Classic Knitwear and Guardian

Classic Knitwear and Guardian A perfect fit?

1. Evaluate the product-company fit? Product Company Fit The product offered gross margin 38~39% which would enhance the margins of Classic Knitwear from 18% which was substantially lower compared to industrial standards. Guardian brand had high level of awareness and it had patented insect-repellant clothing technology. The product had a good market potential due to its innovativeness. This advantage can be leveraged by the production efficiency of the company to achieve a sustainable competitive advantage. The company had a moderate cost advantage over other US producers due to high-volume, low SKU production runs. The addition of the new product meant addition of 16 SKUs. This new product might lead to some inefficiency in its present system. 2. Evaluate the product-market fit? Product Market Fit Classic Knitwear operated in $24.5 billion category of non-fashion casual knitwear. The branded side of non-fashion knitwear market was dominated by three large manufacturers: JamesBrands ($4.5 billion), FlowerKnit ($1.25 billion) andGreenville Corporation ($0.63 billion). These big brands operated on gross margin of around 30-40%. In unbranded segment, Classic competed with little known firms like B&B Active wear which held market share of 23.6% and the “Big Three” were also involved in this market.

There was a customer need for protection against the rising insect-borne illness and the customers were dissatisfied with few prevention products available in the market. The category is virtually non-existent in the mass market as the present players in the insect repellant clothing only sold in niche markets. 3. Will consumers and the trade respond to the Guardian marketing program? Response of the trade(channel) Presently, the retailers were provided with 50% margin on branded knitwear and 40%margin on private-label knitwear. The new product would provide the trade a 45%margin. Our opinion is

that displays would occupy a large amount of retailers space and also the retailer margin is on lesser side i.e. 45% Vs 50% offered by other brands. This would not encourage the retailers to stock the product. But the provision of trade promotion and advertising allowance might induce them to stock the product. The company projected sales would be 10,000 displays within two years of product launch, of which 50% would be in discount stores, 25% in general merchandise stores, and 25% in sporting goods and apparel stores. We think that as the company has no experience in selling to these retail channels, it has to spend considerable resources to develop the channel. The company would make the Guardian shirts available to its existing wholesale clients for distribution to interested screen painter in a later period as it has currently decided to brand the product as “Guardian Apparel”. Response of the Consumers Based on the consumer research, 18.5% of the thousand respondents (185 respondent)were interested in the product. Based on past market research experience,60% of the respondents who indicated they would definitely try (38%) would do so (22.8 %)within the two-year introduction period. The company also predicted that at least 50%(11.4%) would buy an additional shirt the following year. 4. What are the advantages and disadvantages of the licensing agreement? Pros  DEMAND IS HIGHER THAT THE NEEDED AMOUNTTO BREAK EVEN !!!!!!  Wholesalers sold to screen-print channels customized t-shirts and other knitwear with logos  Competitive advantage  Opportunity to reach the outdoor enthusiast market  Positive perception of the brand ( 58% recognizing Guardian’s pioneering status )  Brand high level of awareness and positive costumers associations  Low marketing investment ($3 millions) Cons  More man oriented products  Classic would suffer an immediate loss of its market share and also sales revenue in case Guardian decides to pull its offer  Customers may be reluctant towards the new products  No guarantee that Classic would be able to achieve the level of acceptance within two years  Continue to have no brand recognition 5. What sales volume is required to break-even on Classic’s 2-year marketing program?

6. If Classic implements all of Miller’s recommendations, what is the estimated demand for the new product line over the 2-year launch period?