Executive Summary
Luxury Swap is an innovative web-based product exchange service. Modeled on e-bay's exchange program, Luxury Swap introduces an unparalleled service in KSA, first, and hopes to expand into GCC, East Europe, North America and world at large. The service connects upper class / sellers, who have unneeded luxury products, and middle class/ buyers, who, although having rising disposable income, cannot afford to purchase luxury products at retail prices.
This report is made up of five sections: (1) Service Information, (2). PEST Analysis & SWOT Analysis, (3) Strategic Marketing Objectives, (4) Market Segmentation & Positioning and (5) Four Ps Strategies and (6) Success Measures. The "Service Information" section is a broad overview of proposed service. The "PEST Analysis & SWOT Analysis" section offers an analysis of market conditions in Luxury Swap's proposed operation ecosystem, notably KSA and GCC in PEST and SWOT formats. The "Strategic Marketing Objectives" section identifies marketing objectives of Luxury Swap. The "Market Segmentation & Positioning" section identifies Luxury Swap's potential customers and company's perceived market positioning given current market conditions. The "Four Ps Strategies" section sets strategies Luxury Swap should adopt in areas of Product, Place, Pricing and Promotion areas. The "Success Measures" section offers insights into how Luxury Swap can ensure proper business rollout and sustainability over short, medium mad long ranges.
Luxury Swap (LS): Final Report
I. Service Information
LS is a new service offering provided, initially, in KSA and hopefully, later, in GCC, Europe, North America and worldwide. The service, which is based primarily on exchanging luxury goods between peers, aims to develop an existing business model adopted in conventional, physical settings. by enabling customers / peers of higher income brackets, particularly middle and upper class customers as shown in further detail below, to exchange high end goods including, for example, haute couture products (e.g. designer bags, shoes, apparel, fine jewelry and watches), LS would be able to meet a current market need gap. Specifically, by bridging a gap between a growing size of emerging middle class of increasing purchasing power but who cannot still afford to purchase new luxury products at retail prices and an upper middle class of disposable luxury items, LS would, via a fully integrated web platform, be able to close current gap and, more significantly, develop an innovative business model which cannot, given current service offerings, is not available in Middle East area.
The LS is based, in fact, on e-bay's exchange program. However, LS is differentiated from e-bay's program by focusing exclusively on global and original brands. Thus, by offering high end goods at affordable prices for an emerging middle class of growing purchasing power but, as just noted, cannot afford to buy new luxury goods at retail prices, LS would develop a market need, now in infancy phase, into a fully developed business service. Moreover, by enabling customers to swap luxury goods on an integrated web platform, LS would be able to better achieve a cost-effectiveness advantage by making use of online retailing pricing policies which differ, of course, from conventional retailing pricing strategies in physical settings.
II. PEST Analysis & SWOT Analysis
The overall market conditions for luxury markets in Middle East are particularly favorable in GC area, LS's primary, initial market. Although oil prices continue to show a steady decline, luxury market, combined by consumption patterns and cultural factors emphasizing luxury and affluence ("Understanding Mid-East Luxury Market," 2016), luxury products are more likely to continue to perform well in GCC market. This is supported, at least, by a GDP per capita in GCC area ranging between 30,000 and 100,000, highest in Middle East region ("GDP per capita, PPP," 2015; "Thematic Map," n.d.). To better understand LS's market, a PEST Analysis and a SWOT Analysis are given below.
PEST Analysis:
Economic
GCC is, primarily, oil-based economies. Against a backdrop of falling oil prices, luxury goods are becoming less affordable.
Luxury industry remains robust.
High GDP and purchasing power in GCC.
Social
GCC communities are conservative and luxury goods are perceived as a sign of success and social position.
Technological
GCC enjoys substantial growth in ICT infrastructure and applications. LS's model, at low fixed costs, is projected to release burdens of operation and expansion costs.
SWOT Analysis
Strengths
Unparalleled business model.
Target customers of high purchasing power.
Low start-up costs.
Fast, effective and hassle-free online shopping.
Weaknesses
Possible rejection of used products.
Stock levels are not controllable.
Fresh ideas require consumer education.
Product authenticity verification process development is required.
Opportunities
Expansion to Eastern European countries, and beyond.
Diverse international shipping options offer greater flexibility in handling stock, particularly across distant geographical areas.
Online retailing offers unique, 24/7 access to luxury sellers and buyers globally.
Threats
Emerging competition as LS's model becomes more widespread.
III. Strategic Marketing Objectives
Primarily, LS aims to become world's hub for swapping luxury goods. This can be achieved by enabling peers / customers on LS's web platform to develop long range and lasting business relationships which would lead, accordingly, to a more sustained business. Moreover, by ensuring anonymity, a highly cherished value not only in online retailing context but also for products as valuable as luxury ones. The next sections detail LS's market segmentation and positioning as well as Four P strategies proposed by LS in order to achieve strategic marketing objectives.
IV. Market Segmentation & Positioning
LS has as a primary Target Customer upper classes of substantial disposable income. These customers, who are also LS's sellers, are LS's product providers who sell luxury products to a middle class customer base who, although having a growing disposable income, cannot afford to purchase luxury goods in as frequent rate as upper class.
Given current market situation based on above analysis, LS can better position herself as a premier luxury product hub, at least initially in Middle East, by:
Developing a well integrated, interactive and user-friendly web platform for exchanging luxury product offerings.
Excelling at customer relationship management by offering superior customer service and, not least, guaranteed profile anonymity.
V. Four Ps Strategies
At an execution level, in order for LS to achieve marketing objectives as stated above, LS can adopt four strategies in Product, Place, Pricing and Promotion areas.
In Product area, LS should ensure offered luxury products are not only well stocked but also diverse enough to satisfy different needs of what can be said to be decidedly "volatile" products subject to changing preferences. This can be achieved, more specifically, by developing specific partnerships with leading sellers such as offering bonuses for repeat business.
In Place area, LS is at a god competitive edge, at least in early growth phase, as far as product distribution channels are concerned. The exponential growth in shipment services in GCC area, combined by demographic changes emphasizing online shopping as opposed to more conventional shopping experiences, are apt to make luxury product exchange more flexible.
In Pricing area, LS can have pricing strategy for LS services based on:
Quality of and demand on offered products.
A standard service fee at 5% of product value.
A 10% fee for servicing products owned by LS. In case of high demand, some items can be auctioned (and hence offering more profit margins).
In Promotion area, LS should:
Engage customers via education, particularly across media platforms, given "novelty" of LS's business model in Middle East.
Seek celebrity endorsements.
Intensify TV & Radio advertising, particularly in early launch phase and special seasons.
Enhance B2B presence in trade fairs and retail business workshops / seminars / conferences developed, for example, by local chambers of commerce.
VI. Success Measures
The success of LS in KSA and GCC market, in early expansion phases, can be measured based on:
Adequate understanding of customer needs
Best-in-industry stock control practices in order to avoid possible supply demands, particularly during high seasons.
Proper brand management across different marketing and promotion channels.
Proper education of LS's peers / customers, particularly in early launch phase.
Proper selection of best shipment companies in order to both guarantee value for customers and ensure products are safely delivered.
References
GDP Per Capita, PPP. (2015). World Bank. Retrieved from http://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?end=2015&start=2015&view=map
Thematic Map > GDP - Per Capita (PPP) - Middle East. (n.d.). IndexMundi. Retrieved from http://www.indexmundi.com/map/?v=67&r=me&l=en
Understanding the Middle Eastern Luxury Market. (2016, January 6). World Finance. Retrieved from http://www.worldfinance.com/markets/understanding-the-middle-eastern-luxury-market
