Since deciding to focus on the potential of the on-line business, Skytrex the railway and military models business has continued to expand.The company decided to take advantage of new international sales channels available on-line, while also developing existing channels.
Developing new products, maintaining quality and customer service has put pressure on resources. Critical to growth has been the decision to embrace on-line sales channel in favour of traditional channels.
This enabled more targeted promotion of the product portfolio and ensured sales margins were not eroded by distribution costs.
Skytrex is a small company, although a giant in its niche market. A family run enterprise, which was established in 1972 and has had to re-invent itself to grow and keep up with changes in consumer demand. The company has had to deal with success and recessions. The firm has a very loyal and long standing work force and prides itself of its commitment to offering sustainable local employment.
With only a small team the managing director has always maintained the approach of having core modelling and manufacturing skills within the business while using specialists in their fields to provide support for process improvement through to sales channels development.
Internet and On-line Business Channels
From early in the business it was clear that the Internet would be an opportunity and through sitting down and analysing the business a strategy was developed that has continued to grow on-line sales for over 9 years. The key to expansion were to set goals and deliver a system that would attract international and local customers, ensure that the 6000+ products were easily searchable, simple to purchase, easy for the office to process, simple for the office to update.
Developing an on-line channel is not a one off process and to maximise the opportunity requires continuous development. This includes regular communications and promotions with customers at the minimum cost, ongoing development support to improve customer flow and reduce drop-out rates throughout the sales process, adding international shipping and currencies. It has also required ongoing focus on the on-line sales channels to develop sales volume and margins.
Without this effort the company was reliant on traditional retail channels who offered very high cost per sale, poor terms of business leading to poor cash flow and lacked the flexibility to promote and sell the part olf the range that was available ex-stock at any one time.
Manufacturing, Development and Channel Review
The railway business had been established for 3 years yet the profitability of the range was broken and delivery of new models was problematic.
Analysis of the current railway business from model development to sales channels was completed. The most critical factor of this process was ensuring that everyone from the managing director understood not only the process but also were allowed to come to their own conclusions and buy into the result.
Through this approach it is clear that not only did the business immediately benefit Skytrex has continued to use the process to develop and improve results.
A Better Way to Make and Market Niche Products
The review broke down the process to develop a model, leading to using rapid prototyping to 1) improving the speed of new development and hence the number of new models every year 2) reducing the time spent internally on development allowing more time on sales. 3) reducing the manufacturing time and cost for new models
Secondly the review broke down the true cost of a model, demonstrating areas for immediate improvement, such as adding markings in the box allowing customers to select which to use and removing the most fiddly part of the process.
The review brought to light a critical business problem that either the end user price had to increase or the channel strategy had to change. As the market was unlikely to accept price increases a decision was taken to move only to direct sales eliminating the reseller channels. This had the immediate effect of increasing profit per item, reduced time to deliver models, improving customer satisfaction and service. Sales have continued to increase since.
Key Learning Points:
– Access directly to the end user is now possible and often less costly than working through retailers
– Servicing end-users directly allow the promotion of products that are in stock, available to sell leading to immediate orders and delivery
– Selling direct on-line allow collection of customer payment at point of shipping, thus improving cash flow
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