Introduction
The organisation chosen for the Business Model Canvas is Superdrug Stores Plc. Before a business is established, the very first thing to be considered is the profit, how it will be achieved and target business turnover in order to exceed the investment. In order to achieve the profit, highest market share have to be interacted towards the good and services that are being offered by the business that is different to the other business providing similar or the same goods and services. In other words, this is classed as competitive advantage. Achieving competitive advantage creates a stable and invincible position in the market share. Porter’s five forces, SWOT analysis and Porter’s value chain could be utilised in order to investigate the most feasible and efficient way to achieve market share. Organisation’s vision, mission, value and goals differentiates itself from the competitors.
The chosen organisation has a very fare value share in the target market which will be critically evaluated in the case study in align with the business model canvas allocated through examples, models and researches. Superdrug stores were chosen because it is running successfully across UK and being a loyal Superdrug customer, I would like to Investigate the key reasons for its ultimate success and key aspects of its daily management. the investigation will then be followed with conclusion that will be comprised of suggestions as well as overview of the investigation.
Evolution of Superdrug
Superdrug was founded in 1964 by Ronald and Peter Goldstein and the first store was inaugurated on the 26 April 1966 in Putney High Street (Superdrug.com, 2019). The business then expanded rapidly and has currently 800 stores operating successfully nationwide. Along with expansion in brands of products, Superdrug further invested in providing various customised beauty services and named it beauty studio that is comprised of threading bar, hair salon, hair dressers, body waxing & tanning studio, barbers and nail technicians. Superdrug didn’t just limit itself to beauty studios but they recently introduced pharmacy services, nurse clinic and mobile sim service, all at low cost, appealing to all genders, ethnicities and age groups. The introduction of new services helped Superdrug achieve competitive advantage in the market that ultimately will increase the profit share. Superdrug also claimed to be cheaper compared to Asda, morrisons and boots, is evident from radio advertisement in Superdrug stores. This relates to porter’s five forces where competitor, buyer power and supplier power are taken in consideration before researching, producing and launching a new product or service (Dobbs, 2014).
Key partners
Key partners could also be termed as stakeholders as they take strong interest in the business but some of the stakeholders are also shareholders as they have a certain amount of share in the business. Superdrug is in partnership with various brands such as Marie-curie, L’Oreal, Rimmel, Maybelline, Max-factor, Bourjour, Nip & Fab, Compeed, Nurofen, Colgate, Capri-sun, Coke, ITV (Love Island), Tanya Burr, Zoella, Sensodyne, Garnier, Olay, Nivea Pregnacare, Paracetamol etc. They earn certain amount of fare share by allowing their products being sold in store whereas foundations like Marie-curie are classed stakeholders and are being sponsored by Superdrug as Superdrug is raising funds to help foundation achieve its goals.
Key resources
Firstly, the it is important to understand the basic idea of resource as in what it means or what factors define resources. Resources are products, services and any means that help to produce, deliver, merchandise and advertise the goal. In order to conduct onto resources, it is advisable to research into the target customer segment so that the products and services are designed and advertised effectively. in terms of Superdrug, its key resources range from delivering raw materials to manufacturing plants to shop floor. The key resource of Superdrug is its team, from production and shop floor level to management level including, lorries, drivers, sales advisors, product ingredients, management, all the brands sold in-store, charitable foundations, social media including Twitter, Instagram, Facebook, you tube, celebrities promoting their own range products.
Key activities UK
The primary activity of Superdrug being cost effective. Key activities of Superdrug range from selling multi-branded products within the similar segments e.g. make up segment comprises of Rimmel, Maybelline, Revolution, Lottie, L’Oreal, Max-factor etc., skin care segment comprises of Garnier, Olay, Nivea, nip and fab, T-zone, simple, Clearasil etc., dental care comprises of Sensodyne, Colgate etc. and health care products such as multi-vitamins, blood pressure machine, kid’s products and beauty studio. Superdrug have recently opened beauty studio section that consists of threading bar, nail bar, hair salon, hair dressers, waxing studio, tanning studio and barbers.
Internal activities of Superdrug consist of recruitment and selection, training, retailing, merchandising, advertisement, transportation, research and development, finance management and investments. cosmetics collections in-store and online under Superdrug retail. (Gilliland, 2017)
According to the Fayol’s principles of management, it is also important for any organization to enhance its activities such as planning, organization, coordination, command and control to run the business efficiently. These were found evident in Superdrug’s management, by looking at the pattern of employees organized from sales advisors level to management in the hierarchy. The management is responsible for co-ordinating. Commanding and controlling its team members while planning the best possible way to increase customer service to enhance the sales in the company. (Wood and Wood, 2003).
2017 was reported to be the first year Superdrug sponsored ITV hit, Love Island. Starting its sponsorship ultimately boosted revenue in bronzing, makeup and hair styling, and the Superdrug continue to sponsor the commercial show till date. (SILLITOE, 2018). In correspondence to its sponsorship with ITV, Superdrug signed a deal with Zoella in 2014 to sell her beauty range products along with stationery in Superdrug as exclusive to Superdrug range which is still ongoing (Gilliland, 2017). Apart from Zoella, Superdrug also partnered with Tanya Burr and Fleur de to sell their exclusive make-up and other skin care products.
Customer relationship
Marketing plays major role in endorsing brands the store is offering to its target market. To ensure that the marketing appeals to the right segment of the market, understanding nature of marketing is important. Digital marketing, calls-for-actions, word of mouth, loyalty schemes, 100% happiness guaranteed scheme, exceptional customer service in store, online and on the phone, weekly star buys are all the part of building customer relationship with the target market.
When Superdrug launched its loyalty card back in 2011 (SILLITOE, 2018). The loyalty card offers double points, £1 off when you save 100 points, £10 sim purchase back in points and beauty studio offers exclusive to health & beauty card members only. (SILLITOE, 2018). This programme has increased in sale by 25% with nearly 12 million new registered customers confirmed at the end of 2017. (SILLITOE, 2018). Registered customers also confirm new customers. Marketing of products and services is very crucial for any business are it is classed as one of the effective source of appealing to its target market. The model appendix (1) reveals how digital marketing benefits one’s business growth. Digital marketing is a very non-traditional way of approaching to the audience.
Digital market is proven to be more cost effecting in comparison to other sources of marketing and gives fair opprtunities to all kinds of businesses. Around 40% of the respondents of Gartner’s Digital Marketing Spend Report claim that they are making considerable saving via the digital methods of marketing and advertising. This further sums up the role of digital marketing in targeting its customer segment and converting non-customers to customers. The model appendix (2) illustrates the conversion digital marketing is also useful for building image amongst customers which possibly enhances online branding. For example, some products of Superdrug are exclusive to online only purchase which means that customers can only buy it online. While they are shopping online, they end up browsing for more products and add them to the basket, which further boosts the Superdrug revenue. Loyal clients would put their reviews online, which could be read by other browsers, will eventually convince them to use the product, further boosting up their digital marketing as well as the revenue. Hence Superdrug’s online presence will turn into a web sensation guaranteeing more market reach and better business advancement. (Tiwari, 2018)
Whether the marketer is done digitally or via leaflets or posters, it proposes the organisation that is promoting the services or products by representing the company logo which is the star next to the Superdrug name. This is the registered trademark of the brand which, under any circumstance, cannot be copied by any other business under copyright infringement. All the intellectual properties of the Superdrug are insured, if it wasn’t insured then it would have been possible for fake companies to sell fake products under Superdrug name which could have landed Superdrug in lawsuits filed against them. This is evident from Notwithstanding Clause 3.1 stating to the extent the Supplier provides its own formulation, or any other designs or materials created independently prior to, or otherwise than in connection with, the Contract (referred to as “Supplier Background Materials”), the Supplier retains the intellectual property rights in such Supplier Background Materials and grants to ASW a world wide, perpetual, non-exclusive, non-transferable, irrevocable, royalty free license to use, reproduce, modify, alter or integrate the Supplier Background Material in connection with the Products and in respect of ASW’s rights and obligations hereunder. (Superdrug.com, n.d.) the clause also states that The Supplier shall not without the prior written consent of ASW (i) assign the Contract to any third party or (ii) or sub-contract its obligations to any third party (Superdrug.com, n.d.)
Customer segmentations
This holds a very important place from the establishment of the business up and until the business functions, from planning products to marketing. Customer segmentations acts as reference to which the products and services are manufactured and marketed accordingly. it is important to conduct research about customer’s needs and opportunities for continuous improvement. A very recent example of this is the launch on Superdrug mobile Sim. Peter Macnab, who is the CEO of AS Watson health & beauty UK, which parents Superdrug, stated that “we will continue to focus on offering customers the service and products they want, including our new Superdrug Mobile” (SILLITOE, 2018). Superdrug launched Sim that offers great deal of unlimited minutes & calls, 4 GB internet all for £10 and to make this deal even sweeter, the clients gets £10 back in points.
All the profits earned from the stores can be turned into investment, an example of this is that AS Watson revealed that they are planning to launch 1,300 stores over a year, this means that, according to the plan, Superdrug will be launching a store after every 7 hours, primarily to meet customer demand.
This further arises the question, how do they r meet customer demand and how that affects the business turnover. It was calculated that in filed accounts at Companies House for the 52 weeks ended 30 December 2017, the business detailed a pre-tax profit of £92.9 million, which was up 16% year on year, and revenue of £1.24 billion proving the rise in profits by of 2.3%. (SILLITOE, 2018)
This favoured the evidences of the strong performance in 2017 driven by sales growth in all categories, an increase in its service proposition, and other customer-focused initiatives simply by focusing on the segment that eventually target the market. (SILLITOE, 2018)
The research further proves that the Superdrug is not just attracting the target market by launching cheap mobile deal but also providing mixture of multi-branded products to suits its target market. For e.g. various range of make-up brands, tanning products, eyelashes, dental hygiene products, multi-vitamins etc. to provide their customers variety so that they can chose the desirable products. In order to maintain the fair share, Superdrug have the policy that they offer 100% happiness guarantee, which means that if the customer isn’t happy, they can come back and return the products and get their money back, whether they have used the product of not. this is a part of their own brand endorsement scheme. This could possibly be one of the reasons that customers choose to buy Superdrug own brand products are they are proven to satisfy customers better than other brands. Superdrug own brand products are exclusive to Superdrug only and popularity of these products means that customers will not be able to have access to these products other than Superdrug stores itself, hence generating pofits in the business. An evidence of this is the introduction of new cosmetics ranges such as Revolution, a brand inspired by social media, as a key factor in its growth in this sector. Skincare sales were up by 10% year on year, with face mask ranges said to have appealed to the new generation. (SILLITOE, 2018)
Knowing that beauty section is not just limited to skins care products but also to beauty service hence they have expanded their brow & lash bar section to beauty studio and Superdrug now claims to be the largest brow bar and nail bar operator in the UK. (SILLITOE, 2018). In 2014, it rolled out its new ‘Beauty Studio’ concept, offering beauty services such as threading, manicures and eyelash extensions in-stores. In select locations, it also introduced digital displays and an interactive ‘selfie’ area to encourage shoppers to share their makeovers on social media. (Gilliland, 2017). It was found out that 26 new Brow Bars and 27 new Nail Bars were added to stores. in 2017, bringing the total number of these additional customer services to 284 and 56 altogether respectively. Ten stores now provide ear piercing and seven stores offering waxing, too, as the retailer positions itself as a one-stop beauty shop for its target market. (SILLITOE, 2018).
Channels
These are sources of transportation of its products and services from shop floor to respective address and from raw materials to manufacturing plants. Ports of advertisements via digital media is also classed as channel because they act as channels of advertisement. Firstly, taking transportation into consideration, lorries, vans owned by Superdrug to transport or deliver its products from stores to customer’s address has Superdrug logo, which confirms its target market they do home deliveries and it also act as source of advertisement. Secondly, taking channels of advertisement, they vary from posters to digital advertisement. Digital advertisement comprised of social media websites such as Instagram, Facebook, you tube, twitter, Snapchat and its Superdrug website itself. All their channels are trademarked with their logo. Superdrug encourages their clients and staff members to upload their picture where they have used their products and services, write reviews and tag Superdrug in the post. These posts are made visible to the rest of the world. The nail polish brand that is being used for the nail treatments, i.e. Orly, has been endorsed by Hollywood celebrities such as Kim Kardashian, Rita Ora. Any channel that Superdrug utilizes from marketing to transportation has been contracted, for e.g. promoting its products online strictly complies all the copyright infringement laws and only promotes what Superdrug is liable to.
Overall- value proposition, cost structure and revenue streams
Ben Sillitoe confirms in the report that Like-for-like store sales were up by 2.5% and 22 new UK stores were opened which increased the growth of revenue including skincare, health & wellbeing and pharmaceutical products while Superdrug.com reported a revenue hike of 30%. (SILLITOE, 2018) (Retailanalysis.igd.com, 2018) from the analysis, skincare and health and wellbeing segment performed strongly compared to makeup, dental and other segments. Skincare sales grew by 10% and health and wellbeing sales increased by 8%, boosted by the continued success of its growing pharmacy business and online doctor service. (Retailanalysis.igd.com, 2018) The A.S. Watson also credits the reason for its strong performance to the success of its partnership with ITV’s Love Island. Superdrug sponsors ITV’s Love Island programme, helped to drive cosmetic sales, increasing Superdrug’s market share of the sector to 32%. (Retailanalysis.igd.com, 2018). Cost structure of the business revolves around reduced product prices, star buys, buy one and get second item half price items, 3 for 2 offers to ensure that they generate high volume of sales. Superdrug also ensure that they contract their employees to minimum as 4 hours. They ensure that their staff is employed on part time basis which means less money being paid out. Apprenticeships were also introduced and apprentices are paid lower wage than normal, which means that the task are completed at relatively low wage rate. Choosing right material, investing sum in research and development, investment in technology, paying employees and investing in radio stations.
(global database, n.d.)
The graph above evidences the growth on the sales from the period of 6 years. Such hike in sales means they are making profits which they are continuously investing in research and development of new products and services.
The model appendix (3) mentions the key points to focus on to strengthen the investment proposition in order to achieve excellence performance for both the team as well as sales.
The model appendix (4) suggests the steps for sustainable growth focusing primarily on revenue growth, profitability and cash generative which is the ultimate growth of the business.
Conclusion
Superdrug is claiming to be cheaper compared to other retails in the similar market. They have gained a popularity through advertisement, sponsoring ITV, selling You tube sensation’s products such as Zoella and loyalty schemes. Their sales are thriving. Superdrug focuses primarily on price and quality, endorsing charitable foundations and providing best customer service which ultimately boots revenue. Superdrug ensures that it complies with government laws such as MODERN SLAVERY ACT 2015 to avoid human trafficking and exploitation (Macnab, 2017) and they have zero tolerance approach to modern slavery. Since 2008, Superdrug been active member of BCSI (Business, Social Compliance Initiate) to commit and improve working conditions covering ethical perspectives, no child labour, feasible working hours and requirement for auditing and training and trading contracts. Its also member of the Mekong Club, an independent NGO, that helps in developing awareness and training toolkits on modern slavery for staff members as well as suppliers. (Macnab, 2017).
2019-1-25-1548458351