Question

Case Study Pink Lady Apple Orchard is a small family run orchard in Red Hill, Victoria. Jacinta and Pete own the property, which includes 50 hectares of apple plantings. As the market price of apples sold to supermarkets and fruit shops has decreased in the past few years, causing business to stagnate, Pete and Jacinta have decided to use some of their apple supply to produce their own range of apple based products. They have set up a small market stall at the orchard where they sell products directly to the public. They also have a regular stand at local markets. The number of customers is growing as word of mouth spreads. In an effort to further expand they have negotiated with a number of small retailers to stock their products. Recently they also employed a systems developer, who set up a website which enables them to market their products online and sell directly to the public. In a further effort to expand sales Jacinta organised to have their products advertised on a number of ‘shopping deal’ sites. Each site charged an upfront fee of $500.00. The Pink Lady Apple Orchard’s ‘deal was advertised throughout February. The orchard offered 30% off any sale made through the deal site. After deducting a further 5% commission on sales the ‘deal’ site passed the order and the payment onto the organisation. Jacinta then processed the order and delivered the products to the customer. Jacinta hoped that by offering this deal more customers would be attracted to their products. Jacinta and Pete have always delivered goods free of charge to their wholesale customers. However, with increased sales they are concerned about the increased courier charges. Pete has decided that by charging 15% delivery charge on each retail order he can recoup all the delivery charges. As Jacinta and Pete are already busy attending to the apple orchard they have employed Ruby, a local resident, two mornings a week (8 hours) to attend to all online orders. Although the number of orders is increasing, Jacinta is concerned that maybe not all products sell well enough to continue production. She has been experimenting with different flavours and products, including a new recipe for “Spicy Apple Chips”. Maybe she should change products or delete some products. She does not want unwanted stock accumulating in the storage sheds. She believes that the ‘special deals’ she has advertised for January/February will certainly help sales, but is concerned that she has made a bad decision with regard to profitability. QUESTION:at least two clear recommendations that Jacinta and Pete can adopt. These recommendations must be drawn from the analysis that you have carried out, and must have been discussed in the body of your report.

Answer 1

The two recommendations are:

1. Have selected products on sale , that is with the discount of 30%, rather have the discounts on the fly and not as a norm all the time.
   1. The discount should be for inventories not moving and the regularly moving products need not have any discount and of required need to have some small discounts attached, if the demand is more than the supply as is the case in some of the products then the delivery charge for them should be borne by the customer and that should be provided in the product description.
2. As the products are expanding and they need to identify the products to continue and some to be discarded, they need to see the profitability, demand and customer perception. The ones not moving as rapidly should be discontinued, but the seasonal trend should also be taken into account. As there are several fast moving products, the slow and less demanded can be bundled up with the fast moving and sold at a discount, in a way these offers will attract buyers for the slow moving ones, if required these should be discontinued, after doing a basic profitability analysis. At the end only the top items should be produced in bulk and rest should be presented to showcase their variety.
   1. They can take order for bulk for range of products and have a lead time mentioned, which could help them check the demand and guarantee supply.