Transcript Lady Foot Locker 2006 Case Analysis

Lady Foot Locker
Presentation by:
Julie Perkins & Jody Vail
March 21, 2006
Situational Analysis
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Founded in 1982
More than 600 stores nationwide
Athletic footwear industry offers a
wide array of product
segmentation
LFL specializes in athletic
footwear, apparel, and accessories
There are very few retail chains
that specialize in athletic footwear
for women exclusively
Competition consists of
department stores, and apparel
specialty shops
Situational Analysis
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Strong relationships with key suppliers
is essential:
 Current products on shelves
 Special make-up products
 Highly competitive markets
 Advertising & in-store marketing
 Negotiate for:
 pricing
 product exclusivity
 shoe design
 colors
 material
 matching apparel
Situational Analysis
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Technological advances:
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Aided in developing further differentiation in the industry
Increases consumer demand and competition
Shortened product life cycle
Promotional activity consists of:
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Health magazine “Race for Women”
Sponsored events such as fitness classes, and spa treatments
w/ well known instructors
Receive market funds from vendors for advertising, in store
displays, and sales associate education for products
Athletic event sponsorships
Situational Analysis
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Trends within
industry:
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Prior to LFL, women
were purchasing Keds &
Canvas shoes
It is now possible to find
a sneaker for every
activity or sport and even
casual wear
The athletic footwear
market has declined over
the past couple years
Situational Analysis
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Objectives & Constraints:
 Staying current with new and updated products
 Working to secure product exclusivity (very hard due to other competitors within the
industry)
Financial Condition:
 Strong financial position
 Pricing strategy allows them to reduce inventory quickly and still maintain profits
 LFL is currently #3 in the top ten retailers for total pairs sold
History of Problems:
 Suffered one huge product launch failure (Swoopes II)
 Initially product only sold 3%-4% per week and was forced to markdown after only 10
weeks
Issue at Hand:
 Whether or not to launch a new product (Rebecca Lobo Reebok sneaker)
 Product exclusivity
 When to start advertising and launch product
Marketing Strategy
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Target Market:
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18 – 37 year old active females
Likely to be active in sports, fitness, and family life
12 – 17 year olds represented an important secondary market
Sales however occurred across a broad age segment, the LFL customer was considered to be
somewhat ageless market
Total U.S. Athletic Footwear Market (% of total pairs sold by consumer segment)
Footwear Category
1995
1996
1997
Aerobic
5.0%
5.8%
5.4%
Cross Training
11.4
10.3
10.5
Basketball
2.8
9.7
9.2
Tennis/Court
4.1
5.1
4.5
Running
10.1
8.5
8.7
Casual Sneakers
25.5
33.4
34.5
Walking
26.1
24.9
25.2
Other
15.0
2.3
2.0
100.0%
100.0%
100.0%
Market Analysis
U.S. Athletic Footwear Market (% of total pairs sold by footwear category)
Segment
1995
1996
33.0%
35.3%
Women (17 + years)
41.8
39.8
Boys
10.2
11.2
Girls
7.1
7.7
Infants
7.9
6.0
100.0%
100.0%
Men (17 + years)
Marketing Mix Variables
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Product:
 Due to growing consumer demand, consumer segmentation, and increased competition,
manufacturers frequently introduce new products which shortens product life cycles
Pricing:
 Based on 30% – 55% supplier gross margins on wholesale selling price and 45% retailer
markups on the retail selling price
 Typically offered at full suggested retail price for 1st two weeks
 Shoes were not marked down until they fell below a 10% weekly push
Retail Channels:
 Competition was based upon several factors: 1) target consumer segment, 2) price,
3) merchandise assortment, 4) store reputation, 5) store location, 6) advertising, and
7) customer service
Promotion:
 Celebrity endorsements
 National brand and image campaigns
Marketing Expenditures
Total Advertising Expenditures for the Top 10 Athletic Footwear Brands
Rank
Brand
1997 (in millions)
1996 (in millions)
1
Nike
$159.0
149.0
2
Reebok
55.0
84.0
3
Adidas
21.0
14.0
4
Fila
15.0
13.0
5
Converse
8.0
5.0
6
New Balance
4.0
3.0
7
Keds
3.0
3.0
8
Airwalk
2.0
9.0
9
Asics
2.0
2.0
10
Foot-Joy
2.0
2.0
Lobo Launch or No Lobo
Launch?
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Facts surrounding the decision:
 The Lobo shoe would incorporate Reebok’s
Hexalite technology
 Lobo’s contract with Reebok enabled them to
involve her in product endorsements and ads,
store appearances, and speaking engagements
 12-17 year olds would be critical to reach due to
their buying power, in the past this segment
bought shoes based on fashion, styling, and brand
appeal rather than performance
When to launch the product:
 June at the start of the inaugural WNBA season
or October when school basketball season begins?
Retail Exclusivity:
 LFL desired exclusivity to help differentiate
Marketing Support:
 Reebok would provide the launch plans and
marketing funds (television, print, and in-store
merchandise displays)
 Can a female athlete drive product sales or at least
create demand?
SWOT Analysis
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Strengths:
 3rd highest % of total pairs sold within a given year
 Great reputation for supply of women’s athletic shoes
 Few other chains specialize in women’s footwear
 Largest portion of sales during back to school season
 Prides itself on service
 600+ store chains strengthens relationship with vendors
 Power to solely own the Rebecca Lobo launch
Weaknesses:
 Sales below that of Footlocker and Kids Foot Locker
 Swoopes II launch failure
 12 – 17 year olds do not purchase shoes for performance
 Web page is not kept up to date
 Lack of creative advertising
SWOT Analysis
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Opportunities:
 More product segmentation
 Technologies designed to enhance performance
 Increase in women’s sports participation
 Lobo contract enabled product endorsements, ads, store appearances, and
speaking engagements
 12 – 17 year olds critical is proceeding with Lobo launch also offer
athletic wear and accessories to match
Threats:
 More product segmentation
 Sales within industry starting to fall
 Increasing demand for men’s and children’s shoes
 Discount stores
The Decision
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Launch Lobo shoe with Reebok
Take minimum amount of pairs for exclusivity (15,000)
Price product at $80.00
Advertising and promotional support to commence in June
October delivery date for purchase
 Rebecca Lobo is well known among teens and with solid marketing
efforts the market can be reached effectively
 The Hexalite technology can be marketed as an attractive lightweight
active wear shoe providing a great deal of comfort
 First 5,000 pairs sold will receive one of the following
 free tickets to a Lobo game
 photograph with Rebecca Lobo
 autographed accessories or apparel
 team shirt