A Tale of Two Markets: NYC Subway Line
Executive summary of the case
The case, “A Tale of Two Markets: NYC Subway Line” speaks about the various business establishment strategies applied by Lynne Lambert during her pursuit to establish her brand NYC Subway Line and the line of products used the New York Lifestyle based positioning. The case describes how Lynne tried to channel across the conventional distribution system of the apparel retail markets and tried to develop retail sales for her products in two different markets, the gift retail, and the apparel retail markets. The case study provides an elaborate detail of the competition, costing, distribution, and promotion strategies adopted by Lynne Lambert to boost the marginal profitability of the business and ends up asking a recommendation for attaining them.
Lynne’s Marketing Strategy and target market strategy
Lynne’s marketing strategy for her brand can be summarized into following points:
Developing a tourist gift based retail market for her brand using the differentiation based positioning as the product line offers lifestyle oriented designs of New York Subway line.
Developing an apparel retail market for her brand using the value differentiation and niche design-based positioning as the product line offers lifestyle-oriented designs.
Entering into style and chic based apparel segment and targeting the shoppers of the major fashion brands that are generally sold via organized apparel retailers like Macy’s.
The lifestyle based positioning was also reliant on adequate promotions via social networking and other promotional schemes associated with a web-based sales platform.
Developing associations with big retailers, using celebrity endorsements and other lifestyle positioning based approaches to target a wider range of customers who seek different apparel or gift rather than the conventional designs.
In terms of the target market, Lynne targeted the initial line of product range for following target segments:
New York visiting tourists who purchase gifts and souvenirs from gift retail shops.
Lifestyle design oriented apparel buyers who like the association with New York City related designs and graphics.
General gift and apparel buyers ranging from 10-45, involving both genders, and willing to pay higher prices under the notion of paying for their aspirations to get a unique and differentiated product.
The targeting strategy was based on building a unique brand image based on lifestyle value oriented differentiation and to make the brand visible across all the major points-of–purchase so as to have a relative positioning based advantage. The targeting strategy for the tourist gift market and the apparel retail market were almost similar apart from the distribution difference because targeting the apparel retail customers required an approach via organized retail stores or vertically-integrated stores.
Analyzing market competitiveness using Porter’s five forces
The products offered by NYC Subway Line are sold in two markets. The first is the tourist gift market which is a part of the Gifting industry and the second is the Apparel market which is a part of the Fashion industry. However, in order to analyze the competitiveness of these markets, we need to use the Porter’s five forces model. The five forces analysis for the gift market is as follows:
Rivalry among existing players in the tourist gift retail market is moderate because the tourist gifts are generally classified on the basis of customer demand and gift genre.
The bargaining power of buyers is very high due to an intermediary involvement of sales agents for pitching the product ahead to the retail stores. These agents demand their own commissions-based income and affect the brand presence and visibility at retail point.
The bargaining power of suppliers is relatively low because the product is manufactured and supplied from low-cost offshore markets like Africa, China, and India.
Threat of new entrants is very high as those of fake and unlicensed products pose a huge threat to replacing the product by offering lesser prices. The market has enough room to accommodate new players because of huge demand.
Threat of substitutes remains high for the tourist gift retail because buyers can always prefer an alternative to apparel by choosing a souvenir or memento from the retailers.
The five forces analysis for the apparel retail is as follows:
Rivalry among existing players is high as almost the same genre of products are offered for almost the same segment of targeted customers with very little gap in product pricing.
The bargaining power of buyers is very high due to the presence of multiple retailers and even low-cost retailers for the apparel market. Further, sales reps have their salary which affects the affordability quotient for maintaining proper visibility of the brand.
The bargaining power of suppliers is relatively low because the product is manufactured and supplied from low-cost offshore markets like Africa, China, and India.
The threat of new entrants is very high because new players can very easily enter the domestic retail market. Fake brands leverage their low price strategy over others.
The threat of substitutes is low because apparel retail has no significant substitute.
So, on the basis of the competitiveness analyzed by using the five forces model for both of the above-mentioned markets, the overall competition index of the apparel retail is very high due to the higher threats of existing competition, new entrants, low cost players, and buyer’s bargaining power. On the other hand, the gift market is relatively less competitive because gift options are less driven by competitive measures by the industry players when compared to that of the buyer preferences with respect to eves and relationships. However, since the company is already well established in terms of sales (Appendix B) in the gift market, the apparel retail market seems more attractive for the NYC Subway Line because there is huge scope of growth and gaining market share by fighting stiff competition as they have differentiated value based psotioning for their products.
SWOT analysis for NYC Subway Line
Requirements of succeeding in apparel and gifts market
There are following requirements which are must for success in the gift and apparel markets:
Strategic tie-ups with sales reps and retailers to ensure persistence of products at the stores.
Adequate brand promotion and communication activities to develop a brand image.
Attaining patent for design, long-term license, and creative rights related to lifestyle products.
Adaptive pricing strategies to ensure better marginal profitability in all seasons.
Specific merchandising practices to attract the targeted customer segment with better offers.
Vertical integration with supplier network to ensure a consistent supply of good quality products.
Special commission based and volume based offers to retain more retailers and sales rep.
Different product differentiation strategy for the gift and the apparel retail market.
Out of the above-mentioned requisites of gaining success in the gift and apparel markets, NYC Subway Line lacked two basic aspects that led them to low profitability and inadequate market share.
NYC Subway Line never hired their own sales representatives in order to cut their salary costs.
No specific brand communications strategy like big advertisements or event sponsorships.
Absence of any vertical integration with the low-cost suppliers or big retailers like Macy’s.
Strategy recommendation – Apparel retail market
The appendix ‘A’ shows the figures of the gift market sales being almost more than twice that of the gift retail sales over the five-year span from 2004 to 2008. It is clear that the retail apparel market has immense scope for maximizing sales when the gift retail is already making good revenues. Hence, Lynne should focus the entire resource allocation strategy to gain a market share in the apparel retail market rather than on the gift market. The prime reason for this recommendation is that the apparel retail market is very big in terms of demand and has a number of recognized large retailers who can ease the presence of the brand with respect to competition. Further, the pricing and brand communication strategies can be focused to get better profitability in the apparel retail markets by using the economies of scale.
Recommended marketing mix- 4 P’s -Apparel retail market
Product- The product range from NYC Subway needs to have a separate line of apparel segment which needs to department store based, hip-hop based, and lifestyle segment of apparels to be introduced for specifically the apparel retail market.
Pricing – The existing pricing for the apparel markets should be tweaked to accommodate the salary of the sales rep and in-store brand promotion strategy based budget.
Place- Strategic tie-ups with organized multi-brand apparel retailers should focus on effective product placement at the retailing point along with the other established brands and differentiated positioning to be communicated to ensure the lifestyle designs and licensed monopoly over them.
Promotion - Newspaper advertisements and print ads need to be included in the budget for the apparel retail related brand communications which can position the apparel range of products as the ‘dressing passion of a true New Yorker Soul’ and ‘Hip-Hop attire of a New Yorker’.
Pricing calculations
The appendix B shows the pricing for different products and their relative prices for retailing. The managerial implications of this information are regarding the facts that how the cost of manufacturing, wholesale price, and sales agent fee can be modified to change the gross profit figures for NYCSL. Hence, altering these factors may lead to better profitability for NYCSL.
Pricing Worksheet I: Calculating Target Retail Price from Cost
Pricing Worksheet II: Calculating Cost from Retail Price
