.\An"n ^
Richard
lvey Schoolof Eusiness
TheUniversity Western of Ontado

IvEy
9B10A029

D.BAMBOO
HOMEAND GARDEN
SHOP

Bamey G. Pachac. wrote this case salely to ptovide matetialfot class discussion.The authot does nol intend to illustate either effedive ot ineffedive handling of a manageial situatbn. The author may have diquisod cedain hamea ancl oth6t idenlifying informalionto protect confidentiality.
Richad lvey Scltoo/ of 8i./srhess Foundation ptuhibits any tom of rcprcdudion, storago or trars/n ssro, utithout its winen pamissiotl. Reptududion of this matetial is not @vered under authodzationby any rcpbdudion dghtsoqanization. To ordor @pies or requesl pemissron to reproduce matarials, @ntad lvey Publishing,Richad lvey Schoolof BusihessFoundaton, The Univesil, of WestemOntado,London, Ontado, Canada, N6A3K7; phond(519) 661-3208;fax (519) 661-3882;e-mail cases@ivey.uwo.ca.
Copynght@2010, Richard lvey Schoolol BusinessFounctatbn

Version:
201G12-16

In October2009, salesat D-Bamboo home and gardenshop were 40 per cent less than the previousyear andHarry Laurell,the owner,was reflecting the futureof the business. on his
Whenhe had opened shop two yearsago in Chaguanas,
Trinidad, he hadbeenthe only one-stophome and gardenshopin the areaand quickly gaineda reputationfor selling high-quality plantsand agriculturalsuppliesat reasonable prices. Ten monthsago, however, anotherhome and gardenshop had openednearby, selling similar items to DBambooat slightly lower prices. In order to compete,Harry was thinking of moving to a larger location and expanding business capitalize emerging his to on opportunities such as the demandfor landscaping services wealthyprofessionals. wasuncertain by He how his currentcustomers would reactto sucha move and wondered what kind of marketingactivitieshe shouldengage to ensure business's in the long-term survival.

BACKGROUND
INFORMATION TRINIDAD
ON
AND TOBAGO
The twin island Republic of Trinidad and Tobagowas located l0 kilomet€s off the northeastem coastof Venezuela the southemtip of the Caribbean at (see archipelago Exhibit l). The population 1.3million of wasethnically
(40
diverse, with peopleof African andIndiandescent comprising largest segments per the cent each)and people of European,Chineseand Middle Eastem ancestryadding to the ethnic mix. The official language Trinidad and Tobagowas English,althoughSpanish of and Hindi were alsospokenby small segmentsof the population. Trinidad and Tobago was intemationally renowned for its many particularlythe arurualCarnivalcelebrations, festivals, which took place in Februaryor March prior to
Lent andculminated two daysof street in parades parties. and The country was one of the most prosperousin the Caribbean,primarily due to its large reservesof petroleum and naturalgas,and had experienced economic
While
an boom during the period2000-2006.
Trinidad was the larger (4,828 squarekilometres) of and more heavily industrialized the two islands, tourist travel was mostly to the smaller(300 square kilometres) the two sisterislands,Tobago.The of capitalcity, Port of Spain(population
50,000),
wasthe seatof govemment with othermajorurbancentres being Arima, San Femandoand Chaguanas.
While citizensof the republiccontinuedto enjoy a high

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standard living, steepdeclines the priceof oil andgasover the pastthreeyearsanda steadyincrease of in in the rate of violent crime posed significant challenges the govemment'sability to meet its to goals. development COMPANY
BACKGROUNO
from the Universityofthe
Harry Laurellopened
D-Bambooin August2007,fifteenyearsaftergraduating
WestIndies(UWI) with a dual degree chemistry management. the time, he was single,hadjust
At
in and Bom tumed40 and was excitedthat he had finally realized lifelong dreamofowning his own business. a his andraised Trinidad,Harry hadalwaysaspired be an entrepreneur aftercompleting university to and in Two yean after ventutes. education had been involved on a part-timebasis in a numberof business with a graduatingfrom UWI, while employedfull-time as an insuranceagent,he formed a small business jobs several friend to sell usedshipping containen. Over the coune of his corporatecareer,Harry changed times, working in the salesdepartrnent a shipping agency,then in the customerservicedepartmentat a at paint companyand, starting in 2004, asthe marketingmanagerat a roofing company.
While working full-time at the paint compary, Harry continued to nurture his entrepreneurialambitions lastedsevenmonths, and openeda small restaurantin 2002 in partnershipwith two friends. This business but was closed after the rent for the property doubled. Shortly after the restaurant's closure, Harry partneredwith anotherfriend in openinga decoratingshop, which was later conv€rtedto a plant shop. He eventuallysold his shareofthe business his friend andthey partedways dueto personaldifferencesover to and the strategic directionof the shop.He then followed up on his lifelong interestin the environment plant shop.Harry natureby becominga financial partnerwith anotherfriend who owned a well-established in initially planned playinga minor role in the daily operations on ofthe plantshop,but ashis involvement the businessgrew he becameincreasingly frustratedwith the corporateworld and the lack of decisionmakingpowerin hisjob.
He hnally quit as marketing managerof the roofing company in October 2006 and becamea full-time partnerin the plant shop with his friend.He immersed and himself in the business was involved in all and visiling suppliers aspects includingdirect sales,plant prepantion,chemicallabelingand packaging, promoting the shop. To enhancehis knowledge of plants and the agricultural sector, over a six-month period he pursuedtraining coursesin plant scienceoffered by the Ministry of Agriculture and also took with the coursesin agri-business from other private institutions.Eventually, after gaining someexperience the business his friend and usedthe fi.rndsto open D-Bamboo on August to industry, he sold his shareof
24.2007.
savings,literally every cent that the owner
D-Bamboowas totally fundedwith TT$75,000'in personal possessed. Harry knew that openingthe shopwas risky due to the tubulent economicclimate prevailing in the country, but he was confident that the shopwould be a success and that he had the experienceto deal with any problemsthat might arise.No market research was done prior to the openingand the decisionto startthe business was basedentirelyon Harry's understanding the marketfrom previouswork in his of awareof the growing friend's plantshop.As a resultof his involvement that business, hadbecome in he interest by customersin establishinghome gardensand felt rising prices for herbs and garden supplies offered a uniqueopportunity to launcha one-stopagdcultual shopwith a wide productassortment.

1 All lundsan in Tinidad and Tobagodotlars.IJS$1= TT$6.30
(approxinatev.

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Shop Location
Harry initially wantedto locatehis shop in the capitalcity of Port of Spain,but was unableto find a suitable at a reasonable site cost,so he choseinstead locateit in the Chaguanas to area.The shopwas on the groundfloor of a three-story building in the second-busiest in Chagualas, area abouta five-minute drivefrom a largeshopping centre. The buildingalsohoused threesmall food outletsanda computer sales and repairshop,while a roadside vendorof EastIndian delicacies was locatedapproximately meters
20
away.A popularand heavily visitedgasstationwas directly across road from D-Bamboo,while the th€ mainhighwaylinking the northandsouthofthe islandpassed than200 metres less from th€ shop.
Although D-Bamboowas locatedin a prime location next to a busy intersectionwith high vehicular traffic,
Harry was seriouslyconsidering relocatinghis shop by Christmas
2009. A major disadvantage his of present locationwas that the building in which the shopwas locatedwas recessed an anglefrom the at roadside, the shopwas not clearlyvisibleto passing so motorists.
Harry originallyplanned ere€ta large to floodlit sign at the roadsidein order to attractatt€ntion,but the cost of erecting such a sign was quire high
(approximately
andhe believed dueto the heavytraflic in front ofthe shop,motorists that would
$10,000)
concentmte their driving ratherthanpay attention storesigns.He hadtherefore on to this abandoned idea and insteadhad erecteda 2xl -metre,unlit sign with the nameofthe storeover the front entrance.
The expansion ofthe car park servingth€ buildingin March2009alsomeantthat Harry no longerhad the spacein front ofthe shop to display plantsand allow them to get adequate sunlight. This had increased the cost of doing business sinceplant losses increased 25 per centand many seedlings exhibited had by had stunted growth. Harry also recognized he would needadditionalspacefor a greenhouse orderto that in expand and break into the lucrative flowering plant market. A critical factor that had causedhim to postpone moving was that many customers liked the shop'scurent locationdueto its easyaccessibili!.
Harry was thus looking for a new place close to the current location since he expectedhe would lose roughly80 per centofhis clientsifhe movedout ofthe Chaguanas area:"l suspect I might loseabout that 50 per cent of my customers I relocate if within Chaguanas I am confidentthat over half of those but customerswould return within a few months once I don't move too far away." Another major benefit of moving to a better location was that Harry could potentially reducehis expenses to plant lossesby as due much as 30 per cent. He believed,however,that ifhe could not find a suitablelocation nearby,it would be bestto relocateto anotherdenselypopulatedurban centre,suchas SanFemando(30 kilometresaway).
Product Mlx
Traditionally,
establishments soldplantsor agricultural that that supplies wereviewedasagricultural shops cateredto the needsof farmers.As the focusof suchbusinesses shifted away from serving farmersin rural communities to serving homeovmersin the suburbs,the product mix in many agricultural shops was expanded they were convertedinto homeand gaden shopsto salisry the needsofthe new segment. and As a homeandgardenshop,the productmix sold by D-Bambooconsisted medium-to low-endplantsand of gardening supplies costingmorethan $600,Itemsincludedseedlings not rangingfrom $0.50to $2 each, potscosting$l to $600 and chemicals costing$20 per kilogram(seeExhibit 2). Harry deliberately chose not to cater to the high-end market and carry more expensiveitems, since the tumover of such items was very slow andtied up a lot ofcapital.
Harry firmly believedthat the productmix at D-Bamboo was the major factor responsible the shop's for success.
Unlike competitors who specialized sellingonetype of product,customers D-Bamboo in could of find gardensupplies, ornamental flowersor vegetable
Harry
seedlings in one location.Sinceopening, all Page4

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had introducedmany unique featuresin the shop.For example,customerscould get neatly baggedmanure at D-Bamboo, which was typically a messyproductand not widely available. had also expanded his He product line to include bonsaiplants,turtles and aquariumfishes and widenedthe rangeof brandsin each product category. seasonal
For
events, soldspecial he flowerslike rosesfor Valentine's
Day andpoinsettia plantsfor Chdstmas.
Anothercompetitive
advantage Harry cultivated that was his willingness andability to source
"exotic" plants,suchasthoseusedin religiousceremonies, which weredifficult to find andnot available competing at shops.
Promotlon
Very limited markefing was done for the shopprior to openingdue to the lack of startupcapilal. Harry was also unwilling to incur debt in orderto fund promotional activities. a result,the only promotionthat
As
Harry invested in was to distribute flyers at a nearby shopping plazz and at surrounding companiestwo week before the gand opening. During the first week after opening,Harry had giveawaysof sweetsand balloons childrenwho visitedthe shopwith their parents. alsodiscounted for He seedlings 30 per cent by andgavea free plant to every customerwho visited the shopduring the first month.
In orderto attractcustomers,Harry createdmobile plant shelvesto display plants outsidethe front entrance of the shop, but he did not display a sign outsidethe shop until his secondyear in business.
The
distributionof flyers in the shopping mall prior to specialoccasions along with the periodicaldisplayof small posters a roadside on wall nextto a nearbyfood vendorwerethe only ongoingformsof promotion usedby D-Bamboo.Despitethis low level of marketing, however,therehad beena naturalinffeasein salesover the pasttwo yearsand Harry was reluctantto significantly increase marketingbudgetbeyond his the $750 currently spent on flyen and posters.He believed that even if he tripled his current promotion budgethe would only be ableto increase sales five to l0 per centand this did notjustiry dippinginto by his cashreserves.

Prlclng
Harry delib€ratelykept prices low for the first eight montbs after opening in order to encourage customen to visit the shop. Initially, the markup on plants was 25 to 50 per cent, while on shop items (garden suppliesand equipment)it was 30 per cent.He changedhis pricing stuchre after the first year in business so that for plants costing lessthan $20 the markup increased 100per cent, while for plants costingmore to than $20 the markup was 50 per cent. The markup on shop items, on the other hand, was increased 40 to per cent at the end of the first year and was increasedmore recently to 50 per cent. An exceptionto the generalpricing policy was made for the more expensiveitems (more than $150), where the markup was maintained 35 per cent. Such items(e.g. pumps,resinpots) represented per cent of D-Bamboo's at 15 entire inventory. The normal markup for competitorssimilar in size was 50-100 per cent and the la.rger shopsusuallymarkedup their pricesby 100per cent.Harry's general pricingpolicy, however, wasto set
D-Bamboo
pricesat eitherthe samelevelor slighterlowerthanall othernearby competitors. For the last six months,Harry had beentoying with the ideaof increasing pricesslightly in orderto his improvethe shop'scashflow prosition.
From discussions with customers,
Harry knew that saleswould be affected if he increasedprice and estimatedthat a five per cent increasein price would result in a 7.5 per cent decrease salesvolume.He wondered, in however, the higherprice would change imageof his if the shopandbe enough offsetthe lowervolumeofproductsold. to Page5

9B't0A029

The Consumer who patronized shop.The majority(60 per the ofcustomers
Thereappeared be several to distinctsegments
(25 to 40 yean old) who were first-timehome cent) of D-Bamboo'scustomers were working women
(15
retirees over 60 yearsold gardenowners.The second-largest customer segment per cent)comprised l0 gardening their freetime. Expatriate workersconstituted approximately per centofth€ who enjoyed in in wealthy and were primarily interested shop's customerbase.These individualstendedto be fairly
(10
purchasingexotic plants. Teenagers per cent) and farmen (five per cent) were the final two customer segments. Teenagecustomerswere most likely to purchaseaquarium fishes and flowering plants, while seedlings chemicals. and weremoreinterested purchasing in vegetable farmers base.
Many of theseloyal customers a Over the pasttwo years,D-Bamboohaddeveloped loyal customer were attrdctedto the shop becauseof its extendedopening hours on evenings and weekends.The late on who had stopped their way closingtime (7:00 p.m.) also allowedHarry to caterto walk-in shoppers home after work to purchasefood from the various food vendorssurroundingD-Bamboo and then noticed areaand the shop.Approximately 15 per cent ofsuch walk-in customerswere from outsidethe Chaguanas were not aware of the shop's existenceprior to their first visit. A growing number of customershad also started visiting the shop on weekendsbecausethey found the opening hours on a Sunday to be more convenient. Harry's willingness and ability to procureexotic plant speciesthat were not readily available in competing shops had also attracted some customers away from the larger, well-known suppliers of plants and to werewilling to travel significantdistances
What Harry discovered wasthat manycustomers seedlings. obtain the more exotic varieties of plants and that his reputation for selling such plants gave him a competitive advantage.Several schools in the district had approachedHarry, seeking plant rentals for to theserequests the plant schoolfunctions. SinceHarry did not providethis facility, he usuallyreferred partner. few schoolteachers alsocomeinto the shopandbought had A shopownedby his formerbusiness that Harry felt held signiltcant opportunity seedlings use in scienceprojectsand this was a business to future potential. services(fueled by their who were interested landscaping in Relativelywealthy young professionals anotheremergingma*et and Harry had received exposureto programson cable television) represented several enquiries about such services from customes. The rise in housing projects that required landscaping serviceswas anothergrowing market and Harry had submittedthree proposalsfor landscaping properties,but had beenunsuccessful winning any bids thus far. His plan for the upcoming in commercial year was to attend various coursesin commercial landscapingdesignto increasehis chancesof winning this business.

Suppliers of productlines.Thereweretwo differentcategories
The type of suppliervaried for eachof D-Bamboo's
Harry
suppliersof omamentalplants (which were importedinto the countrybeforebeing propagated). in directlyfrom eightof the l0 largestsuppliers the country boughtabout30 per cent of his omamentals and (a to basedon their wider plant selection speciallicencewas required import plants and seedlings) plants,however,from 30 small homegeographic location.D-Bamboogot the majority of ornamental andpropagat€d a limited scalebeforesellingto on based suppliers, who boughtfrom the largerplantshops sincetheir priceswereusually shopslike D-Bamboo.Harry prefenedbuyingfrom thesesmallersuppliers low€rthantheir largercompetiton'prices.

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Therewere five large nurseries lettuce,tomatoes) the in selling seedlings food plants(e.g. cabbage, for country.D-Bamboogot most of its seedlings from the largestsupplier,who was locatedin Chaguanas.
Harry often had to contend with shoftagesof seedlingsdue to the seasonalgrowing pattems for some plants. The supplyofseedlingswas alsosomewhat of dependent the importation seeds the chemical on by companies who supplied to to seeds the nurseries, who in tum soldseedlings plantshops.
In an inter€sting
The largestherb supplierfor Dtwist, some customers had also tumed into suppliers.
Bamboo, instance, started buyingherbsfrom D-Bamboo starta small homegarden for had to and had off evolvedinto oneofthe largest herbsuppliers the country. in D-Bamboogot its fish, turtlesand pet supplies from threesmall-scale supplien locatedin the Chaguanas area and sourcedchemicalsdirectly from five of the sevenlarge chemicalsuppliersin the country.
Equipment
wasboughtdirectly from largehardware of tools. distributonaswell aswholesalers gardening
Ha.rrysometimes
in collaborated with otherplant shopownersto buy plantsand gardensupplies bulk n orderto getdiscounted prices. Competitlon
When D-Bamboo openedin 2007, there were a few established plant shopsthat dominatedthe Trinidadian home and garden industry. Competitorstended,however, to focus on salesof either plants or chemicals and no one, at the time, had the mix of productsthat D-Bamboocanied. For instance,there were four large family-owned businesses Chaguanas controlled market, oneshoponly sold plantswhile the in who the but other shopsonly sold fertilizers and chemicals.The large seedlingsupplier for D-Bamboo in Chaguanas also sold directly to the public but had slightly higher prices than D-Bamboo and Harry felt that this allowedhim to remaincompetitive despite smallersize. his Initially, there were no direct competiiors in the immediate vicinity of D-Bamboo, with the closest competitor locatedl0 kilometresaway.Within the last l0 months, however, much smallershopwith a a similar product mix had openedone kilomehe away andtherewere rumourstlat anotherhome and garden shop was going to be openedin the nearby shoppingmall by December2009. Harry had also noticedthat within the last year the typ€ of products offered by one of the larger competitors had changedto more closelyresemble own. his FlnanclalPerformance
The slow revivalofthe agricultural interest consumers growing by in seclorin Trinidadandthe increased their own food had helped spur sales in the first year of the company's existence. The Ministry of
Agriculture had also investedheavily in educationalprogramsencouragingcitizens to start home gardens andthis, coupledwith the population's exposure cookingshowson cabletelevision, to had contributed to an increased demand vegetable for plantsandherbsin particular.
Thesefacton had increased
D-Bamboo's
sales significantly. During the first l8 monthsafter opening,saleshad grown steadilybut had slowedconsiderably the in secondhalf of 2009 (see Exhibit 3). Expenses and had rangedfrom 50 to 60 per cent of total revenue increased two to five per centeachyear.Harry hadalsomanaged put aside$55,000in cash,whichhe by to held in reserve caseof an emergency. was reluctant usethis moneyto fund the operations in He to ofthe

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business, his bankerhad reassured but him that he could use thesesavingsto get a loan of twice this amountifneeded. Although he had not done a formal analysisof salestsends,Harry kept a meticulous log of his monthly salesandexpenses notic€d that salestendedto peakin Decemberbut drop offin July andAugust when and familieswereon vacationor savingmoneyto buy schoolsupplies.
Apart from the Christmas season, DBamboo experiencedhigher than average sales during special occasionssuch as Mother's Day and
Valentine's Day. Harry feared, however, that sales for the upcoming Christmasseasonwould not match years the pattem witnessed previous in CURRENT
SITUATION

^