Battle for China

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http://finance.yahoo.com/news/apple-s-mobile-china-win-could-be-a-loser-for-samsung-155550722.html

As Apple continues to slowly raise its stock price after a year of mediocrity due to lackluster product releases, it has been injected with a new spark of life because of same the products but better.  Products such as the new iPhone 5S and 5C are intriguing to new customers of the phone as well as those who are upgrading their previous ones.  Customers are also flocking to stores looking for that new iPad Air which some of my family members have done already.  But besides the domestic US market, the global market is endless.

As Apple targets China due to its growing population and middle class, it hopes to partner with a company that already has a customer base and allow them to sell their product.  In recent news, Apple has announced that it will partner with China Mobile who is also the world’s largest mobile carrier.  Following the announcement, Apple’s stock price raised 0.5% alone and it also helps that China Mobile has over 700 million subscribers.  However, what does this partnership really mean for the Chinese market?

Currently, the Chinese mobile phone market is filled with many low end models as well as many android users.  Apple has struggled to take away market share from Android and fared poorly with their iPhone 5C which directly targeted the Chinese market.  However, this new partnership with Chinese Mobile is important on numerous levels.

As China moves into the future, they are expected to become the world’s number one economy.  Within this, the population of China is aging along with the creation of a growing middle class.  Apple is betting on many of these adopters of low-end devices to make the switch toward its products and display them as a status symbol for others to see.  The world is continuing to become more global and Chinese youth are continuing to follow the trends of Americans.  As more youth enter college and join the career force, they will have the disposable income to afford these trends around the world.

Speaking from a competitor’s standpoint, I would be worried about these trends occurring in China.  This partnership will allow Apple to give even better deals to its current  China Mobile subscribers and become a true force to compete against in this market.  The effects of this partnership can also transfer to India in the future.  India represents another market that is still continuing to grow in regards to their middle class and development status.  On a related note, Apple’s iPad Air is beginning to release this Saturday in India which would further gauge the demand for their new products.  If this launch is successful, no doubt that Apple would be following up and try to expand their mobile line into this territory.

While Apple is determined to keep rolling out the same product lines throughout the world, they believe that they have created a product that is still differentiated enough for people to continue purchasing.  The question remains whether or not these growing middle classes value Apple’s products as they do domestically.

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Don’t Have to Be First, Just Faster Than Your Competition

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http://www.businessweek.com/articles/2013-12-05/h-and-m-turns-to-sportswear-to-make-zara-sweat

I came across this article and it peaked my interest mainly because I wondered how was this news.  Being an avid shopper of H&M, I already knew they had an athletic and sports section that had clothes such as jackets, shorts, and sweatpants.  However, more recently, they are beginning to roll out entire lines of these clothes and expanding their product line to even accessories such as sweat bands and running caps.  In a world where the athletic apparel industry is ruled by such strong brands such as Nike and Adidas, how would H&M even attempt to compete?

Not completely discernible which brand this is

From what the article appears to state, H&M isn’t  trying to become the top producer in the athletic apparel industry, they’re simply becoming the brand that takes away the future market share that Zara would occupy if they produced an athletic line.  Two out of the 4 top clothing retailers in the world (Uniqlo and Gap) already have athletic lines so H&M wouldn’t be the first mover in this regard.  Furthermore, you have brands with customers who will continue to purchase their products due to their loyalty and fulfilling a niche such as Adidas, Under Armour and Lululemon.  From this strategy alone, it seems as though H&M just doesn’t want to be the last guest to the party of this athletic craze.  As the issue of obesity in America and awareness of health consciousness continue to spread, it has created a demand for these products that will not go away in the near future.

Untitled

Looking at the product line of their sportswear section, there’s nothing incredibly unique about these items that can easily distinguish them from other brands.  The look, colors, sizes, and even the materials are all similar to what every other brand uses.  However, following the same strategy that it uses with its other product lines, H&M hopes to capture their audience based on their prices along with having one advantage that their main product lines do not have.  Enter in the athletic apparel industry where clothes do not easily go out of fashion within a season or year.  While running and athletic shoes continue to change over time, the apparel for these fitness enthusiasts have remained the same.  It would not be costly for H&M to hold these products in their inventory unlike their other lines where fast-fashion is a term that dominates their existence.  Athletic apparel is a good investment by this company because it would also not require the same materials in their product lines such as cotton or wool.

H&M is targeting these customers that are price sensitive and are merely seeking a product that will fulfill their workout requirements.  While I do not foresee H&M’s sportswear line as becoming the top player in this market, they will still compete favorably among their competition and still have that timing advantage over Zara.  By sticking to their core competencies and pricing these clothes appropriately, H&M has decisively made a smart decision in this incredibly competitive industry.

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Amazon Prime Air: The Future or Wishful Thinking

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Can this be the future of Amazon not only domestically but internationally as well?

The idea of the juggernaut internet retailer Amazon experimenting with a new delivery system different from the conventional mailing service is an intriguing one.  Aside from the obvious issues of dealing with the FAA in America, how would this idea of being able to receive your order within 30 minutes or less of ordering it transfer over into their international market?

While the idea itself is tremendously innovative and will certainly appeal to those who are willing to pay a higher price for this particular service, it brings up the issue of how will foreign countries perceive this new form of delivery?  One main concern in foreign countries is the idea of privacy and especially when an American company is producing essentially machines with the ability to spy on others.  Even in America, it’s only a matter of time because the public starts accusing the government of using the drone’s to spy on them.

Looking into the technology of these machines, each drone is mounted with a camera and GPS which allows them to properly locate their delivery address and to make sure no problems occur along the way.  Assuming Amazon sees the potential of this idea transferring over to their international markets, how should they market it to those who already view America has intrusive and non-respectful of their privacy?  For example, let’s focus on the country of China.  Amazon has over 4 fulfillment centers in China including Guangzhou, Suzhou, Beijing, and Chengdu.  These are all highly populated and economically important cities to China.  The idea itself would work out properly but how would Chinese citizens react knowing that their product was being delivered from an American company that has had issues in the past with China with spy drones?  Doing further research into matter, I came across a company in China that is currently experimenting with this idea already.

Because China already has commercial regulations about unmanned aerial vehicles, this company, InCake, already has the technology set up and ready to go.  Similarly, another Chinese retailer, SF Express, is currently experimenting with these drones as well.  If this delivery service were to take off in China, Amazon would lose this part of their strategy before they even started in this particular market.  Fortunately, Amazon still has such a strong following that despite them not being the first mover in this aspect of their business, they can still compete against others based on their brand alone.  Conducting further research on SF Express, they do not seem to pose a threat to an online retailer such as Amazon.  However, in the future, other competitors may acquire this drone delivery technology and implement it in their own business model which may challenge Amazon in the future.

Because of Amazon’s strong presence throughout the world, I do not foresee them struggling to make this part of their business model in the future.  While it might need to be marketed differently in countries abroad, the representation of Amazon’s brand will allow them to operate successful without too much controversy over these drones.  Assuming the price is reasonable, I can’t wait to further upgrade my prime account and have my clothes or shoes delivered nearly immediately.

 

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What is Next in the Retail Sector?

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Few other business sectors are as full of constant change and challenge as retail. An uncertain economy, new forms or digital completion, an increasing number of new product launches, and highly informed, more-demanding consumers are just a few of the industry’s challenges. Because of these changes, retailers have found new ways to cater to consumers that required different set of resources and capabilities.

http://upload.wikimedia.org/wikipedia/commons/6/62/Simpsons_department_store_under_construction.jpgBack in the days, for someone to own a store, he or she has do the following: rent or purchase a land; contact an architecture and builders; stock products; and look after the store during opening hours – physical retailers.

 

http://www.hepfi.org/images/store/online_shopping.jpgToday, for someone to own a store, he or she can simply do the following: register a domain name; contact web designers; rent hosting space; stock products in a garage; and manage the website 24/7 – online retailers

 

http://img.xcitefun.net/users/2012/03/288986,xcitefun-virtual-shopping-store-5.jpgHowever in 5 years, for someone to own a store, he or she can simply do the following: Purchase a printer and a camera; print and paste a large poster containing photo of products to be sold; stock product in a garage; and manage the sales portal 24/7 – virtual retailers. It sounds very confusing but if you watch the video below then you will understand how it works.

Virtual Store – video link

A company that is currently being proactive in virtual stores is Tesco Homeplus. Tesco Homeplus is expanding the trial of its award-winning virtual stores to more than 20 bus stops in South Korea, giving busy commuters the opportunity to do their grocery shopping ‘on the go.’ The new stores follow the launch of the world’s first virtual store, opened by Tesco in Seoul in 2011.

Using the virtual display, people can scan the relevant barcode or QR code with their Homeplus App to order different products and can even organize for home delivery that day.

Tesco Homeplus’ Smartphone App, which customers need in order to shop at the virtual store, is now the number 1 shopping App in Korea, with over 900,000 downloads since it launched in April 2011. Homeplus says that the majority of orders placed on the app are at 10am and 4pm, while people are on their way to and from work.

Tesco Homeplus’ Virtual Store has been widely praised for its innovative approach and has most recently been nominated by the London Design Museum for ‘Design of the Year’, as one of 2011’s best digital designs. They are set to expand and could pave the way for similar hi-tech ‘stores’ in the UK.

All the changes that have occurred within retail sector has evolved around the same purpose: to get the goods to hand of customers in exchange for money. It is fascinating how creative retailers can be to find new concepts to satisfy the same needs that has been in existence for hundreds of years. There is no doubt that virtual retailers will be the new dominating player that will compete directly for the share of customers’ wallet in the future.

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Uniqlo’s Rise to Power

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I first heard about Uniqlo from visiting friends who spoke about a store that’s similar to Gap but had items in any color you could imagine.  Fast forward a couple of weeks and as I’m watching the US Open I noticed something different about one of my favorite players, Novak Djokovic.

Not a swoosh.

His clothes stood out because of the smallest detail of an absent swoosh symbol that everyone is so used to seeing.  This small, minute detail sparked my interest incredibly and I began to do some research.  After looking at the website and being overwhelmed by the prices of these clothes, I became dismayed knowing that there were none in the southern California region.  However, knowing their intention to expand 20-30 stores annually in the US through the year 2020, my worries subsided.  If people like me didn’t know Uniqlo before, they would have to be completely shut out from the world if they didn’t know soon enough.

On October 10th, Uniqlo announced that it had posted sales records exceeding  ¥ 1 trillion.  This event was the first accomplishment by a Japanese clothing business to do so in one business year.  In 2012,Uniqlo also joined the ranks of Gap, H&M and Zara as the four largest apparel retailers in the world.  So what is the method to all of this madness?   Mass appeal.

Looking at images of the clothes alone, you can see that Uniqlo has a particular strategy when it comes to diversifying their clothes to the competition.  The answer?  Don’t follow them.  Standardize your product across different cultures and they will buy it.  While everyone else is worrying about what new trends will come out, Uniqlo focuses on the basics such as Oxfords and polos and simply makes them affordable to everyone.  Their styles may not not be as diverse as other brands but their colors are so broad and appealing that it would make even the pickiest shopper buy the same item in large quantities.

Many colors and stylish, not entirely ground-breaking.  But look at those prices.

One Polo. Too many colors. Not always a bad thing.

Want that tee in a particular color? We got it.

Looking at Uniqlo’s history, they were able to take advantage of certain situations that allowed them to jump start their expansion into the global market.  During the 1990s, Japan faced an economic downturn and Uniqlo was able to capitalize during this time by  targeting consumers who were conscious about their spending.  Following their success, they expanded fast and powerfully.  When the global recession occurred, their profits alone increased 19% from 2009-2010.  Aside from their focused expansion into the United States, they are also going after the Chinese market.  Their parallel goal in 2020 is to open 80-100 stores annually and having a total amount of 1000.  If that number isn’t impressive enough, they’ve also opened up their largest flagship store in Shanghai consisting of over 89,000 square feet.

In keeping up with their ability to respond to customers, they continuously innovate on their products while providing them at a low cost.  Their latest product line they developed is called Heattech and is designed to be functional and attractive winter apparel.  The idea is to integrate their functionality while expanding their product line according to the needs of the customer.  In today’s world where taking advantage of an opportunity can lead to incredible results, Uniqlo is living proof of how one can differentiate themselves by doing the same thing everyone is doing but doing it better.

With their goal of becoming the US’s largest clothing retailer within the near future, this dream will become part of our reality soon enough.

 

 

 

 

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