OXFAM TAPS ON MARKETING TO OBTAIN LEADERSHIP STATUS QUO

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The Past Thirty Years of Charity Shop Retailing

            The original charity shop system pioneered as early as 1890s was basically motivated to sell low prices of goods to marginalized sector of the society.  The endeavor was primarily designed to maximize the tendency of the well-to-do families to commit wastage and convert this to charitable ends. Except charity shops’ dormancy during world wars, the sector had experienced growth due to increasing incomes that led to a consumer phenomenon “buy and discard” attitude.  Donations piled up in the warehouses of early charity shops comprising primarily of clothes.  This time of sector prosperity was enjoyed by the initial capitalists like Oxfam and Sue Ryder Foundation with almost same and parallel intentions just like those designed in the infancy of charity shops, formerly salvage stores, at the end of the nineteenth century.                        

            But as the sector stepped within the recent thirty-year experience, luck had curved, at least for the non-competitive ones.  The country experienced recession during 1980s which adversely impact both donor and consumer behavior that was observable until the end of the decade.  The impact to the former, however, was more significant because the inputs charity shops would resell were in bottleneck.  People would think thriftiness a wise move during the time of economic difficulty and price shocks.  Household goods were less subject to donation to the detriment of the fund-raising activities of charity shops. 

            The proliferation of mixed donated and bought-in merchandise on charity shops’ portfolio emerged during this difficult times--- an indication that the sector was adjusting to the environment it was not used to deal with.  As drop of pure donation continued within the decade, charity shop management exhibited features of profit-oriented commercial shops.  They, especially the big charity stores like Oxfam and Sue Ryder, installed additional stores within the country head-to-head with the effects of recession--- a typical business strategy to capture large customer base and established brand name reputation of the charity shops or possibly to increase the probability to locate potential donors on a large location scale. 

            Aggravated the situation of the converted conservative and thrift people, the government minimizes priority to social services that placed supplementary burden to the sector.  This pressured the charity shops to earn more for their parent institutions to fund the left-over responsibilities of the state upon their shoulders.  This situation motivated the charity shops to go further the boundaries of profit-based enterprises.  They had changed their presentation and practice in re-selling donations which includes recycling applications and highlighting of their parent institutions logo to promote company-image.  Also, inter-shop competition for competent, not simple willing, volunteers and search of potential donors was set as the trend.

            The economic hindrance to successful charity shops was faced by the sector resulting to their diverse and dynamic business transactions.  Nonetheless, the resistance proved that charity retailing was one of the most popular trading activities of raising money.  Since then, professionalism was exemplified by the sector that was observed in the replacement of the volunteer staff to a paid one as well as volunteer and less retail experienced manager to strategic, more experience and paid one.  Such could take away the heart and dedication of the volunteers, however, the monetary motivation could ignite the needed business strategies of the individual charity shops to earn more and do business efficiently.  An inevitable offset was required to survive stiff competition which compiled since the sector growth as early as 1960s.  With this direction, 1990s onwards resulted to escalating charity shop outlets in the same manner as income from the retailing shops is increasing--- a sign that consumers accepted the reliability of them especially during financial hardships.    

Explaining the Thirty Year Sector Transformation

            Applying retailing theory, the situation in United Kingdom charity shops could be best described by wheel explanation, also called cyclical retail method. Simply put, the model tells how a retailer enter small and grow tall until such time that adjustment is needed due to the developed “height”.  The “enter small” is the starting point of charity shops characterized by demonstrating low level in price, status and operating costs, 2002).  Upon entrance into the market, a new comer initially offers homogenous products that positioned it to price low.  This is what regarded as a suitable stage for the incidence of Category 1 or 100% of the merchandise is donated ones.  The initial phase also exempts the new comer to abruptly install outlets and implore heavy advertising for brand imaging purposes.  It merely wanted to exploit the local market and test its profitability.

            However, as it matures, its offerings become diverse which lead to the occurrence of Category 2 or partly donated and partly bought-in merchandise on resale.  Fluctuations in the wholesale market price and transportation costs, possibly business vehicle expenditure, incurred in the process of purchasing non-donated goods could pressure the operating costs upwards.  Similarly, the opportunity to exploit the established brand name or full-saturation of the local market caused the shop to branch out.  To make expansion successful, professional and experienced managers and staff are necessary to run the newly opened shops.  As the result to achieve higher status, a higher price is the by-product to obtain profitable growth.

            Applying the Ansoff Matrix and Porter’s five forces, the wheel scenario of the sector within the past thirty years of “diverse and dynamic”,  growth showed that the players used appropriate strategies by looking on their current products and markets in relation to profitability, perhaps long-term growth.  The initial phase of the sector where most players were offering products in Category 1 had experienced saturation of the market due to the growing rivalry.  Since the sector was on demand at that time, especially in the 1980s where recession persisted, entrants were encouraged.  Operations, likewise, was not in need of huge capital where in backyard of homes could be converted into shops.  This in effect brought wide range of substitutes shifting the price sensitivity of the customers upwards.  Because of this, they had focused their attention to find competitive advantage that could enable them to derive additional value to the business.  In effect, Category 2 was established wherein charity shops invested to new products to explore new opportunities like new market or vice versa.  However, such strategy seemed prominent to the players that pursuing diversification was the last resort giving rise to Category 3.  A situation wherein 100% of the products on the shops were bought-in merchandise, this strategy focuses to explore new products and new markets at the same time.  The emergence of such category signaled that the maturity phase of the sector was already reached, if not exhausted.               

            It is also obvious that generic strategies were the overlapping theme of this historical period of the sector.  Category 1 was mainly concern to achieve cost-leadership in the sector.  By carrying all donated-type of merchandise, a shop has less complex financial problems and burdens or additional management expertise in terms of purchasing and inventory control.  Thus, operating costs would not affect much the price of donated merchandise including the absence of mark-up and additional space needed in the case of bought-in merchandise.   Category 3, on the other hand, is the opposite of Category 1.  The former exemplified differentiation strategy by providing something unique to the business through inviting new market segments not just the typical thrift and marginalized social class.  Because of the move, the shop had to improve its shop facilities to fit the relatively modern and elite class, perhaps installing air-conditioning system or displaying of luxurious artifacts.  Such move would typically pressure the price of the products, including the mark-up.  Lastly, Category 2 was situated in the middle of the strategy wherein donated and bought-in merchandise were strategically spread over different market segments.  Basically, cost-effectiveness was observed in the donated-ones while added product value in differentiation was observed in the bought-in merchandise.

Five-Year Marketing Plan for Oxfam Charity Shops

Abstract          

the Oxfam shops will apply the five-year strategy on June 2006 that will evolve at the objective to maintain its leadership opportunities in second hand book sales improve performance of high value merchandise and divert focus from occasional donated items.  The approach is concentrated both on the sales and donation.  Customers and donors are identified in bought marginalized and high street areas. The workforce includes volunteers, professional managers and part-time/ volunteer/ partly paid technical experts to give opinion in terms of pricing and sale-ability of the products.      

            An opportunity for the company exists because the continuous increase in sales, growth of the industry and the recovering economy.  This is supported by the active participation of local government in charity issues.  The projection of Old people already reached 20M and proliferation of cultural minorities which raise the increase in low-cost consumption exhibited by charity shops.  Such facts aided the first-mover advantage and international scope of Oxfam.  Location of the shops are scattered all over the country so careful evaluation of performing and non-performing shops is necessary to maximize profits and minimize costs.  In the customer side, women, elderly, student, low-income earners, collectors and bookworms are the target primary market.  In the donor side, high-income earners, hospice centers, collectors and bookworms alike, house-movers and corporate entities are the primary subjects.

            The company will monitor the performance of its marketing plan by regularly evaluating its performance.  The marketing expenditures should keep below the aggregate store revenues at an acceptable level to be able to avoid contingency actions to be taken.

   

PEST Situation

                Political partnership is healthy, particularly in the local sector wherein local officials agreed to join charity shops in recycling effort.  As most of the charity shops do not have formal recycling plant, unlike Oxfan who has Wastesaver, this joint project could concretize the support of authorities towards sound operations of the sector.

.           In addition, GDP rose to 0.6% in the last quarter of 2005.  In the same percentage, production fell with manufacturing accounting for 0.8% fall.  Services grew 0.2% year-on-year.  Transport industry also posted growth while business and finance services grew by 0.3% resulting to increased output in these sectors.  Government utilities including education, public administration and health also experienced increase.          

             Ninety two percent of the population is whites numbering at 54M while minority ethnic groups accounted for 8% or 4.6%.  Out of this minority groups, Asian British (50%), Black British (25%) and Chinese (5%) groups are the most common.  There are many women in United Kingdom than men with a ratio of 100:85 in 2003 because of the effects of World War and the relatively higher mortality rates of men. Twenty million of the population in United Kingdom are 50 years old and above.  In relation to this, pensioners’ income rose 28% from 1995 to 2004 wherein most of their income is spent in food housing and fuel.  Sixty five to 74 years old of the population are considered the most motivated volunteer.  Although the use of internet and other communication devices had insignificant values to older people, they are willing to learn to use them

Sector Profile

In the retail industry, three-month growth in sales volume was accounted 1% increase in food stores and 1.3% in non-food stores with clothing stores topped with 4.3% growth.  Household goods, on the other hand, exhibited 3.2% percent.  Non-store retailing was considered to grow because of the use of internet.  However, month-to-month analysis found that there was a decreased in total sales volume of 1.3% from December 2005 to January 2006 that reflected in all sectors except the non-retailing ones.  Over-all, the value of retail sales accounted for 1.9% which is higher than the same period.  However, to disrupt appreciable percentages, the average weekly value of sales was the same as last year of January with 4.4 billion pounds which is the lowest annual growth for January at all time and non-store sector posted 5.2% decreased in sales values. 

            A typical charity shop has the primary purpose to raise funds for their parent charities and institutions.  The latter is then tasked to complete the goal of charity shops aimed to improve the quality of life of people.  The initial half of this goal is cited to offer cheap goods to customers who basically in poverty particularly those who can not afford commercial outlet prices.  They are also serving as the marketing and information arm of their parent charities that includes posting the charity logo and likely its objectives to obtain customer-donor patronage.  In addition, the shops provide logistics for the receiving of donations, money and goods, including recruitment of volunteers for a charitable cause.  Lastly, the emerging significance of recycling function of the shops is slowly taking its place as a marketing tool for the environmental-friendly customer.          

Market Demographics

            One of the main causes of the prominence of second-hand goods purchase, especially clothing, is attributable to high street location of charity shops.  This also invited the elite class to share what they have.  Occasional shoppers accounted 60% and 36% of women and men respondents respectively.  On the other hand, 27% and 12% accounted the regular ones.  In a similar survey, 25% and 50% of women and men are still untapped because of their intrinsic immunity to second hand goods, especially clothing, due to health issues, identity and image promotion, and proliferation of branded men’s apparel.  Such information weakened clothing potential to sustain its position of having the largest share of charity shop’s turn-over in terms of type of goods. 

            It was found that there was a significant correlation between the number of charity shops and number of customers.  In Oxford, where the Oxfam was born, 65% of respondents use charity shops with the number of women topping the number of men.  This finding also emphasized the prevalence of students 18-30 years of age in the vicinity that impacted the increase in percentage.  In the same manner, social class and charity shops were observed to have correlation as increasing income resulted to decreasing use of charity shops.  Most common users are described as single parents, unemployed, pensioners and low-waged earners. 

            When it comes to purpose of the users, 65% of men topped 55% of women in terms of low prices objective.  However, women reversed the scenario against men when the purpose is the desire to support charity.  This could be the less emotional nature of men and their role in the family as income-generators.  For the part of the adolescent young adult aged 18-30 and some 31-40, finding unusual goods is the motivating factor for charity shop use.  The conservative and “party-goers” young males submerged to aim for local convenience as the purpose along with older women that are mostly 60 years old and above.   

            Finally, strong correlation was seen between formality of the shop and level of social interaction between staff and customers.  As customer satisfaction involved largely the capacity of the shop to treat them as a part of it, less formality is likely to lead to success and retain regular customer and donor.  However, too much informality could ignite the danger of price bargaining especially form profit-centered dealers.  As a result, there is a need to have an experienced manager and staff to handle such internal conflicts that could affect profitability. 

Oxfam Current Products and Services

            According to Oxfam official website, the parent charity of Oxfam has the main objective to end poverty and suffering in all phases of life may it be lack of education, gender discrimination or warfare.  No doubt, Oxfam had the first-mover advantage in the industry exemplified by its international scope in terms of charitable endeavors and business partnerships including the established eight satellite regional offices spread all over the different continents.  With world-wide coverage through the Internet and 20,000 shop volunteers, the Oxfam shops set another discouragement to small entrants.  The following are its products and services in its charity shops for donation and selling:

1. Books – Oxfam is Europe’s biggest second hand retailer with 100 specialized bookshops
2. Bridal wear – has ten specialized shops.
3. Big Gifts – high value items for auction through the Internet.
4. Clothing and shoes
5. Company mobile gift bank – located within corporate premises
6. Fair trade goods – sweets like chocolates, nibbles, honey, jam and marmalade; coffee and tea; juices and other international products form regions specialized in a certain commodity.
7. Others - music (includes CDs, records, tapes , videos), ornaments and crafted plants, toys and mobile phones, collectible items (includes stamps, old coins)
8. Furniture – could be subjected to collection service    
9. OXBOXX scheme – house-clearing services
10.   Wastesaver plant – recycles the un-resalable donated items like linen and clothing

Shell Directional Policy Matrix to Determine the Portfolio Performance

            This model is useful when assessing the prospects for sector profitability or PSP against the organization’s competitive capabilities or CC.  Oxfam has present and future potentials in both product/service and markets that require evaluation for better decision-making.

Books, especially the unusual and rarely tiled ones, are one of the leadership opportunities of Oxfam in its merchandise.  It should continue its aggressive advertising to attain more donations of books.  The emotional attachment of bridal wear makes it an unattractive for sale coupled with the shop’s limitation to justify the addressed health issue and controversy on clothes.  Donations are also affected in this type of merchandise as the same thinking would be carried-on by most people.  Shifting the distribution channels to relatively marginalized area would seem unusual but effective to this specialized clothing.  The same scenario goes with casual clothing and with similar strategy, although it can provide fair revenues even in high streets because of its generality.  Creating links to local tailors and national manufacturers would improve donations.

Big gifts are an attractive niche especially in the international market.  However, Oxfam is limited to sponsorship which highlighted the Renault Formula 1 Team.  Tapping to national celebrities, old people or perhaps the old artifacts England should be coordinated to maximize the market.  Since international customers are likely to buy this, freight should also be prioritized.  Further, the company mobile gift bank is a very prospective venture.  Employees would likely donate the useable items, including newspapers and other scraps in the office.  Not to mention that building partnership with a corporate entity could be a continuous one as a modern company has installed social contribution is many of its strategies or by-products of such.  A coat and tie, office uniform or empty cartridges could be poured in the warehouse of Oxfam.                        

Among the one-directional potentials of Oxfam, the fair trade is considered one that has phased withdrawal status. The potential of the emergence of conservative customers, although not found, would not appeal to the idea of foreign good consumption especially their hesitance to try the foods in the poor and third world countries due to health and sanitary issues.  The shop should promote the safety and rationale behind these products.  One is to highlight its impact to provide continuous economic well-being of the producers, including the marginalized foreign people.  The OXBOXX and Wastesaver definitely provide value to the company to collect more, even those that are non-resalable.  This will result to large customer base, perhaps, loyalty. 

As furniture appreciates value as time passes, it will result to non-willing donors.  With this, providing with collection provision for isolated cases could pump operating costs in a decreasing furniture share.  To counter the effects, it is a decision of the shop to divest in the project or increase information to local people of the negotiation nature of collection service in furniture.  This means that the value of the item should exceed the fuel and maintenance costs of the vehicle.  Music and ornamental products are also in the phased withdrawal status because of the incompatibility and unpopular synergy to charity shops.  Efforts should be diverted to maintain the leadership opportunities seen in book and clothing products. 

Mobile phones and collectible items position needs to be promoted by the shops to obtain profitability in sales and increase the rate of donations.  Older people are untapped market for second hand mobile phones.  With this, high street Oxfam shops located in high streets should be aggressive to advertise donation of such nature.  On the other hand, collectible items are on the same status as the big gifts.  In order to succeed on this, international market should be tapped and local avid collectors of “anything” should be motivated to hand down some of their precious ones for charity.

Marketing Objective

1. To maintain leadership in second-hand book industry by building huge and loyal provider through publishers, writers and book-collectors;
2. To intensify campaign for celebrities (entertainment and sports), elder people and collecting-enthusiasts to participate in donating programs;
3. To strengthen corporate relationships locally;
4. To increase awareness of health and social benefits of patronizing products from the poor and third world countries;
5. To intensify the service and information of OXBOXX and Wastesaver; and
6. To sustain assorted/ complimentary donations at a level where storage and disposal costs have positive returns.

Market Segmentation and Target Market

            The company, aside form improving its business portfolio, will place emphasis in the rate of closing-opening of shops across the country.  Shops should be located strategically on “slump” or “marginalized” areas and high street ones where the high-income earners are usually prevalent.  In need of this strategy is the effective and efficient distribution and coordination of shops to determine the need of one and surplus of another.  Since high street located shops could not sell the ‘rags” of the elite class to the same elites, transfer to other demand areas is necessary. 

According to industry statistics, there is a continued growth in retail sales both in store and non-store type.  The primary marketing arm of the company to introduce its services to the local people are the customers themselves while international services while be coursed through the Internet.  Because of this, the new company sees opportunity to benefit from the country’s recovering economy and prospect of older people growth in population including the international scope of donations.  The company will basically serve the following market segments.  As customers:

1.      Old people and students

2.      Women, including men that uses thrift and alternative clothing as motivating consumption factors

3.      Low-wage earners

4.      Collectors and bookworms

As donors:

1.      High-income earners

2.      Hospice centers

3.      Collectors and bookworms

4.      House-movers

5.      Corporate entities, basically office employees rarely sales, marketing and mobile ones

Market Positioning

            The shops will exercise price discrimination to adapt the conditions of a local area.  High streets will relatively have higher prices, not only to location but also the quality of the donated items within the area, than marginalized ones.  To avoid opportunistic and mobile dealers, shop managers will coordinate with the local officials to monitor the non-resident prevalence in the locality to ensure equality in distribution of merchandise.  Vintage and high priced donated items will be classified along with bought-in merchandise, less-valued donations and recycled ones.  Items will further categorize into nature of goods: books, household goods, clothing, etc to avoid confusion.  Price tags will be indicated in every item but abrupt price adjustment would be inevitable. 

            To establish loyal customers, reward cards through points will be imposed as promotion.  However, such cards have exclusive use either in the marginalized or high street shops depending in the permanent resident of the cardholder.  This is made to prevent high-income earners to intentionally purchase to marginalized ones to earn points.  Although an extreme case especially to the conservative ones, it is aimed for security purposes.  In addition, informal relationships with customers will be exhibited by shop staff to build relationship.  However, managers are considered to act rather formal especially in cases of insisting customers who claim for discount and other bargaining.   

Financial Controls

            In the initial year, the company will put extra-money to advertise its products and services continuously.  The company will allocate its marketing budget for the following (in order of priority): 

1.      Local print

2.      Local radio

3.      Flyers and catalogue

4.      Internet subscription (this may be prioritized by the parent charity)

Implementation Controls

            Sales and donor performance will be reviewed monthly and compare it with the average monthly costs of marketing tools.  Every six months the headquarters will conduct ocular audit to the donations and sales to determine the success of the marketing program.  Contingency actions will be implemented if the audit falls short to the expectation like door-to-door collection of donations or delivery of bought items to customers’ homes.  Trade-ups could also be resorted. The first two years will signal if such contingency approach will be implemented.  As a result, additional marketing and labor costs should be noted and funded before the contingency action implementation.  As an aggressive strategy, Internet will be exploited due to its potential to course donations in different countries.  If in the fourth year objectives are not addressed substantially, cost-cutting and closing of shops will be resorted.  The withheld staffs and store managers will be absorbed by the parent charity and assets retained in the sale of the shop will serve as cash reserves to fund the high-income shop locations that are identified.  On the end of the fifth year, an over-all performance review and evaluation will be set and another strategy will be developed according to the past five-year experience.