History and Background of Patchi in Abu Dhabi
Patchi is a small scale chocolate store that specializes in providing gourmet chocolate products to its consumers. Currently located in the Abu Dhabi Mall in Abu Dhabi, the chocolate store was one of the first of its kind in its current location and, as such, has been drawing considerable attention due to the novelty of eating gourmet chocolate products. The business itself is not an LLC (Limited Liability Company) but rather was formed as a result of a partnership agreement between several young entrepreneurs in Abu Dhabi that franchised the business from the main Pachi Company.
What must be understood is that one of the ongoing trends in Middle East society today has been to send high school graduates of the U.A.E educational system to various colleges and Universities located in other countries in order to further their education. As a result, many international influences and cultural traditions tend to be brought back by such individuals resulting in new local trends within the U.A.E.
The creation of a company that focuses on gourmet chocolate is one of the results of the sharing of international culture with local residents and, as such, Pachi has gained a considerable following within Abu Dhabi. As for why the owners entered into this specific type of business, this can be explained by the growing popularity of gourmet culture (as referred to earlier regarding cultural sharing) and how gourmet chocolate is normally well accepted in virtually all locations where it is sold. In the case of Pachi, they were actually the first gourmet chocolate company to establish itself within Abu Dhabi.
This paper will examine the origins of chocolate chain “Patchi” and the various entrepreneurial activities and concepts that contributed to its success within the Abu Dhabi market. With various chocolate stores and candy products already present in the Abu Dhabi market today, this makes market penetration and the creation of sufficient brand awareness of a new chocolate shop all the more difficult to implement. As such, the success of Patchi is definitely worth a closer examination since it will showcase how a chocolate store is able to become successful in an already saturated market environment.
The Success of Patchi at the Present
The employees at the renowned chocolate chain Patchi, at the second floor of the Abu Dhabi mall, mention that the secret behind their success lies not only in the type of product they sell but rather in the way in which they make each transaction an “experience” for their customers. What they are referring to is the general ambiance and “feel” that permeates a particular store or shopping area.
Basis behind success
The entrepreneurs behind Patchi in Abu Dhabi explained how they realized success during an economic downturn was possible by making their shop an “experience” rather than merely thinking of it as a shop and they even planned the happy ambiance that pervades Patchi as a method of drawing people in and enhancing their purchasing experience.
As it was mentioned earlier, the entrepreneurs took great pains in the planning process especially in terms of developing their local image and this resulted in the popularity that Patchi enjoys today within Abu Dhabi. The success of a business is directly tied to the course that an entrepreneur chooses to take, this can come in a variety of forms and can result in a plethora of different outcomes however in the end what determines success or failure is how entrepreneurs choose to guide their business and deal with the ramifications of their actions. Based on this, it can be stated that proper planning and sticking to a business concept that places an emphasis on brand image and stability can result in a stable and profitable company.
Development of Patchi
Since Patchi was one of the first gourmet chocolate sellers in Abu Dhabi, this allowed the company to gain a dominant market share and considerable profits due to the effect of being the first mover into what could potentially be a growing type of food genre within Abu Dhabi.
(Cost = amount paid per month for maintaining the business)
(Profit = revenue for the month minus cost for the month)
(Example: Average revenue for 2012 is $60,000 while the average cost is $40,000. Profit in this case is revenue minus cost which is equivalent to $20,000)
Further investigation reveals that there have been no other companies within the Abu Dhabi Mall that have attempted this sort of venture in the past and, as such, this further solidifies the dominant position of the company in what could possibly become a decade long monopoly. On the other hand, it must be noted that Abu Dhabi does have a well deserved reputation for conservatism and this presented itself during the company’s initial development phase.
What must be understood is that while Western culture has indeed been slowly integrating itself into the local culture, the fact remains that various aspects of it are still largely unknown to large swaths of the local society. As such, the initial establishment of a business venture that focused on gourmet chocolate was initially met with a great deal of skepticism and little local support in the beginning. Fortunately enough, the entrepreneurs that began the venture utilized effective marketing campaigns in the form of print ads, television advertisements, online reviews, a company website as well as general word of mouth in order to generate local interest for the venue. The end result was booming business venture that today is one of the most visited venues in the Abu Dhabi Mall.
Financial Performance of Patchi
Presently, Patchi averages roughly 120 people within a day (more on weekends) with an average of roughly $40 per customer. In a given day, that is equivalent to $4,800 and within a month is equivalent to $144,000. Considering the fact that the company does not pay as much overhead costs on electricity since most of the facilities are located inside the mall, this results in a large percentage of the profits going directly to the owners of the store. It must also be noted that such numbers have been steadily increasing as seen in its performance in 2012 which averaged around 50 to 60 on a given day.
This is indicative of the fact that as the popularity of gourmet chocolate continues to grow within Abu Dhabi, the more likely it is that the number of customers on average that patronize Patchi will increase over the next couple of years. Another factor that should be taken into consideration is the fact that Patchi has a considerable dominating position in the market today due to its location in the Abu Dhabi Mall and the fact that it has marketed itself more prolifically as compared to other chocolate companies within the country. In fact, when examining the sheer amount of positive user rated views of the company online it can be seen that the financial performance of the company will certainly get better and increase over time as the number of its patrons continues to grow.
Examining the Business
As mentioned earlier, Patchi is the first business of its kind in the Abu Dhabi Mall and, as such, it came as a direct result of the entrepreneurial activity and was not inherited or bought from a previous owner. The owners of the store explained that in comparison to their new business, one of the advantages of inheriting or purchasing an already established business is the fact that methods of supply, procurement, production as well as sales and customer service have already been established by the previous owner and, as such, entrepreneurs will not have to worry about having to establish such systems themselves which can take considerable time and effort.
Another factor to take into consideration is the fact that established businesses already have a well-known reputation within a local community and, as such, results in constant customer patronage by long time customers of the business. It is usually the case that new businesses have to work hard to ingrain themselves into the awareness of members of the local community through various marketing campaigns which can cost considerable sums with the possibility of such activities having little impact on consumer brand awareness.
On the other hand, the entrepreneurs behind Patchi explained that establishing a new business comes with several advantages that a well established business cannot necessarily obtain. One of these advantages is a degree of flexibility and innovation regarding processes used for operations, production or even inspiration behind the business itself. As it can be seen in the case of Patchi, which is a relatively new business, it was able to establish a unique and one of a kind service that most well established businesses would not have been able to create themselves due to inherent limits in operational design
Environmental Factors
Making it into an experience
The entrepreneurs behind Patchi state the following regarding what it takes to become a successful entrepreneur “now we are in a recession and we see businesses that are successful, I think the one thing you see that they all have is a form of experience for their customers which is the most important part in everything, so we made sure that there was an experience at Patchi”. The “experience” that the entrepreneurs are referring is not just the quality of the product itself but what customers feel when they enter into a particular establishment. In the case of Patchi, their outlet has a warm and friendly ambiance which is not only family friendly but actually promotes, in their words, “a happy feeling” for customers.
For example, it can be seen that in the case of Apple Inc. (which is considered the world’s most valuable company) all their stores, no matter what country they are present in, have a stylish and ergonomic design that looks “clean, modern and cutting edge” which has come to exemplify the experience of buying products at an Apple store (Gunter 2012).
Based on the popularity of not only Patchi but of Apple itself it can be seen that by making their store into an “experience” rather than just a store, this helps to encourage buying behavior among their clientele and even repeat visits. As such, for any business that wants to increase their customer base it is important to develop the experience their venue provides so as to better appeal to consumers and create repeat business.
Strategies Employed to Overcome Business Challenges
As mentioned earlier, one of the initial problems faced by Patchi when establishing its business in Abu Dhabi was a lack of local support as well as general skepticism from the local populace regarding the viability of the business which was relatively unknown at the time. To resolve this, the business utilized numerous print ads, TV advertisements, flyers and word of mouth in order to encourage people to try out the product. In fact, prices were lowered during the opening weeks in order to entice customers.
Over time, their method of advertising and the company objective they focused on which was to establish a first class venue for gourmet chocolate eating eventually came to draw considerable local attention. What must be understood is that Abu Dhabi does have a prevalent and widely dispersed upper class that have quite literally exhausted all marginal utility that could be derived from local food. The result is that such individuals often go to other countries and regions in order to experience new types of food. It is this predilection for travel that the entrepreneurs behind Patchi were able to capitalize on since they were able to establish a new form of gourmet eating in the heart of Abu Dhabi that various members of the upper class could enjoy without having to leave the country for extensive periods of time.
Over time, the store became a well established venue for eating chocolate resulting in a considerable monopoly over the gourmet chocolate business in Abu Dhabi. It must be noted though that this examination of the strategies employed by the Patchi does not take into consideration strategies that resolve issues related to marginal utility and, as such, should not be considered a complete examination of all potential strategies that the company has pursued at the present.
Guiding Principles Utilized in Improving Business Performance
Brand Image
The entrepreneurs behind Patchi in the Abu Dhabi mall explained that a company’s brand image helps to enamor it to customers in that through a distinctive way of presenting the company’s products and services this enables it to distinguish itself from its competitors. They went on further to explain that a brand image can also be utilized to popularize a company among a particular consumer demographic in that through the uniqueness of the brand image, a consumer continues to remember the company and its brand long after the initial consumption of a product or use of a service from that company. As such, the owners of Patchi recommended that for any company, newly established or not, to develop a brand image that appeals to the market segment they are targeting so as to facilitate a greater market share for the company.
Customers of Patchi
Customers of Patchi range from 12 to 40 years of age yet on average, the age demographic that patronizes the venue consists of customers aged from 14 to 28. This is due to the fact that eating chocolate has always appealed to a wide consumer demographic and, as such, it is not surprising that the age demographics for eating chocolate in Abu Dhabi matches those in other global locations.
It must be noted though that the one major difference between eating chocolate in Abu Dhabi and in other countries is the fact that it is gender specific and class specific. As mentioned earlier, Abu Dhabi has a distinctly conservative society. That is why the purchase of certain products is not as much as compared to particular demographics that exist in businesses within other countries (Adamonienė & Astromskienė 2013).
This results in mostly male customers coming to Patchi and buying chocolate for their family at home instead of an entire family going to the chocolate store and buying chocolate. Aside from this, eating chocolate at Patchi can be also considered class specific due to the high prices that the company charges. On average, prices for chocolate, drinks and other miscellaneous costs can run up to an average of $40 to $80 per person per purchasing session and, as such, is not within the price range for a large percentage of the population in Abu Dhabi.
As such, most customers who go to Patchi are usually male and well off in terms of the specific social class they belong to. In order to promote itself with the local community in Abu Dhabi, Patchi utilizes a combination of print ads, TV advertisements, flyers and word of mouth to entice people to try gourmet chocolate as a recreational activity. Aside from traditional methods of brand promotion, the company also utilizes out-of-the-box techniques, such as holding special promos in the Abu Dhabi Mall in order to increase the popularity of the venue as the “go-to-place” for young individuals to enjoy a unique form of eating in Abu Dhabi.
Customers and the Product
The main reason why people go to Patchi is due to the fact that it is a novel form of eating in what is usually a highly conservative society. The uniqueness of the taste, texture and smell of the chocolate does tend to attract a decent following of local “foodies” who enjoy eating good food. As mentioned earlier, Patchi was one of original founding companies of gourmet chocolate in the Abu Dhabi Mall and, as such, has helped to grow the popularity of gourmet chocolate within Abu Dhabi over the past few years. As a result, more and more customers tend to garner significant levels of interests in the company and the popularity of gourmet chocolate eating continues to grow within Abu Dhabi (Elfakhani & Ahmed 2013). It must be noted though that some of the benefits that customers of Patchi expect out of the company is that the chocolate that is being sold is of the best quality and that it continues to be freshly made prior to being sold.
Negative Aspects Related to the Business
One of the things I dislike about Patchi is that it neglected to take advantage of what could be an excellent money making opportunity by having several other product types that it can sell to its clients. The company merely provides customers with gourmet chocolate yet it is seen in most cases that customers tend to want other products to go with their chocolate such as a sandwich or other types of savory food. By either renting out spaces within the company’s location or creating their own dishes, Patchi could have catered to these hungry clients and thus increase the level of profit they gain per visit. For me, this is a wasted opportunity that the company should find some way to resolve in order to better improve their services.
The second problem that limits the amount of customers that come to Patchi is the fact that the prices are well above the norm for chocolate. With prices ranging from $40 to $80 per person per product batch, the prices are way too high in order to entice a much wider consumer demographic.
(This chart shows that on average during promotional periods where rates are below $10 a person the result is a far higher ratio of Middle and Poor class customers that utilize the facilities as compared to instances where normal prices are evident.)
What the company must realize is that in order to ensure continued profitability they must expand their current consumer base to include a diverse array of consumers from different economic classes. The high price limits the company’s ability to do so and thus should be changed in order to resolve this issue.
Key Factors in a Successful Business
The following are the lessons learned from the entrepreneurs of Patchi when it comes to establishing a successful business.
Focus on Quality
The entrepreneurs explained that one of the most important factors in creating and maintaining a successful business is a focus on quality and ensuring that any product bought by a customer is not the result of inferior production or workmanship. What must be understood is that customers tend to patronize businesses that care about their customers by ensuring that the strictest measures are followed in product quality.
Adapting to Changes in Business Environments
The entrepreneurs also mentioned that another factor that businesses should take into consideration is adapting to changes within local business environments. What must be understood is that businesses do not operate within a vacuum, and as such, it becomes necessary to observe what it occurs within local business environments and respond accordingly. This can come in the form of expanding during times of economic prosperity or cutting back and outsourcing specific aspects of the company’s operations during lean economic times. Not only that, companies should be prepared to respond to changing consumer trends in order to stay relevant lest they fall into obscurity and stagnation.
Such a situation occurred in the U.S. between Netflix and Blockbuster wherein Blockbuster continued to stick to its original business model despite changing consumer habits. The end result was that Blockbuster lost its dominant market position to Netflix and has been plummeting in value ever since. It is based on this and other similar instances that the necessity of observing and responding to change shows its importance for any company that wishes to stay relevant in its chosen market.
Focusing on Store Locations
Another strategy employed by the entrepreneurs was to ensure that their Patchi store was placed in a location that has high pedestrian traffic so as to maximize the amount of people that take interest in the ambiance of the store and its product offerings. The pedestrian traffic alone that goes through the Abu Dhabi Mall on a daily basis is incentive enough to establish a store in such a location and makes the Patchi shop there ideally placed in being able to take advantage of the daily pedestrian traffic in order to popularize the store’s image and offerings through various window displays and offerings on the street. It must also be noted that aside from the number of people that traverse the Abu Dhabi Mall on a daily basis, the location itself is home to a variety of commercial areas such as department stores, food chains, restaurants, snack bars, fashion boutiques etc. which creates a spillover effect wherein people who finish their shopping from one store can go to Patchi in order to rest and relax.
Conclusion
Based on this interview alone, it can be assumed that individuals who want to become entrepreneurs need to have the necessary “vision”, knowledge and experience in order to create a successful venture. If even one of these is missing then that person cannot become an entrepreneur. The entrepreneurs behind Patchi said that a person needs a “vision” for a particular product and service which is tempered through knowledge and experience in order to make it into a reality. It is not so much that a person needs a good idea in order to become an entrepreneur; rather, it is also necessary to have the inherent skills, experience and capability in order to actually successfully become one.
It should also be noted that one of the factors that was confirmed during the interview was the fact that the process of becoming an entrepreneur is connected to the concept of trial and error. The people that were interviewed indicated that they had actually experienced a variety of setbacks over the course of their lifetime. It was from these experiences though that the entrepreneur was able to learn from his mistakes and develop in such a way that they incorporated the lessons learned from the failure into a viable and successful business strategy. As such, from this it was reaffirmed that entrepreneurship is inherently connected to trial and error as indicated by the course notes.
Personal Observations
In terms of the experience I have just undertaken in this project I have come to realize that there is more to entrepreneurship that just creating an effective product or service, rather it is necessary to develop a product’s branding, method of sales and consumer interaction. In fact when taking all the facts mentioned into consideration it becomes obvious that what I know now is still woefully inadequate in terms of being able to successfully establish my own business. I still need more experience in terms of understanding markets, determining what works and what will not. I need to be able to make mistakes in order to learn from them and as such I believe that it is necessary that I learn under more entrepreneurs in the future in order to understand what they did and the mistakes they made so as to avoid making them in the future.
Reference List
Adamonienė, R., & Astromskienė, A. (2013). Connection of Youth Entrepreneurial Activity and Value Principles. Viesoji Politika Ir Administravimas, 12(3), 471-482. Web.
Elfakhani, S., & Ahmed, Z. U. (2013). Philosophical Basis of Entrepreneurship Principles Within an Islamic Ethical Framework. Journal Of Transnational Management, 18(1), 52-78. Web.
Gunter, F. R. (2012). A Simple Model of Entrepreneurship for Principles of Economics Courses. Journal Of Economic Education, 43(4), 386-396. Web.