Gizmo Galaxy (GG)
Gizmo Galaxy (GG) is a small independent shop run by Sam, who brings 25 years of experience in retail and tech products. The store offers a variety of new and second-hand electronics, including gadgets, accessories, and digital cameras. Despite having a loyal customer base, the store's overall revenue is on a downward trend, with particularly low market share in the accessories and digital camera segments.
With the rapid evolution of technology, Sam conducted a mix of primary and secondary market research. The findings indicated:
- The demand for digital cameras is rapidly decreasing.
- Sales of gadgets are slowly declining, although the latest releases still attract customers.
- Computer peripherals, recently added to the inventory, are selling out quickly, while interest in refurbished devices is gradually rising.
Although Sam is used to the ups and downs of the market, the current outlook is more concerning than ever. To adapt, he plans to launch an online store to expand sales of gadgets and refurbished electronics. Sam is also aware of the growing competition from online tech platforms and digital service providers.
With limited internal funds to set up the website, Sam is considering two strategies for GG:
- Phasing out digital camera sales.
- Increasing targeted promotional efforts for refurbished electronics.
Explain one advantage and one disadvantage for GG of using sales forecasting.
-
Advantage:
2 marks - Sales forecasting allows planning for future inventory/resource needs
- Helps optimize stock levels and cash flow management
- Must include application to GG's context for full marks
-
Disadvantage:
2 marks - Forecasts are predictions based on past data and may be inaccurate
- External factors and unexpected events can affect accuracy
- Must include application to GG's context for full marks
Explain one cost and one benefit for GG of setting up an e-commerce website.
-
Benefits for GG of setting up an e-commerce website:
2 marks max -
Increased customer reach and sales potential
1 mark - Can target customers in different regions interested in vinyl records/CDs
- Not limited by physical store location
-
Enhanced customer engagement
1 mark - Detailed product descriptions and customer reviews possible
- Can build brand loyalty through social media integration
-
Costs for GG of setting up an e-commerce website:
2 marks max -
Website development and maintenance costs
1 mark - Need to hire/train staff to manage website
- Drains limited cash reserves when revenue is falling
-
Operational restructuring costs
1 mark - Need for new distribution channels and delivery systems
- Additional complexity in operations requiring expertise
Define the term secondary market research.
-
Secondary market research (desk research) is the collection of existing data from published/second-hand sources
1 mark -
The data is collected by the business for decision-making purposes but was originally gathered by third parties, not by the business itself
1 mark
Using the Boston Consulting Group (BCG) matrix, discuss the two new tactics Sam is considering to ensure GG’s future success.
Using BCG matrix analysis:
- DVDs are a dog (low market share and growth)
- Vinyl records are a problem child/question mark (low market share but potential growth)
Analysis of Tactic 1 - Stopping digital camera sales:
- Advantages:
- Frees up retail space for other products
- Can still sell digital cameras via e-commerce
- Disadvantages:
- Risk of losing loyal customers
- Digital cameras may provide USP against competitors
Analysis of Tactic 2 - Increasing below-the-line promotion for vinyl:
- Advantages:
- Cheaper than above-the-line promotion
- Can help move vinyl from question mark to star position
- Complements e-commerce strategy
- Can utilize social media/viral marketing
- Disadvantages:
- Requires financial investment when resources limited
- Success not guaranteed for problem child products
Balanced Judgment:
- Short term: Keep Digital Cameras while monitoring refurbished electronics perforamnce
- Long term: Below-the-line promotion more viable due to:
- Growing market potential
- Better responsiveness to external changes
- Builds on loyal customer base
