Thank you for an interesting post. I must admit I agree with your assessment that this is an excellent business and operating model in what is traditionally a very difficult industry. That said, I also question the sustainability of this business model. During the global recession and the slow recovery, people have down traded in an attempt to save money, and a business model focused on very low price and no frills has done well.
However, has Ryanair taken it too far? Will they be able to fight off the consumer backlash to their brand and to Michael O’leary (CEO)? May people say Ryanair makes its largest margins from clever consumer tricks (e.g. 2% credit card charge, a £70 penalty for failing to print out your boarding pass, €3 (£2.52) for a small bottle of water). As a representative of the UK, I can tell you that Ryanair has an awful reputation beyond price, and that many people now refuse to ever fly Ryanair because the service was that bad or the air-hostesses were that rude. It is worth noting that the other low cost airlines such as Easyjet do not have the same reputation. An interesting example I will cite is this summer Ryanair lost a court battle about their payments to consumers when flights are delayed and are now due a liability almost equal to their net income.
As the economy continues to recover, will consumer get fed up with Ryanair and trade back up?
Thank you, this is a great post on a very interesting company. In my opinion, TOMS are one of the pioneers of an entire segment of philanthropic consumer purchasing. I think the issue is, which many of these businesses will face with the business model and operating model is how to genuinely show they want to make a difference when they clearly make high profits. As you articulated well in the post, TOMS has faced this issue with endless criticism about its actions and how much help they give versus damage.
We have seen in our Marketing module that many marketing programs (e.g. Dove & Pepsi Refresh) will create a story around their respective brands (environmental, social impact, “real beauty”) in an attempt to demonstrate that the brands care. However, a cynics view (and potentially a realists view), is that the underlying motivation is boosting sales, and these stories are just that…. stories.
When I look at TOMS, I know it is private equity owned and is expected to make high profits and returns for its investors. Given people are paying premium prices for their shoes (effectively enough to pay for their shoes and the donated shoes), is TOMS just the ultimate example of a for-profit company using a heavy social image to drive value for shareholders?
Thank you for a great post. I found it very interesting that in the face of stiffer competition on fresh and quality groceries, they are actually lowering prices and making themselves less differentiated than competitors. Intuition for me would have suggested to double down, maintain high prices and emphasize the in store shopping experience, service and quality levels as the justification for the difference. It will be interesting to follow how this strategy pans out.
You also mention the declining life-for-life store sales. Given this declining top line, I wonder whether they will continue to open new stores in the US or actually start to focus more on their international strategy where they remain more unique. I know they now have c.10 stores in the UK, but could they spread further?