Urban_Outfitters_Continuing_Case_Study

1. Identify at least three challenges when setting up a business. Explain why they are challenges. There are several challenges an entrepreneur will face when setting up a business. In my opinion, the top three challenges are: deciding what type of business you want to have, establishing where to set up the business, and coming up with the money to start the business. I am certain that businesses encounter more than just these challenges, but these are definitely challenges that all sorts of businesses will come across in the start-up stage. Deciding the type of business you want to start can be very challenging. You need to make sure your business is unique enough to draw customers in, but you also need to make sure you are selling something the customer wants to buy. Urban Outfitters, for example, came up with the idea to sell “used clothes, bohemian knickknacks, and ‘found objects’.” One of the founders was a college student and knew that the students didn’t have much money. They came up with a business uniquely for the budget of college students and sold items that they would want to buy. It is also very important (and challenging) to come up with the “ideal” location for your business. You won’t find a five star restaurant or hotel in an area that is poor. Entrepreneurs need to keep in mind whom their customers will be in order to determine the ideal location. The founders of Urban Outfitters based their business off of the needs and wants of college students. Therefore, the ideal location for their business was close to a college campus. When Hayne expanded the business, he kept that tradition and opened up several other Urban Outfitter stores close to colleges. Financially speaking, businesses generally cost a lot of money to start. Coming up with the money to start a business can be pretty challenging for some. There are loans available to help entrepreneurs with start-up costs. In the case of Urban Outfitters, however, they put their heads together and used their resources to start up their business. They made their own decorations for the store by dumpster-diving, Hayne and his wife lived in the store (to cut down on their cost of living), and they bought used and cheap clothing to keep their costs down. 2. Define what a “niche” product is. Give at least three examples of niche products. A niche product is a product that is made and marketed for a small and unique market. They are designed to target a certain group of people whether that is college students, nurses, animal lovers, etc. The key when creating a niche product is to make sure your target audience is significant enough to make a profit. In the case of Urban Outfitters, they targeted college students. Examples of niche products are: orthopedic shoes, prescription sunglasses, and protein shakes. The orthopedic shoes are designed specifically for people that need more support for whatever reason (such as people with a club foot). Prescription sunglasses are designed for people that wear glasses and need protection from the sun. Protein shakes are designed for people that work out to help build muscle. 3. Explain why a niche company might have an advantage in a market. Would price necessarily be an advantage' Explain why or why not. Niche companies may have an advantage over other companies because their products and/or services are specialized for a certain purpose or group of people. There costs may be lower than traditional companies and they may have a higher sales percentage because they target a certain thing. Urban Outfitters, for example, was created specifically for college students and their wants and needs. The types of things sold in their stores are exactly what the typical college students needs and wants which makes them a popular place to shop. They also branched out and created another store called Anthropologie was created to target people in their 30s. Price is definitely an advantage for niche companies. Since their products are targeted for certain customers, they can give the customer exactly what they need without having to buy things they don’t need. For example, Hewlett-Packard makes all in one machines (printer, scanner, copier, and fax), for home based businesses, which is a lot more cost effective than buying each item separately. 4. Identify and explain three reasons why customers would pay more for exclusivity. Three reasons why customers would pay more for exclusivity are scarcity, price, and personal satisfaction for their hard work. People like to buy things that will set them apart from others. So buying something that is hard to find (or scarce) is appealing. They want to know that what they have is special and that a lot of other people will not have the same thing. A lot of people are under the notion that the most expensive thing is the best. This isn’t always the truth, but people will definitely shell out the money if they feel what they are buying is top notch. On the flip side of that, some people will search in thrift and discounts stores for things that aren’t pricy, but very unique. The customer likes to buy things that give them satisfaction. Most people work very hard for their money, especially in an economy like we have today. When they do get the chance to go out and spend money, they want to have something to show for that. They want something they can be proud of, because they have worked hard for it. 5. Explain how a niche player “chips away” at a larger competitor’s base. Give three examples of retailers who have done this. Niche players chip away at larger competitor’s in three different ways. The first is by going after a different sales or delivery market. This can mean taking businesses such as bookstores or grocery stores online, or specialized applications you can download on your phone. A good example of this would be Farm Fresh grocery store. There are a lot of people that don’t like to go grocery shopping. Farm Fresh has made that a lot similar for people by allowing them to do that online. The customer logs on to their computer, selects what products they want, pays by a credit card, and can either go pick the groceries up or even have them delivered to their door for a small fee. The next way niche businesses compete is by providing a premium product or service. People like to know that they have the best of the best. There are a couple of examples of this: Starbucks coffee and Apple computers. Starbucks has taken ordinary coffee and given it a European twist, so people are willing to spend the extra money to get that “premium product”. The same goes with Apple computers. Apple products do not get viruses. Since viruses can completely destroy everything on a hard drive, people are willing to spend the extra money to ensure their information is safe. Lastly, a niche can specialize in one product line or “theme”. If a person likes arts and crafts they are more prone to go to a store such as Michaels or Ben Franklins, versus a general store such as Walmart. People who work construction go to Lowes or Home Depot when they need tools because they know those stores specialize in those products.