Flipflops Market in the Philippines Essay

Introduction â€Å"Slip into comfortability, on and off the shore† Offshore entered Philippine flip-flop industry in 2003 as an all Filipino-designed palm beach slippers. Amazed with Philippine beaches, Anton Ng dreamt of building a product that will embody these beautiful beaches and will be shared by every Filipinos and the rest of the world. The Filipino-Chinese businessman wanted to offer a pair of slippers that would define comfortability and durability. He named the slippers Offshore, envisioning that these are the pair of slippers that would be worn on and off the shore. â€Å"Philippines is popular around the world for its beautiful beaches and vacation spots, Offshore flip-flops are the perfect companion when you are taking the time off or when you are offshore,† he said. The designing process is crucial for the company whose aim is to showcase the essence of attractive Philippine beaches and the Filipino spirit in whole. Ng believes in the talent and skills of Filipino graphic artists. Offshore hires nimble young designers who would create lively dynamic flip-flop prints. A rigorous selection process is done from all available designs every season where offshore releases a new set of flip-flop collection. The collection theme and color scheme should match the current season trends and styles. A couple of market tests are done across different Asian countries, before mass producing a new design in throughout Asia. After observing consumer responses to the sample slippers, a final selection of successful flip-flop designs will be done. Offshore prods rigorous quality control process in its production line to minimize the volume of product defects and returns. Given its stern quality inspection, it takes a couple of weeks to produce a batch of slippers. The ultimate goal of the company is to provide comfy and highly durable slippers at an affordable price to every Filipino and to the rest of Asia. The company achieves low costs production by acquiring all raw materials  form China and outsourcing the production in China, as well. Although, the designs and prints are purely Filipino, the flip-flop itself is 100% China-made in terms of materials and labor. By doing so, Offshore has competitive in pricing. In fact, Offshore is one of the cheapest brands in department stores. The products have strong focus in Filipino design for everyday casual wear that would complement current fashion trends. However, the local market has perceived Offshore as low-quality china brand. In addition, the company failed to convey its all-Filipino designed-message to the public. Industry Background â€Å"We have to admit that the imported brands of flip-flops paved the way to the re-entry of flip-flops in the footwear business but it doesn’t mean that a Filipino brand can’t join the race. With Offshore, we are hoping that by creating our own designs and even Filipino-inspired ones, we are not only making quality flip-flops, but we are also giving it back to our country. Our goal is simple and straightforward, a pair of Offshore for every Filipino†, said Ng. The word tsinelas (slippers) originated from the Spanish word chinela, traditional Filipino slippers are made from Abaka. It’s has a simple sole with Y-shaped strap. Slippers are household commodities for Filipinos regardless of economic class. Now it’s no longer called tsinelas or slippers, rather flipflops. It can be made from a wide range of materials such as leather, rubber, plastic and even textile. In the old days the most popular local brands of tsinelas were Spartan, Beach Walk, Rambo, and Islander. Each of them has a strong market positioning. Spartan is the durable brand, Beach Walk is soft and comfortable, Rambo has its very thick sole, while Islander is the classy type. The beginning of 2003 marked the success for Brazilian flipflop brands such as today’s market leader Havaianas followed by Ipanema. These brands revolutionized the way Filipinos wear slippers. The trendy, sleek, chic  designs of these slippers immediately made a buzz, dominating the local slipper industry. On the other hand, local footwear industry has experienced 14% decline in sales last year. The Products Offshore has three sets of collections for each season. These are for kids, teens and men. Kids Sizes range from 30-33 fitting 4-8 year old young toddlers. The kids’ Offshore slippers however are designed for only for boys. Teens Offshore offers three slipper designs for teens 1) Plain colored slippers 2) Pastel colored with stripe and dotted prints 3) Flowery prints Men 1) Single strap rubber soles 2) Traditional Y-strap rubber soles with beach designs 3) Y-strap in sports prints and designs The Competition Havaianas is a renowned global brand of slippers originating from Brazil about 50 years ago. The brand is known for its special rubber formula use for producing high quality, smooth, sleek and durable flipflops. It redefined traditional flipflop appearance by offering a wide range of designs from florals to glow in the dark prints. Through time, Havaianas has built a strong brand image throughout the world. People from different walks of life have been spotted wearing this pair of slippers, from football  superstar David Beckham to the royalties like Queen Silvia of Sweden. Hollywood celebrities like Jennifer Aniston, Tom Cruise among others seem fond on havstoo. Havaianas entered the Philippines market in 2003. In its first 3 years, the brand sold one million pairs thereby cementing its place in the hearts and ‘soles’ of the Filipinos. ‘All Flip-Flops’ a store devoted solely to selling Havaianas merchandise opened in the Philippines in 2006. Following the success of the first store, 19 more All Flip-Flops stores were opened. Ipanema entered the Philippine market in 2001. Currently, this is the top two brand in the local market. Like Havaianas, Ipanema is also a Brazilian-made slippers way back 1971. It is perceived as flipflops exclusive for women. Although the brand offers men flipflops, majority of its market are women. The sales of flipflops for women even increased after launching Gisele Bundchen collection this year. Gisele Bundchen is one of the world’s top model known for her socio-civic activities. The collection design redefines rubber flipflops designs similar to sandals. The sophisticated colors and elegant cuts and designs made Ipanema look glamorous. It is second best-selling flipflop brand now, but sales are predicted to increase next year, outnumbering Havaianas sales. Banana Peel is the most successful local flipflop brand in the Philippines. It was established in the year 2002. It is known to be the chic and trendy flip flops with smooth rubber soles like Banana cut in rectangular shapes. It places itself in the market as functional and comfortable flipflop. In 2004, the first Banana Peel concept store opened in SM malls, being the first ever flipflop store in the country. As such Banana Peel has strong distribution chains; it is the country’s largest specialty retailer of flip flops having 23 branches nationwide and still growing. Also, it has strong local marketing campaigns having popular actor John Lloyd Cruz and actress Maja Salvador as its endorsers. Market Share According to managing director of Al Amizade Marketing Inc. the bulk of flipflop market are women buyers, accounting for 70 percent; men buyers at 20 percent and the children market at 10 percent. In addition, the flipflops sales for men have grown by last year by 10%. Market Distribution Some well-known footwear companies set-up their own concept stores and rent a private space inside malls and distribute their products having a bunch of their own sales personnels for the customers’ an exclusive buying experience. Bulk of the middle and lower-middle class brands are concentrated in department stores, battling each over other rent space in large department stores and malls. Also premium slippers brands have their own space in department stores as well with much bigger space desirable positions. Normally, Havaianas, Dupe and Ipanema are placed near the entrance of the department store with more visibility. While low priced brands are usually located at the side racks of the flipflop section. Channels of Distribution of Footwear Manufacturers/Subcontractors/ Wholesalers/Suppliers Manufacturers/Subcontractors/ Wholesalers/Suppliers Department Stores/Boutiques/Special Stores Department Stores/Boutiques/Special Stores Final Consumers/Buyers Final Consumers/Buyers Current Marketing Strategies Department Store Slipper Brand Currently, Offshore is one of the numerous flipflop brands in local department stores. It has no separate walk-in or concept store. It is placed in the footwear section of the department together with slippers of the same prices, ranging from Php60-750. It is definitely one of the cheapest pair of slippers in the corner in these areas: SM Department Stores and SM Hypermarket Robinson’s Department Stores Metro Gaisano Department Stores in Cebu and Market Market Other Leading Department Stores nationwide. E-commerce Utilization Offshore has set-up its own user-friendly website where photos of all available designs and collection are displayed. Aside from the website, Offshore products may also be purchase from numerous e-business website such as alibaba.com and olx.com. Low Pricing The table shows the pricing comparison of numerous flip-flop brands in SM department store: CASE ANALYSIS Problem Statement Offshore entered the Philippine market, at the same time as giant globally successful Brazilian flip-flop brands, trying to capitalize on low pricing strategy to compete in the saturated market of lower middle class, where there is no clear distinction of among brand names. Furthermore, the brand failed to strengthen its image as an all-Filipino-designed flip-flop, lacking marketing efforts and campaigns to do so. Strengths Offshore have young designers who would create lively dynamic flip-flop prints and produce products every season where it releases a new set of flip-flop collection. The collection theme and color scheme match with the current season trends and styles. This ensures that the product is in line  with the current market trend and taste of its potential clients and customers. Offshore has a strong quality control. A couple of market tests are done across different Asian countries, before mass producing a new design. The rigorous quality control process in its production line minimizes the volume of product defects and returns. It also ensures that the products produced are in top condition/quality with regards to its durability and comfort that it will give to its users. Offshore enjoys low costs of production by acquiring all raw materials and outsourcing the production from China but still maintains good quality products. Weaknesses Offshore has low brand equity because the market is dominated by the Brazilian flip-flop brands as they set the trend for a new image for trendy, sleek, chic designs of these slippers. The company hasn’t done any marketing ads in the past. Another factor is that its brand name â€Å"Offshore† is quite difficult to be recalled and is not easily perceived as a slipper/flip-flop. Opportunities Offshore is a product that is all-Filipino designed and advocates beaches here in our country. This may help in promoting their product to showcase the essence of attractive Philippine beaches and the Filipino spirit in whole. The government implements intensive promotion for tourism. This will likely increase the tourist population and beach goers in our country which may be used by Offshore as an opportunity to communicate their product as the perfect companion when you are taking the time off or when you are offshore. Threats Offshore is highly dependent on its import in China and they are subject to price fluctuations in the said country. Other countries have travel advisory/bans to our country which not only affects the number of tourists in our country but also the movement/travel of goods and services. Target Market Offshore has a broad geographic and demographic target market- from kids to  adult male and female who seeks a pair of slippers/flip-flops as an everyday casual wear that would complement their current fashion trends. It tries to capture intermediate market by producing comfortable and high quality products in much lower prices catering to the normal market. This is troublesome for the customers, since low pricing is attributable to low quality products. Offshore must make up its mind by tapping the right market for its products. Market Segmentation Flipflop styles and design vary according its target market. The market segmentation is based on the lifestyle of the customer just like garments industry. Since flipflops nowadays are not just everyday casual footwear but a fashion statement too. Three market segments can be identified in terms of buying behavior and income levels. The elevated market includes the upper class socio-economic class (SEC) from upper A to upper C demographics. The customers in this segment can afford purchasing luxury items and wth their profligate way of living. This group shops for imported shoes ranging from Php1,000 to Php2,500 a pair in the local retail market. Preference leans towards Brazilian slippers like Havaianas and Ipanema and German brands such as Birdenstock. They frequented concept stores and even online stores. The intermediate market consumers are primarily concerned with the price and comfort of flipflops. They are composed of middle C to upper D demographics of the SEC’s. This group is given high regard to the value of money. Slippers produced for this market are normally of good quality if not excellent, and prices range from Php250 to Php500 a pair. This group purchases in big department stores such as SM and Robinsons. Last category would be the normal market; this group opts to forego quality for price. This composed of low income laborers such as lower D to E socio-economic class. The price points of flipflops for this group are around Php 50-100. They usually buy in local market places and from sidewalk vendors. Current Position Offshore wants to be known not only as a Philippine flip-flop brand but also as casual footwear that offers utmost comfortable mobility and durability. It offers its product at a lower price with the goal of a pair of Offshore for every Filipino. The Y-axis is for the price and the X-axis is the degree of being stylish (right side being most stylish). Stylish meaning that a person buys a good/product to look good in the public. The international brands (Havainas, Ipanema, and Grendha) are perceived to be more stylish with higher prices. The design and appearance of the products are also a big factor of the perception of the market. Crocs being a high price but a little indifferent/middle with being stylish is caused by the current trend and acceptance of the market with closed front slippers. Offshore implements new product design every season to reflect market trends and style but the product is perceived as a low cost and at the left side of being stylish. The Y-axis is for the price and the X-axis is the durability (right side being most durable). The international brands are perceived to be durable due to their marketing effort and communicating to the market that they use special rubber that makes their product more durable. Another notable in the graph is the local brand Islander. For a long period of time, it has captured the title of being durable in the market because of its thick base. Offshore produces good quality products and the production process undergo a strict quality control; but, the low price level associates it as a China brand with low quality. Marketing Mix Product Although Offshore brags of its creative talented team of young Filipino designers, the designs and collection failed to capture the spirit of Filipino culture. Offshore has three sets of collection which all lack distinctive designs that will relive the Philippine beaches and Filipino  tradition. As shown in the pictures above, the collection normally focuses on stripes and floral prints which look normal. These are usual designs for slippers. Price Offshore is priced at a 100php for all categories (kids, men and women). Its price is almost at the lower bound of the prices in the department store which is 60php and way too far from the price of the market leaders. Offshore is cheap while at the same of good quality. The current price level is perceived by the local market as low-quality china brand. Place Currently, Offshore is distributed in popular local department stores, SM, Robinson’s and others. It is placed in the footwear section of the department together with slippers of the same prices, ranging from Php60-750. Promotions Offshore has set-up its own user-friendly website where photos of all available designs and collection are displayed. Offshore products may also be purchased from numerous e-business website such as alibaba.com and olx.com. Recommendations Positioning Statement Offshore shall be the most-preferred choice of flipflops in the C and D markets for its perceived quality as well as its ability to complement everyday casual wear with current fashion trends. Details of Proposed Positioning and Justification Proposed Positioning Having a low price is not bad, and actually it can work to Offshore advantage since more customers shall shift to them as long as they can communicate that they can provide quality flipflops. The only problem is this: their  price is so low that they are more or less on par with those of the China brands or other local brands which are perceived of having low quality. That is why they are perceived by the market the same way as they perceive the former. Thus, we propose for Offshore to slightly increase their prices to distinguish it further from the other local brands. Increasing the price level at 180-220php will lead their market position move slightly higher and will increase attention from potential buyers. These buyers seek to buy items at a significant price level that they consider an item to be stylish. Again, increasing the price level at 180-220php will lead their market position move slightly higher and will change the perception about the product. The price change will change the perception about the product and avoid being associated with China brands or other local brands. Proposed Marketing Mix and Implementation Product The company should try to create its own women collection as women accounts for 70 percent of flipflop buyers. This will greatly increase its potential customers and potential market share. Other product collection should be maintained especially that there is an upward trend for the purchasing behavior of men. The company should continue its new seasonal products to reflect current season trends and styles. They should try to focus on communicating their beach and filipino designs in their product. They could also produce couple designs or paired Offshore to increase/improve the buying process and venture on producing boxes or bags with delicate design for these products. These boxes or bags will serve as the flipflop holders for customers who still wants to be fashionable even if not wearing their flipflops. Price The current prices of Offshore fall within the price range of other not so popular local brands which are perceived to have low quality. Offshore shall therefore increase its price to distinguish itself from these brands while maintaining its affordability versus foreign brands. Slightly increasing the  price to180-220php will communicate product quality rooted to its strong quality control. To justify the increase in price, the product shall be packaged with intricate designed flipflop holders as discussed earlier. Place Offshore should maintain its distribution strategy in popular local department stores as these place is where people who have the capability to buy such goods often go. The company should request the footwear section of the department to group together the slippers of the same prices, ranging from Php180-300. This strategy would lessen the shelf competition and Offshore would appear as the lowest price in the section but at the same level with other brands with good quality. It is also a chance to showcase its design level with others. The company also may hire sales personnel to further guide customers on what and how the product is and to communicate the message of casual footwear that offers utmost comfortable mobility and durability. Promotions Offshore should try to tie-up with hotels or tourist destination w/ footwear package. This will be helpful in communicating the beach or Filipino designs of the company and at the same time giving the customer memento of their visit in the place or experience. The company may implement various below-the-line (BTL) marketing strategies like giving fliers and placing posters in places with high foot traffic. The company should maintain and utilize its current site to communicate its current products. They can also maximize other social networking device to increase market awareness and also communicate its message in a bigger market.