Problem Statement
In the case of Kemper’s Furniture, the company has experienced a considerable drop in sales within the past year. While it may be true that new entrants into the market in the form of Sears has chipped away at its market lead, the fact remains that it should not have resulted in the sheer drop in sales that the company has experienced.
This is despite the considerable level of community support the retailer has received and the increase in the amount of homes constructed in the suburbs which should have increased the company’s sales. It is based on this that this paper will attempt to determine why the sales of Kemper’s Furniture have been decreasing despite the various positive points that should have increased sales for the company or should have at least maintained it at its previous highs.
Situational Analysis
Strengths
The main strength of Kemper’s lies in its considerable ties with the local community. The company has sold furniture in the same area for over 75 years and has created a considerable level of consumer patronage for its products.
Based on the study of Min, Kalwani & Robinson (2006) which examined the ability of new players to enter into a saturated market, they revealed that there is a considerable disadvantage for new competitors since consumers are more likely to stick to a retailer that they know and trust rather than go for an untested retailer in the same market (Min, Kalwani & Robinson, 2006).
While it is true that there will be a slight reduction in the amount of sales that goes towards the retailer that was already ready present, the real disadvantage lies with the new competitors since they have to catch up to the dominating market share of the market leader within that specific market. This shows that despite the level of competition between Kemper’s, Sears and Myer, Kemper’s still has the advantage.
Weakness
The main weakness of Kemper’s lies in the fact that it will be unable to match the lower prices of a major retailer such as Sears. Large retailers often have more efficient supply chains as possess the ability to leverage better contracts with product suppliers enabling them to sell products at a far lower cost as compared to small and medium enterprises. (Golhar & Banerjee, 2013)
Even if the retailer were to lower its profit margin on individual products to 25% percent, it will still be unable to compete with a large retailer that can outlast a medium scale retailer if it ever came down to a price war between both establishments.
Another factor that should be taken into consideration is that Sears is a well known national brand and, as such, would generate a considerable degree of consumer interest in its product offerings. Lastly, as a nationwide retailer it can leverage a far higher advertising budget thereby allowing it to overwhelm any local advertisements made by its competitors within its current market.
Opportunities
One of the noted opportunities from the case study comes in the form of a considerable level of new home construction within the suburbs. This means that more families are moving in which increases the amount of potential new sales for the company. What is needed in this particular case is a sufficient enough strategy that can help entice these new home owners to shop at Kemper’s instead of at Myers or Sears.
Threats
The main threat for Kemper’s is Sears and Myers; these two competitors are in effect eroding its market share of consumers. Based on the case data, it was seen that the arrival of Sears within the area did result in a considerable reduction in sales for Kemper’s which the company attempted to mitigate by increasing the amount of product offerings it had at different price levels.
Examination
When examining the various facets of the case, it became obvious that the problem with Kemper’s Furniture was that they were attempting to directly compete against Sears and Myers in their respective product markets and, as a result, over extended itself. Its strategy of offering price points in the low-medium-high range for all major household appliances is actually working against the company.
This was revealed in the focus group data which showed that Kemper’s was originally known for its mid to high end products that specifically focused on the quality-seeker consumer group as opposed to the price-seeker consumer group. It was even revealed in the group data that consumers saw no discernible difference in the stores and merely shopped based on brand familiarity.
Shoppers shopped at Kemper’s due to its ties with the local community while people shopped at Sears due to the popularity of the brand. However, when examining the contents of either store, it was shown that Kemper’s Furniture initially had high end appliances as compared to Sear’s more affordable choices.
Furthermore, it was noted that the appliance line of Sears was designed to appeal more to price-seekers rather than quality seekers based on the type appliances they had. When taking into consideration the fact that nearly 60% of shoppers at Kemper’s consists of quality seekers while only 40% were price seekers, it becomes immediately obvious that the current slump that the company is experiencing is due to mismanaging the type of consumer group it is supposed to focus on.
Analysis of Alternatives
The best option for Kemper’s is to go back to its original consumer tactic of selling mid to high end appliances. The reasoning behind this is quite simple; most of the company’s customers are quality seekers rather than price seekers. This explains why despite the increasing average price, the number of sales has been going down.
This is due to the fact that a majority of the company’s consumers prefer high end appliances as compared to their current selection of low, mid and high end products. By shifting back to its original business model, Kemper’s will be able to gain back the customers it lost due to mismanagement of its business model (McCrary, 2009).
Furthermore, it is recommended that the company attempt to differentiate the overall appearance of the shop from its competitors. As seen in the focus group report, the people that were questioned stated that they found no discernable difference between Sears, Kemper’s and Myers. As such, by introducing new design elements and making it easier for consumers to immediately get the product they want, it is likely that the company will be able to outpace its local competition through better product offerings and a better store layout.
It should also be noted that Kemper’s should attempt a more economical approach towards its advertising budget. One possible method would be to utilize online social networking in the form of Facebook.
This can be done by getting loyal customers to like and share the posts of Kemper’s as well as encourage more people to join the company’s Facebook network through a variety of online competitions where people can win prizes by liking and sharing specific posts (Shu-Chuan, 2011). Through such a strategy, more people will be aware of the company while at the same time lowering the overall amount of money that is spent on advertising (Shu-Chuan, 2011).
Reference List
Golhar, D. Y., & Banerjee, S. (2013). An optimal ordering strategy for a third-party managed supply chain. International Journal Of Production Research, 51(10), 2969-2980.
McCrary, M. (2009). Enhanced customer targeting with multi-stage models: Predicting customer sales and profit in the retail industry. Journal Of Targeting, Measurement & Analysis For Marketing, 17(4), 273-295
Min, S., Kalwani, M. U., & Robinson, W. T. (2006). Market Pioneer and Early Follower Survival Risks: A Contingency Analysis of Really New Versus Incrementally New Product-Markets. Journal Of Marketing, 70(1), 15-33.
Shu-Chuan, C. (2011). Viral advertising in social media: participation in Facebook groups and responses among college-aged users. Journal Of Interactive Advertising, 12(1), 30-43.