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Gymboree Corporation Essays

Gymboree Corporation

1.0    Introduction

Despite it’s close to 3 decade existence, Gymboree Corporation, synonymous of its product wear, considers itself to be a toddler. Catering to kids wear up to 12 years, Gymboree Corporation sells clothes and accessories in the US and Canada. Its 580 stores carry bright and colorful, fashionable playsuits and rompers, in addition to tailor-made parent-children play programs designed to enhance child development at its some 545 franchisees in the US and some 30 other countries where it has representation. They also operate some 80-plus Janie and Jack apparels for newborns and toddlers apart from their exclusive 50-plus Gymboree Outlet stores. In order to enhance their market reach, Gymboree Corporation has two dedicated online stores: gymboree.com and janieandjack.com (Hoovers, 2007)[1].
Children wear has a tremendous market globally. Unlike major companies like Gap Inc and Talbots Inc, Gymboree has not ventured into distant markets. This feature perhaps makes Gymboree a little short of international reputation.
2.0    Competition

To be expected in any business enterprise, competition comes from three major corporations that have very similar product presence, and target-audience, originating in the United States. Gap Inc, Talbots Inc, and Target Corporation, to name a few, are names to be reckoned with. Gap Inc, a retail clothing store, has an elaborate presence in the apparel market in the U.S. The company caters to casual styles for men, women, and children. Through its multi-faceted marketing strategy, Gap Inc has expanded its operations and brand presence through the urban chic chain, ‘Banana Republic,’ and ‘Old Navy’. Such is its aggressive expansionism that Gap Inc today boasts of more than 3,100-plus stores worldwide. Each chain also has its own online store, while at the same time, from design boards to store displays, Gap controls all aspects of its trademark casual look (Hoovers, 2007)[2].
With an experience of over half a century, Talbots is a serious contender and competitor for the coveted market leader in a selective apparel industry. A name to contend with in the world of women’s fashion, Talbots has begun to concentrate on the more traditional wares. With over 1,380 stores in 47 states in the U.S, Canada, and the UK, under the Talbots and J.Jill banner, Talbots specializes in selling mostly private-label, classically-styled apparel, accessories, and shoes for ladies. However, they have other stores that target children, petites, and plus sizes as well. It also sells through its dedicated online stores and about 25 product catalogs (Hoovers, 2007)[3].
The Company’s operations are seasonal in nature, with sales peaking during the fourth quarter; the holiday season in November and December. Gymboree and Janie and Jack brands compete on a national level with BabyGap and GapKids (divisions of The Gap, Inc.), Talbots Kids and a few other department stores operating in malls, outlet centers or street locations, apart from certain discount retail chains such as Old Navy (a division of The Gap, Inc.), The Children’s Place, Wal-Mart and Target. Gymboree and Janie and Jack brands also compete through their dedicated online stores and mail orders. Competition is based on product design, quality, and brand image, customer service and pricing. This entails the company to pursue the 4 Ps to its advantage. The company provides its trusted customers with high quality apparel and an excellent price/value relationship, keeping a check on price escalation through their proven R&D team (Gymboree Corp, 2007).[4]
3.0    Analysis

Children’s apparel has a world of business opportunities. Globalization has led many countries to partner each other in diverse fields. Many companies have tied up with foreign companies to develop their business and improve their image globally. Whether it’s through joint-ventures or through franchise operations, companies that seek to establish their reputation globally must venture into unknown terrains through partnerships. For a company to be termed truly international, it needs to have its presence felt in other countries as well. This is an area that Gymboree should seek to establish.
Gymboree, a well established and popular apparel manufacturing company in the United States, has been outfitting children since 1986. The brand’s ‘kid-right’ clothing and accessories are designed and crafted to withstand the rugged play enjoyed by kids’ up to 9 years. They are colorfully designed, use versatile fabrics, and employ whimsical graphics with detailed touches. Gymboree, unlike their competitors, have very limited presence globally, and currently operates approximately 581 stores in the U.S. and Canada, apart from their online store at gymboree.com.
3.1       Problem Identification

Currently, Gymboree ships its apparels to a few countries in Europe, Mexico and Venezuela in the Americas, China, Singapore, South Korea and Taiwan in Asia, and Australia. This is perhaps where the real problem lies (Gymboree, 2007)[5]. As mentioned a little earlier, despite the company having an online store to cater to customers from all parts of the globe, the problem most likely faced by the company is in terms of reach and service. There is always a market for new born and infant babies in many developing countries. Gymboree Corporation should strive to make inroads into those markets where the population growth is more. China is undoubtedly an important destination, but then so too is India. Africa has quite a few nations that have the buying power as well. This is where the company marketers should target to enhance the company’s market share and growth.
3.2              Marketing Mix

Gymboree Corporation has a sound marketing strategy in place in the United States. With over 580 stores here and in Canada, Gymboree is well represented and conspicuous. However, the company remains inhibited in its venture abroad. In the U.S and Canada, the company has many store outlets from where customers can walk in by buy products of their choice. However, things begin to get more complicated as their service reach far-flung countries. Shipping, local taxes, government regulations, foreign exchange fluctuations, and stocks can hurt the company no end. This is an area of serious concern for any company that seeks to go global. Gymboree currently offers two shipping services to their customers in all international destinations. Orders are accepted via the online store, and most replies are carried out within 24 hours. Once orders are placed, shipping is carried out through FedEx International Priority service and is typically delivered within 5 business days. Tracking is available with this service. Orders shipping Standard to all other international destinations are now delivered via USPS Priority Mail International and are typically delivered within 14 business days. Tracking is not available with this service (Gymboree, 2007).[6]
3.3       SWOT Analysis

Brand, is a word synonymous of a product one identifies with advertisements. It is a brand that impresses the senses. Brand is the name or symbol used to identify a product. Ferrari is a brand that one associates with flashy cars. Similarly, Levis Strauss is the brand of popular jeans worn by young and old the world over. A brand can add significant value to a product when recognized and has a positive association in the mind of the consumer. This is what is commonly referred to as Brand equity. Brand equity stands for financial gain, brand extension, and buying attitude (NetMBA, 2006).
But, can the same be said with Gymboree? This is perhaps true within the United States and Canada. But, can the same be said about Gymboree in other countries? This is where the difference lies between being truly international and also ran. So, what’s stopping Gymboree from being a truly international company?
Their annual report of 2006 says it all. The following is an excerpt from that document:
“The Gymboree Corporation is a specialty retailer operating stores selling high quality apparel and accessories for children under the GYMBOREE ® and JANIE AND JACK ® brands, as well as play programs for children under the GYMBOREE PLAY & MUSIC ® brand. The Company operates retail stores in the United States and Canada, primarily in regional shopping malls and in selected suburban and urban locations” (Gymboree Corp, 2007)[7].
3.3.1    Strengths

With over 3 decades of baby and infant apparel manufacturing expertise, the company has the wherewithal to make a big impression on the big stage. The company that is listed on NASDAQ has outstanding shares worth $30.8 Million, with a market cap of $1,225.1 Million, fairly strong for a company to make a foray into the international market. Despite a fall in recent share prices, the current share price is put at $39.80 (Gymboree, 2007)[8]. The company produces some of the best baby, infant and children dresses in the world, and has exposure to international marketing as well. With a strong local presence, the company can venture into bigger business by identifying potential markets for joint-ventures and franchisees. The company has an established business tie-up strategy in operation, and the same theory can be applied to form partnerships through joint-ventures in manufacture or retail sales in third countries.
3.3.2    Weaknesses

The company has not been able to make an impression in other markets other than the U.S and Canada. But for a handful of countries, Gymboree has not been able to make an impression elsewhere. Tax barriers, import curbs and duties, and foreign exchange are factors that contribute to this cause. Between the U.S and Canada, there is hardly any hurdle for imports, save for individual import restrictions. This has helped Gymboree make an impression there. However, the same cannot be said of other nations. Transportation costs, import duty, local tax, and foreign exchange fluctuations lead to fluctuating prices, making the market volatile and unpredictable. The online store receives orders from other parts of the world, but distribution takes time and costs much more. This has had an adverse effect on market growth.
3.3.3    Opportunities

Opportunities are plenty. The third world for example is a sleeping giant. Many of these countries have begun to show strong recovery and buying power lately, thanks to liberalization and globalization. Countries like China, India and Vietnam, to name a few are growing economically strong, and the buying power of the individuals in these countries is on the rise. Also the fact that China and India have a strong consumer base makes them among the most attractive destinations for business. This is an area that needs to be addressed. Asia, Africa, and the Middle-East are regions that offer plenty of scope for business, and Gymboree could learn from strategies practiced by some of the more popular brands like Lewis and Diesel.
3.3.4    Threats

Brands are tools used to project a product in the minds of the consumer. They exist mainly by virtue of a continuous process concerned with delivering a cluster of values, interpreted and internalized by customers in such a way that it enhances its existence. The feedback that an organization receives determines the likelihood of brand success (De Chernatony, 2000)[9].
An important aspect in managing contemporary fashion business is supply chain management. Once an order is placed, the manufactured product needs to reach the designated store or consumer. Retail environment constantly undergoes changes, and unless the product reaches the wholesaler or retailer on time, it could have severe economic and consumer pressure. Market responsiveness and meeting the demands of the ultimate consumer are major reasons for success in fashion.
4.0            Recommendation

Setting up of an exclusive retail showroom or marketing presence in another country costs a lot of money and time. Ideally suited to handle these predicaments is the introduction of franchisees or partnerships. Due to increased pressure to perform under trying financial conditions (I say this because of the highly volatile foreign exchange market globally), and alien market conditions, it is best to appoint native or local representatives to handle all marketing aspects. This will ease unnecessary overhead expenses and at the same time bring quicker results. In the case of manufacture, a joint production can be set up with supervision from the parent company. Raw materials can be procured from the local market; manufacture can be done with stringent international standards, and marketed at reduced costs. With globalization, many countries have opened their borders to FDI. Flexible and attractive government subsidies and incentives to investors will also help reduce logistics, and inventory expenses.
5.0            Conclusion

Apparel manufacturing companies face growing challenges to attract and retain new customers in the face of the competition from new products and markets. Planning involves not only the creation of a product, but also a fool-proof system and positive strategy. Whether it is an offensive or defensive strategy depends on the product and the market. Certain points to ponder over are, who are your competitors and what potential do they have? Which tools can serve your goals, how and when? The demands are numerous. Exploration of market terrain, identification of the right consumer, defining or positioning the product, elaborate market strategies and implement, whew! The list could go on and on. But with proper planning and execution, business can go places (Istituto Marangoni, Master programme in Brand Management, 2006). However, one thing that stands Gymboree in good stead is their gradual growth. “The Gymboree Corporation (NASDAQ: GYMB) reported earnings for the first fiscal quarter ended May 5, 2007, at $20.9 million in comparison to earnings from continuing operations of $18.6 million for the same period in 2006. Matthew McCauley, Chairman and CEO, said that the company continued to show solid earnings, and the company’s policy to acquire new customers and expand their store base continued to prove successful. “We expect these efforts to prove beneficial well beyond the first quarter, as new customers come to appreciate the great fashion and unmatched quality of Gymboree” he concluded. Net sales from retail operations for the fiscal quarter ended May 5, 2007, totaled $206.7 million, a 13% increase over the $183.0 million at the same time last year, and the comparable store sales from retail operations increased 3% (Gymboree, 2007).[10]

6.0    References

1.         Hoovers.com, The Gymboree Corporation, NASDAQ, http://www.hoovers.com/the-gymboree-corporation/–ID_16057–/free-co-factsheet.xhtml

2.0       Gymboree, Our Company, At-A-Glance, http://ir.gymboree.com/profile.cfm?ghome=2534374303003787&gplay=

3.0       NetMBA, Brand Equity, www.netmba.com/marketing/brand/equity/

4.0       De Chernatony, From Brand Vision to Brand Evaluation.: strategically building and sustaining brands, 2000

5.0       Istituto Marangoni, Master programme in Brand Management, www.istitutomarangoni.com/marangoni_master_29.htm

[1] The Gymboree Corporation, NASDAQ, 2007
[2] The Gap Inc, NYSE, 2007
[3] The Talbots, Inc, NYSE, 2007
[4] Annual Report 2006, Seasonality and Competition
[5] International Shipping
[6] Shipping Service
[7] Annual Report 2006, Form 10K,
[8] Our Company, AT-A-Glance: Facts and Figures
[9] Chapter 2, page 14
[10] Our Company: Press Releases

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