E-Com Case Study

SMU840
IUIGA’S CHALLENGE: IS OMNI-CHANNEL WORTH IT?

… the idea – or the cliché – of omni-channel retail is a reality.
Kevin Plank, Founder and ex-CEO, Under Armour1
It was a relatively cool evening in January 2020, when Jaslyn Chan, Head of Marketing at Iuiga, a
Singapore-based e-commerce venture, started to analyse the company’s latest sales and customer
data. It had been almost 20 months since Iuiga adopted omni-channel retailing. Next week, Chan
needed to present the results outlining the impact of this action to the senior management team.
Iuiga endeavoured to maximise customer value by offering a curated range of high-quality products
in the ‘home and living’ category at affordable prices. Unlike other e-commerce portals, the start-up
owned the items it sold besides undertaking storage, logistics, distribution and marketing. The same
products that China-based original design manufacturers (ODMs) produced for big global brands
(known for their superior design, quality and hence high prices) were sourced by Iuiga and retailed
under its own brand name, at much lower and transparent prices, through its website and mobile app.
Having taken off with a promising start in May 2017, Iuiga’s sales had however plateaued just eight
months later. Attributing this decline to lack of brand awareness and low penetration of online buying
in Singapore, Chan proposed opening a pop-up store as a marketing platform to drive greater brand
presence and customer engagement. In May 2018, after much deliberation, the Iuiga board gave the
go-ahead to launch the pop-up store, even though physical retail was an uncharted territory for the
team and required additional investments to acquire the requisite resources and develop expertise.
The pop-up store’s runaway sales success buoyed Iuiga to adopt a more long-term brick-and-mortar
retail strategy, and by December 2019, it had established nine retail stores that contributed 80% of
its total sales, and employed more than 40 sales people (full time and part time).
Preparing for the upcoming meeting, Chan wondered what her recommendation to the board should
be. Analysing the data, she tried to determine if going physical had been successful or whether the
sales in the offline channel grew at the cost of sales in the online channel. Moreover, what types of
customers did the different channels attract? Finally, should the company increase the physical
footprint further? Would opening additional pop-up or brick-and-mortar stores enable more customer
acquisitions and tapping of new market segments?
1
Kyle Stock, “Under Armour's Kevin Plank on Retail's Future”, Bloomberg, 6 November 2014,
https://www.bloomberg.com/news/articles/2014-11-06/retail-expert-outlook-2015-under-armours-kevin-plank, accessed March 2020
This case was written by Associate Professor Sandeep R Chandukala, Associate Professor Ernst C Osinga and Dr. Sheetal
Mittal at the Singapore Management University. The case was prepared solely to provide material for class discussion. The
authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have
disguised certain names and other identifying information to protect confidentiality. This case was developed with the support
of Retail Centre of Excellence (RCoE).
Copyright © 2020, Singapore Management University Version: 2020-03-03
This document is authorized for use only in Prof. Sunil Chandran's PGP /E-Commerce at Indian Institute of Management - Visakhapatnam (IIMV) from Mar 2021 to May 2021.
SMU-20-0029 Iuiga’s Challenge: Is Omni-Channel Worth It?
Pop-up, a Marketing Platform
The objective of the pop-up store was to create market traction for Iuiga by connecting with the larger
offline audience of Singapore in the shortest time possible. However, it came riddled with many
concerns. For starters, launching a physical store, albeit a semi-permanent one, would increase
Iuiga’s operational costs due to the expenses of renting a physical space, hiring salespeople,
merchandising and integrating the store with its online portal. This meant Iuiga would have to reduce
its margins in order to maintain its lower prices vis-à-vis the premium brands it benchmarked against.
In addition, with the Iuiga team having no experience in physical retail, it would be a steep learning
curve for the company, necessitating recruitment of talent from outside along with providing training
to its existing personnel.
While Chan agreed that there were high costs associated with the proposed pop-up store, she argued
that it was an essential brand-building measure. Moreover, Iuiga’s policy mandating all potential
customers to become members first through its online app before any purchase could be made would
ensure that all customers, acquired offline or online, were captured in its database and could be
effectively targeted through digital marketing.
To further address the concerns, Chan analysed which of the two scenarios would yield a higher
benefit-to-cost ratio. One, in which part of the marketing budget, US$36,000 (estimated operating
cost of launching a pop-up store for three months) was used for launching and running the pop-up
store, and the other in which the same amount was used for digital marketing. The potential impact
on brand awareness, customer acquisition and sales was calculated based on estimates of footfall
traffic metrics in shopping malls for the first scenario, and based on past experience and industry
estimates for the second one. On comparison, the cost-benefit ratio was found to be much more
favourable in the case of the pop-up store.
The analysis helped in convincing the senior management team, and the pop-up store was rolled out
(refer to Exhibit 1 for the image of the pop-up store). The monthly operating cost of the store
comprised rent of US$7300, labour cost of US$5100, and utilities expense of about US$110. The
initial results were encouraging with a healthy growth in the number of customers visiting the store
and an increase in sales over time.
Within a few months, the pop-up store proved to be a success as a marketing platform. Besides the
growth in Iuiga’s customer acquisition numbers, conversions, repeat purchases and overall sales, its
brand awareness and recall in the target market also improved significantly (refer to Exhibit 2 for
details on customer acquisition numbers). In addition, the physical space not only served as a
collection point, but also enabled easy exchange and return by making the process more efficient and
consumer friendly. It also triggered opportunities for impulse buying and cross selling, in a product
offering that was otherwise more suited to planned buying.
Brick-and-Mortar, a Long-Term Commitment
As the pop-up store was quite small, Iuiga was restricted in the range of products and services it
could offer. Moreover, with a pop-up contract being a short-term lease – typically for three to nine
months – at every renewal, Iuiga not only faced the risk of having to pay higher base rent and a higher
2/11
percentage of its gross turnover (GTO), it also had to deal with the prospect of possible unavailability
of the desired space and location. Chan shared,
At that time, we were also facing problems in storing stocks as the manufacturers expected us to
increase the minimum order quantity (MoQ). However, if we increased the order size, our back-
end faced difficulties in storing the items, and the pop-up store was not big enough for the
increased inventory.
Chan felt that opening regular retail stores would provide Iuiga a longer-term solution as its
customer-interfacing platform. In addition, it would provide a larger storage space for its inventory
and the ability to offer the full range of its products and services, while keeping the fixed-operating
costs stable. However, this presented certain concerns too. Would Iuiga be able to manage a much
larger inventory, have adequate turnover, and more importantly, maintain its margins given the high
overheads associated with physical retail? Sales growth of the pop-up store might be short-lived and
sales could plateau soon, similar to the trajectory of Iuiga’s online sales. An inventory-heavy business
model also ran the risk of becoming cash strapped and incurring product loss or damage in case of
poor turnover.
Nonetheless, Iuiga went ahead and opened two regular brick-and-mortar stores in December 2018
(refer to Exhibit 3 for the images of the regular stores). Compared to the pop-up, the second store
was more than twice its size, while the third store was almost four times as large. The size of the
stores was calculated based on the sales potential of the two locations - the expected average basket
size from each store, and therefore how much sales could possibly be generated per square foot. The
accepted ratio was between 1.5 and 3.
Teething Issues
In the pop-up store, Iuiga was unable to display many of its products due to the limited space - and
in the case of the regular stores, the company did not have enough product range to fill the entire
store and had to replicate many of its product verticals. According to Chan, “We wondered how a
customer felt when they walked into the store and found many of the stock keeping units (SKUs)
repeated.” With Iuiga having neither an inventory management system nor any merchandising
strategy for its stores, the company feared that there might be an adverse impact on the customer’s
perception of its brand.
Furthermore, as expected, the operating expenses of the company increased on two key counts.
Foremost was the heavy rental cost that the two stores commanded. Iuiga’s lack of experience in
physical retail had led to poorly negotiated terms and conditions with the leasing companies or
owners. The other was the hiring and training cost of full-time sales personnel to service the stores
round the clock during the opening hours.
Another point of concern was Iuiga’s hitherto product selection process, which was manufacturer-
centric rather than being market or customer-oriented. Its sourcing team in China selected potential
products based on manufacturers’ best-selling items and their read of international market trends
instead of catering to what customers in Singapore wanted. At times, the company also adopted an
experimental mind-set while including new products in its portfolio. Consequently, the turnover from
the two stores was less than expected (refer to Exhibit 4 for the turnover details).
3/11
One more challenge that Iuiga faced was in terms of its bargaining power vis-à-vis the manufacturers.
In its online-only avatar, the manufactures had been lenient and flexible with respect to the minimum
order quantity (MoQ) requirements, but with Iuiga’s foray into offline retail, they expected bigger
order sizes. However, only if the retail stores generated the expected sales in a given period could
Iuiga order more and manage a larger inventory.
Learning on the Job
Over time, Chan and her team developed a greater understanding of how to run physical retail
successfully. For better inventory and SKU management, Iuiga adopted a turnover mind-set along
with a market-research-based product portfolio. Chan explained,
We now undertake market research in Singapore, and based on that, inform our sourcing team
what we want to bring in. If there are better versions of that available – we ask what the cost is
and how much it will contribute to the turnover. We are driven by where and which product will
generate more turnover, and that defines our product choices, selection and inventory.
Chan acknowledged that visual merchandising at the stores detailing which SKUs should be
displayed and how, required a certain skillset and expertise in offline retail that Iuiga lacked. She
added,
So, we hired someone from Muji [the globally renowned company against which Iuiga
benchmarked its quality], who had extensive experience in operating retail stores including
merchandising. The person works for us as an in-house consultant, and advises us on how to do
store displays in order for the products to look better to the customers, and drive more
conversions.
Henceforth, Iuiga adopted the practise of innovative island displays and refreshed its merchandise
every week in each store (refer to Exhibit 5 for the images of product displays). Chan explained,
The key space in a retail store is the island. When a consumer walks into the store, they look first
at the island to see what the store is selling. Under A-B testing, we consider a bunch of bestseller
products from a few categories. We try out a particular display using some of these items for one
week, and change to another display using other items for the next week. And, then we evaluate
which one works better by looking at how many times these items were picked up, how many
times customers asked about these items, how many times they engaged with the product, how
many transactions occurred for these products, etc. Based on all of this, we decide what goes on
each island of each store on a weekly basis.
Having hired many full-time employees to operate its stores throughout their opening hours, Iuiga
struggled to utilise them effectively during the daily/ weekly lean times when the footfall declined.
Over time, the company learned that the customer footfall at the stores varied with predictable highs
and lows. Thus, by providing additional support at peak times through part-time workers, Iuiga could
reduce the total number of full-time employees required. Fewer permanent workforce not only
increased the efficiency of its salespeople, but also reduced the overall cost of manpower.
Initially, Iuiga faced managerial issues such as lack of motivation in its retail staff, as the company
did not have any career advancement process for its employees at the store level. However,
4/11
leveraging the experience of its in-house consultant, Iuiga soon adopted an employee engagement
framework that defined performance parameters, provided transparency about what was expected of
them, and shared how they could add value to the team and to themselves.
Silver Lining in Going Physical
The transition from online to offline retail required Iuiga to adapt many of its strategies. In online
retailing, the role of packaging was essentially to prevent damage to the product during shipping. All
information regarding the product was shared on the company website and promotion initiatives were
communicated through digital marketing. However, as Chan pointed out,
In the physical stores, there is no need of external packaging as shoppers want to touch and feel
the products before buying. But we need product labels, to share key information about each item.
In addition, in order to highlight products’ key attributes, the transparent pricing strategy or
launch promotions, we have to develop marketing collateral for each store.
Despite the added expense of developing labels and collaterals, the operating cost of Iuiga came
down substantially due to the cut back on external packaging. Moreover, as Iuiga standardised its
templates for the printable material, printing costs were reduced too.
As an online retailer, Iuiga had avoided selling slow-moving bulky products due to its limited
inventory carrying capacity. A big and heavy product would block the storage space in its warehouse
at the cost of faster-selling items. However, when Iuiga started retailing offline, it found that many
bulky items, such as the shoe rack, exhibited high take-off. Chan explained,
The element of presentation is missing online. But offline, customers can immediately see how
much space the item will take in their house, how it will look and how it will work, without anyone
needing to explain anything.
Consequently, Iuiga became bolder in sourcing and including products in its portfolio that it would
not have dared to earlier.
With the stores also doubling up as collection points for its online self-pickup orders, Chan believed
there would be an increase in store sales as the customers who came to pick up often ended up buying
other items on impulse. Moreover, the immediate face-to-face access to customers at its stores
enabled Iuiga to garner feedback, resolve minor issues on the spot or translate them into actionable
steps, and provide satisfactory solutions in real time.
To provide customers a seamless experience irrespective of the platform they used, Iuiga added
interactive RFID screens in stores to facilitate easy and quick access to information on all products,
including buyer reviews. It also added a self-checkout function on its app enabling customers in the
stores to purchase without having to stand in a queue for making payments (refer to Exhibit 6 for
the image). This not only sped up the payment process significantly but also offered customers the
flexibility in payment methods.
In 2019, Iuiga went on to open six more stores, taking the total tally to nine outlets - four regular and
five pop-up stores. With experience, Chan and her team had learned to negotiate better, winning
5/11
favorable rental contracts for these six stores. Moreover, with its brand gaining a stronger retail
presence, Iuiga’s bargaining power vis-à-vis shopping mall owners and agents had strengthened.
Most of the new contracts comprised either no or low base rent and a small percentage of the said
store’s gross turnover, and the pop-up stores did not incur any premium per square foot of space over
the regular stores.
According to Chan, operating cost was no longer the criterion to select store type; the decision was
driven instead by the availability of preferred location and space. Iuiga selected the location of its
stores based on how much traffic it attracted, how large was the available space, which product
categories would work well in that location, and the degree of competition nearby. Chan shared that
sometimes having a competitor close by helped in drawing greater footfall. “One of our stores is just
ten steps away from a Muji store. It helps in creating our brand presence by driving brand
comparisons”, she said.
Mixed Retail: Is It Viable?
Iuiga’s mixed retail strategy comprising online, regular physical stores and pop-up stores, was
advantageous in terms of risk management. According to Chan,
Use of both pop-up and regular stores would enable the company to make an easier transition to
online if required. For example, in case of market downturn or change in strategy, it would be
easy to shut down a pop-up store by simply not renewing the short-term lease, unlike a regular
store that has longer-term lease.
In addition, it allowed Iuiga to optimise sales by having flexibility in its operations and providing
customers an integrated experience across channels. For example, Chan explained,
In market situations such as the 2020 pandemic scare, with the government asking people to stay
at home, or the customers opting to order from the sanctity of their homes - our online retail has
become the preferred channel versus the physical stores. Also, on occasions such as 11/11 or
Christmas season, our online sales tend to shoot up exponentially, while there is only a linear
increase in our offline sales. After all, at a physical store, there is only so much you can do - even
if you empower your staff, incentivise them, introduce new products in the store, it still is very
much dependent upon the organic traffic a mall has, and how much percentage of that traffic
filters into your store. Thus, it does not see the kind of highs the online channel begets during
such events.
As Chan went about reviewing the sales data, she wondered if going physical had been worth it, and
more importantly, what its implications were for Iuiga’s future retail strategy. Should it continue to
expand its physical reach, given the low penetration of e-commerce in Singapore? Moreover, it was
important to evaluate whether the offline sales cannibalised online sales. What was the impact of
physical stores on the average basket size of online customers? Did the data indicate that the physical
retail was better suited for customer acquisition than its online platform? Finally, did the purchase
behaviour of online customers differ from those who shopped in its offline stores?
EXHIBIT 1: IUIGA’S POP-UP STORE
6/11
Source: Reprinted with Company’s permission
EXHIBIT 2: CUSTOMER ACQUISITION AFTER THE LAUNCH OF POP-UP
Month Total New Sign Ups Pop-Up Sign Ups Online Sign Ups
Jan-18 2384 0 2384

Feb-18 3056 0 3056
Mar-18 2160 0 2160
Apr-18 2721 0 2721
May-18 3651 1494 2157
Jun-18 5993 2387 3605
Jul-18 5105 1814 3291
Aug-18 5090 1908 3182
Sep-18 4827 1736 3092
Total 34985 9338 25646
Source: Company Data

EXHIBIT 3: IUIGA’S REGULAR PHYSICAL STORE
7/11
EXHIBIT 4: TURNOVER AT THE FIRST TWO REGULAR STORES
Store 1 Store 2
6 Months’ Revenue 6 Months’ Revenue
Month Revenue Month Revenue
Dec-18 $190,360 Dec-18 $215,234
Jan-19 $96,994 Jan-19 $153,101
Feb-19 $94,208 Feb-19 $137,146
Mar-19 $105,818 Mar-19 $155,756
Apr-19 $87,979 Apr-19 $152,632
May-19 $91,138 May-19 $159,423
Source: Company Data
EXHIBIT 5: PRODUCT DISPLAY IN STORES
8/11
9/11
EXHIBIT 6: SELF-CHECK-OUT AND RFID SCREEN IN THE STORES
10/11
11/11

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SMU840

IUIGA’S CHALLENGE: IS OMNI-CHANNEL WORTH IT?

Kevin Plank, Founder and ex-CEO, Under Armour1

Copyright © 2020, Singapore Management University Version: 2020-03-03

Pop-up, a Marketing Platform

Brick-and-Mortar, a Long-Term Commitment

Learning on the Job

Silver Lining in Going Physical

Mixed Retail: Is It Viable?

EXHIBIT 1: IUIGA’S POP-UP STORE

Source: Reprinted with Company’s permission

EXHIBIT 2: CUSTOMER ACQUISITION AFTER THE LAUNCH OF POP-UP

Jan-18 2384 0 2384

Source: Company Data

Source: Reprinted with Company’s permission

EXHIBIT 4: TURNOVER AT THE FIRST TWO REGULAR STORES

Source: Company Data

EXHIBIT 5: PRODUCT DISPLAY IN STORES

Source: Reprinted with Company’s permission

EXHIBIT 6: SELF-CHECK-OUT AND RFID SCREEN IN THE STORES

Source: Reprinted with Company’s permission

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