Define the Problem or Objective

Define the problem or objective

Advanced Material Inc.'s (AMI) objective for Nundies was to appeal to the female gender and offer a substitute for underwear and thongs. Women would be able to wear the Nundies, which were a single-use disposable pant that sticks to the inseam of women's pants, leggings, athletic wear, shorts, and jeans. To describe the Nundies, which are no undies, is a ultra-thin nylon and lycra liner for women who dislike visible panty lines. The problem arose when Nundies' sales were not as successful as projected by the management team. Nundies faced dilemmas with sales because the store repurchase level by various companies did not meet Nundies expectations.

Approximately 6% of stores placed additional units beyond the initial purchase. The online purchases were not used frequently and staff at the various stores with Nundies were not upselling the product. Nundies products were not distinctly displayed and they seemed to blend in with other products stores were selling, which had a huge impact on sales. Because the stores were not properly displaying the merchandise, the sales associates were not promoting the Nundies appropriately and this led to a decrease in sales and a reduction in reordering Nundies. This was a serious affect on the overall sales and profits.

Relevant information

Nundies is a product designed to help women maintain a degree of protection when women decide not to wear underwear. AMI manufacturing estimated that the labor and material costs to produce a single liner would be $.60. The design is three colors package option - black, buff, and assorted. The liners would be packaged in a colorful 5-count plastic pillow package that would cost about $.45 per unit. The wholesale price to retail stores would be $7.00 for each 5-count package. Furthermore, manufacturer's agent would be paid 12% commission on each 5-count package sold. The agent would be responsible to establish the distribution coverage among the women's boutiques and stores for Nundies. Based on Nundies marketing research, women's boutique and speciality shops account for the 30.9%, the largest percentage of women's underwear sales, department stores are 30.7% and mass merchandise and warehouse club stores are 29.1%. Internet retailers and factory outlet stores account for 9.1% of sales.

Review the decision factor

There appears to be disconnection between the buying of Nundies at market and the selling Nundies at the stores. It appears that store managers and sales associates are unclear as to how they should sell Nundies merchandise once they arrive at the store. The decision factor derives from three marketing proposals that were stimulated for consideration. The proposals were to:

1. Continue development of the women's and specialty store channels - This proposal is to continue reliance on manufacturer's agent or organizations which recruit stores through showroom apparel markets or exhibiting the product at the Lingerie Americas Trade show twice a year. The costs is to attend these events were approximately $14,400 for AMI travel, lodging, meals and marketing registration fees, exhibit set up, and sales materials;

2. Pursue upscale department store accounts - this proposal is to pursue store accounts with department stores such as Bloomingdales, Nordstrom, Saks Fifth Avenue, and Lord & Taylor. Each of these stores vary in merchandise buying practices. Only 10 out of the 39 upscale stores have chosen to stock Nundies. If the manufacturer's agents were used to market the Nundies, they would be paid 12% commission on wholesale sales; and

3. Pursue midlevel department store accounts - this proposal involved pursuing department store chains. This excluded upscale, discount, and mass merchandise stores. These stores included JCPenney, Kohl's, and Macy's. If the proposal was secured through the midlevel department store accounts the merchandise would increase to 7-count package at $7 or $8 per package sale.

A decision was made to dissolve