The Business Report of the Australian Major Footwear Retailer

The Australian UGG Company Major Assignment The business report of the Australian major footwear retailer-UGG Table of content 1. 0. Executive summary4 2. 0. Introduction5 2. 1. Background of UGG Company5 2. 2. Assumptions and limitations5 3. 0. Overview of the market5 4. 0. The marketing environment5 4. 1. The Microenvironment5 4. 1. 1. Key competitors6 4. 1. 2. Other environment6 4. 2. The Macroenvironment6 4. 2. 1. Demographic environment6 4. 2. 2. Economic environment7 4. 2. 3. Political environment7 4. 2. 4. Cultural environment7 5. 0. Product7 5. 1. The three level of the product7 5. 1. 1.

Core Product8 5. 1. 2. Actual Product8 5. 1. 3. Augmented Product8 5. 2. Brand, packaging and labeling9 6. 0. Target segments9 6. 1. Demographic segment—Gender, Age and life-cycle stage segment9 6. 1. 1. Evaluation the needs and wants of the segment (key users benefit)9 6. 1. 2. The market positioning of the segment10 6. 1. 3. The trend of the segment11 6. 2. Geographic segment11 7. 0. The product categories11 7. 1. Evaluation of the categories11 7. 2. The trend and development of the categories11 8. 0. Conclusion12 9. 0. Recommendations12 10. 0. Reference list13 1. Executive summary

The following report analyses the demographic segment which is classified by gender and age-cycle is targeted by The UGG Company. Firstly, the report briefly describes the background of UGG. Secondly, it shows a general impression of the footwear market and identifies its microenvironment and macroenvironment. Thirdly, it emphasizes the product of UGG and points out the three levels. Fourthly, it judges the two variable segments and illustrates the demographic segment in detail. Then, the report also exhibits its product categories. Finally, it draws a conclusions sum up and gives the recommendations.

The secondary information which has close relationship to marketing is the sources of the report. For example, academic journals, textbook, statistics from formal organizations and company websites and newspaper. There are some assessments to evaluate the field of marketing in The UGG Company after assessing. There are two main recommendations for The UGG Company to improve its business: 1. UGG should improve marketing information system in order to do some research to satisfy customers’ needs and wants. 2. UGG should utilize sustainable material to produce products aiming at undertaking its social responsibility and gaining reputation. 0.

Introduction 2. 1. Background of UGG Company The UGG Company was first established in California by Brian Smith, a young surfer from Australia (Deckers Outdoor Corporation, 2009). It was acquired by Deckers Outdoor Corporation in 1995. Thompson (2004) reports that the sale astonishingly increased from $250,000 to $11. 75 million between 2003 and 2004. The brand becomes national and year-round nowadays because of more than 70 shoe styles except its classical-style boots and slippers (Thompson, 2004). He also mentions that the sales project in 2004 was set up at $75 million which was in double growth of 2003’s. 2. Assumptions and limitations

The limitation of the report is not enough adequate information presenting. With the development of globalization, the company should take actions depending on the varied circumstances to have a strong position in its marketplace. 3. Overview of the market IBISWorld Pty Ltd (2009) defines the footwear retail as a connection between the manufacturing company and customers. It also identifies that the shoe retail is mainly concerned about purchasing and promoting attractive shoes without any change to the customers. Other activities such as customer service, cash handing are also involved in the footwear retail (IBISWorld Pty Ltd, 2009).

According to the statistics by IBISWorld Pty Ltd (2009), the industry has revenue of $2475. 0 million between the year 2008 and 2009. But meanwhile, it experienced a real growth of -2. 9%. 4. The marketing environment 1. The Microenvironment 1. Key competitors Footwear market is a competitive marketplace because of globalization. There are 3,238 retails providing large number of appealing shoes to customers in Australia and there are 48 sheepskin retails among them (Yellow Pages Australia, 2009). Barack (2008) recognizes that in the present environment it is a difficult task for retailing to maintain the same revenue as before.

Other famous brands like Chukka boots and Rocky are the direct competitors to UGG (Wikipedia, 2009). IBISWorld Pty Ltd (2009) asserts that Ascendia Retail Pty Limited is the top indirect competitor to UGG because it holds 16% of the Australian market. Followed by that, Betts Group Pty Ltd takes up 6. 8%. And 77. 2% of the market is made up of other companies such as NIKE Australia and Foot Locker. 2. Other environment The footwear retail industry including UGG often depends on resellers which belong to marketing intermediaries like Myer to promote its goods.

And the market for UGG is consumer markets which individuals purchase shoes for personal use. 2. The Macroenvironment 1. Demographic environment According to the research by IBISWorld Pty Ltd (2009), the demand of footwear retail is affected by age which involves three generations: Generation X, Generation Y and Baby Boomers. Generation X and Y stand for aged 32 to 43 and 14 to 31 respectively. The former group accounts for 42. 0% of the footwear sales in the end of 2007; the latter group has 30. 0% of that. Baby boomers which have aged 44 to 62 account for 25. 0% of the share (IBISWorld Pty Ltd, 2009). . Economic environment Consumer sentiment index, trade weighted index and Real Household Disposable Income play vital roles in the footwear retail industry. Firstly, IBISWorld Pty Ltd (2009) points out that consumer sentiment index represent the consumers’ confidence of economy. It also mentions that trade weighted index has a significant effect on customer demand for imported footwear. Furthermore, income is closely related to customer’s purchasing power. For instance, wealthy customers have more buying power to choose whatever they like. 3. Political environment

The Australian government performed a policy which led to an enormous change in the world of Australian footwear retail. It reduced the protection of the Australian footwear sector in the mid-1980s (Webber &Weller, 2001). They indicate that the footwear industry has to restructure in the modern world in Australia because of globalization. 4. Cultural environment Cultural issues also shape the marketing decisions. Wikipedia (2009) asserts that boots was originally invented by the people who live in cold countries to protect their foot in low temperature environment. Australians form a habit of wearing boots in winter to keep warm. . Product Footwear can be classified into the category of shopping products which are evaluated in the aspect of comfort, quality, price and style. 1. The three level of the product 1. Core Product The core benefit that consumers are really purchasing in the market of footwear is to protect their foot. According to what customers actually want, UGG provides sheepskin footwear which can control the temperature of the bare feet to close to the body regardless of the temperature outside, especially in winter in order to keep customers warm (Deckers Outdoor Corporation, 2009). . Actual Product Actual product defines as “a product’s parts, styling, features, brand name, packaging and other attributes that combine to deliver core product benefits” (Kotler, Brown, Adam, Burton and Armstrong, 2007, p. 388). Deckers Outdoor Corporation (2009) claims that the philosophy of UGG is to provide comfortable, high quality, attainable as well as fashionable products aiming to deliver core benefits. It also points out that UGG®Australia is relatively well-known brand because it is the world’s largest purveyor of grade-A sheepskin.

Furthermore, actual product of UGG includes its relevant sheepskin care product which is a unique product to retain customers. 3. Augmented Product A number of authors propose that augmented product is “additional consumer services and benefits built around the core and actual products” (Kotler et al. , 2007, p. 388). UGG creates a website to give convenience for customers searching information and knowing more about UGG. Moreover, UGG provides not only sales service telephone number and e-mail address, but also aftersales service to maximize customer satisfaction (Deckers Outdoor Corporation, 2009).

These intangible augmented products contribute the value to the core product in order to gain competitive advantage. 2. Brand, packaging and labeling UGG achieves in the selection of brand name because its brand name can be distinguished from its competitor and easy to recognize. Currently, UGG uses brand extension strategy to launch new products in men’s footwear. In addition, UGG labels “made in Australia” in the packaging to differentiate from others. 6. Target segments Due to differential needs and wants, the market can be divided into three segments: Gender, Age and life-cycle stage and Geographic segmentation (IBISWorld Pty Ltd, 2009).

The target group for UGG is the demographic segment which classified by gender and age-cycle. 1. Demographic segment—Gender, Age and life-cycle stage segment 1. Evaluation the needs and wants of the segment (key users benefit) Classifying segments effectively can bring success to the company (Dibb and Simkin, 1991). Kotler et al. , (2007) assert that gender segmentation has been widely used in the business of footwear. Therefore, the category of footwear retail can be categorized into three main parts: women, men together with children and infants footwear.

IBISWorld Pty Ltd (2009) evaluates that women’s footwear occupies a dominant position in the market because it holds 50. 0% of the Australian market share. However, men’s footwear as well as children’s and infants’ footwear has the same percentage which takes up only half of the percent of women’s footwear in the market share (25. 0%). UGG Company uses differentiated market-coverage strategy to target several market segments and offers several different products. UGG sells the shoes of women as well as men, but it started from women boots originally.

It seems apparent that the frequency of purchasing shoes for women is much higher than men. Consequently, UGG focuses on women want initially. Women select their desired shoes in the aspect of styles and colors (IBISWorld Pty Ltd, 2009). Typically, women regard the styles and colors as fashion. Most of them will try their best to follow the current fashion. Deckers Outdoor Corporation (2009) declares that providing fashionable products is one of the objects of UGG Company to satisfy the women want of fashion.

In the modern world, many famous stars like Julia Roberts wearing the boots of UGG causes a fashion of wearing UGG boots (Blakeley, 2004). Compared with women, men are more concerned with the price and quality of the shoes. According to Deckers Outdoor Corporation (2009), UGG Company offers the footwear which value comfortable and the highest quality in order to attract men customers. It also claims that UGG Company only use the perfect material to produce products such as the highest quality leathers, suede and the world’s finest sheepskin to keep user warm and comfortable.

For instance, the company only uses vegetable-based dyes and put shoes in refrigerated container to prevent melting when transfer (Palmeri, 2006). 2. The market positioning of the segment The UGG Company chooses product differentiation as its positioning strategy. Deckers Outdoor Corporation (2009) promises that it produces accessible luxury products to differentiate from other competitors. For example, Women’s footwear of UGG is range from $60 to $400 (Hirshlag, 2006). As a result, the behaviors of buyers who buy the products of UGG are affected by their economic situation. 3.

The trend of the segment Currently, men prefer casual and fashionable street shoes rather than athletic shoes (IBISWorld Pty Ltd, 2009). This trend brings new opportunity to the company. O’Loughlin (2005) demonstrates that UGG Company expands its business by crossing gender lines to target men. Sales to men of UGG are up to $53. 4 billion in 2006 (Thompson, 2006). 2. Geographic segment IBISWorld Pty Ltd (2009) lists the footwear retailing locations in Australia by states. A number of authors claim that the geographic segmentation brings benefit in satisfying local differential needs (Kotler et al. 2007). For example, Victoria can be thought of a competitive and mature market in terms of high average income. According to the data by yellow pages Australia (2009), there are 13 retails selling the products of UGG in Victoria. 7. The product categories 1. Evaluation of the categories The UGG Company supplies a strong market for unique footwear to outwear (Wilson, 2007). In brief, it involves a variety of boots, casual, slippers and accessories (Deckers Outdoor Corporation, 2009). The category satisfies a variety of customers’ desires. The unique boots bring warm and luxury to buyers.

The series of casual shoes meet the expectation of customers who prefer casual lifestyle. The slippers and accessories offer a varied choice for customers. Moreover, the company also provides care products for customers to take great care of the sheepskin shoes for the sake of retaining customers. 2. The trend and development of the categories Edelson (2009) reports that the company will focus on its outwear line in future to appeal more customers who seek sheepskin outwear. She also mentions that the company is interested in expanding the collection of accessories and designing handbags for UGG fans. . Conclusion From analysing and evaluating the statistics searched, we can conclude that UGG can target the demographic segment which is classified by gender and age-cycle effectively. It takes the microenvironment which includes marketing intermediaries, customers and competitors together with macroenvironment which involves demographic, economic, political and cultural environment into consideration. Furthermore, it identifies the emerging trend of the product categories and discovers the opportunity for attracting potential customers to make the profit as high as possible.

However, UGG still lacks efficient information about marketing intelligence and research. 9. Recommendations 1. UGG should improve marketing information system in order to do some research to satisfy customers’ needs and wants. • David (1989) emphasizes that marketing research can assist marketing managers perform and recognize the market segments well. For UGG, the company should design some survey to collect primary data to analysis customer preference such as the colors, size and length. 2. UGG should utilize sustainable material to produce products aiming at undertaking its social responsibility and gaining reputation. UGG should continue using vegetable-based dyes and healthy material. 10. Reference list Barack, L. (2008). From Ugg to Utterly Impressive. On Wall Street, 18(9), 64. Blakeley, K. (2004). Foot Fetish. Forbes Global, 7(1), 20. David, C. (1989). Trends of Marketing Research. Marketing Intelligence & Planning, 7(9/10), 17-24. Deckers Outdoor Corporation. (2009, September 29). Retrieved November 05, 2009, from http://www. uggaustralia. com. au Dibb, S. & Simkin, L. (1991). Targeting, Segments and Positioning. International Journal of Retail & Distribution Management, 19(3). Edelson, S. (2009).

Ugg Taps Nichols for Outwear Line. Women’s Wear Daily, 197(103), 9. Hirshlag, J. (2006). Ugg’s First Boutique Set to Bow in SoHo. Women’s Wear Daily, 192(116), 16. IBISWorld. (2009, October 14). Footwear Retailing in Australia (G5222). Retrieved from IBISWorld database. Kotler, P. , Brown, L. , Adam, S. , Burton, S. and Armstrong, G. (2007). Marketing (7th ed. ) French Forest, NSW: Pearosn Education Australia. O'Loughlin, S. (2005). UGG Step up Licensing, Tries Appealing to Men. Brandweek, 46(21), 11. Palmeri, C. (2006). Sensitive Soles. Businessweek, 3987, 14. Thompson, S. (2004). Ugg Australia.

Advertising Age, 75(44), 19. Thompson, S. (2006). Ugg, others take a shot at gender bending. Advertising Age, 77(21), 4-6. Webber, M. & Weller, S. (2001). Trade and inequality: Australia's textile, clothing, and footwear industries, 1986-1996. Journal of Economic Geography, 1(4), 381. Wilson, B. (2007). Ugg goes for Gold Coast. WWD: Women's Wear Daily, 194(80), Wikipedia Foundation. (2009, November 14). Retrieved December 12, 2009, from http://en. wikipedia. org/wiki/Boot Yellow Pages. (copyright 2006). Retrieved November 06, 2009, from http://www. yellowpages. com. au