Nature's Candy is beginning its first year of operation. NC recognizes that marketing activities are critical to the success and profitability of the business.
NC offers a wide selection of private label naturopathic and homeopathic nutritional supplements. The basic market need is for a wide selection of reasonably priced, consistent-quality supplements.
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Nature's Candy has collected information regarding the common attributes of the prized customers. This information will be used to determine the specific needs of the customers and the best method for communication with the targeted segments.
Nature's Candy is providing its customers with a wide selection of private label supplements. NC seeks to fulfill the following benefits that are important to their prized customers.
- Selection: Customers demand a wide selection so all of their supplementary needs can be met by one store.
- Quality: There are hundreds of different brands selling supplements within the U.S. Having consistently high-quality products is important because supplements are not government regulated and vary widely in quality and strength.
- Customer Service: Consumers want to patronize companies that have customer service as a priority. NC will be using Amazon.com and L.L. Bean as industry benchmarks.
The market trend for supplements has seen a recent increase in sales as well as an expansion of product offerings. This trend is fueled by several factors:
- An increase in holistic medicine relative to the traditional western view of medicine.
- An increase in people's desire to monitor/manage their health. This can be seen by the increase in fitness club memberships over the last five years.
The market for vitamins and nutritional supplements has grown to over $6.5 billion annually. Herbal sales alone are growing by 20% per year. This market is lead by the aging Baby Boomers who are concerned with their mortality. Also, there has been a paradigm shift of perception of nutritional supplements. Homeopathic and naturopathic products are seen as normal, they are no longer outliers in society. Additionally, positive medical results from major studies have further legitimized these products.
The nutritional supplement market is a semi-mature market characterized by high-growth rates, medium barriers to entry, and a few large competitors. Despite the competition in the market, many companies have reported annual growth levels of 30%. The market leaders are as follows:
- General Nutritional Companies, Inc. (GNC) (website: www.gnc.com): This company is a nationwide specialty retailer of vitamins, minerals, and sports nutrition supplements. With over 3,000 stores, GNC generated $1.19 billion in 2000.
- Nature's Sunshine Products, Inc. (website: www.naturessunshine.com) : Nature's manufactures and markets a variety of health supplements. This multi-level marketing company had 2000 revenues of approximately $370 million.
- Rexall Sundown, Inc. (website: www.rexallsundown.com): Rexall develops, manufactures, markets and sells vitamins, nutritional supplements, and consumer health products through retailers, independent distributors, and mail order. Rexall had 2000 revenues of approximately $370 million.
- International Vitamin Company, Inc.: IVC manufactures, packages, sells, and distributes private label vitamins and nutritional supplements to drug stores, supermarkets and health food stores. IVC had revenues of $107 million in 2000.
The primary channels of distribution in this market are:
- Mass market retailers (Fred Meyer, Rite Aide).
- Direct sales organizations.
- Health food stores (GNC).
- Mail order catalogs and the Internet.
The following SWOT analysis captures the key strengths and weaknesses within the company and describes the opportunities and threats facing NC.
- Strong relationships with private label manufacturers that provide high-quality supplements and on-time deliveries.
- Efficient operations providing NC with above-average margins.
- The ability to scale rapidly as sales increase.
- The lack of brand awareness due to the fact that NC is a start-up company with only an Internet presence, no real store front.
- The proven strategies for developing online visibility are still being tested, it is currently trial and error.
- An efficient business model within a growing industry.
- The ability to service the entire country.
- Provide differentiation through enhanced convenience and service attributes.
- General trepidation of Internet-based business.
- Increased government regulation for supplements.
- Aggressive competition from U.S., Canadian, and other markets.
Within the mass-market retailer channel, the three primary vitamin and supplement product categories are national brands, broad-line brands, and private label brands. The national and broad-line brands consist of 60% of the domestic market, while the private label brands account for the remaining 40% of the market.
- Examples: Centrum, One-A-Day.
- Generally do not provide a full line of vitamins or other supplements.
- The product formulas are conservative and generic in nature.
- Examples: Rexall Sundown, GNC's Nature's Fingerprint, Country Life.
- Full lines of products under one brand.
- This is the market segment where most of the product development and innovation occurs.
- Stronger potencies and cutting-edge ingredients.
- Highest price.
Private Label Products
- Examples: NatureMed.
- Under retailer's name.
- Smaller line of products than broad-line brands.
- Manufactured by a third party.
- More conservative potencies than broad-line.
- Tend to be the cheapest.
Nature's Candy will market and sell private label (manufactured by a company that places the retailer's name on the packaging) naturopathic homeopathic dietary supplements to individual consumers via the Internet. These products will include ginseng, ginkoba, and various antioxidants. After year one, additional products will be offered.
Keys to Success
The keys to success are simple to articulate but challenging to achieve:
- Outstanding customer service.
- Consistently highest quality products.
- Efficient operations.
Nature's Candy is still in the speculative stages as an Internet-based retailer. Its critical issue is to continue to take a modest fiscal approach. While its business model allows for rapid scalability, the business should be expanded only because it is necessary to serve the customers with a high level of attention and service that they are/should be accustomed to.
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