Introduction Sue Koenig opened the Joggers Universe retail store in 1987 at the age of 24. For the last 10 years she has mainly offered the sale of high-end running shoes, walking shoes, shoes for aerobic exercise, basketball shoes, tennis shoes, and crosstrainers, with the emphasis on Nike brands. Nike’s superior promotion strategy and name brand recognition has allowed her to maintain good steady sales, with a $5 to $7 premium on every pair of shoes sold. She also has offered the sale of sportswear with the focus on fashion as well as function.
As a formerly nationally ranked runner, her passion for running and fitness has allowed her to stay abreast of exercise trends and allowed her to stay competitive in her chosen market. Issue The issue facing Sue Koenig and Joggers Universe is that despite her on-hand knowledge of running and exercise trends, access to superior name brand products and fashions, and her healthy profit margins, her overall sales have flattened out. She appears to have been able to capitalize on the jogging and fitness trends in the market growth stage, when there were relatively few competitors, and total industry profits were at their peak.
Now that the fitness industry as a whole has entered the market maturity stage with the maximum amount of direct competitors, her business has begun to suffer. Root Cause The sales at Joggers Universe have faltered due to many factors: 1 – The primary cause for her loss of market share is due to the fact that her current, long-term customers are getting older, and have found that jogging has become too demanding for them, and as a whole are switching to low-stress exercise programs. The merchandise that Joggers Universe offers no longer meets the demands of her loyal clientele, and so they have begun to shop elsewhere.
On the other hand, when Sue attempted to change her product lines to accommodate this loyal but dwindling customer base, she found that her sales to younger, hardcore runners began to suffer. Clearly, this trend cannot be allowed to continue, as she will not be meeting the specific needs of any market segment. 2 – Due to changes in consumer culture and activity, younger people are exercising less, and are likely to use their casual day-to-day shoes as their exercise shoes. As such, there are many department, discount, and regular stores that offer these types of shoes, and customers can buy them without paying a premium. – Increased competition from other retailers has cut into her bottom line. In addition to Wal-Mart offering an extended assortment of athletic shoes at deep discounts, Joggers Universe faces competition from Foot Locker, who offers basically the same kind of products as she does. A number of local retail chains have opened that offer lower-quality and lower-cost versions of her products, and she also faces increased competition from online retailers. Alternatives A – Made-to-order high-performance athletic shoes
Sue may want to consider revisiting a sales strategy she attempted in 2003 and change her business structure to providing expensive, made-to-order, high-performance athletic shoes. This product line incorporated new technology that was used to capture the specific contours of a person’s feet, which was then sent back to the manufacturer by UPS. The customer was able to choose which style they preferred, and in two weeks the shoes were delivered. The company that provided this service unfortunately went out of business, but Sue discovered another company that provided the same service.
The main advantage and disadvantage of this alternative is that this will require Sue to change which market segment that she will be promoting to. The segment of customers that Joggers Universe will be focusing on will be serious exercise enthusiasts, who are also more affluent in their spending habits. The downside of this is that it will require Sue to discover how to find and market to this new clientele. It will also require her to abandon a large percentage of her current customer base. Since these customers are mostly abandoning high-impact exercise programs and their product needs are changing, this is an acceptable tradeoff.
Although it seems that the runners market seems to be shrinking, this problem can be addressed with the addition of more expensive ancillary products that these more affluent customers will be interested in buying in addition to these expensive, premium shoes. Stocking accessories such as heart rate monitors, like the Forerunner 301  which retails for $199. 99, and runners watches like the Ironman Race Trainer  which retails for $150. 00 will appeal to the elite athlete that Joggers Universe will hope to attract. She could also stock expensive, high quality running outfits.
Since these customers are generally interested in their health and wish to stay in peak condition, Sue should consider aligning herself with a multilevel marketing company (MLM) that offers health supplements in order to earn extra revenue. An advantage of moving in this direction is that the company that will be providing Sue with these specialty shoes is willing to grant exclusive distribution rights for her territory, which would help to keep the prices for product in control, and would keep other retailers from copying her strategy.
This company is also responsible for the warehousing of these shoes, which would save money for her in terms of storing and managing unsold merchandise. The largest challenge that Sue would face if she were to pursue this strategy is in informing customers that this market exists, since this type of product is in the market introduction stage. She would have to establish a website for her store that promotes how the ordering process and production of these shoes works (this would be outsourced to a reliable web production company).
She would also require her employees to go through a two-day training program for her new sales practices, including how to make the molds for the shoes and explaining their benefits. She would also have to develop a new advertising campaign that would be published in more upscale local publications that caters to the more affluent types of customers that Sue hopes to attract. B – Incorporate Women’s fashionable athletic, casual wear and dress shoes This alternative incorporates two different approaches, and would allow Sue to maintain her current customer base while expanding her product lines in subtle ways.
Firstly, she would retain her current product line and incorporate new women’s athletic wear and casual wear lines from designers like Donna Karan, Calvin Klein, Georgio Armani, and Ralph Lauren. This will allow her to get into a sales trend that is still in the market growth stage, where there are few major competitors. The main advantage of this alternative is that it allows Sue to maintain her loyal customer base that she has spent years building. Bringing in new and exciting fashions shows her customers that she cares about them, and would like to keep them.
The second part of this strategy involves dedicating a small but growing section of her store to stocking lines of dress and office wear shoes. This strategy deviates away from the original concept of Joggers Universe, but will allow Sue to retain her aging customer base that is largely moving away from high-impact exercise programs, and are generally exercising less. Incorporating this strategy will not require Sue to drastically change her business structure, and as such she will be able to retain all her current employees, and only provide minimal amounts of new training.
The main disadvantages of this alternative includes the fact that it does not really provide much in terms of differentiating Joggers Universe from other local retailers that offer essentially the same kinds of products. In attempting to hold on to her loyal customer base, she increases the chance of losing sales to other retailers, especially behemoths like Wal-Mart, who can offer running, exercise, and dress shoes for cheaper prices. Sue will have to begin aggressively advertising in local publications and periodicals to showcase her new and current product lines.
She also may be forced to preemptively drop her retail prices in order to stay competitive in this increasingly crowded market. Furthermore, if Sue is to begin offering dress and office wear shoes, she will be required to establish a new distribution channel with a reliable middleman company. Recommendation Although it would be nice for Sue to be able to stay with her loyal customer base that she has held on to for many years, the business strategy outlined in Alternative B can only be maintained for so long.
Attempting to keep these customers happy at the expense of further growth is the real cause of her problems. She potentially runs the future risk of losing any new customers and eventually all of her business to lower cost retailers offering essentially the same types of products that Joggers Universe offers, without the added cost of a premium price. It is recommended that Sue change her business strategy to selling the products outlined in Alternative A immediately.
Implementation Sue should proceed by blowing out her current inventory with a massive discount sale. If she has a reverse channel in place with her suppliers that will buy back merchandise that she has been unable to sell, she would definitely utilize that. If she has been keeping a list of long-standing customers, she should consider sending out a mass mailing thanking them for their continued loyalty, but explaining that she will be closing her doors for a reorganizing.
Of course, she should invite these customers back for her eventual re-opening, should they be interested in her new product lines. After this, it is simply a matter of scaling back her operation and bringing in her new products and processes. Since Joggers Universe will be offering smaller and limited product lines, she will no longer require to as large a store area, so she should let her lease expire and move into a smaller store.