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CASE STUDY REVIEW OF BOO.COM
Date of submission
Boo.com was previously a British online retailer founded in 1999 and dissolved in 2000. In 2007, the website was acquired by Web Reservation International and turned into a travel site (Lindstedt 2001; Malmsten, Portanger & Drazin 2001). This essay: Analyzes the decisions and strategic mistakes that led to the failure of Boo.com. Compares the marketing strategies of the retailer against other online retailers. Analyzes the marketing strategies of Boo.com, and evaluates the sustainability of the new Boo.com.
Boo’s Inefficient marketing strategies and decisions
Small market segment,
Boo.com’s marketing strategy the online retailer solely target the market the youthful market segment, consumers between the ages of 18-24 on the assumption that the sports and lifestyle clothing market is large and only targeting this segment of the market would generate enough sales to make the venture profitable (Lindstedt, 2011). There are limitations associated with having such a limited market segment: there is a potential that the market segment targeted are the wrong target and not the most viable consumers for the product (Hines, & Bruce 2012, p.43). Market reports clearly indicated that the apparel industry is highly profitable in the mail order and home shopping which is not a popular means of shopping for the market segment targeted by boo.com (Lindstedt 2001; Malmsten, Portanger & Drazin 2001. Having a small market segment typically results in lower sales volumes even if the market is exploited 100%, a small market segment may not be large enough to sustain the business. The particular market targeted by Boo.com also had strong competitors from established brands who had existed in the market longer and had well-developed distribution systems and customer loyalty making the market highly competitive.
Insufficient market analysis
The founders of Boo.com had an excellent business idea to tap into the under-exploited online retail market, however they failed to conduct sufficient market analysis so as to determine at which rate to invest optimally to receive the shortest payback period, which markets to focus their marketing strategies, and the potential purchasing power of its target consumers. The management of Boo.com forecasted their sales. However, they could not reasonably determine; the costs of customer acquisition, the payback period for the costs incurred in customer acquisition, and the average amount the customers would spend on shopping (Lindstedt 2001; Malmsten, Portanger & Drazin 2001). If the management of Boo.com had the adequate credible market information they would have been positioned to determine the operational costs, so as to know how much investment was viable.
Increase in markets as a response to low sales volume
After the launch of Boo.com and sales figures falling short of the projected sales figures, Boo.com management decided to address the low sales by increasing the company’s presence from18 countries to 31 countries, and increasing the brands from 22 brands to 40 brands (Malmsten, Portanger & Drazin 2001). This move did not address why Boo.com was falling short of its sales forecasts rather it transferred the problem to a larger scale. The efficient response was for Boo.com’s management to review why the company was falling short of its targets and to come up with strategies to address the shortcomings, increasing the number of brands and markets was not a solution to the problem, it was rather transferring the shortcomings to a numerous markets and brands.
Inadequate assessment of their partners and collaborators
Boo.com management assumed that lifestyle and sports brand manufactures would partner with them and offer them products at discounts so that they would retail online at competitive prices (Lindstedt 2001; Malmsten, Portanger & Drazin 2001). They failed to take into consideration that lifestyle and sports brands have their own established brick and mortar stores, and franchises (Hines & Bruce 2012 p. 23). Offering products to Boo.com at a discount would be unfair to their franchises and store since they would be a competition, and unlike the franchises and stores who sell solely the products of a specific brand, Boo.com would also sell the products of competing brands making it difficult to create strategic relationships with Boo.com.
High operational costs
Boo.com marketing activities were costly. However, they were not that efficient. Boo.com decided to publish an online magazine instead of a catalog which would support sales. The Look Book, Boo.com’s magazine was 44 pages with publications in different languages which required a number of diverse staff to publish (Lindstedt 2011). Unlike a catalog which is slightly affordable to publish, and highly summarized, the Look Book was costly to publish and definitely bulky with literature (Tompson 2011, p. 34).
Inefficient Human Resource Practices
Boo.com was unveiling a global brand, and the company relied on a large scale recruitment of the necessary personnel the organization required to achieve its objectives (Mills 2002). Hiring a large number of human resources in short period to carry out strategic organizational tasks is risky in that the human personnel recruited may not be competent to carry out the tasks assigned and time constraints may hinder the training and development of the recruited Human capital, the recruited personnel having been with the organization for a short period lack loyalty to the organization or share the organizational culture (Lovink 2009).
Contrasting and comparing Boo.com’s strategies to other online retailers and online businesses
Unlike boo.com, Amazon did not launch simultaneously in all its major markets. Amazon debuted in the American online market and established a brand and reputation in the American market before penetrating European and Asian markets through mergers and acquisition of established e-retailers in the markets (Piercy 2012, p. 45).
Unlike Boo.com. Lastminute debut the online market with a large target market, and a limited number of products mainly travel and leisure, the retailer did not increase the number of products it offered till 2000, 2 years after the founding of the company to include travel gifts and leisure (Combe 2012).
Unlike Boo.com, Egg.com was not an entirely new company but rather an online division of Prudential life Assurance Company (Soskin 2010, p.31). Therefore, Egg had market experience and had the skills and strategies to counter the unfavorable market dynamics they were likely to encounter. Egg also had the support of prudential life who would bail the company through vast resources and managerial expertise both which Boo.com lacked.
Unlike Boo.com, Google has diversified its services and products to include; cloud computing, online advertising, search engines, and soft wares. Diversifying into products and services increases a company’s potential to survive since it is not solely dependent on one product or service as its main source of revenues (Matthewson 2012, p. 13).
Assessment of Boo.com’s marketing mix
Pricing: Boo.com’s pricing strategy had a lot of challenges, not only would the retailer get products at a discounted rate from sport and lifestyle brand manufactures so as to price their products competitively, but also lifestyle products tend to be to pricey to reflect product quality and maintain brand image creating a negative brand image if the products are discounted online (Lindstedt 2001; Malmsten, Portanger & Drazin 2001). Without competitive pricing and price discounts it becomes challenging for a new entrant to attract and retain its customers.
Product: Boo.com offered a deep selection of sports and lifestyle brands, the retailer stocked products from a number of prestigious brand manufacturers. However, Boo.com products offering was not broad, and limited to sports apparel which limited the variety of products that they could offer to consumers.
Place: Boo.com’s distribution strategy had its own advantages and disadvantages. The sole advantage it had was that it would penetrate markets where brick and mortar stores of lifestyle brands were insufficient at the customers convenient (Bolton, & Thompson 2013). The main disadvantage is that unlike brick and mortar stores where the consumers makes a purchase and receives the product immediately, consumers who shopped via Boo.com had to wait for a number of days for an order to be filled and the product delivered to the consumer.
Promotion: Boo.com’s promotional mix was efficient, the organization relied on both TV and print ads to create awareness of the brand and its products in the market, even though it was costly. Boo.com’s failed to match its product and service delivery to customer’s expecxtations that were raised through the organization’s promotional activities (Malmsten, Portanger & Drazin 2001).
Process: Boo.com’s process was not efficient due to technological and logistics limitations. Consumers had to wait for a considerable time to pay for an order and receive the product, since the payment was online and technology was not as advanced in the days, Boo warehouses were also centrally placed (Lindstedt 2001; Malmsten, Portanger & Drazin 2001; Mills 2002).
Physical evidence: Boo.com’s strategy to offer a virtual sales person (Jenny/ Miss Boo) was efficient mimicking a typical physical shopping experience. The virtual sales person would walk users through a virtual store, and the shoppers would drag their selected items to models and view how the clothes fit in 3 D. Creating a physical evidence for the consumers while offering services online adds value in service delivery (Schlie, Rheinboldt & Waesche 2011, p.67).
People: Boo.com’s management wa had the relevant and competent human personnel to provide leadership and steer the company in the right direction. However, the company large scale recruitment strategy likely compromised the quality of the human capital the organization acquired. Large scale recruitment of employees hinders efficient screening of employees, due to the personal nature of retail business it is vital for retail companies to recruit the right caliber of staff who can acquire and retain prospects, and build a relationship with the prospects.
Boo’s E-retail strategies
Virtual sales person, Boo adopted the strategy of having a virtual sales person to guide customers through the online stores and make the online shopping experience as close to physical shopping as possible (Malmsten, Portanger & Drazin 2001). The concept has been adopted by many corporate organizations that conduct business online, a virtual sales person gives a website a competitive edge since most online consumers prefer to listen to virtual sales people than read texts on web pages. Virtual sales people have the ability to influence, persuade and motivate prospects to make online purchases (Piercy 2012, p. 43).
3D shopping experience, Boo strategy of enabling the prospect to try and observe the parallel of their choice is an emerging trend in the online fashion market. Online fashion retailers have gone a step further into creating mannequins that are similar to the particular shopper by enquiring about body size, weight, height and relevant measures to create mannequins that are approximately 94% accurate to the prospects physique so as to determine exactly how the clothes would fit on them (Hines, & Bruce 2012, p. 56).
Reasons for the Failure of Boo.com
The down fall of Boo.com can be attributed to poor management that resulted into inefficient decision making, and uncalculated strategic risks. Boo.com management made certain market assumptions that were detrimental to the growth and development of the company: the management assumed that by targeting a small market segment the youth they would make adequate sales to generate enough revenues to cater for the operational expenses of the business. The management also developed an expansionary policy to become a global brand by launching simultaneously in all the major global market instead of establishing in its local European markets, learning the market dynamics and expanding with more managerial and industry experience. Boo’s management also failed to conduct sufficient market analysis so as to determine the buying power and trends of its prospective consumers, and to furnish prospective investors with adequate information on the viability of the venture. The management of Boo was not also sufficient in their recruiting strategies, and even though their marketing activities were efficient some were not financial viable, for instance publishing a multilingual magazine instead of a catalogue (Lindstedt 2001; Malmsten, Portanger & Drazin 2001; Lovink 2009; Mills 2002).
Sustainability of the new Boo.com
After the liquidation of Boo.com in 2000, Web Reservations International acquired the site and turned it into a travel site with reviews and listings. By the launch of the site it had acquired 1 million reviews that had been previously collected through WRI sites (Lindstedt 2011, p.92).
The new Boo.com renamed hostelworld.com is a sustainable due to the managerial and industrial expertise it enjoys being part of Web Reservation International. WRI founder is a hostel owner in Dublin, South Africa giving him knowledge and skill to deliver market specific needs. WRI also has efficient recruiting strategies, the company’s recruitment strategy is based on recruiting staff language skills, multicultural backgrounds and hospitality industry experience (Bolton & Thompson 2013).
Favorable industry trends particular in the hospitality industry ensures the growth of hostelworld.com. Technology, particular information technology is a critical success factor in the hospitality industry. The consumers in this particular industry are tech savvy, Boo.com being an online travel agency with a rich history and heritage in technology system it is likely to thrive in an industry that embraces and promotes technology.
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