Question

11. 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

Current Key Issues

Carla Gomez started her 'Running On' 1994 which was the sprouting time of running shoes because of running as an exercise,  started getting mass acceptance. Besides serious runners, ordinary folks also got attracted. But the supply of variety of shods was not much and only big players colud advertise their products in mass scale. Nike was on among them. So it was a grate success for Karla to focus on Nike alone. Since number of outlets were less those days, it was natural to get referal sales also. Loyal customers were her store's strength.

Since the entry barriers were less and cunsumer demand increased, new stores and new brands were flurished. Substitus in the market increased with a visible price war because of changing global trade rules. Till that time a few big players were holding the market and when low cost attractive shoes from countries like China floaded the market, the situation completely shifted to a buyer's market. Naturaly, Carla also faced the bad effects of the same. More over, big super market chains like Walmart tapped the advantage of economies of scale to bring down price which was a big blow for small retailers. The change was visible but Carla could not act as fast as the situation demanded.

Carla's customer were loyal because of the personal connection and quality brand. But she was not keen to develop a new set of young customers because of her lack of effort to understand the new trend early, to take the 'first-entry' advantage in her area. The reluctance to spend on promotions pulled her store back from visibility to young generation.

Again, Carla failed to act agressively to be first in two more new trends set in the industry; customer design and online purchase. Even though she tried the 'made to order' shoes as the extreme end of customization, I doubt that she trained her staff and sales persons to giv a real push to it. In the present senario, certain definite and aggressive steps can boost her sales and make the business sustainable.

Recommendations

1. Let her stores sell a wider spectrum of shoes catering to the need of young customers. She can definitly think of a layout change to keep special areas for high end, medium and low end products.
2. Take calculated risk in spending some money on local advertisement.
3. Since the new 'Make-to-Order' company is ready to train sales people, she should grab that opportunity to make her sales people with specific knowledge and skills on their products to give state of the art service to her customers.
4. Has to modify her website and start online ordering system also. She can approach firms who can make cloud based cheaper sites initially to start her online business.
5. New generation youngsters demand more choice. The stores has collabrate with more brands to attract them.
6. Staff training and advertisement plays key role. Since price war is the present problem everywhere, Carla has to focus on an effective procurement management system by inviting new suppliers and manufacturers with varying cost-quality-fashion trade offs and volume-discount offers.
7. Local campaigning through old loyal customeds and occasional special events at her shop has to be carried out as an advertisement tool. Can add some promotional tools like lucky draws and local celebrity endorsemenys can be thought of.

Summary

In the changing scenario of business Carla was not responding to changes fast, eventhough she was flexible in making trials. Since she were not keen to create new customers she ignored to keep her business aligning to new trends. If she isbready to bring adynamic and young professional as a head and ready to tap the new trend and technolofical advancements she cqn make her business realy rewarding. As a person, she has to take quick decision and invest some money on promotions. For online platform and acounting systems she can go for cheaper cloud based service providers. Ultimately, she has to develop a trained and motivated staff to execute her plans aggressively.

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