Our case assignment is about the New Zealand Retail Company Pumpkin Patch Ltd which combine retail, online, and wholesale / franchise. We focused on the Company’s history, brands, 5 Porter’s forces, value chain, SWOT analysis, location and Financial situation to expose their problems and issues related to the market and industry in the last few years, as well as changes in their relations and closure of stores overseas last year.
THE COMPANY
COMPANY’S HISTORY
Pumpkin Patch is a chain store based in New Zealand, which has expansion itself over Australia, the United States and the United Kingdom. Its founder was Sally Synott. She was a childrendswear buyer and looked everywhere for quality clothing for kids, and not being able to find it she decided to create the company to provide quality, design-drive kidswear. It initially began as a mail-order business, soon followed by the opening of their first store in Auckland in 1990.(Pumpkin Patch – Our company)
KEY EMPLOYEES
Its Chairperson is Jane Freeman, and Nell Cowie as its CEO. Currently,the company has 2200 staff members. (Pumpkin Patch – Our people)
KEY COMPETITORS
Pumpkin Patch has had its ups and downs in the industry and market in the past 22 years. Because of the underperforming on the UK and the closure of the US operation, its earnings were downgraded to $12m – $14m (from $16m – $18m previously).
The reason was because of the continuing challenging and volatile conditions intensified by rising input costs. The company’s main competitors are Witchery Kids, Levis Kids, Motion, EllieB, Papoose, Le Bon, among others. In 2010, PPL launched the brand “Charlie and Me”, seen as an opportunity to enter the “everyday” market (including Cotton On for Kids, JK Kids gear, The Baby Factory, Kmart and the Warehouse) that encompasses 75% of the global childrenwear sales.(New Zealand Institute of Chartered Accountants 2011).
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They also launched Pumpkin Patch General, focused on lowering costs, which is why it is an online shop currently. (New Zealand Institute of Chartered Accountants 2011).
BRANDS
In order to don’t been stuck in the kidwear industry, Pumpkin Patch has created: Patch Maternity for Mums-to-be with a stylish maternity collection; Urban Angel for teenage girls; Charlie & me for the young male teenagers and toddlers; and its always recognized brand Pumpkin Patch for babies and toddlers.
BUSINESS OPERATIONS
Pumpkin Patch Retail Stores
It currently has 190 stores in New Zealand, Australia and Ireland, employing 2200 staff (including full time and part time staff).
It used to have some stores in the US, but they were closed in 2012 because of unprofitability. The design of its stores is to give the sense of passion that the company puts into the clothes. It is designed to be inviting and exciting, showing the Pumpkin Patch collections, giving the customer the pleasure of purchasing a creative and innovative product. (Pumpkin Patch – Our channels) They are actually trying new business operations such as:
– Rolling click and collect out across all of the Australian and New Zealand stores. This allows customers to buy online but get the product delivered to one of the stores where the customer will pick it up. – Trailing e-counter which allows a customer or one of our store team members to use an online facility in store to order product that is not available at that store and arrange delivery back to the store or to the customer’s home. – Free in store wi-fi, expecting to roll this out over the majority of the stores in the coming year. 70% of smartphone owners use them while in store shopping so free wi-fi is a low cost way, creating a reason for customers to come into store, stay longer, and buy more.
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Location
The location of the stores is carefully evaluated, analysed by the customer catchments, customer demographics, cost of retail space and proximity of competitors and other existing PPL stores. The sizes of the stores are between 250mand 350m2with leases of minimum 5 years.
Subsidiaries
Pumpkin Patch has had always in mind to widen its horizons, so they open up to 190 stores, planning on opening 11 more stores in 2013.
Catalogue and Internet
Pumpkin Patch has an e-tall website called www.pumpkinpatchkids.com. Its average number of visits received on 2009 was 65 000 000. It is regularly refreshed to include all the latest available ranges of products and services. Customers usually purchase their products on-store. Nevertheless, there is a significant database of customers that purchase them via the Internet or the catalogues, which are produced seasonally at 300 000 in New Zealand and Australia.
VALUE CHAIN
Product design and origination
It’s an extremely important part of the business model. The entire process starts with the design, the look, and the feel of the products. For the local and international customers, design is one of the key differentiating factors when they decide what kidswear to buy and one of the areas the company stands out from the rest.
The product origination process is very important too. All Pumpkin Patch branded products have been created by the design team of the company which means that the products are unique and cannot be legally copied by anyone.
Product development and sourcing
While Di Humphries, who is the new Merchandise and Brand Director, will significantly add to the talent and ability that already exists within the design area, she also brings experience around product innovation, develop and sourcing.
Marketing & communication of brand values
This part of the value chain has always been quite critical to the long term success of any brand, even more today with the increase in use of social media and other internet based media. Now, retailers have to anticipate customer’s behaviour, whether the starting point for the sale starts online. Pumpkin Patch Ltd currently has over 180,000 followers on Facebook and therefore uses Twitter and YouTube to get messages and promote its brands.
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Distribution
Pumpkin Patch is unique in this area as they use three main distribution models to sell their brands around the world: retail model, wholesale or franchise model, and online model.
In 2012 the online sales across Australasia were the equivalent to approximately 11% of the retail sales. They have a very sophisticated internet platform that serves the online customers across 8 international markets. The International Partners team is responsible for developing and supporting relationships with third party operators who sell Pumpkin Patch products through their own outlets which could be either franchise stores, concessions, or even a department store. Another significant advantage is that it requires little investment as it leverages off the existing design, supply chain, and support functions. They don’t have to invest in the in-market infrastructure or local store costs as that is paid for by the local partner.
Customer Experience
Whether a customer purchases a product online, at one of the stores, or at one of a franchise partner stores they need to have a high quality customer experience. The company has been known for its exceptional customer experience and they work hard to maintain those high standards. However, now customers are looking for flexibility and different ways to buy from Pumpkin Patch Ltd, and they are increasingly using technology to buy products. Technology is becoming an important part of the overall customer experience. For example, 90% of consumers believe that using social networks to research products saves time when shopping and 74% say that family, friends, and customer reviews are a leading influencer when making purchasing decisions. For this reason, they are proactively using Facebook and other social media to communicate, educate, and influence customers and they are rolling out other exciting technology based initiatives like trailing e-counter, free in store Wi-Fi.
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SWOT ANALYSIS
This analysis helps identify the strengths, weaknesses, opportunities and threats of Pumpkin Patch Limited, in order to know which steps will be needed to be done in planning to achieve the company’s objective. The internal factors are strengths and weaknesses, whereas the external are opportunities and threats.
Strengths
Online growth: the advantage of this factor is that reduces costs and allows customers to buy the products without having to go to the store, being quick and easy. As a result of this, their catalogue is posted on their website, showing the wide variety of products available, Loyal customers: Because of its good products, Pumpkin Patch has a growing number of loyal customers that maintain its position as one of Australia’s more important retail stores. Unique products: This factor assures Pumpkin Patch’s position in the market, thanks to its quality and variety. Unique brand, not retailer: Pumpkin Patch sells itself as a brand, NOT a retailer. It focuses on the ‘package’ of: style creation, product quality, consistent message to customers, etc. Less investment: In future growth it will not be necessary much level of investment thanks to its leverage of existing infrastructure.
Weaknesses
Low market share: Even though it is emerging consistently, Pumpkin Patch still doesn’t punt too much on the market.
Opportunities
Takeovers: Pumpkin patch took over some companies, which wasn’t good for some analysts in the market. The closure of their stores in the US and UK was a reason for that. Expansion: It is available in existing and new markets as Pumpkin Patch model is scalable. Threats
Economic slowdown: The Global Crisis affected everyone, and Pumpkin Patch as well as a retailer in the industry. Lower cost competitors: There are several lower cost competitors trying to overgain or ‘steal’ customers from other big companies with lower prices and showing a variety of products as well.
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FINANCIAL SITUATION
In the section Appendixes, the Income Statements, Statements of Comprehensive Income, Statements of Change in Equity, Statements of Cash Flow, Financial Summary and Balance Sheets (for the year ended 31 July 2012), will be shown to demonstrate de financial situation of Pumpkin Patch Limited. (Pumpkin Patch LIMITED & SUBSIDIARIES Financial statements 2012)
STUDY QUESTIONS:
1.- What are the key issues/ problems in the case study?
– Warehousing and distribution: Pumpkin Patch operated the only warehouse in Auckland that using freight transfer stocks, products to the stores or to the customer, the freight is able to be turned off at a day’s noticed, so there’s no overhead cost that were going to be lumbered with. And capacity problems happened one day, according to case study “the freight cost is dearer, but margins are higher, the exchange rate is an issue. – Designed: Pumpkin Patch had experienced increasing problems in New Zealand and overseas with rivals copying exclusive clothing and fabric designs. – Product sourcing: Asian manufacturing did raise issues. Those factories were regularly audited for under-age workers and for health and safety practices. The other issue raised by Asian manufacturing were quotas into the UK and US markets, particularly on Chinese goods. But it is a short-term problem according to company. – Pumpkin Patch closest competitor was JK, has 24 stores around New Zealand, JK tended to locate their stores very close to Pumpkin Patch stores, compete on the price, JK’s 2005 catalogue was shot the same school that Pumpkin Patch had used in 2004, for limit the problems Pumpkin patch made exclusive agreements with their supplier.
2.- Its competitive advantages:
– Product are unique, good quality
– Style fashionable
– Sufficient all stages of a child’s growth – from baby to toddler, primary school, including clothing, nightwear, accessories, footwear… – Variety brands for maternity, babies, girls and boys such as Patch Maternity, Urban angel girls, Charlies and me. – Garments are reasonable price and lasting.
– Best kids collections, season after season.
3.- If you were the CEO what strategies at least three you will put into practice for next three years – Firstly, pumpkin patch is one of the kids wear brand leading on the words so, aim increasing selling and earning in next few years, pumpkin patch keep focus on product development, continues on its unique and fashionable children wears including style creation, artwork, product sourcing and control of quality. -The Internet or mail order catalogues, to expand market worldwide and more convenient for customer, catalogues will sent to loyal or long-term customer via email or mail. – To bring Pumpkin Patch more closer to limited expend consumer, open more outlet stores in popular outlet factories such as DFO, Birkenhead point in Sydney. It is one of the strategies that pumpkin patch will use to increasing consumer in the lower level.
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Conclusion
Despite of the closing of their stores in UK and US, Pumpkin Patch sees its growth coming from continued development of its markets particularly in Australia with new business operation via stores or internet, continued expansion of overseas retailing through department stores in Australia, the United States, Europe, the Middle East, South Africa and Asia and continued expansion of online revenues through its websites in New Zealand, Australia, The United Kingdom, Ireland and The United States.
References
Pumpkin Patch – About us 2012, accessed on 2 January 2013, http://www.pumpkinpatch.com.au/banner/girl/s_about_us_au,
Pumpkin Patch Ltd. Analysis and Interpretation of the Annual Report 2011, New Zealand Institute of Chartered Accountants, accessed on 21 December 2012, accessed on 17/28 December 2012 www.nzica.com/Students/Teacher-and-academic-resources/~/media/Files/2012%20PPL%20Analysis%20And%20Interpretation.ashx
Pumpkin Patch LIMITED & SUBSIDIARIES Financial statements 2012, accessed on 2 January 2013, http://www.pumpkinpatch.biz/documents/959_Group_Financial_Statements.pdf
Pumpkin Patch – Our company 2012, accessed on 20 December 2012, http://www.pumpkinpatch.biz/ourcompany.html
Pumpkin Patch – Our channels 2012, accessed on 19 December 2012, http://www.pumpkinpatch.biz/ourcompany_ourchannels.html
Pumpkin Patch – Our products 2012, accessed on 20 December 2012, http://www.pumpkinpatch.biz/ourcompany_ourproducts.html
Pumpkin Patch – Our people 2012, accessed on 21 December 2012, http://www.pumpkinpatch.biz/ourcompany_ourpeople.html
Pumpkin Patch 2012- Annual Shareholders Meeting 2012, accessed on 4 January 2012,
https://www.nzx.com/companies/PPL/announcements/229980
Pumpkin Patch 2012- Annual Report 2012, accessed on 4 January 2012,
http://www.pumpkinpatch.biz/documents/792_AnnualReport2012.pdf
