Heather should locate her business in Tonbury because although Tonbury has a smaller population its residents on average earn less than people from Dyton this means that they will be much more likely to shop at heathers store than people from Dyton.
Tonbury has a smaller population than Dyton however its growth rate is much faster than Dyton’s in 3 years Tonbury’s population is expected to rise by 9000 however Dyton will only increase by 3000. Tonbury has only got 4 jewellers in its town this will mean there will be a lot less competition which help the business grow faster on the other hand Dyton has 8 jewellery shops which would make competing in the jewellery market extremely difficult.
Investigation 2
In this report we will advise heather on which of the following distribution methods she should use to get her product to the consumer:
1. Use a shop (preferably just outside of the town centre).
2. Distribute her product on the internet.
3. Operate her business through a market stall.
Distribution method 1: Producer->consumer
This is when the product goes straight from the producer to the consumer. This method is used in online stores were people sell goods that they have made. This also occurs with some business which sells on the niche market as there product wouldn’t have much success in large retailers.
Distribution method 2: Producer->retailer->consumer
This is when the producer sells its goods to a retailer such as Argos and Argos then sells it to the consumer
Distribution method 3: producer->wholesaler->retailer->consumer
This is similar to distribution method 2: Producer->retailer->consumer however the stock is sold to a wholesaler before going to the retailer this enables the producer to distribute in larger quantities.
After conducting some research I have found that 67% of heathers target market would buy their jewellery from a shop this is because people feel more comfortable with actually being able to see what they are buying instead of an image on a website which could have been manipulated to appear more attractive. One disadvantage of using a shop would be that it is difficult to see all the jewellery and can be tiring.
The remaining 33% said that they would purchase their jewellery online because it is often cheaper, easier to browse and offers a wider range of goods than that of a shop. We have to remember that heathers target market is the teenage fashion market and if they are purchasing the jewellery themselves they will not be able to buy online because they would not have a credit card.
My research showed that buying jewellery from a market stall is very un-popular I think this is because people feel there is a lack of quality from products sold on market stalls. One advantage of distributing through a market stall is that people would already expect budget priced jewellery and would be in the correct place for your target market to find it. However going for a market stall would not be a good idea as the primary research has shown there will be very little customers.
The results of my questionnaire have shown that most people spend about £21-£30 when shopping for jewellery therefore we know that our jewellery should be priced in and below this class interval.
Larger jewellery stores operate their business through shops and open more branches in different areas as their business develops. If you look at the major names in the jewellery market such as Argos, H.samuels and Goldsmiths you will see that they all use both the internet and a shop. Most large jewellery stores use distribution method 2 which is producer-retailer-consumer. Low budget shops also use this method. However, larger stores also use distribution method 1 which is producer-consumer using there websites however lower budget stores are not popular enough to make a lot of money online so just use distribution methods 2 and 3.
(http://www.hsamuel.co.uk/)
(http://www.argos.co.uk/static/Browse/ID72/14416987/c_1/1%7Ccategory_root%7CJewellery+and+watches%7C14416987.htm)
(http://www.goldsmiths.co.uk/)
Low budget shops often just use a shop such as Claire’s accessories although they have a website they do not sell any products online it is just use to advertise there products in store. Claire’s accessories is a shop which sells budget priced jewellery to the teenage fashion market, for girls. Because most teenager do not shop online (only 33%) there is no need on spending money on hosting an online shop for this. Low budget shops therefore tend to stick with distribution method to because they don’t sell expensive enough jewellery to make it worth selling online in some cases delivery would cost more than what is being delivered (http://www.claires.com/europe/)
Analysis of graphs and data
This graph uses statistics collected from a questionnaire given to heathers target market (teenagers). As you can see from the graph most of her market spend between £21-£30
As we can see form the graph above most of Heathers target market but there jewellery from shops a smaller minority purchase there jewellery from online shops and there was nobody who said they bought there jewellery from market stalls.
This graph shows us that most people do not go to the market and our previous graph lets us come to the conclusion that those who do go to the market do not purchase and jewellery.
Overview of Options:
Market stall
Advantages
- In the right place for budget priced jewellery
- Cheaper and easier to start of with however the rent price of a market stall per day is £23.21. there are on average 252 working days a year therefore annually you would be paying about £5848.92 for your market stall
http://www.wolverhampton.gov.uk/business/opportunities/markets/stall_info.htm
Disadvantages
- My primary research has shown that your target market does not purchase jewellery from the market
- Although its cheaper than a shop for only £3904 more you could have a shop which is the most popular form of buying jewellery
http://www.shopproperty.co.uk/PropertySearch.aspx?Town=Wolverhampton
Online
Advantages
- Cheaper running cost than a shop and if operating of a site like eBay you don’t even have to pay for your own web hosting.
- The second most popular form of purchasing jewellery with 33% of your target market purchasing in this way
- Less competition as rival chain Claire’s accessories do not distribute online
Disadvantages:
- Cant see or touch the product and may put off some customers
- Have to organise delivery to people’s locations.
- Less people shop online
Shop
Advantages
- Would allow use to be getting maximum customers
Disadvantages
- Have to pay rent
- Hard to get a shop in a good location and can be very expensive
Mixture
Advantages
- Less competition issues
- Would attract a wider market
Disadvantages
- Higher start-up costs
- Rent for the shop and stall added to the cost of hosting a website would be very consuming of money.
After reviewing all the options I have come to the conclusion that the best distribution method for heather to use is:
Producer (Heather) ->Retailer (Heathers shop) –>consumer
My primary research has shown that 67% of people would rather purchase their jewellery from a shop instead of market stalls or online. Heathers business is only beginning therefore I think going online is not a good option. However, seeing as rival chain Claire’s doesn’t distribute online I think this may be a possible expansion of the business in the future. As heather will be making her jewellery on her own I don’t think she will be able to distribute enough stock to sell to a wholesaler this rules out distribution method 3.
Investigation 3
Methods of promotion
Sales promotion:
Price reductions
The price of an item is reduced this can be used to get rid of old stock sitting on store shelves. It can also be used to get rid of an older version of something when a newer version is coming out.
Loss leaders
Price of an item is lowered to a point where the shop will make little or no profit. Many people will come to the shop to purchase the cheap item and a lot of these shoppers will also purchase something else on which the shop will make a profit.
Added value
This is often used in supermarkets- e.g. buy a bag of flour and get 30% extra. This can also be used in buy one get 1 free in which you are getting 100% extra.
Gifts
These are given when purchasing a product and often entice people to buy the product. E.g. andrex puppy toy with toilet roll
Point of sale
This is when shops put items by the till or entrance its designed to attract the attention of the customer.
Competition
These are used to increase sales by for example saying that you have a chance of winning a holiday when buying a can of coke in reality your chances of winning the holiday are extremely slim. However the prize attracts more customers.
Merchandising
This is when your company promotes a certain brand or company for example a chocolate bar could promote the new harry potter film and change is packaging to match the film.
After sales service
This is when a company offers a guarantee such as find a better offer and well match it and take 10% off.
Public relations
This is when a company tries to get the public to know about their product. This can be achieved by sending stories to the local newspaper or you could have a celebrity promote your product. Public relations cost the company a lot less than sales promotions. They could also try and talk about there product on the radio and TV.
Sponsorship
This is when a company uses the name of a more popular company to increase sales for example Barclay’s sponsors premier league. Many Internet stars make their money by being sponsored by a company which serves as advertising for the company.
Advertisement
Advertising is used to make the public, who are the potential consumers of the product, aware of the product and to make them want to purchase the product. It is estimated that approximately in 2010 £250 billion will be spent on advertising
High priced jewellery stores advertise using consistency to their advantage. People who are looking for very expensive, luxury jewellery will want to show how much they are willing to spend on jewellery. Tiffany & Co is a perfect example of this they distribute all there jewellery in a small blue box. My primary research has shown that 70% of heathers target market would purchase an item from a more expensive store even if they could get the same item in a much cheaper store.
http://uk.tiffany.com/
Medium priced jewellery stores such as Argos use advertising on TV but also sponsorship. In 2004 Argos sponsored a children’s TV channel. The sales of products which previously had not been selling shot up by 50% because Argos sponsored their shows on TV.
http://www.thinkbox.tv/server/show/ConCaseStudy.5
Low priced jewellery stores such as Claire’s often sell products which relate what their target market is in to. For example they sell jewellery with pictures of famous celebrities. They also use a lot of sales promotions because they are aimed at people with a lower budget their consumers will often be looking out for items of added value or reduced price.
The promotional methods that can be used by heather are:
Public relations: Heather could try and get stories of her business put in her local paper or put on her local radio station this would let people know about her shop and would increase the shops popularity.
Advertising- although advertising is very expensive and in most cases not affordable for heathers business which is just starting up. However there are many cheap alternatives such as Google Ad words which cost $1(50p) per every 1000 impressions. However you can advertise for free on YouTube by making a video. One YouTube advert by an American company known as ‘The Red House’ has nearly 3 million views and YouTube allows videos to be uploaded for free.
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Heather will have to try and utilize as much sales promotion techniques as possible because her target market are people who are looking for budget pieced jewellery and therefore looking to save money.
Although my research has shown that TV advertising in the most popular it is far too expensive for heathers business which is just starting we the 2nd most popular advertising method is adverts on the sides and back of buses I have found that for 6 weeks of advertising it costs about £250
However seeing as internet videos is 3rd place and is free to upload I think it should be considered along with bus advertising
As you can see price reductions are the most popular for making people want to get an item. Heather should also write down the original price to show that it was once more expensive this will help sell more of the item
Although you would get more customers sponsorship is expensive and only a small amount of people would actually want to buy you’re products afterwards. This would only help if you were a larger company with money to spare to gain more popularity.
I think heather should use bus side advertising and online video advertising because although they have a lower popularity than TV advertising they cost a lot less especially the video and heathers target market are more likely to be using public transport as they cant drive and more teenagers will be watching videos online. I think heathers should stay away from sponsorship as it is expensive and will only give a small popularity increase. Heather should make sure that her products have a lot of price reductions to make the customers see that they are making a saving.
Heather should advertise were teenagers will be looking most such as on buses because teenagers will be using them. Sites such as YouTube are extremely popular among teenagers and making an advertisement video and uploading it to the site will ensure that the target market sees it. The benefits of selling to the teen market are that they will be looking for certain kinds of jewellery that won’t be available in other shops so therefore bringing more customers heathers way. A draw back is that a lot of teenagers don’t work so they won’t have as much to spend.
As the jewellery gain popularity you will be able to afford better ways of promoting it. Therefore you will have to invest more into advertising in places like TV were most teenagers look. Eventually when you have enough money you can look into sponsorship which will give you a popularity boost but will cost you quite a lot depending on what you’re sponsoring.
