development .................................................................................................................................. 6 Distribution .................................................................................................................................................... 6 Marketing Strategy ....................................................................................................................................... 7 International Expansion............................................................................................................................... 8 Heelys India .................................................................................................................................................. 9 Market Analysis – Indian Footwear Market ............................................................................................ 11 Growth & Forecast ..................................................................................................................................... 11 Retail Organisation .................................................................................................................................... 13 Buyers .......................................................................................................................................................... 14 Suppliers ..................................................................................................................................................... 14 Competition ................................................................................................................................................. 14 Threat of New Entrants ............................................................................................................................. 15 Market Segmentation ................................................................................................................................ 16 PART II: Business Plan for the Proposed Re-launch ............................................................................... 17 Vision and Objective .................................................................................................................................. 17 Analysis of Original Business Strategy ................................................................................................... 18 Creating a competitive advantage ........................................................................................................... 18 Issues faced and Key Factors Behind Lack of Success ...................................................................... 19 Landing cost ............................................................................................................................................... 19 Revised distribution and pricing strategy................................................................................................ 20 Pricing .......................................................................................................................................................... 21 Lack of Support from Heelys Inc.............................................................................................................. 22 2|P age The Re-launch of Heelys India Marketing and promotion .......................................................................................................................... 23 People .......................................................................................................................................................... 24 Low penetration of internet shopping ...................................................................................................... 24 Cultural factors ........................................................................................................................................... 25 Limited market research and identification of Target customers ........................................................ 25 Recession ................................................................................................................................................... 26 Proposed Strategy for the Re-launch...................................................................................................... 26 Marketing..................................................................................................................................................... 26 Operations................................................................................................................................................... 27 Supply Chain .............................................................................................................................................. 28 Distribution ChannelL ................................................................................................................................ 28 Data Collection ........................................................................................................................................... 28 Organising Training & Sales Meet ........................................................................................................... 29 Human Resources ..................................................................................................................................... 29 Financials .................................................................................................................................................... 30 Porter’s Analysis of the India strategy .................................................................................................... 32 3|P age The Re-launch of Heelys India EXECUTIVE SUMMARY In 2007, Heelys Inc. (“Heelys”), a US maker of branded roller shoes, entered the Indian market via an independent local distributor, granted exclusive distribution rights across India. The distributor, an entrepreneur from Chennai, purchased an initial stock of 500 pair of shoes from Heelys and hoped to successfully introduce his distinctive product to the growing Indian market. The reality of retail in India – negotiating with large Indian retailers on one hand; customer price expectations and resistance; and import duties, among other factors, all combined to offset the initial progress made and in 2009, after having sold just 400 pairs of shoes, the Indian operations was shut down. This paper examines why the combination of a seemingly attractive market and a proven product did not result in a winning formula for the Indian market. It goes on to offer a re-structured strategy which Heelys could use should they decide to pursue the Indian market again. With the slowdown in US consumer spending over the last three years and a subsequent drop of 19% in consolidated (national and international) profits, it is timely to explore options in emerging markets again. PART I: BACKGROUND HEELYS INC Heelys is in the business of designing, marketing and distributing branded and patented wheeled footwear, which incorporates a single removable wheel in the heel. This allows the product to facilitate walking, running and rolling (see Exhibit 1 overleaf for selected images of the product and its functionality). 4|P age The Re-launch of Heelys India EXHIBIT 1: HEELYS: THE PRODUCT 5|P age The Re-launch of Heelys India According to Heelys: “We believe our products appeal to a broad range of young, active consumers around the world who enjoy wheeled sports activities. The primary market for HEELYS-wheeled footwear is five to fourteen year-old boys and girls.”1 PRODUCT DEVELOPMENT The idea for a shoe with a wheeled heel was conceived by psychologist, Roger Adams, who, at the age of 9 months had entered the Guinness Book of World Records for becoming the youngest person to learn how to skate. It was not until the age of 47, however, while watching children skate along the beach that he was struck by the idea to create a shoe which could turn into skates by shifting body weight. By 2004, the company had eight US and international patents to mitigate the risk of copycat products. In 2005, it earned a place as the ‘Best Skate Sneakers’ in the second annual Reader’s Digest “America’s 100 Best” list. Heelys introduced a number of sub-brands. In 2002, it took over the Soap shoe brand, a product which allows wearers to slide along surfaces via replaceable plastic soles and re-launched with Heelys signature colours and style. It also introduced hybrid between Soap and Heelys and sold it under the Axis brand (now defunct). Currently, Heelys classify its products under Classic Heelys, Hx2 (with two removable wheels tow provide extra stability and Nano (with an inline footboard to facilitate tricks). DISTRIBUTION After successful creation of a prototype, Adams founded Heelys Sports Limited in 2000. The product was a success from the initial launch and it sold out within hours of its first display in small retail outlets. In 2001, Heelys secured distribution at two 1 Heelys 2010 Annual Report 6|P age The Re-launch of Heelys India large retail chains – Mervyns, a department store with 187 stores in 10 states and Sports Authority, America’s largest sporting goods retailer with 400 stores in 45 states. To this day, Heelys follow a strategy of offering their product through selected distribution channels comprising full-line sporting goods retailers, specialty apparel and footwear retailer. They also sell online exclusively via amazon.com and zappos.com. MARKETING STRATEGY From the beginning, marketing spend has been limited and instead Heelys has relied on a universal marketing strategy of controlled distribution and growth to create an exclusive, trend-setter, brand. It had deliberately avoided mass retailers such as Walmart, which would be inconsistent with its brand goal to maintain some exclusivity and mystery around its product. Accordign to Heelys 2010 annual report: “Our marketing strategy is to position our products and the HEELYS brand to represent a lifestyle that allows our consumers to have Freedom and Fun with the sense that they are Fearless, providing them a sense of excitement and individuality.” Despite being targeted at children and teenagers, Heelys chose a high price bracket of 90-110 USD initially and marketed the product as sporting equipment rather than kid’s shoes. Prices have come down since then and Heelys now retails in the range of $40-$85 in the United States. To compel customers to purchase at this price, Heelys bet on the trend setting network effects among teens. It relied on grassroots marketing, an approach which emphasizes customer’s personal experience with the brand. Heelys formed ‘Team Heelys’ composed of hand-picked teenagers such as athletes. The company paid them to wear and give demonstrations of the product in typical places where teenagers hang out such as shopping malls, concerts and sporting events. The interest this generated coupled with limited availability of the product enhanced its 7|P age The Re-launch of Heelys India desirability. Bystanders were even able to purchase the shoes on the spot from the performers, if they so desired. Since the use of Heelys needs some practice, the demonstrations helped overcome many reservations about ease of use. Other marketing mediums, such as selected TV ads on kids’ channels, were used in complement. The limited marketing budget also guided focus of the initial marketing efforts to the sunny states of California and Florida where skating was more popular, and later built up along the East coast and other states. Other marketing activities happened without any planning on part of the company. For example, the R&B singer Usher wore a pair of Heelys in his music video ‘U don’t have to call’. A number of media outlets such as CNN and Sports Illustrated ran features on the product, all of provided free publicity. The power of the brand was such that it gave rise to a new sport – heeling. Impromptu demonstrations of one’s skills in heeling could be seen on street corners. INTERNATIONAL EXPANSION Following the domestic success of the brand, Heelys were quick to move into international distribution, first entering the Japanese market. They currently have a presence in over 50 countries across the continents. In 2010, domestic sales generated 28.4% of net sales. Since they could not afford their own subsidiaries, Heelys opted for a distribution model whereby they grant exclusive geographical rights to a local independent distributor. These distributors generally use Heelys global marketing strategy but made autonomous decisions on the specificities such as form and medium of advertising, website content and events. It was in Japan that Heelys encountered copycat cheaper versions of its product. To combat this, Heelys introduced its own lower price sub-brand, exclusive to the Japanese market, called Cruz. 8|P age The Re-launch of Heelys India Over the past few years they have started to exert greater control over international distribution. In 2008, Heelys set up a wholly-owned subsidiary in Belgium to serve as a head office for managing operations in Europe, the Middle East and Africa and to work more closely with distributors. In 2010, Heelys terminated its contract with its Japanese distributor and formed a wholly owned subsidiary for the Japanese market. HEELYS INDIA In 2007, Heelys was approached by an entrepreneur from Chennai, at the time working in Deloitte Consulting in New York, who was looking to introduce the product to the Indian market as their distributor. Since Heelys had followed similar strategy to expand in other countries, Heelys asked for a formal business plan from the entrepreneur. Even though he did not have direct relevant experience in wholesale distribution in India, Heelys were sold on the Indian growth story and convinced by the high quality nature of his business plan. The plan outlines his vision for Heelys in India: “The plan is to make Heelys the first mover for sports shoes and roller shoes throughout India. I would like to help Heelys gain market share in apparel and shoe industry across all the major metro cities in India” “The overall approach is to capture 1% of sports shoe and apparel market in the next 5 years”2 Three potential market penetration strategies to develop the Heelys Brand were outlined in the business plan as shown in Exhibit 2 2 Business Plan submitted to Heelys Inc., 2007 9|P age The Re-launch of Heelys India EXHIBIT 2: HEELYS INDIA MARKET PENETRATION STRATEGY OPTIONS, 2007 Expansion Model I – Mid Size Retailing This model involves an in-depth retail trends analysis followed by short-listing potential retailers. The actual expansion is broken down into 3 phases. • Phase I – Bangalore: This would be the pilot phase of the project. Given Bangalore’s burgeoning middle class with an immense buying power and sizeable disposable income, Bangalore was considered the ideal location to launch. • Phase II – Metro Cities: This phase would involve distributing shoes to individual retailers in the metro cities: Chennai, Mumbai, Delhi and Calcutta. • Phase III – Secondary Cities: The final phase would involve distributing shoes and apparel to individual retailers in the secondary cities: Coimbatore, 10 | P a g e The Re-launch of Heelys India Gurgaon, Pune, Noida, Chandigarh, Ahmadabad, Cochin, Hyderabad, Bhubaneswar, etc. Expansion Model II – Large Size Retailing Large retail conglomerates have entered India in a big way in the recent past. The idea would be to partner with such large conglomerates. The advantage of such an approach would be the mass exposure gained right away. However, this does not give Heelys and the distributors the required flexibility to expand to untapped regions across the country. Expansion Model III – Independent Retailing & Tie Ups This model involves setting up independent retail stores for Heelys and tying up with existing large independent chains. Cross promotion of this sort has proven to be very effective, for example, Reebok’s tie up with Bata to sell Reebok’s footwear in Bata stores. While this is an effective model, the lack of quality retail space at economically viable prices is a clear deterrent to this model. Heelys granted him exclusive distribution rights with the intention to pursue Expansion Model I. Heelys India was set up in December 2007 with the intention to sell the initial stock of 500 pairs before purchasing more. The product was launched in January 2008 in Bangalore. MARKET ANALYSIS – INDIAN FOOTWEAR MARKET GROW TH & FORECAST The Indian footwear market has seen a growth of 18% in the recent years (20032009). This market is estimated to be over 250,000 Million Indian Rupees (MINR). The forecasts look promising given other factors such as favorable government support for investment, export & import conditions. It is expected to reach 500,000 MINR by 2015. The growth trends are as shown in Exhibit 3. 11 | P a g e The Re-launch launch of Heelys India EXHIBIT 3: INDIAN FOOTW WEAR MARKET SIZE (IN MUSD) Source: AM Mindpower Solutions With increase in brand awareness amongst ccustomers, ustomers, the demand for organized organi footwear retail is on an upward swing. The household income India varies largely due to unequal wealth distribution. distribut A large population of India lies in the lower and middle class. These are households earning less than 2 lakh INR per annum. However there is a growth in the Indian disposable income. However, the expected growth in the number of households in the higher gher income bracket is expected to be much bigger compared to the growth in the number of households in the lower income brackets. The growth in the number of households earning 4.5 lakhs per annum is estimated to be 27% from 2011 to 2012 whereas growth in the number of households earning less than 0.5 lakhs per annum is estimated to be 2% in the same period. (Exhibit 4) 12 | P a g e The Re-launch launch of Heelys India EXHIBIT 4: HEELYS: HOU USEHOLD INCOME DISTRIBUTION IN IN NDIA Source: Yousigma RETAIL ORGANISATION The footwear outlets in India range from small dealer shops to big retail chains. The small dealers stock local brands and few well known mid range brands such as Bata, Liberty etc. Such dealers are common in small towns and metropolitan cities. A few brands such as Reebok, Bata etc have multiple company owned stores in metropolitan cities. Multi-brand brand outlets such as Dec Decathlon, athlon, Planet Sports (they also have online shopping) cater to sports footwear and other sports accessories for all age groups. Retail outlets such as Lifestyle, Shoppers Stop, Reliance footprints also sell sports footwear. 13 | P a g e The Re-launch of Heelys India Brands such as Lilliput, Disney cater to the kids segment and have their own range of footwear. BUYERS Though footwear is a daily necessity, the range of products available in the market empowers the customers to choose from a wide variety. This renders the bargaining power of buyers to be moderate. SUPPLIERS Owing to cheap labor and manufacturing costs, footwear manufacturing costs are quite low in India. They also lack differentiation in designs when compares to western counterparts. This weakens the power of suppliers. COMPETITION The footwear retail in India is highly fragmented and unorganised mostly. A few big players do exist. The Indian sports footwear is dominated by brands like Adidas, Nike, Reebok etc. A few leading companies: Adidas Adidas includes the brands Adidas, Reebok and TaylorMade Adidas Golf. Their offerings include sports footwear, apparel and accessories for various age groups. They have specific products for popular sports like tennis, running, basketball etc. They also cater to fashion conscious customers by releasing special designer wear from time to time. 14 | P a g e The Re-launch of Heelys India Under the Reebok brand, they offer sports, fitness and casual footwear, apparel and equipment. The TaylorMade Adidas Golf brand offers a range of golf clubs, accessories, footwear and apparel. Adidas outsources most of its manufacturing activities to Asian countries to maintain low costs. They have endorsement contracts with celebrities from various sports. Adidas sells through company owned stores and multi brand outlets such as Lifestyle, Shoppers Stop, Reliance footwear etc. Bata Bata India Limited is a manufacturer and marketer of various types of footwear, products related to footwear, accessories, garments, sports goods and other merchandise for various age groups. Bata India recorded revenues of $205 million in the fiscal year 2008. Bata sells through distributors and dealers. Liberty Liberty offers footwear offers footwear, leather accessories, travel accessories, watches, sun-glasses and jeweler through distributors, company owned showrooms and multi brand outlets. THREAT OF NEW ENTRANTS Though fixed costs in the retails sector are lower compared to other industries, the existence of big players exploiting economies of scale deters entry of new players. However, the emergence of specialist footwear allows new entrants to start off well. In segments such as sports footwear, there are established big players such as adidas, nike etc. Hence threat of new entrants in such sectors is quite low. 15 | P a g e The Re-launch launch of Heelys India MARKET SEGMENTATION Men’s footwear accounts for nearly 60% of the Indian footwear market. The kid’s and women’s footwear market is about 25% and 15% respectively. (Exhibit 5). ). India has the 2nd largest population in the world. It is the 11th largest economy in the world and is one of the fastest growing economies, ssecond econd only to China. The population of kids in the age group 10 to 19 is close to 250 million in India. (Exhibit 6) The kids segment in the footwear retail sector has a good growth potential given a large available base and lack of kid specific footwear brands that ha have ve made it big in India. A growing demand for branded footwear further helps the situation. Overall, the probability of a well marketed quality product, targeting the right customer base has a high probability of being successful in the given Indian setu setup for kids footwear. EXHIBIT 5: INDIAN FOOTW WEAR MARKET SEGMENTATION 16 | P a g e The Re-launch launch of Heelys India EXHIBIT 6: INDIAN POPUL LATION DETAILS (AGE 0-44) Source: AM Mindpower Solutions PART II: BUSINESS PLAN FOR TH THE PROPOSED RE-LAUNCH VISION AND OBJECTIVE The vision is to make Heely’s a leading kids’ footwear brand in India known to make the most innovative cult and cool sports shoes. We seek to make Heely a sought after kids’ brand by having an aura of coolness around its unique design and hence being different ferent from other brands. The mission is: • To re-launch launch Heely’s in India as a joint venture with an existing footwear retail chain through a scalable & profitable business model. 17 | P a g e The Re-launch of Heelys India To create a ‘Heely ’ buzz as part of the initial awareness and marketing campaign. • To offer innovative footwear designs targeting young ambassadors in the age group 8 to 16 & associate Heely’s with their ‘happening and cool’ moments. • To maintain an exclusive Heely experience by making the product available in select stores and Heely’s online shopping portal ANALYSIS OF ORIGINAL BUSINESS STRATEGY CREATING A COMPETITIVE ADVANTAGE An “innovative and differentiated product” and “exclusive distribution rights across India”, allowing reach into untapped secondary markets, were the two key ways in which Heelys India hoped to establish a competitive advantage. The distributor hoped to overcome challenging industry forces by: targeted distribution through high end/profile retail outlets; appealing directly to customers and their willingness to buy through creating excitement about the product; trying to skim the top layer of Bangalorian society through portraying the exclusivity of the product and gradually rolling out the product across other metros and secondary cities. Before the strategy could be implemented, the distributor faced a big roadblock in obtaining an import export license, particularly because he did not have prior professional experience of working in India and navigating such regulations. Eventually, it was only when the distributor, out of frustration, barged into the custom Officer-In-charge’s room after being repeatedly denied a meeting that he managed to obtain the license. 18 | P a g e The Re-launch of Heelys India In the end, the above constraints led to a value chain which was not coherent with the strategy to capture 1% of the Indian market for sportswear and apparel over 5 years. Customers were essentially priced out of the market and the product did not manage to capture share of mind, share of voice and share of distribution as envisaged. Additionally, he was not able to reach the break-even point and did not recoup his initial investment of $20,000. The full timeline of events is shown below. ISSUES FACED AND KEY FACTORS BEHIND LACK OF SUCCESS In addition to the navigation of the import regulations, we have identified the following factors which hindered the Heelys brand taking off in India, some within the control of Heelys and its Indian distributor and some outside. LANDING COST On top of the $20-25 wholesale price at which Heelys sold the product to the Indian distributor, $20-25 in import duties increased the landing cost by almost 100%. This 19 | P a g e The Re-launch of Heelys India level of import duties meant the picture of the cost/price projections in the business plan was skewed. REVISED DISTRIBUTION AND PRICING STRATEGY The plan to launch the product in selected high end/profile footwear showrooms was in sync with the overall nature of the chosen product and with Heelys universal distribution strategy. To this effect, Heelys India set about meeting retailers like Reliance, Lifestyle, Pantaloons, Metro and Westside. This was one of those places where translating the business plan to reality was not as simple as it seemed. Since the distributor was acting independently of Heelys Inc. he faced a big hurdle in convincing the retailers, over the phone, to take a meeting. Talks with Reliance and Metro, which were challenging to arrange in the first place, came to a standstill after the retailers insisted on a 40% retail margin. With the sourcing cost from US close to $ 40-50, the expected margin would have taken the total cost price up to $75. This was comparable to emerging findings from Heelys India’s market research that most children’s shoes were priced at a maximum retail price of Rs 2,500 ($55). Thus, even though Metro offered to place the product in showrooms across India, the margins were not feasible. The distributor had no option but to divert from the original path and he started approaching the smaller skating retailers and sports shops for stocking the products. They had an asking margin of 25-35% and although they did not offer the same reach and publicity as the large retailers, he had no options but to stock his product in such outlets. He convinced several smaller specialized retail outlets to stock the product – Coles, a sporting store in Bangalore, and skating stores in Mumbai, Chennai and Ludhiana. He was also successful in dealing with The LOFT, a large scale retailer, headquartered in Mumbai with a good presence in the Bangalore area. Later, Loft also introduced Heelys in their Banjara Hills showroom, a high end area of Hyderabad. 20 | P a g e The Re-launch of Heelys India These smaller stores did not offer the same reach and publicity as the large retailers and were out of sync with his idea to reach the growing middle and upper class customers in large numbers. PRICING As mentioned, the Indian distributor was severely constrained in the pricing of the product since the combination of cost from Heelys and import cost came out to be $40-45. The chosen retailers asked for a margin of 25-35%. Since Heelys has a market in 50 countries and most places the price ranges between $100-125, it was decided to keep the prices at par. However, market research done by visiting stores and noting prices found that in India the high end of the range for most kid’s shoes are Rs 800, with a maximum of around Rs. 2500. Customers do not want to spend much on kid’s shoes as children outgrow their shoes frequently. Only adult shoes such as Adidas and Nike came to the price range of Rs 5000. This was like a red flag but since the distributor was already dyed-in-the-wool, he went ahead with the plans and priced the shoes in the range of Rs. 3500-6500 [$75$145]. “I was optimistic, thinking there is no real market but we can create one.”3 Based on this analysis, we have calculated Heelys India needed to sell 1,333 pairs of shoes in order to breakeven on his investment (Figure C below). 3 Interview with the distributor, August 2011 21 | P a g e The Re-launch of Heelys India EXHIBIT 7: CALCULATION OF BREAK-EVEN POINT H Heelys Selling Import Price Duty Indian Entre- Retailer’s preneur’s Margin Margin Initial Investment $ Indian Entrepreneur's Unit Profit per pair No. of units to break even $ nos. Heelys Selling Import Indian Entre- Retailer’s Price Duty Margin preneur’s Margin 20,000 15 1,333 LACK OF SUPPORT FROM HEELYS INC Heelys did not provide any financial support to the distributor. Their modus operandi was to wait until an international distribution business had been established for at least three years before thinking about taking any equity. In some instances e.g. in France, they had taken over the distributor to improve margins. To go for Joint Venture model, Heelys asked the distributor to achieve sales target which looked farfetched. Aside from the absence of any financial support, sales and marketing support was also not forthcoming from Heelys Inc. 22 | P a g e The Re-launch of Heelys India The entrepreneur had to put all capital from his personal resources and borrowing from his family – a total investment of $20,000. This was not sufficient to undertake the scale of market research and promotions he had envisaged in the business plan. MARKETING AND PROMOTION Nevertheless, Heelys India set about creating hype about the product and reaching directly to customers. One of the cornerstones of the India strategy was creating Heelys.in – distinct from the global website to tailor marketing to Indian customers and allow them to shop online. Heelys India website was considered to be appealing in appearance and ease of use – in our opinion, better than the parent website. He held a launch in Garuda Mall, Bangalore – the biggest mall in South India. The LOFT, however, did not have an outlet at the mall but instead a few blocks away closer to MG/Brigade road. Heelys India page snapshots on social platforms of facebook and Twitter (see Exhibit 8) are below. EXHIBIT 8: HEELYS INDIA FACEBOOK AND TWITTER PAGE 23 | P a g e The Re-launch of Heelys India PEOPLE The organizational structure was informal and most of the primary work was initially kept within the family. A full time marketing person was hired who would also double up doing day-to-day work like receiving orders on the phone. A PA was there to deal with the administrative and financial aspects of the business. While this may have been a relatively informal approach, it was very early and in our opinion, the organizational set-up was not a critical aspect of the entire venture. In fact, being relatively restrained and spartan in hiring was a positive point. However, the team’s lack of experience and contacts in retail distribution, which affected credibility, did serve as a hindrance. LOW PENETRATION OF INTERNET SHOPPING The website, which allowed online shopping was an innovative idea, only a little ahead of its time since online shopping was less proliferate in India compared to countries like the UK, where this channel had been successful. Additionally, buying shoes online does not allow customers to try it on first, which is more of an issue with shoes as compared with apparel. 24 | P a g e The Re-launch of Heelys India CULTURAL FACTORS Indian customers proved not to be as risk taking as European or US customers. The roller skating culture is not common in India and Heelys India was not able to create this culture with his limited resources. More crucially, Indian customers are notoriously price-sensitive – most find it difficult to comprehend the amount of money to be spent on footwear which the kid is going to outgrow very soon. The upper middle class also essentially has the same thinking process and thus the pricing was a crucial factor in the decision not to purchase. LIMITED MARKET RESEARCH AND CUSTOMERS IDENTIFICATION OF TARGET After securing the agreement to purchase the initial stock from Heelys, the distributor started work on the market research and strategy he had outlined in the business plan. Soon, Heelys was pressurizing him to place the order he had agreed to and the purchase was completed before retailer margin expectations and import regulations had been worked out. Additionally, and as a consequence of the dearth of financial support from Heelys, there was no budget to undertake proper market research or promotional activities. While children up to the age of 14 are the primary target in the US, older teenagers (high school and college students) in India were also taking an interest in the product. But because of the pricing issue, only the upper middle class would be able to afford the product, which represent a fraction of the Indian customer base. There was also the possibility that these upper class people were not really dependent on getting these shoes from Indian market as they had access to original US market where these products are available for a lower price. The eventual strategy was not positioned to capture a large customer base. 25 | P a g e The Re-launch of Heelys India RECESSION When the business started in 2007-2008, global slowdown had already hit and India was simultaneously affected. This, while not affecting the business directly, this may have brought a sense of caution in splurging on expensive goods. It affected the budgetary prudence of Heelys Inc. and the support they could offer. PROPOSED STRATEGY FOR THE RE-LAUNCH This section presents the team’s tactics on a revised strategy which Heelys Inc. could use to re-enter the Indian market. We believe this will provide for a more successful venture than last time and establish the Indian market for Heelys. MARKETING TARGET SEGMENT: Kids and teenagers from 8 years to 16 years AIM: To create an aura of “coolness” around the product. Marketing Activities PHASE I: Create awareness about the brand. We as a team strongly believe that the best way to sell these products is to create a buzz about them. To ensure that the product gets noticed by target customers we will try to position it in: - Kids games shows and TV serials where we intend to pay the producers to show characters using our product and mentioning the brand name ( very subtly) - Place our product in a movie or music video. - Kids’ video game character wearing Heely! 26 | P a g e The Re-launch launch of Heelys India PHASE II: Create awareness about the product. This would include teaching people how to use Heely and trying to ensure that there enough opportunities available for kids to learn how to roll using these shoes shoes,, starting with the Delhi and Mumbai Mumbai. Schools Summer Camps Shopping Malls - Sponsor the annual sports days for top 3 schools in the town - Organize classes in summer camps whrer kids are taught how to glide using heely ! Put together a Team Heelys of youngsters and have them wear wheely around malls - Organize wheely race as a part of annaual sports day in schools - Sponsor summer schools camps where kids come and learn various sport. Organize weekend stalls in the malls with a ramp where kids demonstrate how to PHASE III: To build a positive connotation with the product we will try to associate ourselves with organizations like CRY - Try sponsoring kid’s education. OR - Try sponsoring young talented ki kids ds who get through Olympic and other international sports competition. OPERATIONS This project would be a joint venture between Heely and an Indian retailer like Planet Sport. In terms of Operations we would set up a structure as desccribed in the following sections. 27 | P a g e The Re-launch of Heelys India SUPPLY CHAIN - The stock would be stored in a central warehouse hub. The warehouse should be situated in the city which has the head office/ operations base for the brand. - We will tie up with a courier service to pick up our stock from the port of arrival and take it to the stores. - Stores will be regularly replenished with stock from the warehouse. The stock will go to stores via road. - We plan to have RFID chips on all the shoes to track them. DISTRIBUTION CHANNEL The distribution channel is one of the most important factors that shapes brand’s perception and impacts its image. We would like to retail our product via specialized stores dedicated to retail of sportswear. For example:- Planet Sports - Decathlon stores. DATA COLLECTION - As a small new brand we would like to manage our operations by collecting and analysing data via simple tools like excel. Each product will have a style code and a bar code. - All the stores will be required to send weekly sales updates. Replenishments and stock call backs would be done based on these weekly sales updates. 28 | P a g e The Re-launch of Heelys India ORGANIZING TRAINING AND SALES MEETS The success of any organization depends on its employees. Hence it’s crucial that every single member of the organization should share the vision of the company and enjoy being a part of it. Every single person should be conferred with the responsibility of conveying the value and ideals of its brands to the people around. Hence the company should arrange for meetings where everyone gets a platform to speak and voice their opinion about how to reduce wastage/increase sales. HUMAN RESOURCES These are undoubtedly the most important aspect of any organization. Our team will consist of: BACKEND Merchandising: People with strong analytical skills. They will keep track of the stock ordered for a season. Merchandise available in the warehouse as well in the stores. They’ll be responsible for chasing the sell through of various stores and ensuring that adequate replenishments are done , inter stores transfers are done bases on individual stores requirement etc. Retail: A team of aggressive sales people. Retail team will be responsible for creating sales targets for various stores and assist the store staff in achieving these targets. They will serve as a bridge between the front end sales team as well as the back end merchandising and marketing team and help liaison between the three. The end purpose if to equip front end with resources so that they can achieve their targets. Marketing: The marketing team will use their creative genius to increase brand awareness and visibility. 29 | P a g e The Re-launch of Heelys India FRONT END Regional Managers: Their major task would be recruiting and training sales assistants. Getting people with the right attitude and spending time and energy to aptly train them would be their primary job. Sales Assistants: Young enthusiastic people who will grow up to become store managers. These are the people who directly interact with customers and hence must have complete knowledge about the product. FINANCIALS FINANCIAL Since we intend to launch this project in a joint venture with Planet Sports Retail the initial retailing would be done through their stores. Since Heely is not a mass product we intend to not open any exclusive outlet and retails through few Planet Sports stores till the time we are confident that the product’s awareness in the country had reached a substantial level. Cost, Margins and the Final Sales Price The product is manufacture and imported from China. The average cost price of the product is around $15. India imposes around 35% import duties on sports footwear imported into the country. Hence the landing cost for all these products would be $21. The retailing the company will do a markup of around 100% which of which 60% will go to Planet Retail India and 40% to Heely (60:40 ratio). Hence the final Retail price of the product will be around $38. 30 | P a g e The Re-launch of Heelys India Both the companies would be expected to pitch in for creating successful marketing campaigns for the product. We would expect them to contribute around $20,000 each for creating a two year marketing programs which would include creating teams for grass root marketing. EXHIBIT 9: FINANCIAL PROJECTIONS 1st year 2nd year Total Value in Dollar (in Rs.) (in Rs.) (in Rs.) ( in $ ) Sales and Marketing 5,00,000 6,00,000 11,00,000 24,444 Merchandiser and Planner 400,000 450,000 8,50,000 18,889 Events 300,000 200,000 5,00,000 11,111 Sponsorships 250,000 225,000 4,75,000 10,556 29,25,000 65,000 Human Resources Marketing and Sales Training Total 14,50,000 14,75,000 % Contribution Amount Contributed by Planet Sports 60.00% 39,000 Contributed by Heely 40.00% 26,000 First year sales Second year sales 31 | P a g e 1100 1995 Per piece Earning ($) 12.6 8.4 Break Even (2 years) 3095 3095 The Re-launch of Heelys India Assumptions - The project would be headed by the existing country manager/CEO of Planet Sports. - There is no fixed cost associated with the project. The company will operate out of Planet sports existing office - The initial focus would be on recruiting the right team and creating a buzz about the product with marketing. With these projections the investment made by both the companies will break even in two years time. PORTER’S ANALYSIS OF THE INDIA STRATEGY ORIGINAL STRATEGY 32 | P a g e The Re-launch of Heelys India REVISED STRATEGY 33 | P a g e