ARMARIUM: LUXURY FASHION BRANDS FOR RENT Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Armarium: Luxury Fashion Brands For Rent Case Solution

Section 3: Challenges in dealing with Threats

Scaling Challenges

Armarium experiences several challenges in dealing with the threats outlined above. The company had already started its 2016 pace of revenue by February 2017. By 2019, profitability had been hoped for, however the business model had to be tweaked and effectively implemented to achieve success. By 2017, Armarium anticipated achieving five key objectives. Firstly, the company aimed to build on the demand side with an emphasis on the best and most effective client acquisition pipeline, using customer research, marketing testing, and pop-up shops. Secondly, Armarium aimed to develop the infrastructure of e-commerce in order to increase the efficiency of product rentals and the sale of goods. Thirdly, the company aimed to provide additional online branding of styling central services and develop the Armarium brand. Besides, Armarium aimed to improve the data collection and review of the company's consumer relationships as well as to boost the brand partners' offerings and values.

To date, the New York showroom has produced more than half of the company's profits. Due to the high-cost difference across channels and the capital and operational costs associated with running physical stores, scaling Armarium has focused on being able to serve most customers via online channels. The website and mobile app costs have to date, been higher than the team expected. The organization has encountered low conversion rates, despite this high-touch digital experience. Many users arrived online, but few converted to users. The firm had 15,000 website sessions monthly with a 0.17% conversion rate. On average, visitors spent 6 minutes per session on the web and viewed 5.8 posts. Moreover, the app was downloaded 25,000 times, with a monthly conversion of 2.7 percent. It was difficult to bring users to the web and the app. The luxury image of the business and the ties with designers required restrictions.

Facebook ads were tried, and Google Search ads were paid for by the company, creating a high investment return of 330 percent. Armarium continually invested in content marketing through its ARMI400 influences. The ARMI400 influence business continued to invest in content marketing. It used its 36,000-consumer email list to involve prospects. The result was an open rate of 15 percent and a conversion rate of 3 percent. A test with Instagram was misleading, because even after 13,000 followers were acquired for the brand; it led to the low engagement levels. The business experimented on the price front with online sales offering customers 20% off. The most impressive outcomes were derived from earned media.

The total expense of the 2016 pop up shops included an average of $425 in customer acquisition costs. In 2017, nine pop-up stores were scheduled for operations. It widened its horizons to include the Kentucky Derby in Louisville, Kentucky; the Cotton Carnival in Memphis, Tennessee; and the Swan Ball in Nashville, Tennessee. However, these places were not well served by luxury shops. It collaborated with luxury shops in these markets to host events in their stores. The founders, however, wondered if Armarium’s growth warranted a bigger and more robust physical footprint. The team was wondering if they should try a similar shop- in-a-shop channel as they were inspired by Rent the Runway’s display of Neiman Marcus.

The team also pondered whether to open their showrooms in Los Angeles and other major markets in the U.S. Additionally, the team tried to find cross-selling solutions through collaborations with traditional online retailers. During the test, Armarium customers could finish their look through a collaboration with Net-a-Porter, allowing them to set three product proposals — handbags, jeweler, accessories, and shoes. To buy products in the online store of Net-a-Porter, the shopper clicked a link. A 10% profit on all products sold was given to Armarium; the Net-a-Porter shoppers spent an average of $950. However, the founders were shocked after hearing some critical feedback they got for the test. They stated: “It was the first time that you’ve seen a shared economy platform merge with a full-price retailer. I thought it was ground-breaking. It shows that the sharing economy and full-price retail/e-commerce can work to complement each other, mixing high and low and bought and borrowed pieces. But everyone was incredulous that I was willing to drive customers off of our site. Armarium was fielding cross-selling requests from the e-commerce arms of Far-fetch, Cavalli, Ferraro, and Capitol. The team needed to decide: Should it expand its ‘complete the look’ effort beyond Net-a-Porter?”

Getting Ready to Raise Capital

When the team brought the Marches newcomers into the Oscars event in Los Angeles, they realized that they had to find time to talk about financing. They felt it was important to expand their company by $3 million because they needed massive capital infusions in marketing, infrastructure, inventory, and staff budgets. It was time to provide some extra support with only seven full-time workers. However, the company needed to determine how to devote its capital to attract and maintain its customers before it could request an incremental financing from its investors. The company struggled to see whether it could continue targeting HENRYs, switch to HNWs, or try to pursue both. The founders discovered that they had sold brand partners to draw HENRYs. In company’s conferences, the founders assured they would “procure the future luxury client for the mega-retailers and their brands.

They further stated: “we are not cultivating a rental customer; we are cultivating a shopper who will move on from rentals to buying at full price once she is introduced to the brands.” Often, they had to fix their stock problems. By March 2017, a shipment accounted for 52 percent of the Armarium inventory. Upcoming choices comprised three main factors. Firstly, it comprised the purchasing of the last season stock at a substantial discount. Secondly, it comprised the purchasing of items at a minor discount for four to six weeks in the season. Finally, it comprised the rental of floor samples from a manufacturer, enabling Armarium to return items at the end of a pre-specified rental period. Overall, they needed to strengthen their marketing plan, including decision-making on the distribution plan as well as the promotional strategy.

Section 4: Alternative solutions

Corporate level strategy: New product line

To be successful in the long run, the company needs to work on its corporate-level strategy, which requires a transformational decision by the high-level management. The decision would be to increase the cost of development as the customers are increasing in the market.Therefore, fulfilling the demands of a huge number of customers,require extensive investments. Moreover, the major benefit which the company will obtain from the increasing cost of development to introduce a new product line related to healthy food and beverages,is the competitive advantage that will drive from distinguishing the products from their competitors in the market.The major benefits of introducing a new product line are the inability of the company to increase its market share by targeting the employees who are health conscious. The company will be perceived to be more concerned for society and its health locally as well as internationally. However, this would reflect significant benefits to the company in the long-run.

The other approach is to hire new skilled employees to fulfil the need of increasing operations. However, this is a costly and time-consuming approach. Therefore, this approach should be implemented in the long-term to increase the efficiency of operations and permanent effects in the long-run.Besides that, the company is facing threats based on the prediction that customers will revoke their subscription, therefore, it must be considered by the functional level managers and report to the corporate level managers to highlight the intensity of the issue and its consequences on the performance of the company. The company should continue the provision of high quality as well as original content to its consumers.

Business level strategy: Acquisition of companies producing healthy products

However, the company is performing well but still, it needs to work on business strategy for sustainable outcomes in the coming future. For adopting and implementing a business-level Strategy, the company needs to invest in new brands.Therefore, another alternative to increase the market share is the acquisition of companies that offer healthy products so that the market share could have an increase. However, the company will have to bear the acquisition cost. This will require the company to make extensive investments in developments to evaluate the chances of success of the acquisition. If this strategy is implemented successfully, then new customers will be attracted to the new product(s).
Besides that, development in existing products should not be overlooked and there must be a frequent evaluation of current markets to track any changes in the demands of consumers.

By acquiring the company;Armarium can take benefit from the non-occurrence ofthe huge cost of research and development that would take place if the company produces the product itself. Another benefit for the company is that it does not need to work on marketing strategies as the product already hasan existing customer basein the market. Besides that, the public having extreme health concerns would stop criticizing the company................

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ARMARIUM: LUXURY FASHION BRANDS FOR RENT Harvard Case Solution & Analysis