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Nundies is a brand of disposable thin panties designed for women who prefer a discreet panty line or a thin liner instead of traditional underwear. The company sells its products through various channels, with a primary focus on women's specialty shops, of which there were 242 in 2007. In addition to physical stores, Nundies distributes its products online via its official website and other retail websites. The main objective of Nundies is to provide convenience and comfort for women who dislike regular underwear.
A significant advantage of Nundies is the absence of direct competitors offering comparable products in the market.
Nundies is currently facing a primary issue. The issue revolves around the low store repurchase rate which is causing Nundies's expectations to be unmet. In terms of additional orders for extra units, only about 6% of stores have placed such orders. Additionally, only 10% of reorders contribute to the total units sold.
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While online activity is seen as positive, it is not being utilized frequently enough for reordering purposes. Another problem that needs addressing is the quantity of panties included in a single package.
One issue is that the sales staff in stores do not sufficiently promote Nundies. They believe that Nundies can sell on their own because they are already being displayed on the shelves. As a result, the sales staff does not discuss the product or recommend it to customers. Additionally, customers who have an interest in Nundies may feel embarrassed to show their interest in stores.
This lack of initiative from the sales staff directly affects the sales of Nundies' products. Furthermore, displaying Nundies' products alongside other merchandise in shops causes them to blend in with other items, increasing the likelihood that customers will overlook them and resulting in significant sales losses. Therefore, if store personnel do not actively suggest or promote Nundies' products and they are not properly displayed, Nundies will experience a decline in sales and potentially impact reordering from other companies, ultimately affecting their profits and sales.
Advanced Materials Inc, a manufacturing company with a significant industrial customer base, has shifted its strategy to concentrate on promoting its own product and transforming its product development capabilities to cater to customer needs. The medical and consumer markets are its primary target markets. AMI's core capability lies in the production of single-use medical grade products, making the launch of Nundies particularly groundbreaking for the company.
Advanced Materials Inc. has released a new product called Nundies, which is unlike any previous products manufactured by the company. This product marks a shift for the company, as they move away from their previous focus on foam fabrication and instead focus on consumer and proprietary medical products. The cost to manufacture a single liner includes both materials and labor, totaling approximately $0.6 per unit. The liners will be available in three colors - buff, black, and assorted - and will be packaged in 5-count plastic pillow packages that cost $0.45 each to produce. These packages will be sold to retail stores at a wholesale price of $7, and the selling price to customers will be $15.
Furthermore, Nundies offers a 12% commission on the wholesale price of each 5-count package sold to its agents. These agents are responsible for expanding Nundies's distribution coverage among specialty stores and women's boutique stores. According to Nundies's marketing research, the largest percentage (30.9%) of women's underwear sales are made in women's boutique and specialty shops. Department stores rank second with 30.7% of sales, followed by mass merchandise and warehouse club stores with 29.1%. Internet retailers and other retail outlets make up the smallest percentage at 9.1%. A survey of 1042 women aged 18-49 revealed that 84% of women are interested in products that eliminate panty lines. Among those women, 58% have tried wearing no-seam panties to achieve this goal.
Only 22% of women choose to not wear panties in order to eliminate panty lines, indicating that the majority of customers prefer to wear something. Among women, 81% are interested in underwear products that provide comfort and hygiene benefits. Of these women, 35% would wear this type of product 3-5 times per week, the highest percentage. This is followed by 29% who prefer to wear it 1-2 times per week. Among those who would wear it 3-5 times per week, the age group of 30-35 has the highest percentage at 39.8%. In contrast, 41.7% of those aged 18-24 indicate they would use this type of product only 1-2 times per week.
Regarding the distribution channels, the majority of respondents (64%) expressed a preference for purchasing the no panty line product from mass-merchandise stores like Target and Walmart, followed by midlevel department stores at 49%, and online purchases at 41%. Women's boutiques ranked last, with only 28% of customers willing to shop for this product there. However, if customers were aware that the product was available for sale online/internet, a significant percentage (53.1%) would actively seek it out, making online selling the channel with the highest potential that should not be overlooked.
A second focus group study was conducted to highlight the product's display concept and explore user impressions. The participants in this study were women aged 21-60 with annual household incomes exceeding $25000. These participants favored Nundies' display and packaging, expressing a desire for the product to be available at both "contemporary concepts" locations in shops and lingerie stores. They also stressed the importance of demonstration in attracting customers, underscoring the need for knowledgeable salespeople to boost sales. All participants expected to find and purchase the products at department stores. While online purchasing was viewed positively, it was not commonly used for reorders.
These research studies have shown that Nundies have a high market potential due to the significant interest from women in this type of product that offers both no panty-line and convenience. Nundies effectively meet women's expectations by providing protection and allowing them to feel unrestricted. As a single-use and disposable panty option, Nundies adhere to the inseam of women's leggings, athletic wear, shorts, and jeans. By choosing Nundies, women can opt for no underwear while still enjoying the convenience and protection it offers.
Nundies targeted a specific market of 36.7 million women aged 15-60 with household incomes over $25000 per year. The selling price was set at $15, which participants considered to be high. While the target market didn't see this as a major issue, participants suggested that a $15 package should contain 10 liners for better value. However, Nundies chose to set their price at $15 based on competition, manufacturing costs, retail margins, and profit goals. Additionally, Nundies were more popular in higher-end specialty stores and upscale department shops, where customers showed greater interest. As a result, Nundies maintained this selling price to achieve higher margins.
Nundies launched without much media advertising and did not use consumer-oriented advertising in its promotion. Instead, Nundies introduced the product through print advertisements in retail trade magazines such as Southern Vanity, Women's Wear Daily, and Fashion. These magazines also featured articles about Nundies to generate awareness. Additionally, Nundies took advantage of major celebrity events like the Grammys and the 2007 Academy Awards by placing sample packages in gift bags given to celebrities. Nundies also showcased its products at the Lingerie Trade Show in New York and Las Vegas. This event was attended by buyers for women's boutique and specialty stores who decided which accessory lines to carry.
By the end of 2007, Nundies had a total of 232 women's boutique and specialty stores, along with 10 high-end department stores, across 40 states. These channels received a shipment of 11,383 units of Nundies products, including 1,777 units for reorders from 15 stores and 285 units for online purchases. According to exhibit 6, the second quarter (April, May, and June) had the highest sales record with 4,506 units ordered. The following quarter (July, August, and September) ranked second with 3,552 units ordered, possibly due to the warmer weather prompting women to wear dresses, shorts, and skirts. These products provide light coverage and protection without showing panty lines. However, Nundies' orders drastically declined after the summer season, with only 1,656 units ordered in October, November, and December. This poor sales performance may be attributed to several reasons.
Nundies primarily focuses on women aged 15-60, who make up 23% of the total population. It is worth noting that the majority of this group falls between the ages of 25 and 52, constituting 80.83% of the target market. Therefore, Nundies should prioritize catering to this specific age range in order to maximize effectiveness.
Furthermore, Nundies currently provides a package of only 5 panties. However, there is a possibility for Nundies to increase the number of panties in each package. This is because customers find the current selling price of $15 per unit more appealing if it is offered for a package of 10.
Thirdly, Nundies is currently missing out on mass-merchandise stores like Target and Walmart, as well as midlevel department stores such as JCPenney. Even though women’s underwear is primarily sold through women’s boutiques and specialty shops, this is not the optimal option for Nundies. According to the survey, the majority of participants (64%) anticipate purchasing Nundies at mass-merchandise stores. The second most desired channel for customers is midlevel department stores, at 49%. However, Nundies predominantly distributes its products to women’s boutiques, specialty stores, upscale department stores, and online platforms - channels that attract fewer customers. As a result, Nundies is forfeiting access to 59.8% of these two lucrative markets that would potentially draw in a large number of customers.
Additionally, Nundies' launch is deficient in both media advertising support and consumer-oriented media advertising. Consequently, there is a lack of awareness among consumers regarding the existence and purpose of this product. Therefore, in order to boost sales, the primary objective for Nundies is to enhance brand awareness by implementing media advertisements through commercial or print media.
The performance of Nundies can be affected by various factors, including the impact of sales personnel. It seems that sales staff are unsure about how to properly present and promote Nundies. They believe that simply displaying the product in stores will be enough to sell it. However, many Nundies displays end up blending in with the other merchandise. Additionally, numerous customers feel embarrassed to show interest in Nundies, unless they are already familiar with the concept of being panty free. To address these issues, it is necessary to create an informative brochure or advertisement for departments and retail stores. This would allow sales personnel to clearly mention and recommend Nundies to customers. Moreover, it is important for Nundies agents to suggest and monitor display arrangements to ensure that Nundies is given a prominent position and does not get overshadowed by other items.
Nundies's target market is comprised of 36.7 million women aged 15-60. Of this group, Nundies primarily focuses on customers between the ages of 25-54, which makes up 29,669 individuals and represents 80% of the total target market. The majority of these customers have an annual income exceeding $25,000. According to a survey, 36% of women are interested in Nundies's product idea, while an additional 41% expressed potential interest. These percentages translate to 13.2 million interested customers and a potential market size of 15 million individuals.
Among the target market, 28% of women stated that they would actively seek out this product in stores, with an additional 49% expressing a possible inclination to do so. This equates to 3.7 million customers who would actively seek out Nundies, with a potential market size of 6.5 million individuals.
Approximately 1.07 million target customers would use Nundies 1-2 times per week, while another 1.3 million individuals would use it at least three to five times per week. Only around .7 million people would use it more than six times per week and another .63 million users would reserve its usage solely for special occasions.
As a result, Nundies anticipates a projected annual usage totaling at around365 million units or about73million unitsper year.
The development of the women's boutique and specialty store channel should be continued by Advanced Materials. In 2007, the sales revenue reached $34150, the variable cost amounted to $13887, and consequently, the margin equaled $20263. The net income, which is derived by subtracting fixed expenses ($14400) from the margin, totaled $5863 for Advanced Materials in 2007. Therefore, if AMI persists in expanding its presence in women's boutique and specialty channels, it will generate a profitable outcome that may cover all fixed expenses. Alternatively, the company could aim for a break-even point. To achieve this, Nundies sales need to reach at least 1618 packages or 8090 units, resulting in a total sales revenue of $24283.
There are two types of buying practices in upscale department stores: centralized buying and decentralized buying. In centralized buying, retail sales consultants directly contact the department store account and provide them with information about the target market, market size, and sales displays. The top five upscale centralized buying department stores have a chain of 300 stores, while the top five upscale decentralized buying department stores have a chain of 350 stores. The commission for AMI's agents on the wholesale price is 12%.
The cost is significantly greater when compared to the women’s boutique and specialty store channel, which incurs $20,000 to $30,000 in expenses for sale presentations and retail consultant fees. Additional costs, such as warehouse, catalogue, and pay line, range from $35,000 to $55,000. Based on the performance of 2007, 242 department stores sold a total of 11,383 units. Thus, for the 300 centralized buying department stores, an estimated 2,800 packages can be sold. Meanwhile, the 350 decentralized buying department stores can potentially sell approximately 16,500 units.
Midlevel department store accounts, such as JCPenney (with 1000 stores) and Kohl’s (with approximately 930 stores), employ a centralized buying strategy. These stores are considered house accounts and involve retail sales consultants. This proposal involves Nundies with varying package materials and graphics, along with the addition of 2 extra liners in each package. The selling price for these products is expected to be $8-$10. However, the retail margin percentage will remain the same as for current department store accounts.
For women’s boutique and specialty stores, the cost of goods sold per unit is $3.45, with a wholesale price of $7. Additionally, there is a continual sales cost of $14400 plus 12% commission. In the worst-case scenario, the break-even point is 5313 packages or 26565 liners produced. Thus, the profit at full capacity would amount to $39800.
The second category is upscale department stores, which have the same cost of goods sold and wholesale price as boutique costs, namely $3.45 and $7 respectively.
Upscale department stores have upfront costs ranging from $195,000 to $305,000, excluding ongoing sales costs. In the break-even scenario, the production of 70,422 packages or 352,110 liners leads to a negative profit of $179,000.
Midscale department stores have lower cost of goods sold at $3.26 and a lower wholesale price of $4.65. The upfront costs for these stores range from $225,000 to $340,000, with no ongoing sales costs. To break even, these stores need to produce 205,036 packages or 1,435,252 liners, resulting in a negative profit of $265,143.
In summary, boutique stores are the most profitable distribution channels for AMI. They have the lowest entry cost, higher margins compared to other proposals, and production limits that are more compatible. Additionally, they are the only feasible option that does not require significant expansion. On the other hand, upscale department stores would require 13 times the packages sales to break-even, while midrange department stores would need 54 times the Nundies sales to break-even. Considering the limited capital amount, these two proposals appear to be less feasible.
In order to boost the success of Nundies, AMI could distribute complimentary samples to fashion bloggers or youtubers and have them endorse the product, thus enhancing brand recognition and generating word-of-mouth publicity through these influencers. Moreover, another cost-effective strategy to promote Nundies would involve utilizing Youtube to provide instructional videos.
The goal is to inform the audience about Nundies and its usage instead of simply showcasing it in the store. Additionally, retailers should be provided with sales tips. To make the display more appealing and prevent it from blending with other merchandise, it should attract more attention. Sales personnel should be trained to provide information and actively suggest and demonstrate Nundies to customers. Pamphlets and samples should also be available. Kiosks can be used for advertising Nundies. Furthermore, AMI could offer discounts for reorders to incentivize repurchases.
Kerin and Peterson (2013) published a case study titled "Nundies" in the book Strategic Marketing Problems Cases and Comments International Edition. The book was published by Pearson in 2013 and has an ISBN13 of 9780273768944.
Nundies: Analyzing the Market Situation in 2008. (2016, Sep 15). Retrieved from https://studymoose.com/nundies-case-study-essay
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