Foxy Originals a Toronto-Based Jewellery Company

OVERVIEW

Founded in 1998 by recent university graduates Jen Kluger and Suzie Orol, Foxy Originals, a Toronto-based jewellery company, grew to become a well-known designer and producer of high-end jewellery with a strong presence in the Canadian market.   Foxy Originals’ high- quality necklaces, bracelets, and earrings are currently sold in over 250 Canadian  boutiques.  The company’s fast-growing customer base consists mainly of style- and price-conscious women between the ages of 18 and 30 years old.  The company’s ability to satisfy huge demand for low-priced high-end jewellery gave it a competitive advantage in a market that long had overlooked low-income young women.  As a result, Foxy Originals had a remarkable 400% growth (Exhibit 1) in its first three years of business, and it continues to grow at a rapid pace.  With the growing popularity of its products, Foxy Originals was running the risk of becoming over-saturated in the Canadian market.  In an effort to avoid this problem, the company decided to enter the U.S. market by January, 2005. To achieve this goal, Foxy Originals had to make a vital decision regarding its distribution strategy: Would the company attend trade shows or hire sales representatives?

SWOT ANALYSIS

Foxy Originals’ strengths reside in its owners’ experience, stylish products, pricing strategy, and its current market presence. Foxy Originals owners, Kluger and Orol, are the company’s greatest assets. Orol’s parents owned a successful metal manufacturing company that specialized in making medals and jewellery. Orol became familiar with the most effective and efficient jewellery production methods. Kluger had been designing and selling her own jewellery since she was fifteen. Kluger’s experience in jewellery fashion and design helped the company stay ahead of the latest trends in the ever-changing jewellery market. Orol and Kluger’s extensive experience in jewellery design and production gave their company the strength it needed  to compete in the brutal high-end jewellery market. In addition, one of company’s key strengths is its ability to produce high-end jewellery while keeping production costs at a minimum. By combining high quality with low prices, Foxy Originals was able to gain market share at an unprecedented rate. Gaining a decent market share gave the company the brand recognition it needed to secure shelf space at 250 boutiques nation-wide. A strong market presence has translated into a healthy financial gain that allows the company to continue its current operations while exploring expansion opportunities.

Foxy Originals’ success came at a price.  The company’s weaknesses include local market saturation, lack of international market experience, and the high cost of securing retail accounts. The company realizes the need to expand, but officials worry about their lack of experience in the US market.   Foxy Originals does not know how the US market will respond to its products, and it does not know how competitive the US jewellery market is.  Officials similarly worry about the high cost of securing new retail accounts.  Kluger’s and Orol’s method of personally securing each new retail account is extremely effective but time-consuming and expensive. They cannot apply this method in major American cities. Therefore, Kluger and Orol must try risky new methods--attending trade shows or hiring sales representatives.

Tapping into the US jewellery market creates almost unlimited opportunities for Foxy Originals. The company will gain a larger customer base, wider brand exposure, and greater international market experience. The estimated US population of women between the ages of 19 and 33 is 30 million (censusscope.org, 2000)--almost equivalent to the entire Canadian population.  If Foxy Originals were able to secure even a small percentage of this population, they would gain greater exposure, and in turn, would increase demand for its products, making Foxy Originals the latest must-have in fashionable jewellery.  Gaining invaluable experience in the process of taking its products into a “foreign” market, Foxy Originals will find answers to critical questions: How does the US market respond to their products? How big is the demand for their products? How competitive is the US jewellery market? What are the best pricing, marketing, and distribution strategies?  This experience will be vital to Foxy Originals’ future expansion plans into Europe and Asia.

Although entering the US market presents Foxy Originals with huge opportunities, it also presents significant threats. Challenges the company may face are the risk of being eliminated by stronger, better marketed competitors; potentially low demand for its product and expensive marketing and distribution.  Given that Signet Group, Tiffany & Company, and Zales Corporation control the American market, Foxy Originals must establish its brand on the strength of its superior designs and lower price tags.  Many Canadian customers have supported Foxy Originals because of their pride in Canadian products, but the US market buys exclusively according to fashion trends. Adding to the challenge, preliminary market research suggests 50% of Foxy Originals’ designs do not appeal to American shoppers. Given half the stock’s limited appeal, marketing and distribution costs associated with establishing the brand, securing shelf space, reaching-out to consumers, and gaining market share may prove too much for Foxy Originals to manage.

PROBLEM IDENTIFICATION

With the Canadian market becoming over-saturated, Foxy Originals is trying to decide on the best strategy for expanding into the US market. The company must overcome its unfamiliarity with the US jewellery market, its lack of a solid marketing and distribution strategy, and the high costs of acquiring new retail accounts.  Time is an important factor, because Foxy Originals plans to enter the US market by January 2005.  Given that it is starting to draft plans in June 2004, the company has only six months to develop a solid plan for US expansion.

ALTERNATIVE IDENTIFICATION

Foxy Originals currently has three options:

Option one: Foxy Originals can sell its products at trade shows. Orol and Kluger will personally attend trade shows devoted to fashion, apparel and giftware. They would have a booth set up to present their products, address customers’ inquiries, and take orders. Attending these shows will give the company an opportunity to showcase their products to over 75,000 interested buyers. In addition, trade show appearances will give the owners opportunities to network with retail owners, sales people, and potential customers.

Option two: Foxy Originals can hire sale representatives to sell their products. The company would pay them commission, based on their sales volume; in addition to a small monthly fee. Sales representatives have more experience in the US market, and they are well-connected in the jewellery industry.

Option three: Foxy Originals can benefit from using both distribution methods. They can sell their products at trade shows and hire a qualified sales force to distribute their products.  Although development of a skilled sales force emerges as the preferred option, it comes with its own set of complexities and challenges. The logistics are complex. If done incorrectly, this option could put the company in competition with itself;  sales at trade shows could undermine the sales efforts by the sales representatives.

DECISION CRITEIA

Foxy Originals must establish relevant decision-making criteria by which to evaluate its alternatives. The company must carefully evaluate expected profits, market-entry time, and the complexity of each alternative

ALTERNATIVES ANAYLSIS – MATRIX

ALTERNATIVE ANALYSIS – DISCUSSION

Attending a trade show will cost $9,433.33 on average (Exhibit 3) and will generate an average of $8,230.42 profit per show (Exhibit 6). By attending the 10 potential trade shows, the company will generate $82,304.2 in profit in 2005. Since trade shows are scheduled throughout the year, it will take Foxy Originals longer to enter the US market if they rely solely on trade shows as their distribution method.  To attend trade shows, Kluger and Orol have to keep up with show schedules and locations, book tickets, have booths set-up and promotional materials ready.  The process is fairly complex, and a small mistake could sabotage all their efforts. For example, if Kluger and Orol missed a flight, the company would miss an entire show, but it would still incur all the expenses.