Transcript Document 7830085

Proposal to G2000 Apparel Limited
Jane Lam
Jason Chen
Roger Gao
Roy Ng
Stanley Tsui
97194890
08934099
08934166
08934233
08936463
October 2009
The Story Line
Situation
G2000 has been employing C Trading as the exclusive franchisee for all its operations in Thailand for the past 10
years. C Trading is a heavy weight player in the Thailand apparel market, carrying another 26 domestic and foreign
brands in addition to G2000.
Complication
In the past 3 years, merchandise purchase volume from C Trading has seen no growth. G2000 management would
like C Trading to open new G2000 stores in order to increase purchase volume.
Question
How to motivate the franchisee, C Trading, to resume store opening program for G2000?
Answer
Illustrate to C Trading that resuming store opening program for G2000 has good financial returns, carries very low
risk, and growing the G2000 brand can result in a stronger apparel brand portfolio for C Trading.
Rationale
1. Good Financial Return
–
–
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Thai apparel retail market has been growing fast and the trend is expected to continue. Foreign business wear brands such
as G2000 will be the fastest growing segment.
C Trading’s competitors have been opening new stores and seen sales grow, while for G2000, the number of stores and
sales volume have been stagnant over the years.
G2000 is willing to offer incentive program to C Trading for opening new stores, including special discount for the initial
order, and reduced royalty for the first 2 years.
2. Low Risk
–
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Based on historical data, on average, 94% of G2000 stores are profitable.
Opening counters rather than shops can further reduce the risk of opening new stores as counters require lower CAPEX
but yield higher profit margin and ROI.
3. Stronger Apparel Brand Portfolio for C Trading
–
G2000 is a foreign business wear brand. This segment is growing fast, but it is heavily under-represented in C Trading’s
current brand portfolio. By investing in the G2000 brand, C Trading achieves a better brand mix and will be well positioned
to capture any growth in the Thailand apparel market.
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Total Thailand apparel retail market has been growing
fast while growth for G2000 has stalled
• Thailand apparel retail
market is expected to
grow at 11% p.a. in next
5 years
Total Thailand apparel retail market has been growing
fast while growth for G2000 has stalled
• Foreign business wear
market is expected to
grow at an even high
rate
Source: based on market research and Thailand franchisee internal statistics
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Competitors have been growing fast while
growth for G2000 has stalled
• Competitors’ store
opening programs have
directly led to
substantial increase in
sales and profit
Competitors have been growing fast while growth for
G2000 has stalled
• G2000 should compete
aggressively by
reinitiating store
opening program
Source: based on market research and C Trading internal statistics
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New store profit outlook is attractive after
G2000’s incentive program
• Royalty is one of the
biggest expenses
• G2000 is willing to
incentify C Trading by
– reducing Royalty for the
first 2 years
– offering special discount
for the initial order
Source: Based on C Trading and G2000 internal data
55
Counter vs. Shop
Counter Profit Margin is
HIGHER
Counter Sales per
Foot (SPF) is HIGHER
Source: Based on C Trading internal statistics
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Counter vs. Shop (cont’d)
Counter Setup Lead
Time is SHORTER
Counter Setup CAPEX is
LESS
Source: Based on C Trading internal statistics
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G2000 stores are generally profitable
On average, 94% G2000 stores in Thailand are profitable
Source: C Trading Financial Data
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Investing in the G2000 brand results in a stronger brand
portfolio for C Trading
• G2000 is uniquely
positioned to be the
foreign business wear
brand in C Trading’s
brand portfolio.
• Growing the G2000
brand is inline with C
Trading’s strategy, which
is to be the brand
conglomerate
in Thailand.
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Appendix 1: Interview Notes
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2 Oct 2009
via the phone
Jane Lam, Stanley
Ms. Sung,
Brand Manager, C Trading
Ms. Sung believes G2000 is a great brand that cannot be missed in fashion retail portfolio and with massive potential to grow
further into premium fashion. However, local business development lack motivation to open new stores as they are fine with
status quo. Political instabilities are great hindrance in their mind when taking new initiatives with uncertainties and risks.
Nevertheless, they are happy to devote their time and effort to aim higher for G2000 in Thailand market given their local
management has committed with the brand principal, Hong Kong G2000.
2 Oct 2009
via the phone
Jane Lam, Roger
Ms. Alicia,
Operation Manager, C Trading
There are 30 G2000 stores in operation in Thailand. On average 94% stores are able to make good profit in the past 10 years. Ms.
Alicia revealed that other apparel brand stores generally have only 75%-80% of stores which are generating profit and recognized
that G2000 has better than average profit generating capability. Ms. Alicia noted while C Trading has not been actively expanding
its G2000 operations in the last few years, competitors have in fact been opening new stores with good sales increase and healthy
profits.
5 Oct 2009
via the phone
Stanley, Jason
Mr. Kong,
Senior Marketing Manager
Thailand Retail Association
C Trading is a major player in the Thailand apparel market. This market has seen much growth in recent years and the outlook is
good for foreseeable future in spite of all the political turmoil. Foreign business wear brands are performing especially well due to
lack of quality local players and the air of prestige associated with foreign brands.
6 Oct 2009
via the phone
Jason, Roy
Mr. Kiet,
Retail Vice President, C Trading
C Trading is a conglomerate in Thailand retail industry. It is highly vertical integrated (from manufacturing, merchandise to
department store). It is also horizontally wide in the mechanizing business. The products distributed are divided into Fashion
Apparel, Watches, Cosmetics & Personal Care Products, Photographic & Musical Instruments. Traveling Goods, Electronics &
Electrical Appliances, etc. G2000 business is only a small part of C Trading’s operations.
In the apparel line, C Trading currently carries 27 brands. Only 3 of these are business wear brands. Out of the 3 business wear
brands, only G2000 is a foreign brand. Mr. Kiet agreed that a complete brand portfolio will benefit the sales of their department
store.
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