Selling Strategies Case Study - As an OEM manufacturer in China for many years, our niche is not only manufacturing quality garments but also stable graphic printing.

We make use of Taobao platform to receive orders from customers. Our sales team will check if any stocks in factory warehouse; if positive, finance staffs will confirm the receipt of payment before the sales team arrange delivery accordingly to customers.

Traditional OEM companies entering the internet

Internet has fundamentally changed our traditional OEM business model, in which we manufacture garment in according to specific customer’s instruction and deliver finished products per sales contracts. For On-Line Business, we have to educate potential buyers and to sell our inventory directly to the customers who are geographically separated.

We are also inevitably facing legacy issues when addressing the internet.

1. Inadequate understanding of digital terminology to effectively sell products

Our existing team is not familiar with digital sales. The sales director has to spend a lot of time to get green light from management team, so the project progress was not up to an aligned timeline.

2. We don’t have issues of legacy system. Our company has been using SAP ERP application, which is an integrated enterprises resource planning software for several years and has in-house IT department working with SAP teams to configure all programming served for On-Line Business.
3. We have also assigned internal web-designer and programmer for the FISH website.

Brand Leaders in China

Vancl () became the No.1 internet apparel brand in the China market. The selling strategy Vancl applied is to go for volume with aggressive pricing with many new styles of products plugged up. Per information from Vancl’s chief executive officer, he expected sales to triple to 20billion Yuan ($3billion) in 2010.

Following to Vancl, the 2rd one is 7p(七浦路) () and the 3rd is Doyeah(都仪) ().

All of the above leaders are not listed companies in China, I could not make any comparison per financial perspectives owing to limited information on internet.

Share of the served markets have been captured - Market Share and Market Growth

Per internal 3 years sales plan, we expect to burn few million dollars before we achieve break-even. Right now the online sales are approximately 1.5% of total sales group-wide in Y2011. Although our market share is really low, we still have confident in China internet market.

To analysis the marketplace, here I adopted the Boston Matrix developed by Bruce Henderson of the Boston Consulting Group in the early of 1970’s. The BCG matrix could serve as a simple tool for viewing a company’s business portfolio at a glance, and may serves as a starting point for discussing resource allocation among strategic business units.

Considering the four categories in the BCG Matrix, absolutely FISH business is not in Star area as we have not been well-established yet and could not see strong opportunities there at the moment. We are still new to the market and finding the right internet selling strategy.

Per China Internet Market Overview report, in 1H08, the number of Internet users climbed a further 20% to reach 253M as per CNNIC, giving China the world’s largest Internet user base. We believe that China markets experiencing high growth as also the total market is expanding. We are willingly to invest more in internet selling and therefore should result in higher of cash consumption.

Question Mark (“Problem Child”):

Since our market share is still low even though we consume a relatively large amounts of cash, resulting in net cash consumption. If we could find a right internet selling strategy, like Vancl and other leaders, we should have potential to gain market share and become a star in the future. We have to put more efforts to get markets to adopt our products. We aligned to invest heavily to gain market share and have no intention to stop or sell the On-Line Business at the moment.  

Current approach to utilize the internet to maximize sales

We promote our products through the following two channels

• FISH web sites
• Internet intermediaries

Own FISH websites

We have in-house programmers to design own websites to promote our tees. To save costs and test the water, we contracted some non-famous singers as our model. We sponsored them for small-scale concerts but they have to wear our garments in return.

The web introduces what we will sell in each season and welcome potential buyers go direct to Taobao for further visit and complete the purchase.

We attract buyers to subscribe our news by sending a free tee as a welcome gift at the very beginning.

Internet Intermediaries

We used Taobao, one of the famous internet platforms to link up customers and suppliers in virtual place.

Taobao is an internet intermediaries which are a very effective way to drive sales. We do want to make use of their user bases and effective payment channels to facilitate our internet selling. According to our internal analysis, more than 95% of sales were done through Taobao, and the rest are selling through direct contact to our sales team or sales to our internal staffs.

Opportunities & Threat

Opportunities

• China market, including Hong Kong & Taiwan, is a huge internet market.
• After the economic crisis, both US and Europe market are very weak. The customers are very prudent to place small-size orders only with reduced gross profit margin. Having our own brand produced in our factory could fill up the idle capacity to cover factory’s fixed cost and may be new income sources in the future.
• We will launch a sub-line which is basic-style garment where it can also be used to train up new sewers in our factory.
• Our core value is not only the printing & embroidery pattern, but also good fabric quality which we are offering at competitive prices. Our existing workers are very skillful and could manufacture quality garments for current branded customers. In this connection, we should have no problem to handle orders from On-Line Business unit.
• As we are a garment manufacturer, we could save more costs in the supply chain than other brand leaders in China.

Threats

• Budget for the On-Line Business may be cut if the orders from US/Europe are still insufficient to cover the factory costs.
• As we are OEM factory, we could not promote our FISH product proactively as it may be conflict of interests with current brand-customers, say why does the graphic design so similar? We are considering to establish a new off-group company to hold the On-Line Business Unit.
• Dead stocks: We were overestimated the sales and over-production of the numbers of garments in each style. In this regards, we are inevitable holding many dead stocks on hands. Warehouse management is one of the key projects of our company in Y2012.
• Slim profit margin in China: China costs are keeping booming, e.g, minimum wages, material costs, exchange rate, eco-protection cost, utilities charges etc, all have a BIG impact to our presence in China, which in turn impact to our On-Line Business too.

Maximize the potential opportunities of internet selling

The use of the internet is no longer a novel selling strategy. It is increasingly entering the mainstream. It offers low cost access to a huge customer base which is not limited by geographical boundaries. China market is huge, desirable and growing market. Clearly we could not race for the leadership, but, at least in short term, we still want to maintain the brand place in the market.

Surely, we will not go head to head on price as economies of scale in the leader’s favor.

We aim to achieve the following objectives on the Web:

• Maximizing the number of visitors interested in our products
• Ensuring those visitors are easily and efficiently finding all the information they need to purchase our products;
• Most importantly, we want to earn loyalty from customers. According to the survey done by GlobalSpec, 13% of surveyed users from engineering, technical, manufacturing and industrial marketers indicated that customers is their primary marketing goal in 2009, up from just 5% in 2008.

We go through the following three approaches to maximize the potential opportunities of internet selling:

Customer Loyalty

1. Customer service center: we built an in-house real-person customer service unit to answer directly any queries.
2. E-marketing: A great way to stay in touch is through e-mail or e-newsletter sending customer information about fashion trend highlights together with our newly released tee categories. We also invited our customers to join our public functions;
3. Customer friendly policies: we loose our strict return and exchange policies from 7 days to 2 weeks. We hope our customers gain more flexibility in purchasing our products.

Web Strategy

No business can ignore the opportunity to interface with customers which the internet affords. Customers are increasingly using the net to source their needs.

To maximize the net selling, we aim to achieve the following approaches.

1. Gain visibility: Being high on search engine rankings, which then leads to more “hits” in Taobao.
2. Re-design our company websites in order to be more convenient for customers to select. Reduce the number of graphic pattern release in each season to keep customer’s concentration on key products.

Others

1. Include a sub-line, mainly a basic-style tee which is at lower price garment.
2. We will invite famous artists in China as our models to present our products.
3. We also engaged with social networking sites, facebook and twitter, as a means to promote sales, go alone with our own websites to attract more customers.

Conclusion

We are not taking the full advantages of the net’s low cost owing to low volume structure in place now. How to fine tune our internet selling strategies & how to make money online are the critical factors we have to address.

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