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Introduction to the case

Ann Star Fashion Shop

Ann Star Fashion Shop is one of the reputed womens fashion wear store in Philadelphia. It

started operations in the year 1947 and by Laura Taylors grandmother and subsequently run by

her. Till now the store faced no major competition. However, when a low cost fashion clothes

company, Hillmans, opened its store in the area it became a concern for Laura Taylor.

Hillmans Store

Hillman started its operations five years ago. The Fairmount store opened near Ann Star Fashion

Shop was the companys ninth store. The company targeted the women with expensive tastes

and limited funds, and who did not want to wait for the newest look until it has been copied in a

lower price range. The concept was to buy the clothes in lots close to actual buying season of

well-known brands. Thus, they were able to offer 20% lower price as compared to departmental

and specialty stores.

Filene Basement

The strategy of Filene Basement is to sell branded clothes off season.

1. Prime Space (12 days)

2. Less Desirable Location3. Third Area

4. Charitable organization

They had regular suppliers like Neiman-Marcus in Texas and Bergdorf Goodman in New York.

Issue in the case

Ann Star Fashion Shop is faced with competition from a discount fashion store Hillmans and it

has to decide upon a strategy to maintain it sales

Analysis

Alternative 1- Continue with the same strategy

Positives

Higher per unit profit-50% markup currently

Clear positioning-fine designer cloth shop

Retain its loyal customer base who are very particularabout designer wear

Negatives

High mark up will be exposed due to price comparison

with Hillmans

Loss of consumer base to a certain extent (consumers

who are less particular about color, style, service)


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Altenative 2- Imitate the competitors exactly

Alternative 3- Filenes Basement along with current operations

Linking objectives of Ann Star fashion Shop with their strategy

The objective is to seek profit and maximize patronage. The pricing strategy has to be in

alignment with the objective of the pricing which is value based pricing (high markup with

comparatively lesser volume)

Recommendation

Increase the value to the customers. This can be done by improving the monetary value to the

customers by offering customized products, the time spent can be reduced by offering online

services, knowledgeable staff and extended service time, Physical efforts can be reduced through

online store and knowledgeable staff, Psychological burden can be reduced by way of

testimonial advertisements and online review. Thus the following actions are recommendations :

Managing the perception of value to the customers

Additional value to the consumer by adding supplementary services and enhancing thecustomer experience

Reducing non-monetary costs to the customers

Positives

Customers wont switch to Hillmans

Negatives

Risk of price war with Hillman

Hillman enjoys economy of scale- 9 stores

lower procurement cost

Ann Star cant win in price war with Hillman

Lowering Price is not consistent with current positioning

Loss of reputation

Lowering price means Reduced Profit

Maintaining profit means reducing costs

Less service

Less selection

Loss of customers who need service & selection

Positives

Rate fencing will self segment the customers

Target customers will be retained, and prevented from

being lost to Hillmans

Filenes basement would offer garments at half the price ascompared to Hillmans (that sold at 20% markup)

Negatives

Dilution of Ann Starr brand due to shift of focus away from

the current positioning

Not offer direct competition to Hillmans

Unable to capture the target customers of Hillmans

mos group2 ann star

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