PROJEC

8f7J1Y DATE

Name of Second Reader

William Byun

DATE

CALIFORNIA STATE UNIVERSITY SAN MARCOS

PROJECT SIGNATURE PAGE

PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE

MASTER OF BUSINESS ADMINISTRATION

PROJECT TITLE: Research on PilloveTalk

AUTHORS: Yanlin Wang

PRESENTATION DATE: 8/7/2018

THE PROJECT HAS BEEN ACCEPTED BY THE PROJECT COMMITTEE IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION.

Name of Project Advisor

Research on PilLovetalk

1

Research on PilLovetalk Yanlin Wang

Research on PilLovetalk

2

Table of Contents

Part I Executive Summary ...................................................................................................................3

Part II Introduction ............................................................................................................................3

Part III Company Analysis ...................................................................................................................3 A. 3C Analysis ............................................................................................................................3

a) Customer ..................................................................................................................................... 4 b) Competitors ................................................................................................................................. 4 c) Corporation ................................................................................................................................. 5

B. 4P analysis .............................................................................................................................5 a) Product ........................................................................................................................................ 5 b) Price ............................................................................................................................................. 5 c) Place ............................................................................................................................................ 6 d) Promotion .................................................................................................................................... 6

C. Business Performance Analysis ...............................................................................................6

Part IV Market Analysis ......................................................................................................................7 A. Porter’s 5 Forces Analysis .......................................................................................................7

a) Competition in the Industry ........................................................................................................ 7 b) Potential of New Entrants into an Industry ................................................................................. 8 c) Power of Suppliers ....................................................................................................................... 8 d) Power of Customers .................................................................................................................... 8 e) Threat of Substitutes ................................................................................................................... 8

B. SWOT Analysis .......................................................................................................................8 a) Strength ....................................................................................................................................... 8 b) Weakness ..................................................................................................................................... 9 c) Opportunity ................................................................................................................................. 9 d) Threat .......................................................................................................................................... 9

Part V Strategy Recommendation .......................................................................................................9 A. Enhance Market Exposure ......................................................................................................9

a) Reason ......................................................................................................................................... 9 b) Detailed Method.......................................................................................................................... 9

B. Target at Young Chinese Generation ..................................................................................... 10 a) Reason ....................................................................................................................................... 10 b) Method ...................................................................................................................................... 10

C. Updating Designs Quickly and Follow the Trends .................................................................. 10 a) Reason ....................................................................................................................................... 10 b) Method ...................................................................................................................................... 11

Part VI Risk Analysis ......................................................................................................................... 11

Part VII Conclusion ........................................................................................................................... 11

Works Cited ..................................................................................................................................... 11

Research on PilLovetalk

3

Part I Executive Summary In this research, I analyze pilLovetalk, an online retailer boutique who provides customers with home products such as pillows, aprons with inspiring slogans as a way to help customers decorate their homes with positive energies to deepen their faith. While the business idea seems to be cheerful, the actual business performance of pilLovetalk is dim and the company even fails to breakeven since there are too less orders. Too figure out the problems behind, I adopt 3C, 4P and some industry analysis frameworks to find out the current position of the company.

After going through all the frameworks, I think that the problems behind the company is that it has too less exposure to its customers. However, due to limited financial capability, the company needs to find out marketing strategies which cost less.

Considering the company’s products features, I recommend the company to operate accounts on famous social media and start to target at Chinese international students and workers through WeChat platform as a way to quickly reach them with a comparably low cost.

Part II Introduction In this research, I choose pillovertalk, an online shop, as my research objective. PilLovertalk is a home and office decoration products supplier established at the end of 2015 (Francis, n.d.) by Vivien Francis, a young mother who has gone through many tough and desperate moment in her life and still upholds a positive and hopeful lifestyle.

Currently, pillovertalk provides customers with many different products including kitchen and dining products, bedding and bath products, pet products and so on. The products of pilLovertalk are sold mainly through official website, namely, www.pilLovetalk.com. Meanwhile, the company is also looking for wholesalers to help enhance the products’ exposure to more customers not only to boost sales but also to bring the positive spirit to more people.

Although there are countless suppliers of mugs, aprons, pillows on the market, I think the design of the products of pillovertalk and the messages behind the products are making the products different.

At present, the company is just a start-up with small income. However, I believe that the products are attractive and the company will have a great future if better business strategies are executed.

Aiming to help the company to reach to more customers and boost sales, I am going to make some detailed recommendation based on analyses toward the market and the company itself. At the same time, I will point out both the positive outcome and the potential risk of adopting the recommendations.

Part III Company Analysis In this section, I adopted 3C, 4P and business performance analyses to have a detailed look into the company.

A. 3C Analysis As a classic business analysis model, the 3C analysis business model was originally created by

Kenichi Ohmae, a management consultant, to figure out key success factor and to create suitable marketing strategy through analyzing the customers, the competitors and the corporation. (Web Analytics Consultants Association, n.d.)

Research on PilLovetalk

4

Hence, in this research, I decide to use the 3C analysis to have a clear understanding of current situation and get support in generating further recommendations.

a) Customer Based on the website introduction and communication with the founder of the company, I find

out that, in the current stage, the company is targeting at women who are around 30 to 57 years old with healthy lifestyle. Meanwhile, those people are mainly well educated and have a secure job and stable home. They may have college degree and they enjoy being in nature, practicing mindfulness and always looking for opportunities such as reading books, participating in workshops and seminars to improve themselves.

In addition, the targeted customers like home décor and are making effort in beautifying their living environment.

According to the descriptions above, it can be summarized that the targeted customers are well-educated and rich women who are enthusiastic in home decoration. Therefore, they are highly likely to purchase products of pilLovetalk. Meanwhile, it is possible for pilLovetalk to turn them into loyal customers as they are wealthy enough to purchase home décor frequently.

b) Competitors Home décor is a highly competitive industry with both large market leaders and small vendors

competing with each other. Large market leaders in the industry includes giant corporations such as IKEA, ZARA Home and many other brands etc. Meanwhile, there are also small startups who are gaining momentum in competing with each other such as décor market and countless middle and small home décor suppliers.

Although the market is fiercely competitive, different types of companies have different features and different targeting customers. Since there are too many competitors, I divide the competitors into two categories. One category of competitors includes major players in the home décor market. Another category includes other market participants who are not as well-developed as the companies in the first category. Obviously, pilLovetalk belongs to the latter category.

For the market leaders such as IKEA and Zara Home, they have established their brand equity for a long time. Their brands are so famous that almost everyone knows them. When there is a woman who wants to purchase a pillow without knowing the quality of different brands or how to choose a good pillow among innumerable products, the first several choices appear are the famous market leaders.

The reasons behind their strong brand equities are long history, great market channel exposure and word of mouth effects. Usually, the market leaders provide a vast product portfolio and provide their customers with one-stop shop as, under most circumstances, customers who are looking for home products can find anything they want from the shops of the market leaders. Oftentimes, after spending several hours in the shops, customers turn out to spend much more they originally plan to. What’s more, due to a large product portfolio, the market leaders are also targeting a bigger customer segmentation. They not only have individual customers but also can work directly with big business customers such as restaurants, companies, hotels and so on.

In addition to a wide product portfolio and valuable brand equities, these great corporations, over the years, have collected enormous customers’ information. When adopting the information properly, the companies are able to catch the major customers’ need and preference, to design better customer relationship management strategies, and to keep their strong position in the market.

While the strong finance ability, brand equity, years of experience and customer information are all great advantage of the big corporations, since these giants sell the same products sold to people all over the world, it is hard for them to provide customized products to customers. In other word, for customers who are looking for products that can highlight their special taste, the giant corporations who manufacture thousands of products based on solely one model may not be good choices.

Research on PilLovetalk

5

Even the market leaders are strong in many aspects, there are still great room for the second type of categories to compete. Meanwhile, the market is changing and there are different companies with different business models that are getting momentum (Nichols, 2015). Among the numerous competitors of the second category, there are some competitors operate with a similar model with pilLovetalk. Thus, they are the major threat to pilLovetalk. For example, Décor Market, an online retail boutique which founded in 2015 is also a home products supplier. It is designed to provide all things essential for a home. (Decor Market, n.d.) A wide product portfolio and competitive pricing are the key competitive advantage of it. Meanwhile, the product portfolio is much wider than pilLovertalk’s as Décor Market also sells furniture. In addition to online retail boutiques, pilLovetalk also faces strong competition from giant online retailer such as Walmart, Amazon, through which potential customers are able to select the products they want from thousands of manufacturers. While the convenience to a vast number of products provide the potential customers with more choices, it also causes customers a lot more time to choose an ideal product. In other words, the more choices among similar products, the more time spent.

c) Corporation Different from most of its competitors, pilLovetalk is a small online retailer boutique which

provides products with a special type of design which aims to inspire customers while improving their living environment. The key advantage of pilLovetalk is not the products themselves but the messages that the founder wants to deliver through the products.

On the official webpage of pilLovetalk, potential customers can not only choose products, but also read the founder’s blog to know her personal life and find out some ways to get out from a life full of pressure or turn to a positive attitude even facing some difficulties in life. While using the products from pilLovetalk, the customers can not only make their living environment look better but also get spiritual support from the design of the products. To some point, the products from pilLovetalk are inspirational instead of merely functional.

In addition to business strategy and operation principle, the company currently faces a problem of limited workforce. Currently, the key manage team of the company only has one person, namely, the founder, Vivien Francis. As a result, the company not only needs to find out better business strategies but also look for more partners to work together to make the company better.

B. 4P analysis a) Product Aiming to inspire customers to hold a positive attitude towards life and targeting at women,

pilLovetalk provides different types of home products such as mugs, aprons, cutting boards, pillows, totes, pet products and so on with a unique design combing both beautiful decorative patterns and inspiring messages.

The products are displayed on the online shop and are categorized by two different sequences. One sequence is the traditional sequence which categorizes products by function. Another sequence, closely related with the core concept of the products, categorizes products by the message they deliver.

According to Vivien Francis, the initial drive of establishing pilLovetalk was to deliver the messages to encourage more and more people to deepen their faith, self-love, and love for life. Therefore, the products of pilLovetalk are not only to meet customers’ functional need but also to meet their spiritual desire. By decorating home with pilLovetalk’s products, the customers are surrounded with words and slogans full of power.

b) Price

Research on PilLovetalk

6

The prices of the products of pilLovetalk are comparably cheap and affordable for its targeted customers. For the similar types of products, the prices of pilLovetalk are lower than those of IKEA and ZARA Home. Since the targeted customers are usually educated with a stable work, the prices of pilLovetalk won’t drive them away.

For a startup with limited resources and brand equity, the price is suitable and customer friendly.

c) Place PilLovetalk is an online retail boutique. On the current stage, pilLovetalk only sells products

through its website. However, it is also looking for wholesalers to expand its market exposure. Currently, the company has limited orders, the self-owned online shop can help the company to get hold of the first-hand information about its customers.

Yet, for a startup who sells products within a super competitive market, the current market channel is far from enough for the future development of the company. Even though the products have a moving story behind and the prices are competitive compared with the price of those big names, pilLovetalk doesn’t have enough exposure to its targeted customers. Meanwhile, since pilLovetalk provides many different products with different designs, the lack of sells channel will cause the company to waste a lot of money.

d) Promotion Currently, there are no discount offered from the website. Every product listed on the website is

sold at its normal price. While if the company has a large customer base, a discount activity can help the company to largely increase its sales in a short period of time. However, currently since the online shop doesn’t have a lot of customers, it is not necessary for the company to organize great discount activities. Meanwhile, since the image of the company is more about spiritual energy, frequent discount activities will change the message of the company. Although the company doesn’t operate any discount activities to its potential customers, it promotes the core concept of the products through blogs and introduction page from the website.

C. Business Performance Analysis As a startup company, the income of pilLovetalk is highly fluctuant as the following chart suggests. There is currently no specific pattern of the monthly revenue of the company. However, for a startup, the revenue seems to be too small to have a positive forecast for the future of the company.

2017 monthly income 2016 monthly income Growth Rate Dec 502.13 1814.65 -72% Nov 707.41 1913.3 -63% Oct 1598.97 5938.8 -73% Sep 528.92 566.7 -7%

Aug 205.47 1106.1 -81% Jul 420.74 19.95 2009% Jun 976.72 59.85 1532% May 1352.58 320 323% Apr 493.13 N/A N/A Mar 1245.33 N/A N/A Feb 154.93 N/A N/A Jan 69.98 N/A N/A

Research on PilLovetalk

7

The above sheet listed the monthly revenue of pilLovetalk. According to the founder of the company, most of the revenue are generated through pillows and pillowcases.

From the sheet, it is obvious that the company didn't run well at the latter half of 2017 as the sales decreased significantly.

The revenue of pilLovetalk is violently changing every month and the main trend of the income is decreasing. Meanwhile, there isn’t any specific trend behind the fluctuation. However, considering the low unit price of the products of pilLovetalk, the fluctuation may be merely caused by the unstable number of orders received every month. Therefore, the company should spend more effort in identifying ways to increase sales. Meanwhile, according to the founders of the company, the current cost of company is much higher than the revenue. In other words, the current orders are so little that they are unable to cover the operation spending of the company. To be honest, the current company performance is terribly poor. The company should take efforts in finding solutions to change the situation.

Part IV Market Analysis In this part, I will adopt Porter 5 Forces Analysis and SWOT to analyze the current market situation and pilLovetalk’s current position.

A. Porter’s 5 Forces Analysis Porter’s 5 Forces is a useful model to identify and analyze the main competitive forces the scope

an industry. (Investopedia, n.d.) I will show the weakness and strength of the industry through this analysis.

a) Competition in the Industry As mentioned in the competitor analysis in the last part of this research, the home décor market

is full with countless companies. As a result, it is hard for any single company to totally change the market picture or the market trend.

Usually, the more competitors, the lesser the power of a company. In addition, when the competitive rivalry is low, a company has more freedom to achieve its goals (Investopedia, n.d.).

Research on PilLovetalk

8

Considering the great quantity of suppliers who provide customers with products with similar functions even at similar price, the power of any individual company is low in the market. For pilLovetalk, it is free to try different methodologies to boost its sales and profits.

b) Potential of New Entrants into an Industry Although it may take great investment for companies to sell furniture at big stores, the barrier

for an entrepreneur to sell pillows, mugs and other home décor with small cost is much lower. Therefore, the potential of new entrants is very high due to the low entry barrier. As a result,

during the development stage, pilLovetalk needs to keep an eye on any new entrants who follow their designs and ideas. It is highly likely that their business idea may be copied by someone else if the business proved to be successful.

c) Power of Suppliers The suppliers of the home décor market are mainly textures material suppliers. The power of

the suppliers is low as there are great number of suppliers available. Meanwhile, thanks to the globalization, people can purchase material from all over the world. Due to the difference in labor cost, even the local suppliers increase their prices, the customers can look for new suppliers from other countries. For example, there are famous B2B platform such as 1688, Amazon, Made in China and many other online platforms that list all the potential suppliers from different countries.

d) Power of Customers The power of customers is closely related with number of buyers a company has. The less

customer, the stronger the power of customers (Investopedia, n.d.). Currently, pilLovetalk has a very low customer base. Therefore, the customers have strong power. Meanwhile, due to great amount of competitors within the industry, the switch cost of the customers of pilLovetalk is also low.

e) Threat of Substitutes Although there are countless substitutions within the industry, it is hard for customers to find

something to substitute home décor since customers will always need pillows, beds, mugs and many other home products in their daily life nowadays. As long as the customers are not too poor to purchase the products, they need these home products to meet their basic need.

Therefore, the threat of substitutes from outside the industry is low and pilLovetalk can spend more efforts into other forces.

B. SWOT Analysis

SWOT analysis is one of the most popular frameworks to analyze the overall strategic position and environment of business (Management Study Guide, n.d.) . In this research, I adopt the SWOT analysis as a support in finding suitable strategies for pilLovetalk.

a) Strength Competing in an overcrowded industry with thousands of companies providing homogeneous

products, pilLovetalk’s main strength comes from its special design and the unique message behind each product. Meanwhile, the inspiring and moving stories behind the founder also add many value on the products themselves. Therefore, the company has a strong appeal to those who are seeking positive energy to support them going through darkness of life.

Instead of plainly selling functional products, pilLovetalk is also sending messages to its customers.

Research on PilLovetalk

9

b) Weakness The biggest weakness of the company currently is its weak financial performance. As mentioned

above, the company currently can’t generate enough revenue to breakeven. In addition to the poor business performance, the company also seriously lack brand exposure. The company relies totally on its website. However, the channel is hard to help the company to reach to a lot of customers since it requires customers to search it themselves while most potential customers don't even know the existence of the company.

c) Opportunity The home décor industry was once dominated by big-box retailers such as IKEA. However, it is

now undergoing a sea change since potential customers are receiving endless inspiration and access through tools like Pinterest and design blogs (Nichols, 2015). Therefore, in addition to the former market giants, customers are now looking for more choices.

Under such a trend, pilLovetalk can establish its brand image with its unique design and spread its brand messages through different popular social media.

Meanwhile, according to Business Wire, a market research company, the global online home décor market is estimated to grow at a CAGR of 19.45% during the period 2016-2020 (Business Wire, 2016). Therefore, there are still great market in the industry.

d) Threat As stated in the previous part, the home décor market is full of competitors and the low entry

barrier makes the market available to almost every entrepreneur. Therefore, if pilLovetalk can’t grow quickly, it is highly possible that some other new market entrant with similar business idea but much stronger business resources take off pilLovetalk’s customers.

Part V Strategy Recommendation The poor business performance indicates that the current business strategy of pilLovetalk is not helpful at all. Considering the market situation and the company’s specific condition, I here come up with two recommendations for pilLovetalk to consider.

A. Enhance Market Exposure a) Reason Currently, the company gets few orders from its sole business channel, the website. Judged

from the outcome, clearly that the current level of market exposure is far from enough. Actions should be adopted to increase the market exposure so that there will be more potential customers know the products and knowing the products is the first step for potential customers to finally purchase one.

b) Detailed Method There are many different ways to increase market exposure and the varied methods can be

categorized as two types. One is advertisement and another is business channels. Since there are many home décor online retailer boutiques in the market, when customers

search home décor online, there are a lot of different companies competing with each other. To have a higher possibility to be found by potential customers, pilLovetalk can purchase only service such as page ranking and digital marketing service. Therefore, when customers who show interest in purchasing home décor or anything that is spiritual, they may see an online advertisement on the page which lead them to pilLovetalk’s website. In addition, as mentioned above, Pinterest and many blogs are influencing

Research on PilLovetalk

10

the market. Thus, pilLovetalk can also spend efforts in operating accounts on these social media to attract potential customers.

The second category of methods is to increase business channels. In addition to the online shop, pilLovetalk can work with offline retailers such as supermarkets, chain retailer stores and etc. Since the products are designed to inspire people to deepen their faith toward life, pilLovetalk can also try to work with colleges, churches or any organizations that also aim to educate people, enlighten people and inspire people.

Only when the people who are likely to purchase the products know the existence of pilLovetalk, there is possibility for them to order products.

B. Target at Young Chinese Generation a) Reason As mentioned at Part II of the research, pilLovetalk targets at women aged around 30 to 57.

Considering the products function and the messages behind the products, the current targeted customer profile is too limited as the products of pilLovetalk can meet demand for more than the current targeted customer.

Therefore, if the current targeted customers are hard to reach, the company can try to enlarge its targeted customer base as a way to find more potential customers. Considering the reachability, I suggest pilLovetalk to try to target at the young Asian Generation as a way to quickly increase the number of orders.

b) Method The young Chinese generations are Chinese international students and people who graduated

and work here. Their family are rich and wealthy so they have enough living expenses. These people want to look fancy and fashion. The social media they use mostly are Instagram and Wechat. Most of them rent apartments or houses with friends, so they can have demand to look for home décor. Meanwhile, they want to make the houses warm, fancy, cool, special, and attractive.

To attract them, pilLovetalk can use the most popular social network among Chinese people, WeChat, to advertise its products. On January of 2015, the number of registered WeChat accounts has reached 1.12 billion, with 440 million monthly active users. Among the users, around half are aged 20 to 29 and the 30-39 age group is the second largest (Xiang, 2015).

On WeChat, users can share their life moments with friends and there are a lot of different marketing campaign are held through WeChat. In addition, the WeChat Official Account is also a useful tool to communicate with both customers and potential customers.

To quickly test the market, I suggest pilLovetalk to hire one or two Chinese people to set up a WeChat Offical Account and also design an incentive mechanism for the audience to share the information and the stories of the products of pilLovetalk on their WeChat moments.

The young Chinese international students, living far away from their hometown, usually have a strong connection with their compatriots. As a result, if the products of pilLovetalk can receive the appreciation of a small group of Chinese people, the information will be soon widely spread.

The method is worth test as the cost is low, much lower than the cost of purchasing advertisement services.

C. Updating Designs Quickly and Follow the Trends a) Reason

The industry is highly competitive. Products and designs becomes out of date quickly. Meanwhile, since the most targeting customers are young people. Therefore, new and fashion styles will better catch their attention.

Research on PilLovetalk

11

b) Method

PilLovetalk can use some short but trendy words to express positive life attitude and life style to its customers. Meanwhile, the designer should always follow the hottest topics and fashion trend so that the products they design will be more attractive.

Part VI Risk Analysis Judged by the company’s current business performance, it is clear that if the company doesn't

take any action, it will unable to make any profit. Therefore, new strategy should be taken. However, there are risk related.

First, as shown on the graph above, there is not clear pattern of the change of monthly revenue currently. Therefore, if the company purchases advertisement, it is hard to make sure that if the added revenue can cover the cost.

Secondly, there is still potential that if new business channels can’t bring pilLovetalk enough new revenue. Meanwhile, if the company cooperates with new business channels, it has to prepare more products in advance. There is potential that the cost will increase.

Considering the above risks, the company should test recommendations one by one according to the potential cost generated. Since hiring part-time Chinese employees to help use the WeChat to sell products seems to be the cheapest method, the company had better try WeChat first.

Part VII Conclusion PilLovetalk is a startup company providing home products with inspiring slogans. Currently, the company doesn’t run well due to lack of market exposure and improper business strategy. To help the company boost sales, I recommend it to try advertisement, cooperate with offline channel, target at young Chinese through WeChat and update products quickly. Considering the cost and potential gain, I suggest pilLovetalk to try WeChat first.

Works Cited Business Wire. (2016, April 26). Global Online Home Decor Market Growth of 19.45% CAGR by 2020 -

Analysis, Technologies & Forecasts Report 2016-2020 - Key Vendors: Amazon, Bed Bath & Beyond, IKEA - Research and Markets. Retrieved June 23, 2018, from Business Wire: https://www.businesswire.com/news/home/20160426006068/en/Global-Online-Home-Decor-Market-Growth-19.45

Decor Market. (n.d.). About US. Retrieved June 20, 2018, from Decor Market: https://decormarket.com/about-decor-market/

Francis, V. (n.d.). About Us. Retrieved June 21, 2018, from pilLovetalk: https://dev-pilLovetalk.pantheonsite.io/about-us/

Investopedia. (n.d.). Porter's 5 Forces. Retrieved June 24, 2018, from Investopedia: https://www.investopedia.com/terms/p/porter.asp

Management Study Guide. (n.d.). SWOT Analysis - Definition, Advantages and Limitations. Retrieved June 22, 2018, from https://www.managementstudyguide.com/swot-analysis.htm

Nichols, C. (2015, January 29). 7 Home Decor Startup Trends to Watch. Retrieved June 24, 2018, from Entrepreneur: https://www.entrepreneur.com/article/242163

Research on PilLovetalk

12

Web Analytics Consultants Association. (n.d.). 3C’s Model (3C analysis business model ). Retrieved June 23, 2018, from https://www.waca.associates/en/web-analytics-dictionary/3cs-model/

Xiang, T. (2015, Jan 22). WeChat Reaches 1.1B Registered Accounts, with 440M Regular Users . Retrieved June 23, 2018, from Technode: https://technode.com/2015/01/22/wechat-reaches-1-1b-registered-accounts-440m-mau/