Question

1. Running

On Carla Gomez is the owner of Running On—a retail store that sells shoes and accessories to runners. Carla is trying to decide what she should do with her retail business and how committed she should be to her current target market. Carla started Running On retail store in 1994 when she was only 24 years old. At that time, she was a nationally ranked runner and felt that the growing interest in jogging offered real potential for a store that provided serious runners with the shoes and advice they needed. The jogging boom quickly turned Running On into a profitable business selling high-end running shoes—and Carla made a very good return on her investment for the first 10 years. From 1998 until 2008, Carla emphasized Nike shoes, which were well accepted and seen as top quality. Nike’s aggressive promotion and quality shoes resulted in a positive image that made it possible to get a $5 to $7 per pair premium for Nike shoes. Good volume and good margins resulted in attractive profits for Carla. Committing so heavily to Nike seemed like a good idea when its marketing and engineering were the best available. In addition to running shoes, Nike had other athletic shoes Carla could sell. So even though they were not her primary focus, Carla did stock other Nike shoes, including walking shoes, shoes for aerobic exercise, basketball shoes, tennis shoes, and cross-trainers. She also added more sportswear to her store and put more emphasis on fashion rather than just function. Even with this broadened product line, Carla’s sales flattened out—and she wasn’t sure what to do to get her business back in growth mode. She realized that she was growing older and so were many of her longer-term customers. Many of them were finding that jogging isn’t just hard work—it’s hard on the body, especially the knees. Some were not running as often—and buying shoes less often. Other of her previously loyal runner-customers were switching to other, less demanding exercise programs. However, when she tried to orient her store and product line more toward these people, she wasn’t as effective in serving the needs of serious runners—still an important source of sales for the store. She was also facing more competition on all fronts. Many consumers who don’t really do any serious exercise buy running shoes as their day-to-day casual shoes. As a result, many department stores, discount stores, and regular shoe stores have put more and more emphasis on athletic shoes in their product assortment. Many customers were growing more comfortable buying shoes online. When Carla added other brands and put more emphasis on fashion, she found that she was in direct competition with a number of other stores, which put more pressure on her to lower prices and cut her profit margins. For example, in Carla’s area there are a number of local retail chains offering lower-cost and lower-quality versions of similar shoes as well as related fashion apparel. Walmart also expanded its assortment of athletic shoes—and it offers rock-bottom prices. Other chains, such as Foot Locker, have focused their promotion and product lines on specific target markets. Still, all of them (including Carla’s Running On, the local chains, Walmart, and Foot Locker) are scrambling to catch up with rival category killers whose selections are immense. In the spring of 2014 Carla tried an experiment. She took on a line of high-performance athletic shoes that were made to order. The distinctive feature of these shoes was that the sole was molded to precisely fit the customer’s foot. A pair of these custom-made shoes cost about $170, so the market was not large. Further, Carla didn’t put much promotional emphasis on this line. However, when a customer came in the store with a serious interest in high-performance shoes, Carla’s sales clerks would tell them about the custom shoe alternative and show a sample. When a customer was interested, a mold of the customer’s bare foot was made at the store, using an innovative material that hardened in just a few minutes without leaving a sticky mess. Carla sent the mold off to the manufacturer by UPS, and about two weeks later the finished shoes arrived. Customers who tried these shoes were delighted with the result. However, the company that offered them ran into financial trouble and went out of business. Carla recently learned about another company that is offering a very similar custom shoe program. However, that company requires more promotion investment by retailers and in return provides exclusive sales territories. Another requirement is that the store establish a website promoting the shoes and providing more detail on how the order process works. Running On had a pretty basic website, so Carla knew she would have to spend some money to make this happen. In addition, all of a retailer’s salesclerks are also required to go through a special two-day training program so that they know how to present the benefits of the shoe and do the best job creating the molds. The training program is free, but Carla would have to pay travel, hotel, and food expenses for her salespeople. So before even getting started, the new program would cost her several thousand dollars. Page 620 Carla is uncertain about what to do. Although sales have dropped, she is still making a reasonable profit and has a relatively good base of repeat customers, with the serious runners still more than half of her sales and profits. She thinks that the custom shoe alternative is a way to differentiate her store from the mass-merchandisers and to sharpen her focus on the target market of serious runners. On the other hand, that doesn’t really solve the problem that the “runners” market seems to be shrinking. It also doesn’t address the question of how best to keep a lot of the aging customers she already serves who seem to be shifting away from an emphasis on running. She also worries that she’ll lose the loyalty of her repeat customers if she shifts the store further away from her running niche and more toward fashionable athletic shoes or fashionable casual wear. Yet athletic wear—women’s, in particular—has come a long way in recent years. Designers such as Donna Karan, Calvin Klein, Georgio Armani, and Ralph Lauren are part of the fast-growing women’s athletic wear business. So Carla is trying to decide if there is anything else she can do to better promote her current store and product line, or if she should think about changing her strategy in a more dramatic way. Any change from her current focus would involve retraining her current salespeople and perhaps hiring new salespeople. Adding and maintaining a website isn’t an insurmountable challenge, but it is not an area where she has either previous experience or skill. Clearly, a real shift in emphasis would require that Carla make some hard decisions about her target market and her whole marketing mix. She’s got some flexibility—it’s not like she’s a manufacturer of shoes with a big investment in a factory that can’t be changed. On the other hand, she’s not certain she’s ready for a big change, especially a change that would mean starting over again from scratch. She started Running On because she was interested in running and felt she had something special to offer. Now she worries that she’s just grasping at straws without a real focus or any obvious competitive advantage. She also knows that she is already much more successful than she ever dreamed when she started her business—and in her heart she wonders if she wasn’t just spoiled by growth that came fast and easy at the start. Evaluate Carla Gomez’s present strategy. Evaluate the alternative strategies she is considering. Is her primary problem her emphasis on running shoes, her emphasis on trying to hang on to her current customers, or is it something else? What should she do? Why?

1. Provide a top-line/executive summary as the introductory section of this Case Analysis (i.e., summarize the case situation and identify the main issues covered). This summary should be no longer than two to three paragraphs.
2. Answer the case questions provided in the text. They are listed at the end of the written case. Answer each question separately, number them correctly, and answer them in sequence. Take care to point out the pros and cons of the main topics before you justify your answer. This approach demonstrates critical thinking and problem-solving skills.
3. Identify and discuss issues that you consider to be important or relevant to the case, but are not covered in the case questions.

Answer 1

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Answer1:

Retail shop Running On is owned by Ms. Carla Gomez which mainly focuses on athletic shoes. Jogging shoes. tennis shoes. basketball shoes etc. For the first 10 years since she started a business, she could get maximum returns for her investments. She could deliver high-quality shoes to her customers and also could build up a strong customer base. This helped her in creating a brand image in the market.

As the years went its customers too grew older and the competition also increased. Her old customers switched to some other simple exercise programs as they felt running is difficult. She couldn't serve the needs of young customers and hence her profit got declining. Anyway, she is getting reasonable benefits out of her business but she couldn't bring her business back to the fine. She is adopting various strategies so as to gain more profits.

The alternative strategies which Ms. Carla Gomez adopted to bring her business back to line are discussed below.

• She focused on her existing loyal customers and tried to bring more products for them for satisfying their needs.

• She put more emphasis on fashion when she extended her product lines. This was to target on young customers.

• She started offering customized shoes for the customers according to their preferences as an experiment.

• She also had a pretty website where customers can view all the details.

• She also conducted free training program for their employees and enabled them to provide correct information about the shoes to the customers.

Ms. Carla Gomez's primary problem is that she is really worried about whether her decision to introduce different product lines other than shoes will affect the interest of the existing loyal customers. To survive in the competitive market she should conduct an intense market survey to find the needs and desires of the customers. If she could identify that the demand for athletic shoes is reducing then she can certainly think of some other options which customers prefer. Anyway, she is getting a reasonable profit from her existing product lines. If she introduces other products the existing customers will certainly entertain it as they could get more products from the same shop.