Hightower Department stores: Case Analysis Case Solution
The company should move towards the TVCs as well as the other means of communication such as billboards newspaper, social media and every other means from where the company can address their target market.
The company is working on almost 50% above cost which is a good rate of gross income but the company should give benefits to its customers such as Christmas sale, buy one get one free etc. However, it will decrease the profits but the company will be able to save its carrying cost of inventory as well as it will prevent it from unrealized inventory.
The company is offering some promotional strategies such as the sale of toys after every Christmas season which helps the company to sell out its unrealized or unsold bulk but it disturbs the cost structure. Moreover, the company sells them at 90% cost, which ultimately gives loss of 10% in cost as well as some loss in inventory carrying cost.
The company is following this strategy by giving certain percentages of the stores to toys as well as the company also distributes the space as per the market demand of those toys. However, the strategy is working well but there are still some errors which need to be rectified.
The company gives major spacing at interception points to those toys that are the best selling brands while all of the peers remain with a little space in shelves. Moreover, this strategy is helping the firm to maintain the image of its high demand toys but it is also overlapping other potential brands.
The company should give marginal spacing to those brands which are giving it profits and are not its leader brands. Moreover, the company should distribute equal spacing and post some additional space to other potential brands by placing them at main interception points such as the main entrance, kid area etc.
Overall Store Strategy
As far as the overall selling strategy is concerned the company is working well but there are certain issues. However, the company is hiring and retaining the friendliest and competent selling personnel but still the company is unable to sell more toys. The reason is that the personnel are just limited to the specific area of toys and as we discussed above the company has allotted a small are for toys.
The company should give more spacing room for the toys’ area as well as the company should train the selling personnel to demonstrate the usage of those toys in front of kids. They can also wear some costumes at the time of seasons such as Christmas to give more comfortable and exciting look to children and in order to increase the sales volume.
Overall Financial Situation
Exhibit 1shows the overall profitability situation of the company and from there we can see that the company is working on a higher profit percentage, which was 47% in the first year then it reduced to 45% because of the excess inventories left to sell. Furthermore, it again decreased by 3% and then increased by 4%; the reason behind this increase is cost cutting. In addition, the company reduced the focus towards advertisements and TVCs. Moreover,it remained constant in the preceding year.
If we talk about the unit sales, the sales as per units were 5932 then the sales declined and became 5879.Later on sales increased to 6025 units and again declined in the last year and came to 5983 units although the the previous year is the forecasted year.
Sales per dollar was 53 million then it turned in to 58 million and later on it became 64 million and finally it became 67 million. The reason behind this increase in revenue and the conflict between decline of profitability and incline in revenue is inflation………………..
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