While I agree that Kayla Itsines has a low-cost operating model, there are several concerns that I have regarding the sustainability of the business, two in particular that would suggest she could be a future “Loser”.
• Unprotected revenue streams – While the BBG guides are transferred to the final customer via a low cost, PDF file, they are just as easily shared with non-purchasers thereafter. For instance, EBay is one of many secondary markets, currently selling the ‘product’ for as low as 5% of the retail price. (http://www.ebay.com/itm/Kayla-Itsines-Bikini-Body-Guide-and-H-E-L-P-Nutrition-Guide-Bundle-/111366537226) Without built-in mechanisms to block content access to non-purchasers (akin to Kindle), there is little reason to believe Kayla Itsines could sustain continuous revenues.
• You’re only as good as your last act – In an attempt to solve the problem above, Kayla recently launched an app (on November 22nd) that would deliver a recurring revenue stream: $20 per month for a minimum of 3 months. The app has a 1.5/5 rating in the apple app store with many fans in the community responding in “outrage” (it seems paying for content is not something Kayla’s cult is actually interested in doing). Therefore, while this community of followers is one of Kayla’s most valuable assets, I’m unconvinced that this loyalty will sustain over time. As an attendee of Kayla’s worldwide tour stop in NYC, I am reluctant to admit that this business model may be just another fitness fad that ends as fast as it began.
Zara has undoubtedly been able to deliver a high growth model (same store sales growth of 5% in 2014) in an industry (traditional department stores in the US) that has struggled to deliver even single digit same store sales growth over recent years. I had a few two questions regarding how they operate their business model:
• As you mentioned, the company can respond real-time to customer feedback. However, customer preferences must vary by store and even more, by country. How does Zara manage diverse demands across stores (localization)—does their centralized development team design market-specific products? How are product allocation decisions made and how is inventory managed in-season?
• Zara is known to only have two major sale periods a year. Given the demand for consistent newness, how does the company clear out of old stock/ product lines throughout the year that don’t resonate with customers?
More importantly, with the growth of online-only retailers who can more easily deliver this same value proposition without the overhead costs of running stores, how will Zara evolve its model to sustain its competitive advantage?