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'How We Compete in the Carpet Sector' Extract from CPT Marketing…
'How We Compete in the Carpet Sector'
Extract from CPT Marketing Module
By client
Retail
: 59% (2021) revenue from network of retailers
We don't sell direct to homeowners due to the cost required to manage this part of the value chain
Despite move to online shopping (2020), no plans to develop digital retail
Online sales are unsuitable for carpet retail as homeowners prefer to see feel purchases before buying
Commercial
15% (2021) revenue
WWL not normally involved in fitting as commercial clients usually sort themselves
Need to be competitive over price to win commercial clients, therefore margins tend to be lower
But, high volume so opportunities for cost savings efficiencies, and transport costs saved due to single location
Offers 60-90 days credit
Competitive advantage:
Reputation for quality and reliability of supply and service
Logistics and warehouse processes - for similar price WWL offers additional benefits of off-site storage and on-time delivery.
Bespoke
26% (2021) revenue
System:
WWL design team works with client to develop unique designs
Manu, supplied and fitted by WWL in house
Client's expectations being managed & met are critical to the success of this work - relies on word of mouth & reputation
Credit period hugely varied - sometime clients take a long time to pay, usually roughly in line with contract delivery
Bespoke
:
Order size and period
SMALL
Ave revenue/ order £50k
No of orders 35
Completion 2-4 months
MEDIUM
Ave revenue/ order: £150k
No of orders 14
Completion 3-6 months
LARGE
Ave revenue / order: £250k
No of orders 2
Typical completion 5-12 months
Repeat clients:
Approx. 50% of small and medium orders are from repeat clients
Both large clients have given regular levels of repeat business
Bespoke
Mark up:
Priced @ high mark up due to uncertainties taken on by nature of work and also reflects the high added value.
Bespoke
: Risk and uncertainty
Unusual sizes - high level of wastage (25%) due to fitting into non standard spaces
Some contracts require WWL to take responsibility for removal & disposal of old end of life carpet
Premium service @ premium price - but customers can be demanding and have high expectations re communications, flexibility, changes to delivery dates etc.
Can cause delays, extra costs, project management costs
New vs returning client: new clients costs can rise unexpectedly, whereas repeat clients are easier to cost out predictably
Evaluating new contracts:
Scenario planning
Sensitivity analysis of key variables
Following example in
Ex 9
:red_flag:
Product mix :pencil2:
Strongly influenced by
bespoke design clients
:champagne: Most 100% wool carpets and rugs are sold as part of bespoke design contracts
Unique design of rugs to complement the carpets
strongly influenced by individual client taste
Typical 2021 bespoke contract:
Product portfolio ratios (of 26%)
80:20 carpet
14%
100% wool
8%
Rugs
4%
In absence of other info, consider following 2021 assumption of needs for new bespoke client contract when costing out