Electronic Shelf Labelling System Swot and Market Potential Anticipated Share

December 30, 2016/ Free Online/ 0 comments

PURPOSE

The purpose of this assignment is to provide an opportunity to conduct some research into emerging trends and market potential using non-traditional data/information sources through a detailed SWOT and a market potential and anticipated market share analysis. ILYK is a company manufacturing and selling digital display software and digital tags to retail stores throughout Hamilton and surrounding areas.

INTRODUCTION

Digital displays are labels that can be affixed to store shelves to display pricing, product description, weight, allergy information, any promotions and a bar code. With this new technology retail store employees can change the prices of the products in one shot. The information will be located in a database that will be transferred to all the labels via Bluetooth.
The retail industry needs to be extremely efficient at identifying and ordering goods as well as at the display of the goods, posting the price of such goods and attracting the attention of its customers to the price of such goods especially when goods are marked down for promotional purposes. This applies both to inventory ordering and back ordering of goods, as well as the actual sales of goods from existing stock. Profit margins may be critically dependent on those factors, especially when retailers have to turn over or clear out stock.
The SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in the digital signage industry. It involves specifying the objective of the business and identifying the internal and external factors required to achieve that objective.

Strengths
offer a strong foundation for growth

Weaknesses
are attributes harmful to achieve objective

Opportunities
are ongoing, sustainable growth

Threats
are addressed by the strengths of the sector
MISSION STATEMENT

To provide a cost effective and streamlined process of displaying digital product information in the market place, while retaining a high quality product design and building lasting relationships with our customers.

VISION STATEMENT

Our vision is to become Canada™s leading manufacturer of high quality digital product information displays. Positioning our employees and customers first, ILYK is the company people want to work for and do business with.
SWOT ANALYSIS

OPPORTUNITIES
THREATS

Newly introduced to the Canadian market

Target customers growing

The most economic way of pricing (Green Technology)

Less competition

Cost/effectiveness and range of applicable technology are increasing

Product may not pick up in the market

Change in technology

New competitors introducing design and sourcing complexity

STRENGTHS

WEAKNESSES

Educational/work background (IT and Process Automation)

Enthusiastic staff

Cost advantage (low startup cost)
Limited targeted market (only retails store)

Limited financial base

Lack of reputation

OPPORTUNITIES

New to Canadian market

This technology is widely known and used in Europe, China and Israel; however, this is considered a new product in the Canadian market. There are a few distributors in the United States of America, but only one in Canada. By manufacturing the product in house and selling it locally, we see a huge advantage if the product picks up in the marketplace.

Citation: (PRLog (Press Release), JRTech Solutions partners with Pricer to provide ESL technology to Canadian Retailers, May 26, 2009)
http://www.prlog.org/10243779-jrtech-solutions-partners-with-pricer-to-provide-esl-technology-to-canadian-retailers.html

Target customers growing
The population of Hamilton has grown significantly since May 2001, the population of the city of Hamilton was 490,268. The entire province of Ontario was 11,410,050 people. In the five years between 1996 and 2001, the population of Hamilton grew by 6.1%. With the increase in population there has also been an increase in retail stores. Some of which are expanding and others are being built from ground up. We see that the demand for more retail stores is an opportunity for our product to sell as most retail stores need to cut costs in areas where they can improve product management using the latest technology. This new technology will allow retailers to cut down on employees and labels costs.
Citation: (Dana Flavelle, Wal-Mart to expand; other retailers wary, Feb 24 2010)
http://www.thestar.com/business/article/770397”wal-mart-to-expand-other-retailers-wary (Wal-Mart to expand; other retailers wary. Retail giant plans to open 35-40 more supercentres in 2010, creating 6,500 jobs)
http://www.hamiltonkiosk.ca/population.php

The most economic way of pricing (Green Technology)

Most Canadians are emerging in to the going green concept to become environmentally friendly. This has been the case for the past few years. Corporate see a benefit to this from a profit stand point. Over a long period of time retail stores will see a major reduction in labels (paper) by using this technology. The tags are made from recyclable product and will have no harm for the environment.

Citation: (Checkpoint System Inc (METO), Electronic Price Labeling, 2010) http://www.checkpointeurope.com/downloads/07ElectronicPriceINT.pdf

Less Competition

As there is only one distributor in all of Canada we see that the level of competition is very low. The benefit that we see here is that we will be manufacturing the product which is an advantage over our competitor as they get their product from non Canadian manufacturers. JRTech Solutions (retail systems provider) is working with a company called Pricer to provide ESL (Electronic Shelf Labels) technology to Canadian Retailers. This indicated that our competitor is new to this market as well. It makes it more difficult with the competitor is more experienced. Less experience equals greater opportunity for us.
Citation:
http://zbd.typepad.com/zbd_solutions/shelf-edge-label/
http://www.elabelsys.com/overview_sim.htm
http://www.prlog.org/10243779-jrtech-solutions-partners-with-pricer-to-provide-esl-technology-to-canadian-retailers.html

Increasing Technology

A technology that is newly introduced to the market has a lot of advantages that will attract customers. This product will benefit our customers in many ways. It will improve the sale accuracy (price at shelf = price at checkout), reduce cost of shelf-edge label maintenance, increases profitability/quick investment payback, and eliminates costly fines from price audits. This highly scalable infrastructure allows for future growth and most importantly it promotes customer satisfaction and loyalty.
Citation: (Transforming Transactions into Relationships, NCR RealPriceTM Solution, 2002)
http://www.ncr.com/en/products/pdf/hardware/sa_decisionet.pdf

THREATS

Product may not pick up in the market

The classic Product Life Cycle concept suggests new products appeal to different user groups at different times with a small market of early purchasers willing to experiment by purchasing the product well before much larger markets make the commitment. Buyers in the early stage often seek benefits that are more personal in nature, while customers in latter stages of adoption are often drawn to products offering significant usage benefits beyond those of existing products, such as how it can save them time or money. Retailers may not want to purchase the product due to fear of the unknown, testing the technology and training the adequate employees. Other factor that may prevent retailers to purchase this technology early on is the investment and cost associated with purchasing the product. When investing into a new product the customer doesn™t want to be uncertain of the efficiency and with a rare product in Canada this may be a threat to our company.

Citation: (Paul Christ, Marketing Strategies for Late-to-Market Products, May 18, 2010) http://www.knowthis.com/blog/postings/marketing-strategies-for-late-to-market-products/

Change in Technology
Changes in technology have helped retail businesses in a number of ways in the past couple of decades. Everything from electronic scanning devices to the Internet has combined to streamline the operation of retail businesses on a day to day basis and allow the businesses to focus more upon selling to their customers versus completing tedious work. With new technology coming out everyday this can pose a threat to our product if a newer and more unique product comes out there is a chance our product may become obsolete.
Citation: (Dkeviv, How a New Business Can Keep Up with Changing Technology, n.d)
http://www.helium.com/items/1792053-success-of-facebook-success-of-startup-how-to-succeed-in-a-fast-changing-technology

New competitors introducing design and sourcing complexity
Supply options are increasing design and sourcing complexity. As new suppliers seek industry revenues, new options for technology, services, pricing structures and supply sourcing are made available. This poses a threat on our company as we will always need to be as competitive and educated as our competitors. As well as finding ways to make sure we can always provide our product to our customers in a timely manner.
Citation: (Lyle Bunn, SWOT Analysis: North American Digital Signage, Nov 2009) http://www.google.ca/urlsa=t&source=web&cd=1&ved=0CBQQFjAA&url=http%3A%2F%2Flylebunn.com%2FDocuments%2FSWOT%2520DS-DOOH%2520Industry%2520Nov%25202009.doc&ei=qesQTP7ZG4Kdlged_-DRBw&usg=AFQjCNH1a6nf8q_LV3McI1fUjq4R3wWtgg&sig2=oZrPptL3QAiZKJPdDmWQrg

STRENGTHS

Educational/work background

Our company consists of four shareholders, most of which have extensive IT background. Three of these shareholders are currently working in the field of Information Technology. Two of the three currently code at work and are familiar with most programming languages. This is a great advatantage as we will not require outsourcing the software development. Our fourth member worked in the field of Process Automation and is a great asset to the team. This knowledge allows us to create our own software and products in house.

Enthusiastic staff

We are all excited about this product and are looking forward to see this market in Hamilton and slowly grow with time to other cities within Ontario and then hopefully to other parts of Canada. With new technology coming out every day, we are eager to get our product out there and be involved with the retail industry. The team is willing to sacrifice time to create this product with the busy lives that each of us has.

Cost advantage
Each member plans to invest $10,000 into the company to get started as the startup costs are very low for this product. We do not plan on purchasing our own facility, instead we plan to rent out a small area and do everything in house. We are optimistic that this product will pick up in the market and we will be able to see the return on investment quickly. We believe this product carries its value and will sell well and there will be a demand for it.

WEAKNESSES

Limited target market

Unfortunately the drawback we see with this product is that it will only be sold to retail stores and not every selling business. In the real world, not all of our targeted customers will purchase our product which will make it difficult for us to grow, especially in the first few years. Our target customers much have at least three franchisees available within Hamilton and surrounding areas in order for it to be worth our time and investment. This can be challenging to achieve.

Limited financial base

Our plan is to avoid getting a huge bank loan as we don™t want to be swamped with debits from the beginning, instead each member will put $10,000 towards the company. If we require a loan at any point in time, we will get the smallest amount from the bank to reduce any unnecessary debts.

Lack of reputation

As this product is fairly new to Canada we see potential problems with getting the product known in the market place. Also, the fact that™s a new and small company, bigger retail stores may not have the confidence in our product or our business. We will have to strive to earn their trust. There is evidence of its ability to compete against existing systems and this can be a problem as well to larger retail stores. It will be an investment for them to purchase our technology and they may not be willing to do that if they are not 100% sure that our product is better than other products that are similar. Customers will hesitate to purchase an unknown brand/technology.

MARKET POTENTIAL/ANTICIPATED SHARE

Electronic Shelf Label (ESL) Global Market Revenue
Venture Development Corporation (VDC) is a technology market research and strategy consulting firm that advises clients in a number of industrial, embedded, component, retail automation, RFID, AIDC, datacom/telecom, and defense markets. VDC anticipates that revenue shipments for ESL solutions will grow at a compound annual growth rate (CAGR) of 17% through 2012, with unit shipments expected to approach 27 million. In 2007, the global market for ESL surpassed $65 million, with unit shipments exceeding 10 million. The growth of this product and the retail market states that this product will most likely evolve substantially in the next couple of years. The chart below shows the anticipated revenue of this product in the year 2012 (globally). We believe this has a direct result on our product and level of success.

Citation: (MoreRFID, Electronic Shelf Label (ESL) Suppliers Leverage New Display Technologies to Bolster Adoption, May 2008) http://www.morerfid.com/details.phpsubdetail=Report&action=details&report_id=4537&display=RFID
Key Steps in Estimating Market Potential
This table summarizes the initial potential market we are targeting within the first 5 years of business.

1 Define your target market and market segments
Commercial Retail stores:

Retail Store Number of stores Location
Wal-Mart 6 Ancaster, Burlington, Hamilton, Stoney Creek
Zellers 7 Ancaster, Burlington, Hamilton
Canadian Tire 8 Ancaster, Burlington, Hamilton, Stoney Creek
Shoppers Drug Mart 34 Ancaster, Burlington, Hamilton, Stoney Creek
Home Depot 4 Ancaster, Burlington, Hamilton, Stoney Creek
Fortinos 11 Ancaster, Burlington, Hamilton, Stoney Creek
No Frills 7 Ancaster, Burlington, Hamilton
Metro 8 Burlington, Hamilton
TOTAL: 85

2 Define the geographic boundaries of your market
Hamilton and surrounding area (Ancaster, Burlington, Hamilton, Stoney Creek), Ontario, Canada

3 Derive an average selling price.
$10,000 for software and 5000 digital displays (additional displays at $0.45 each)

4 Determine the average annual consumption.
We anticipate that average annual consumption of this product is 1 per store

5 Target Customer Characteristics
At least three Franchise in Hamilton and surrounding area
Minimum area of retail store: 12000sq feet
Where the store image is a part of their values
6 CALCULATION
Estimating Market Potential: MP = N x P x Q Where:
MP = market potential
N = number of possible buyers
P = average selling price
Q = average annual consumption
MP = 85 x 10000 x 1
= $ 850,000

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