Classic Knitwear

Classic Knitwear (Explanation)

Explore branded shirt market - Classics main problem was that they had no brand recognition among retail customers resulting in no product differentiation resulting in substantially lower gross margins than those enjoyed by leading branded product manufacturers, which is currently 18% versus 30%to 40%. Further retailers also prefer branded apparel product. The company wanted to achieve increased manufacturing efficiencies in the hope of achieving short-term margin goal of 20% in 2006.

Increasing market share - Classic was the #2 player in the screen-print industry with 16.5% market share compared to the #1 player occupying 23.6% of market share. The screen-print industry shipments to wholesalers exceeded 80 million dozens in 2005, representing $2.5 billion in factory sale. T-shirts represented 53.5% of the total non-fashion casual knitwear market. Company’s short term goal is to increase the gross margins and the market share by penetrating into a new market and taking the target group as men with the age group of 18-35 yrs. outdoor enthusiasts male population.

Diversification - Classic is considered as a major player in the non- branded segment and because preference of retailers for branded apparel classic is diversifying its market by focusing on a particular segment collaborating with guardian to manufacture insect repellent t-shirts. According to the online survey, customers as well as retailers prefer this since it is a branded product.

Technology Advancement – Guardian’s repellant provides protection through 70 washes ñ nearly 3 times the 25 washes promised by existing insect-repellant apparel.

Benefit of Guardian Brand Name - In the targeted segment, awareness of guardian brand name is 50%. Out of this 50%, 95% consumer held positive perception about Guardian, further 58% recognized Guardian's pioneering status in insect-repellent clothing technology.

Guardian EPA Certification - Guardian had received EPA registration for the newly patented insect-repellent technology that guaranteed protection through 70 washes ñ nearly 3 times the 25 washes promised by existing insect-repellant apparel.

Reducing advertising cost – Creating own brand and marketing it would require an investment of $8 million to $10 million. The company’s CFO Chong clearly pointed out that the investment size of that potential was out of the financial resources of the company. But collaborating with Guardian enables Classic to not only meet its higher gross margin target but at a lower marketing budget of $3 million.

Advantage over competitors – Because of growing national awareness of insect borne illnesses such as Lyme disease and the West Nile virus, current dearth of prevention products and some insect repellent clothing was already selling successfully into small niche markets, it gives perfect opportunity to Classic to experiment the same at mass level.

Leveraging existing Guardian’s Client Base – Guardian has a very high perception among customers in terms of quality of its products. The existing client base of guardian can be easily catered by Classic through its new shirt – which uses Guardian’s name. It can support the existing product portfolio of Guardian in terms of higher value proposition while fulfilling the Classic’s objective of higher gross margin by entering branded product markets.

Nationwide awareness of insect-borne illnesses - There was an evidence of growing national awareness of insect-borne illnesses and also people were dissatisfied with few prevention products they could purchase. (Page-4; para-1)