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Delia's Case Study by: Dana Ackelson, Chris Kinney, Chuck Planeta
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Case Presentation
Delia's: Hitting the Sweet Spot with Teens
Backgrounder/Company Overview Started by two college roommates, Christopher Edgar and Steven Kahn, Delia's has become one of the hottest forms of fashion among teens today. Aimed at consumers between the ages of 12 to 24-year-olds, Delia's offers a wide range of apparels, accessories and home furnishings. This market, though recently expanded into the male segment of the market, more directly focuses on females and there ability to set the trends among their fellow peers via the fashions available by Delia's. When first entering the market, Delia's was strictly a catalog purchasing only company. There success relied heavily on the notion that the females in their target market, upon initial liking of the products, would develop a brand loyalty to the Delia's company and would anxiously await the arrival of the printed catalogs and take them to school and converse with likeminded targets to make purchasing decisions. This notion worked. Not only does Delia's offer products of their own but they also took the intelligent initiative to co-brand with other entities that targeted the same segment of the market. These means of co-branding included such companies like Roxy, Free People, Dollhouse, 26 Regular, Sugartooth and Greed Girl. This was a service that was not only convenient to the consumer but also to that of Delia's because the risk decrease when it was spread over all the co-branding partnerships. More recently, the increase in Internet usage has forced Delia's to expand its large database onto into the virtual world. This analysis will develop some of the pros and cons to developing Delia's as an e-commerce organization. Problem Analysis Although Delia's has recently made an astounding success my extending their services into brick-and-mortar retailing, it still faces the onset of the web and all the challenges and opportunities associated with expanding into such an ever-changing environment. With their initiation into this market Delia's discovered that its site mostly served as an entertainment agent and not so much as an avenue for purchases. As the article, "Delia's: Hitting the Sweet Spot with Teens" stated, by 1999, only three to four percent of sales were made online. With this assessment, it becomes clear that Delia's needs to question just what type of services they would like to offer online. Perhaps a cost-benefit analysis would be key here, but for analysis sake, we'll just stick with the facts. In their efforts to remain competitive in relation to the e-commerce, Delia's has made alliances with well-known subsidiaries that also target the same segment of the market, or at least provide an easy-to-travel avenue to ultimately reach the Delia's site. Yes, this will help Delia's increase awareness about their product and services, but will that in turn lead to more purchases via the web? It's quite obvious when evaluating their target market that a major hurdle stands in the way. The ability to use credit cards for purchases. A majority of Delia's target market cannot legally own and operate a credit card, thus dampering online purchasing. Although it would seem that parents could assist in this area, the matter of convenience is far more realistic. By this we mean that young consumers shopping online could browse the site and find their desired items but the actual purchasing process would have to be done via their parents. This means that the task of getting the parents online becomes more relevant. More often than not, we feel that these consumers would have a more likely chance of receiving their desired items if the parents could just call the orders in. Secondly, Delia's is faced with the challenge of competing for the same consumers over all their avenues of purchasing. For example, what would make a consumer more prone to shop online versus shopping via the catalog, versus shopping in the retail stores? If Delia's is spreading their funds across all these venues are they using their dollars most effectively? As noted in the before mentioned article, Delia's core catalog business softened in late 1998 for a major operating loss. Furthermore, the overall Internet operations are another substantial drain on their resources? Therefore, it seems that Delia's needs to find a creative way to involve parents in the purchasing decision process, increase their sales through the website, and create greater awareness of their brick-and-mortar retail sources. Alternative Recommendations (1-2) A great way for Delia's to maneuver more sales to the website would be to create a larger awareness of their services online. This could include the use of traditional advertising as well as non-traditional advertising. In their catalogs they could feature a learning packet that would enhance the fascinating services that they offer online. They could increase the probability of its success by offering a contest online that would feature something like a $1,000 shopping spree or a trip for "you and two of your friends to one of Delia's new retail stores for a shopping spree weekend." Not only would it promote the use of the site but would subsequently enhance the consumer's knowledge of the retail stores that are going up everywhere. Conversely, this could take away from catalog sales and the need for parental charge cards is still a major contributing setback. (2-3) In order for Delia's to overcome one of its major challenges to online purchases they need to create a greater awareness among the parents of the segmented target market. This could be done in a variety of ways. For example, Delia's could create partnerships with magazines whose aim is to the parents of Delia's target market and perhaps offer buying incentives within. By this we mean, that Delia's could place an ad in Spiegel magazine that would offer parents a 20% discount on their purchases if they also purchase an online coupon to Delia's for their children. Not only would this create an awareness among the parents, initiate conversations about Delia's among the teens and the parents (a tool that could help illuminate the perception of Delia's via the positive word of mouth from the teen) and possibly prompt the parents to visit the site to see for themselves the products and services that Delia's has to offer. Conversely, this would need to be a matter of convenience for the parent and perhaps a 20% discount isn't enough of a discount to prompt the awareness. Additionally, as another matter of convenience, teens may be put in the position to shop from the catalogs their parents are shopping from (the idea of one-stop shopping). Selection of Best Alternative We feel that since Delia's is in such a sticky situation that there is not solely one way to solve this problem. As we outlined above, there are three methods that serve to overcome the challenges that Delia's currently faces. Most importantly, Delia's needs to decide which avenue to take and then approach it aggressively. We feel that the idea of approaching the parents and creating greater awareness of their site will definitely help to boost their revenues and hopefully diminish the worries of targeting across the three main sources they have. Although the catalog was their foundation for success, perhaps eliminating it would increase the need to visit the website or the retail stores. Especially since their stores have already been raided with success and can barely keep up on their inventory. Furthermore, since inventory is a problem right now Delia's could promote their website in their retail stores via stickers or signs that say something along the lines of, "Are we out of something you want....we have it online...visit us at www.Delia's.com." By using their creative resources among these ideas we feel that Delia's could increase brand awareness, form long-lasting and financially rewarding partnerships, strengthen perceptions of brands not only to the consumers but also to the parents, potentially increase market share and thus increase revenue.