Brand Stagnation Case Studies
Kraft Heinz, Borders, and The Sharper Image are three US brands that neglected growing sales and revenue which led to brand stagnation. While The Sharper Image had successfully recovered, Borders did not and closed up shop. Meanwhile, Kraft Heinz fights on to recover from its misaligned sales and revenue growth strategies. These are outlined below.
- Fortune reported that Kraft Heinz has done permanent damage to its brands by focusing on cost-cutting while neglecting sales and falling revenues.
- In an attempt to revive slow-growing packaged brands in the market, Kraft Heinz used a technique known as zero-based budgeting since its merger in 2015.
- The strategy focused on cost-cutting and in turn pressured managers to lower all costs for a series of periods.
- This took focus off both sales and revenues, with the result of Kraft reporting zero gains in revenues this 2019.
- Gains in profits were made from chopping costs but resulted in flat sales and revenue.
- This February, Kraft Heinz announced a $15.4 billion writedown which meant lower future earnings than expected.
- Harvard Business School has warned that zero-based budgeting strategy is not a wonder pill for every company.
- Fortune reported that Kraft's failed strategy has done permanent damage to its brands, which are struggling to gain ground with health-conscious millennials.
- Borders was once a top national bookselling chain with over 400 stores across the US.
- It was a pioneer of the book megastore business along with Barnes & Noble.
- However, Borders made several mistakes over the years which included neglecting its sales strategy.
- When the digital media revolution hit, Borders invested heavily on merchandising and physical CD/DVDs instead of digital music sales.
- NPR reports that Border's competitor "Barnes & Noble also invested in beefing up its online sales. ...Borders did not."
- Instead, Borders invested in its physical plant and stores.
- It also made a crucial mistake in outsourcing its online sales to Amazon, which eventually took Borders' market shares from the bookselling industry.
- As customers went online to buy books, Borders stagnated as a brand and increasingly lost revenue.
- The company's last turned a profit in 2006 and never recovered.
- Borders shut down on September 2011 with Barnes and Noble acquiring its remaining brand trademarks.
The Sharper Image
- The Sharper Image was a major retail store chain with nearly 200 stores in large malls across the US.
- After around 30 years in business, Hilco noted that the brand slid into stagnation due to "years of declining sales."
- This was compounded by the brand's inability to craft an effective sales strategy.
- PYMNTS report that "the brand had been going through “some issues” adopting to a retail environment that saw fewer and fewer consumers heading to the mall."
- ThreeSixty bought the brand in December 2016 and made fundamental changes to its sales and revenue growth strategies.
- This included licensing agreements with Conar, Allstar Products, Aerus LLC and Mystic Apparel - effectively expanding the brand into new areas such as beauty, pet care, and home along others.
- ThreeSixty also broke through the brand's mall environment and offered The Sharper Image's products in large store channels such as Target and Kohl's.
- As a result, "The Sharper Image is a vibrant brand once again, with products being sold online," thru mail order and in retail stores outside its initial mall environment.
- The brand remains "focused on marketing and advertising efforts to boost sales" and might return to brick-and-mortar stores should revenue and operations continue to improve.
- ThreeSixty also stated it will work on expanding The Sharper Image's opportunities in the US and abroad.