LCX is the popular fashion stores with its over 120,000 square feet space, a sort of mall in mall concept, agglomerating a collection of trendy youth-oriented brands clustered together and selling mid-range to high-end designer fashion, cosmetics, and lifestyle products. LCX has two locations; the first store is in Ocean Centre (OC) while the second is in Causeway Bay. Following the success of OC LCX, its second store opened in Fashion Walk, Causeway Bay, which is the most hustle and bustle hub in Hong Kong side.
Though the operation model, brand mix, and store concepts are identical for two locations, the sales turnover and business performance are varied tremendously. Fashion walk LCX since starting operations has suffered from low foot traffic and is behind budget by average 30% every month. The investment in FW LCX is long term since the management had signed a 3-year tenant agreement with the main landlord. The poor performance of FW LCX must be improved as the deficit of budget impacts the Company’s overall effectiveness.
I am acting in the capacity of the head of marketing. The expected outcome is an improvement in sales performance, successful retention of existing tenants and attracting new ones. I have worked closely with the CEO in reviewing the market trends and customer motivations, developing a strategic plan for improved profitability and achieve ROI while keeping maintaining LCX brand value.
The performance gap between OC LCX and FW LCX is likely to have resulted from the different dimensions of the business environment in the Causeway Bay district. The two stores apply the same operation models; hence, the business environment comes out as a factor that may affect performance. Though FW LCX is situated in Causeway Bay, it is not close to the MTR station and situated at the far end corner of the street of Fashion Walk. Customers need to take an 8 min walk from MTR station to LCX.
Consequently, the store seemed inaccessible and needs something unique to attract customers.
1. Catchment: The first catchment for LCX is customers wandering around the Causeway Bay, fashionistas who appreciate designer brands, residential in the areas of Fashion Walk, and tourists. The location of LCX is not very accessible, and customers are forced to walk for 8 minutes to LCX, and along the way, there are many international brands flagship shops. FW LCX store faces cut-throat competition. Stores such as SOGO and Forever 21 are located strategically near where customers assemble.
2. Leasing Problems: Majority of brands in FW LCX can also be found in Ocean Centre LCX. FW LCX just copied the same tenant mix found in CW LCX. This is not strategic for FW LCX since there is still low traffic and less commercial activities. This strategy seemed work but only filled up space and satisfied the occupancy rate.
3. Solutions and Analysis
Taking into account the problems facing the store which include: lack of a strong value prospection of LCX against fierce competition in Causeway Bay, lack of special products and brands to attract and target customers, no car parking space, I have developed a new business strategy specifically for Fashion Walk LCX: this strategy promises to meet customer needs adequately.
Strategy: Converting FW LCX to LCX Outlets, being a fashion destination in town for offering international brand’s products at reasonable prices.
FW LCX stores will now be converted into LCX Outlets. This is expected to provide desirable foot traffic and the average sales per visit. This could help offset the discount prices and increase total sales turnover. The outlet shops will feature brands such as Adidas, Nike, and DKNY Jeans and this will help improve store and product variety.
The newly branded LCX Outlet shop targets tourists who are seeking branded products at a reasonable price. The store will offer premium products at a reasonable price for market penetration purposes. Tourists are presented with several options as they walk along the street; hence, it is important to present them with desirable products at a lower price in order to stand out. This will draw attention away from the competition and increase awareness which will, in turn, drive profits. Psychological pricing has proved to be an effective strategy; hence, it will be applied widely. This may be the only way to get them to visit the store given that other stores also stock quality and trendy products. Promotions will also be an important strategy, and this time, they will be attractive.
• Analysis: The LCX Outlets strategy will give LCX a strong presence in Causeway bay since they will offer variety and quality.
• The strategic location of the outlets may increase foot traffic which is likely to drive sales and brand awareness.
• Conversion of FW LCX into LCX Outlets does not guarantee improvements. The creation of new outlets is not an outstanding strategy as there are other stores already located in the same street. It will take more than opening shop.
• The pricing strategy will attract customers and at the same time maximize profits.
Learning and Insights
The conversion of the shop business model into an outlet with the view of marketing situations varied from the district and the aim of improving ROI is a success. The sales performance of FW LCX has improved exponentially, from the loss of 30% of the budget to over 15% of the budget, the monthly sales turnover has increased from average HK$2.1 million to HK$3.5 million, this is a 66% increase, and average monthly sales per square fee is HK$115.
The business has used a creative business strategy; this case study is a successful story.