Chic by Choice : a case study on pricing strategies and consumer perceptions

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Title: Chic by Choice – A Case Study on Pricing Strategies and Consumer Perceptions Author: Jennifer Rodrigues Pestana

Abstract

Millennials have been shaping markets and influencing the way companies are offering and communicatingits productsandservices because,incontrast withthesocalled generation baby boomers, they are focused more on the experience, rather than on ownership of things. Chic by Choiceis a Portuguese start-up, foundedin May 2014,that decidedto enterin a new online market category that has been witnessing significant growth and showing great potential when consideringthe reasoning millennials live upto: why buyif you can rent, use, havefun andthen,returnit? The Online Fashion Rentalindustry has one big playerin America, who started operations in 2009, and in Europe, some smaller competitors in major marketssuchasthe United Kingdomand Germany, where onlineshoppingissomething relatively embedded in their consumption behaviours. Being able to acquire one of the latter competitors, Chic by Choice wasin a phase of rapid growth but, atthe sametime,it neededto keepits results positive and enticingto secure external investment.

Therefore,in ordertoachievethese goals,thecompany hadto make decisionsregarding pricing, more specifically,the price and discounts giventothe first customers so asto acquire them moreeasily, makingthema more desirableandattractive value propositionand, by consequence, keeping revenue and average order values as high as possible.

Resumo

A geração“millennials”tem moldado mercadoseinfluenciadoaformacomoasempresas comunicame oferecem osseus produtoseserviços uma vez que,emcontrastecom o que acontece com a chamada geração “baby boomers”, os primeiros estão mais concentrados na experiência que obtêm dos bens e não na posse dos mesmos.

Fundadaem maio de 2014,a Chic by Choiceé umastart-up Portuguesa que decidiuentrar numa nova categoria de mercado que tem assistido a um crescimento considerável e apresentado um grande potencial quando se toma em consideração o pensamento dos millennials: porquê comprarse é possível alugar, usar, aproveitar e depoissimplesmente devolver? Aindústria de Aluguer de Moda Online possui um grande concorrente na América, queiniciou operações em 2009, e na Europa, algumas empresas mais pequenas em mercados chave como o Reino Unido e a Alemanha, ondefazer compras online é algo que está relativamenteincorporado nos seus comportamentos de consumo. Sendo capaz de adquirir um dosseus concorrentes mais pequenos, a Chic by Choice apresentava assim umafase de crescimento acelerado, mas, ao mesmo tempo, precisava de manter os seus resultados positivos e atrativos,de modo a assegurarinvestimento externo.

Assim sendo, para conseguir atingir estes objetivos, a empresa teve de tomar decisões relativas ao preço, mais especificamente, ao preço e descontos aplicados aos primeiros clientes para os captar maisfacilmente,tornando a proposta de valor mais desejável e, consequentemente, manter oslucros e o valor médio de aluguer o mais altos possível.

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Acknow

ledgements

First of all, I would like to thank Filipa and Lara, co-founders of Chic by Choice, for giving me the wonderful opportunity to develop my thesis about the company, and allowing me to workinastart-upso promising andexciting, asI didforthe pastfew months, toreally understandthe business andthe market. Forthe entireteam of Chic by Choice, who supported me sincethe beginning and provided me allthe help I needed, a hugethank you, because you made me feel like part oftheteam from day one,and I could not be happierto share with you thisjourney from now on.

Second, I want to thank my supervisor, Professor Paulo Marcos, for all the valuable insights he gave methroughoutthe process of writing,and for pushing meto do better everytime. My peer, João Canedo, was a veryimportant support for me because he revised all my work when it was needed andtold me everything was goingto be alright even when I did notthink so. At the same time, a huge thanks to my friend Fábio Viegas, for all the endless conversations on the phone about both our thesis and the never ending advices he gave me throughout this entiretime. Also,I wanttothank my friend Joana Rosa,forallthe helpandstrenghtshe transmitted me when I was struggling with the final details of the thesis. A special thanks to my friend Mafalda Fragoso,that was always present to help me and give me valuable advice on what I should do to improve and tell me that I was strong enough to get this stage done successfully. I would also like to thank my boyfriend Mário Bengalinha, with whom I share everythingin mylife, and mytwofriends, Ana MartinandJoana Torrejais,forthe never ending supportthey gave me and for, mostimportantly, believingin me and being certainthat I would succeed inthis stage, as I didinthe rest of my academiclife.

Finally, I wanttothanktothe mostimportant peoplein mylife, my parents, forthe unconditional love and support they give and gave me in everything I do in my life. You are the best parents someone could ever ask for and without you,this was never possible, because you always helped meto be a better person andto believein myself.

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Tab

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F

igures

Index

Figure 1: Example of a masstige strategy. ...22 Figure 2: Price-Promotion Categories. ...23 Figure 3: Model of online consumer behaviour. ...27

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Introduct

ion

Price promotions are an essential marketing tool that both online and offline retailers use to generate sales and increase their market shares (Grewal et al. 2011). In fact, recent research performed hasshownthat morethan 40 percent ofconsumer purchase decisions depend on priceand promotional instruments (Inman et al. 2009). Consequently, bothestablishedand new companies in the market must be able to develop the most suitable pricing strategies in orderto gain customers, without compromising and dilutingthe value ofits brands.

The case study presented aimsto provideinstructors with a real example of a start-up company, Chic by Choice, that entered in a new market category, the Online Fashion Rental Industry,andsoon hadtofaceimportant marketingchallengesin orderto,firstly guarantee sustainable growth to secure investors and secondly, to gain reputation and credibility in the market.

Thestructure ofthecasestudycontainstwoimportantandcomplementary parts. Allthe necessaryinformation regarding Chic by Choice,the dilemma faced bythe marketingteam of thecompanyandtheissues pertainingthechallenges neededto besurpassed,are presented first. Afterwards, ateaching note was prepared fortheinstructorsthat will usethis case study as alearning materialintheir classes. This part contains a detailed description of what theoretical materials should be covered in advance in order for students to be able to answer the suggested assignment questions, as well as guidelines on howto moderatein-class discussion and further consolidatethe subjectstaught.

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Ch

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Cho

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,

The

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ive

Mode

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of

Renta

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It was one of the greatest challenges of Lisa Zambujinho’s career. Embracing the position of head of digitalat Chic by Choice,that was workinginandshapinga new marketcategory such as online rentals, would mean that the time for decision making and, consequently, the implementation ofthestrategieschosen, wasshort. Foracompanythatstarted operations almost two years before, the start-up has successfully surpassed all the requirements to gain credibilityamonginvestorsand partnersand afterwards, it wastimetostartlookingatthe results and deciding the next steps. Given the liability of newness1_when_concern_ing_Ch_ic_by

Choice, and alsothe “newness” dimension ofthe market category itself,– which comprised a very recent and new way to do online retail – it was necessary to acquire new customers in orderto grow faster.

However, Zambujinho was well aware ofthetask she hadin her hands andtherefore, boththe numbers and her market knowledge would haveto helpinthe decision and make sure thatthe customeracquisitioncosts(CAC)andtheaverage order value(AOV) were being keptas small and as big as possible,respectively. Havinginto considerationthatthe concept of renting a dress online was relatively new and different for the consumer, it was necessary to establish the best pricing strategy to apply for new customers of the platform to make them into actual clients,and notjust subscribers at Chic by Choice. Zambujinho sat down andtried to organise alltheinformation she hadreceivedfromthe preliminary meeting withthe managing director Filipa Neto, andshe understoodthecrossroadencountered. Wouldshe dropthe priceandthefirst discount offered bythesame percentage in orderto makethe dresses seem least expensive for the consumer or, in turn, would she increase both price and discountto highlightthe promotional benefit? Whateverthe decision,two aspects ofit became very clear for Zambujinho andthe entire marketingteam ofthe company. One resides inthemajor importance of growingthe customer base of Chic by Choicein a sustainable way whenthere was a needto gain more awarenessinthe market and consequently, more revenue from new customers. Andthe second one,comprised thetight deadline faced by Zambujinho: results hadtocome quickand mistakesshould beavoidedas muchas possible. Therefore, shouldthe discount be 20€ or 25€ toincreasethe AOV ofthe company and, atthe sametime, the number of reservations?

1_“S_t_inchcombe₍₁₉₆₅₎_argued_tha_t_new_organ_iza_t_ions_suffer_a_l_iab_i_l_i_ty_o_f_newness_,_a_grea_ter_r_isk_of_fa_i_lure_than_o_lder organizations, becausethey depend onthe cooperation of strangers, havelowlevels oflegitimacy, and are unableto compete effectively against established organizations” – Freeman, Carroll and Hannan, Theliability of newness: age dependencein organizational death rates, University of California, Stanford University, retrieved 23 February 2016 from:

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Ch

ic

by

Cho

ice

–

How

the

project

began

Duringthesecondedition ofthe Decoded Fashion London Summitin May 2014, Chic by Choice launched and presentedtothe worldits e-commerce platformthat would allow women from several countriesto havethe possibilityto rent designer dresses at very attractive prices (Exhibit 1 and 2).The idea behind the business was created given a real need that the founders, Filipa Neto and Lara Vidreiro, andtheir friends had when buying dresses for special occasions, which ended up being used once ortwice and cost a fortune2_._They_wan_ted_to_wear

a beautiful and expensive dress, but did not wantto paythe enormous prices associated because after they wore the dress once, it becamealmost impossible to use it again for other party and so,it ended up being stuckinthe closet.

“It’slike Farfetch meets Rentthe Runway, Ithink you’ve got something disruptive!” Liz Bacelar, CEO ofthe Decoded Fashion Summit3

A

Shot

to

Make

it

Rea

l

Neto and Vidreiro are two Portuguese entrepreneurs that did their higher education at Universidade Católica de Lisboa,today knownas Católica Lisbon School of Businessand Economics.At the age of 20, for both students at the time, the idea for the business took life andfromthat moment on,they knewit was possibleto create a viable business. They participated in one of the biggest competitions in Portugal, with more than 3000 competitors and managedto getsecond place withtheir project3_._Af_terwards_,_they_en_tered_two_more

competitionsand were placedagaininreally good positions, whichreinforcedthe beliefto make theideacometrue. Aftercarefullytestingtheconceptlots oftimesand makingsure people had arealinterestinthat innovative project,thetwo had decidedto establish a deadline of 6 months in order to get funds to kick off with the business. If that did not work, they would pursuetheirstudies at university and dothe Masters, whichinturn, did not happen3_._Ne_to_and_V_idre_{iro f}_irs_t_launched_ano_ther_company_w_i_th_a_very_s_im_i_lar_concep_t_of

renting dresses but with a completely different business model, called Stylein Box, and were supported by another investor. However, with time, they realized that their vision and ambitions were quite differentfromthe ones oftheinvestor, andsothey have decidedto

2 _Barbosa_,_Mar_iana_de_Araú_jo₍₂₀₁₄₎_,_Ch_ic_by_Cho_ice:_Ves_t_ir_um_Va_len_t_ino_pode_aumen_tar_o_PIB_nac_iona_l,_re_tr_ieved₁₀

November 2015from: <http://www.dinheirovivo.pt/fazedores/chic-by-choice-vestir-um-valentino-pode-aumentar-o-p ib-nacional/> 

3_H_ine_,_Lauren_,₍₂₀₁₄₎_,_F_i_l_ipa_Ne_to_–_CEO_o_f_Ch_ic_by_Cho_ice,_re_tr_ieved₁₀_November_,₂₀₁₅_from_:

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leave to pursue their real goal: create a disruptive model of engaging with department stores and e-commerce platforms in order to have the best portfolio of brilliant and luxury designer brands3_.

The

Bus

iness

Mode

l

Fromthe needidentificationtothe development ofthe business model,the steps were carefullythought and designedin orderto makesure everything worked cohesively and effectivelyto providethe best experience possibletothe consumer. First of all,it was crucial to partner withthe best and mostluxurious European boutiques,the most well-known brands such as Valentino, Dior and Dolce Gabbana and also,the warehouses and distributors, which turned the inventory more flexible and less risky2_._T_hese_dec_is_ions_were_ac_tua_l_ly_very

strategic for boththe company andits main partnerslikethe brands because itturns outto be a win-win situation: Chic by Choice would be able to provide the best portfolio of dresses to itsclientsandthe brands wouldalso be abletoreduceitsinventory,and getrid ofend of season products.

In what concerns the process of renting a dress, the company tried to make it has smooth as possibleandtheconsumersimply hadto gotothe website,select hersizeand date ofthe event, wait for the package to be delivered by DHL, the logistic partner of Chic by Choice, and afterthe rental period,the dress would be collected and senttothe dry cleaning partner,in order foritto be washed and prepared forthe next customer.

Neto considered that online businesses live of speed and so, it was essential for the company to find investors that were prepared to invest in a fast go to market and that these investors would guarantee stability duringthe operation, which ledthemto raise 520.000€ from Business Angels (Faber Ventures, an investment fund specialized in digital products and two venture capitals, Portugal Ventures and The Edge Group)2_.

Atthetime, thecompany was actuallythe only playerinthe marketthat distributed across almost the entire Europe and it became crucial to continue the investment in countries where online shopping was really embedded and was considered natural, such as the United Kingdom – where the business development and partnerships with luxury brands areas were based, whereastherest ofthe areassuch astechnology, design, operations, content and

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customer service were based in Portugal – and Germany, because consumers in this country were really usedto buyitems online4_(Exh_ib_it_5).

Althoughthe majority ofthe operations ofthecompany were still basedin Portugal, given that there the prices of warehouses and offices were relatively cheaper, Chic by Choice had also officesin London, where both Netoand Vidreiro spent the majority oftheirtimein international meetings and also, as a way of being closertotheir partners (brands and boutiques)5_._T_hey_cons_idered_tha_t_be_i_ng_in_the_Un_i_ted_K_ingdom_has_became_a_huge_advan_tage

forthem duetotheinspirationthey got fromevents likethe Fashion Weektothetoptech entrepreneursin Tech City5_.

In September 2014, Chic by Choice acquired the assets of the second largest rental community in the UK, “Wish Want Wear”, that comprises a list of around 230.000 subscribers, which allowed the company to have access to a data base of potential customers right at the start of the business6_._Th_is_acqu_is_i_t_ion_became_,_consequen_t_ly_,_a_source_of

competitiveadvantagetowardsitscompetitors,sinceitallowedthemto getawarenessand recognition from alarger audiencein a shorter period oftime.

Therefore,laterin August 2015,the company was also ableto acquire one ofits major competitorsin Europe,astart-upcompany basedin Germanycalled La Remia,that was launched in 20136_._A_l_{though there}_were_s_im_i_lar_i_t_ies_be_tween_some_opera_t_ions_and_targe_t

segments of the two companies, Chic by Choice proved to have a more successful business modelthat hadanenormous potentialto growfurtherinthefuture6_._The_acqu_is_i_t_ion_of_La

Remia by Chic by Choice not onlyenabledthecompanyto quicklyincreasetheir market powerand presence within Europe,astheacquisitionincreasedtheir network ofstrategic partners(e.g. designers)andclients(customers), butalso gavethema wideraccessto new marketssuchas Germany,thereby overcomingthe problem of“liabilities offoreignness”. Furthermore,itcreatedthe potentialtoexploitcosteconomiesthroughtheelimination of

4 _Ferre_ira_,_A_._Cr_is_t_ina₍₂₀₁₅₎_,_“Somos_o_ún_ico_p_layer_que_d_is_tr_ibu_i_pra_t_icamen_te_por_toda_a_Europa”,_re_tr_ieved₁₂

November, 2015 from:

<http://tek.sapo.pt/opiniao/artigo/chic_by_choice_somos_o_unico_player_que_distribui_praticamente_por_ toda_a_europa-43947pmi.html>

5_Ha_l_l_,_Sarah_,₂₀₁₅_(March₄₎_,_F_i_l_ipa_Ne_to_,_Co-founder_and_Manag_ing_D_irec_tor_o_f_Ch_ic_by_Cho_ice_on_democra_t_is_ing_the

luxuryfashionindustryfor women: Why buy when you can rent?, retrieved 15 November 2015 from:

<http://www.womanthology.co.uk/filipa-neto-co-founder-and-managing-director-of-chic-by-choice-on-democratising-the -luxury-fashion-industry-for-women-why-buy-when-you-can-rent/>

6_Informa_t_ion_prov_ided_by_one_of_the_co-founders_F_i_l_ipa_Ne_to_in_an_in_terv_iew_performed_on_the₁₈_th_of_February_to_the_case writer.

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duplicate functions (e.g. marketing) and synergies (e.g.logistics) (Grant 2010).Bythattime, thecompany wassecuringa very profitable margin perrental of 65%and witnessingan average order value(AOV) of 105€6_._Fur_thermore_,_resu_l_ts_were_ab_le_to_prove_a_ro_ta_t_ion_of

each dress of 20, meaning thata dress can be rented about 20times afterlosingits quality and being suitable to use by a customer and, an occupancy rate per week of dresses that clearly surpassedinitial expectations and dramaticallyincreased results6_(Exh_ib_it₂₃₎_.

In the beginning of 2016, the company extended its portfolio of products, by having accessories like earrings, necklaces, bracelets and clutches available for customers to complete their looks. Additionally, Chic by Choice starteddeveloping a mobile app in order toimproveconsumers’experience whensearchingforthe productstorent,increasetheir levels ofloyaltytowardsthecompany and gain more valuable datatoaidinthe decision making process of more strategic decisions (Exhibit 31).

Partnersh

ips

and

Dea

ls

for

the

Product

Assortment

From the beginning, both Neto and Vidreiro knew they would need to have the top fashion retailers associated with Chic by Choice and offer a portfolio of brands that women look for and desireto use atleast onceintheirlife. They were awarethatthis was one oftheir biggest challenges,to have thesereference names working witha youngandrecentcompany7_._The

companystartedtofirstsourcesome brandsfromluxury boutiques,asthey werealready familiar with another very successful Portuguese start-up, Farfetch, and so it was interesting for themto also collaborate with Chic by Choice duetoits attractive revenue channel, as Chic by Choice bought the dressesat partnership’s pricesandso, they were ableto decreasethe risk ofstock7_._In_terms_of_the_brands_the_company_dea_l_{t d}_irec_t_ly_,_th_is_{was done}_usua_l_ly

throughthe brand’s e-commerce stock,which also helped themto sell stockthey had already produced6_(Exh_ib_it_7).

Target

Segment

Zambujinho knewthatthe target segmentof Chic by Choice was composed mainly by middle class womenthat eventhough had moneyto spendinthistype of services, were cost conscious enoughto save moneyinitemsthey would probably use once ortwice. In fact, she was awarethatthese women wanted to acquirethe smartest deals ofthe market whenit came

7_Co_leman_,_A_l_ice_,₍₂₀₁₅₎_,_Por_tuguese_S_tar_tup_Pu_ts_Des_igner_Fash_ion_W_i_th_in_Everyone’s_Reach,_re_tr_ieved₂₅_Oc_tober₂₀₁₅

from: <http://www.forbes.com/sites/alisoncoleman/2015/02/03/portuguese-start-up-puts-designer-fashion-with in-everyones-reach/>

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to fashionitems andinthis matter,the perception of a good discountappeared very appealing forthem.

“Ourtargetis mostly women with purchasing powerintheir 20’stotheir 40’s. Rentals are a powerful way to market a luxury brand and convert aspirational buyers into actual consumers.”8

Filipa Neto This emphasizedthe needto reallytryto forecast whether consumers would care more forthe price ofthe dressitself, disregardingthe discount applied, orinthe opposite,ignorethe price ofthe dressifit was their favourite dress andlook atthe discount offeredinthe first rental. At the same time, given that the marketing department had developed a brief survey in order to obtain more valuable data about the company’s target segment, Zambujinho was also able to get accesstoinformation about willingnessto payfor a party dressfor English and Portuguesesubscribers, discoveringthataround 42% ofthemspend morethan £100(100€ respectively) to buy one single dress (Exhibit 12 and 17). Additionally, 48% of the English and 26% of the Portuguese respondents stated that they buy an average of 5 or more dresses per year (Exhibit 11 and 16).

Reach

ing

On

l

ine

and

Off

l

ine

Consumers

Through

D

ifferent

Channe

ls

Sincethe beginning, both Netoand Vidreiro understoodthey hadtothinkaboutspecific channelstoreachconsumersandsincethe businessis completely based onane-commerce platform, digitaltools wouldturn outto becriticalin ordertoachievethe desiredlevels of success. First of all,in what concerns social media networks,the company created one profile for several platforms, but focused its attention on Facebook, Twitter and Instagram (Exhibit 25,26 and 27), eventhoughit had also created a profile on Pinterest, Polyvore, LinkedIn and on Youtube.Inthespecific case of Facebook, Chic by Choice usedthe platform’s paid featuresto promote strategic poststhat registered attractivelevels of CTR (clickthrough rate) and also to launch ads. Alongside with social media channels, the company invested in other typesof paid mediain search engineslike Googleto bid for crucial wordsthat would rankthe web site firstinthe results forits search andto place banner ads (Exhibit 30).

8_Bu_tcher_,_M_ike_,₍₂₀₁₄₎_,_Ch_ic_by_Cho_ice_Is_A_European_Take_One_Ren_t_the_Runway,_re_tr_ieved₂₅_November₂₀₁₅_from_:

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As a way of reaching the desired target segment and providing credibility to both the brand and the service, Neto and Vidreiro knew that it was very important to establish partnerships with keyfashion bloggersin main markets. This would not only bea validation of quality from a person outsidethe company but also, a wayto foster e-WOMthrough online usersthat can also provide their experience and some valuable reviews (Exhibit 28). Another channel used by Chic by Choice consists of an affiliate program with a major playerinthe marketthat basically,allowsseveral websitesto placethecompany’slinks, banners, products,among other features, onits pagesand gainacommissionfromeach purchasethatistrackedfrom their web6_.

Regarding unpaid channels,the co-founders started engaging withtheir subscribers by email, sending regular newsletters that contain a wide range of information about new products on the web site, new designers, promotions, tips and suggestions for occasions and much more curated contentto drivetraffictothe web site and ultimately, entice conversion (Exhibit 29). Additionally, when considering organic search (also known as natural search), Chic by Choice was well aware of the critical aspect of ranking first in the results of a search engine tool and therefore, it truly engaged in a search engine optimization (SEO) strategy to guaranteetoprankings through not only organicsearch, butalso paidsearch. Atthesame time,in orderto have a bridge between online and offline channels,the company also hired a PR agency that had the ultimate goal of aiding in the connections with fashion publications, celebrities and important events that would reinforce the brand’s positioning in the market6_.

Eventhoughthese channels are provingto helpinthe achievement of results,it was alsotime for Zambujinho to take a closer look on the performance of some channels in order to assess if changes need to be implemented to improve metrics that are vital to fulfil all the strategic plans that weresetinthe beginning ofthe year (Exhibit 24).

The

On

l

ine

Fash

ion

Renta

l

Industry

The main drivers oftheemerging onlinefashionrentalindustrycould besummarisedas technological developments and the trend of the sharing economy. Information and communication technologies (ICT) reduced transaction costs, which made sharing easier and cheaper on alarge scale9_._The_shar_ing_economy_was_be_l_ieved_to_have_enormous_po_ten_t_ia_l_and

was regardedasa disruptiveforcefortraditionalretailstores. This economy was mainly

9_The_Econom_is_t₍₂₀₁₃₎_The_r_ise_o_f_the_shar_ing_economy,_re_tr_ieved₂₆_November₂₀₁₅_,_from_: <http://www.economist.com/news/leaders/21573104-internet-everything-hire-rise-sharing-economy.>

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driven by the so called Millennials, consumers born between 1980-2000, who put less focus on "ownership", butinstead,value sharing andthe experience attachedtothe consumption of products or services. The only objects Millennials "needed" to own were their smart devices. According to a research from Nielsen, 85 percent of people between 18 and 34 years of age had their ownsmartphones. These devicesseemed to bethe keytothesharingeconomy. Businesses such as Uber or Airbnb, and at the time, also designer rental companies, strongly profitfromthistrend. Accordingtoaresearchstudyconducted by Westfield Malls,inthe United Kingdom, 46% of Millennials saidthatthey would beinterestedin rentingitems from theirfavouritestores10. Furthermore, concerningtheclothingrental andfashionaccessories acrossthe UK,this generational group aged between 25 and 34 years old, desired to rentthose products,summing upto 38% of Londoners who wished to dothis10._A_fac_tor_tha_t_cou_ld

explainthetrendtowards no ownership was thefactthat many people desired and wanted products of high quality, but were not ableto affordthem, duetotheir fast paced consumption habits11_.

Whiletheconcept ofrentingformal wear was relatively newfor women,the business had long been established for men’stuxedos.In 2004, Lloyd Lapidus and Greg Pippo, decidedto createthe company Bag Borrow or Steal, giventhe factthatthey were very familiar withthe tuxedos rental concept and fascinated bythe observation of women constantly borrowing each other clothes and accessories. At the time, the company was regarded as one of the pioneers withinthe onlinefashion-rentalindustry. Others quickly noticedthe value oftheindustry, leadingtotheemergence of manycompetitors,somecompeting directly with Bag Borrow and Steal, some choosing slightly different target segments. In 2009, for example, the company Avelle decidedto offerfashionrentalfor high-endfashionand Rentthe Runway expandedthe modeltotheluxury clothing segment12_.

10_“_Wes_tf_ie_ld_:_How_We_Shop_Now_|_Wha_t’s_Nex_t”,_Re_tr_ieved₁₁_March₂₀₁₆_,_from_:

<https://www.jwtintelligence.com/2016/02/study-rental-retail-shopper-loyalty-and-more/>

11 _Reu_ters₍₂₀₁₅₎_Ren_t_ing_c_lo_thes_is_a_th_ing_now,_r_e_tr_ieved₂₆_November₂₀₁₅_,_from_:_<h_t_tp_:_/_/uk_.bus_iness_ins_ider_.com

/r-millennial-nowners-follow-uber-with-new-fashion-trading-model--2015-5?r=US&IR=T>

12 _Fa_l_lon_,_N_ico_le₍₂₀₁₄₎_C_lo_th_ing_Ren_ta_l_Bus_iness_Mak_ing_Leas_ing_Fash_ion_Easy,_r_e_tr_ieved₂₆_November₂₀₁₅_,

from: <http://www.businessnewsdaily.com/544-avelle-clothing-rental-business.html#sthash.KySghqL0.dpuf>

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Intimes of recession, where peoples’ price consciousness elevated rental companies profit, by offering consumersthe possibilityto wearfashionable and upto date designin a more economicalfriendly way11_._Bu_t_even_in_econom_ica_l_ly_s_tab_le_t_imes_,_budge_t_,_and_a_t_the_same

time fashion conscious consumers, depict the ideal target segment, as the rental model gave them accessto expensive fashion. Other potentialtargets were people experiencing fast changes of clothing size, such as kids and pregnant women11_.

Regardingthe mostrecenttrendsthat were currentlyemerginginthe onlinefashion rental industry, the“pay-as-you-goretail” was becoming moreand moresignificantinthe market where, people then werenot just interested in changing their wardrobes every few weeks but rather,in a day-to-day basis, keepingit simple easy and cost effective10_.

“The driver behindthistrend is consumers really valuing theflexibility of selecting an item for just one wear or use. This means you can choose something that no-one’s ever seen you wearing before, orthat works bestforthe occasionyou’vechosenitfor, without havingto committoit or worry about whether you’ll wearit again.”

Myf Ryan, Westfield10

At the same time, there has been evidence of a new feature concerning this market category: the rental subscriptions.Around 20% of UK shoppers would be willingto spend £200 or more per month on unlimitedclothingrentsubscriptions10_._More_spec_if_ica_l_ly_,_when_cons_ider_ing

Londoners only,this percentage rose upto 40% and forthe fashion-forward consumers ofthis fashion-hubs, 59% of people were willingtospendtheseamounts of moneyfor unlimited rental subscriptions10_.

Tak

ing

an

Eye

at

Compet

it

ion

in

Major

Markets

The head of digital also took into consideration what the main competitors were doing in the major markets of Chic by Choice, boththe United Kingdom and Germany. Zambujinho decided to first analyse Girl Meets Dress, a company launched in 2009, following the same need identification as Chic by Choice, with a stock of over 4,000 dresses from 150 different designers, witha pricerangethat goesfrom under £50to morethan £10013_._The_company

offered an “advancedtry on”serviceforcustomer who wanted totry dresses beforetheir events at a price of £30 and also rent accessories to complement the look, as well as beauty, hosiery and shapewear products13_._In_wha_t_concerns_i_ts_pr_ic_ing_s_tra_tegy_to_acqu_ire_new

13_Dav_id_i_,_Adam₍₂₀₁₄₎_How_G_ir_l_Mee_ts_Dress_is_cap_i_ta_l_is_ing_on_dem_ise_o_f_ownersh_ip,_r_e_tr_ieved₁₁_March₂₀₁₆_, from: <http://www.theguardian.com/media-network/media-network-blog/2014/jun/11/girl-meets-dress-anna-bance>.

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customers, the company offered a £10 discount for the first rental on any dress14_._G_ir_l_Mee_ts

Dress sold not only in the UK, but also to other European countries. Regarding the German company, Dresscoded, was founded by a model and her brother in 2012, following her need to attendto several eventsin a different dress15_._The_company_a_l_lowed_women_to_ren_t_a_dress

for any occasion from prices that started at around 60€16_._Accessor_ies_were_a_lso_ava_i_lab_le_for

rent,andinsomespecific products,thecustomer was ableto purchasethem.Interms of promotional dealsassociated withthefirstrental, Dresscoded did not offera discountand deliveries were only doneto Germany15_.

Alongside withthese competitorsin Europe,the company alsofaced a more established American playerthat setthetoneinthe market offashionrentals since 2009. Thetwo founders of Rent the Runway, Jennifer Hyman and Jennifer Fleiss,started the company after receivingtheir MBA’s from Harvard andin four years, were ableto raise 3.5 million members who rent dresses for alltypes of occasions17_._Af_ter_ga_in_ing_recogn_i_t_ion_in_the_marke_t

and proving asuccessful business model,thecompanystarted partnerships with, not only brands of dresses butalso ofaccessories, bags,jackets,tops,skirts,jeansand many other items. Consequently, withtheincreaseinthe variety offashion products initsinventory,a verticalintegration of operationsto reduce costs andimprove efficiency, and withthe proved willingness to pay for clothing rent subscriptions by consumers, Rent the Runway extended its value proposition byallowing womentosubscribeaservicethatallowsthemtorent 3 itemsfor aslong asthey want, change thelatterfromtime totime and pay $139 per month18,19_.

What

to

Do

in

the

End?

Zambujinhotook a step back andtriedto make sense of alltheinformation andthoughtsthat were coming to her head. Given where the market was headed to, what the competition was doing and thebesttoincrease both revenue, AOVand customer database, would sheincrease boththe price and discount or not? Whateverthe decision,it hadto come fast…

14_G_ir_l_Mee_ts_Dress_web_s_i_te,_re_tr_ieved₁₁_March₂₀₁₆_from_:_<h_t_tp_:_/_/www_.g_ir_lmee_tsdress_.com>. 15_Na_tascha_Gruen_,_founder_of_Dresscoded_.com_,_re_tr_ieved₁₂_March₂₀₁₆_from_:

<http://www.nataschagruen.com/about/natascha-gruen/>. 16_Dresscoded_web_s_i_te_:_h_t_tps_:_/_/www_.dresscoded_.com_.

17_Ga_lbra_i_th_,_S_.₍₂₀₁₃₎_The_Secre_t_Beh_ind_Ren_t_the_Runway’s_Success._Re_tr_ieved_May₂₀₁₆_from_:

http://www.forbes.com/sites/sashagalbraith/2013/12/03/the-secret-behind-rent-the-runways-success/#5bd242f46f37 18_Ren_t_the_Runway_web_s_i_te_:_h_t_tps_:_/_/www_.ren_t_therunway_.com

19_B_loomerg_,_(2016),_The_Ne_t_f_l_ix_o_f_Fash_ion:_Ren_t_the_Runway_S_treams_Wardrobes,_re_tr_ieved₂₅_May₂₀₁₆_from_: <http://www.bloomberg.com/news/videos/2016-03-24/the-netflix-of-fashion-stream-a-wardrobe-with-rent-the-runway>.

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Teach

ing

Note

Introduct

ion

The case study presented was prepared by Jennifer Rodrigues Pestana under the supervision of Professor Paulo Marcos,within the context of the Marketing Case Studies seminar, given bythelatter at Católica Lisbon School of Business and Economics. Alltheinformation provided about Chic by Choiceis based on actual experiences faced bythe marketers andthe case writer involved but,in orderto preserveconfidentiality, real data has been disguised, without damagingthe quality ofthe teaching goalsproposed.

Atthe sametime,this case study does notintend in any waytoillustrate acorrect orincorrect wayto make business,and morespecifically, marketing decisions or even,tosomeextent, supportandendorsethe brand. Conversely,the main goal ofthecase writeristo providea valuableteachingtool forinstructorsto useintheir management classes so asto demonstrate realchallengesfaced bycompaniesinthe market andfoster healthyandconstructiveclass discussionsthat will help studentsto deepen boththeirtheoretical and practical knowledge.

Synops

is

Chic by Choiceisa Portuguesestart-up, foundedin May 2014,that allows womentorent exclusive designer dressesforafraction ofits price. Enteringinarelatively new market category,such asthe Online Fashion Rentalindustry,the company quickly gained consumers’ attention and, by presenting athorough and well-designed business planto externalinvestors, it was able to, not only, secure crucial investment to grow, but also to acquire competitors in the early stages ofits development as a branditself. Therefore, giventhe needto establishthe companyasareferenceinsidethecategory, andthe vital balance between positiveresults when it comes to measures of KPI and a constant acquisition of new customers to enrich its customer base,thetypical marketing challenges of most companies arised at Chic by Choice. Thiscase studyaimsto discussandanalyse which pricingstrategyis moresuitableforthe company to achieve its goals, taking into account the consequences of each strategy concerning both quantitativeresultsinterms of performance and also, qualitativeissues regarding consumers’ perceptions ofthe value ofthe brand within each path.

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Suggested

Ass

ignment

Quest

ions

This sectionwas designed withthe main purpose of fostering a deep analysis ofthe case study bystudents,and morespecifically, helpthemtofindasuitablesolutionforthe dilemma presented. Therefore, in order for them to be ready for class discussion of the case, students should prepare in advanceand answerthe following questions:

1. Performanindustryanalysisin whatconcernsthis new marketcategory of online fashion rentals using Porter’s Five Forces framework.

2. From the information extracted about both the industry and the company itself, develop a SWOT analysis to further build a TWOS analysis, where the latter comprisestheintegration betweenthe elements ofthe SWOTinto morestrategic questionsthat Chic by Choice should consider.

3. Chic by Choice is heading to a premium positioning in the category of online fashion rentals. Therefore, what are the best communication strategies(from the ones already used and other new) thatthe company should employinthis first stage, where acquiring new customers and get awareness are crucial, without damagingthe brand? 4. Discuss the advantages and disadvantages of Chic by Choice implementing a

subscription model and quantifythis decision.

5. Assess which promotional discount should be applied bythe company giventhe results of each oneinterms of AOV (average order value), CAC (customer acquisition cost) and number oftransactions obtained.

Teach

ing

Object

ives

This casestudy was developed around aset ofteaching objectivesthat are aimedto be fulfilled atthe end ofthe comprehensive analysis performed bystudents. Therefore,the teaching objectives are:

a) Tointroducestudentsto a new market categoryinsidethe onlineindustrythatis contingent oftechnologicaladoption bycompaniesanda deep understanding ofthe latest consumertrends;

b) To familiarize withthe Online Fashion Rentalindustry dynamics andits main players, who are shapingthe market and settingthe standards for new companies;

c) To fosterthe knowledge ofthe newesttopicsinside management relatedtothe “sharing economy”issues andthe millennials’ impactinthe way companies are operating, as well as, general concepts about online consumer behaviour;

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d) To understand what are the main pre-requisites for a start-upto enterinthe market and be successfulin sustaininginvestment;

e) To present real life challenges regarding online pricing promotion decisions to students and assess which options could bethe most profitable forthe company; f) To analyse how a company goingtowards a premium positioninginthe market

shouldcommunicatetoitsconsumers and develop knowledge on digital marketing concepts andtools;

g) To quantitatively measure the impact of the different pricing decisions and foster the use of a results driven perspective when considering marketing challenges;

h) To develop a critical analysis of boththe external dimensions andinternal capabilities of a company when deciding what pathto pursue inthe future.

Use

of

the

Case

Study

This case study about Chic by Choice was developed in order to create a teaching tool that will allow instructors to illustrate a real and concrete example of a company that was faced with a pricing challengethat neededto be addressedin order to achievethe desired results by the managers. It is further intended that both undergraduate and graduate students are able to critically assess alltheimplications andresources availableto gettothe endresult and understand how thetheoretical knowledgeacquiredin businessschoolscan beappliedto practical settingsinsidethe companies.

Therefore, instructors may provide the suggested assignment questions to students, in orderforthemto preparethecaseinadvanceandfurther discussitina class ofaround 90 minutes of total duration. However, since this case study can be used in courses like Marketing Management, Consumer Behaviour, Brand Management, Entrepreneurship and Digital Marketing, whichcomprise very broadandsometimes different teaching objectives themselves, instructors may prefer to adapt the questions given the main topics they wish to coverin class.

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Re

levant

Theory

With the main goal of having the best preparation for in class discussion of this case study, students are recommended to read the following materials that comprise concepts of consumer behaviour, pricing and communication strategies, e-marketing and digital marketing:

Ø Strauss,J., & Frost, R. D.(2014). E-Marketing. Upper Saddle River, NJ: Pearson Prentice Hall.

Ø Solomon, M.R. (2015). Consumer Behavior: Buying, Having and Being. Saffron House: Pearson Education.

Ø Kotler P., & Armstrong G., & Wong V., & Saunders J. (2008). Principles of Marketing Management. Saffron House: Pearson Education Limited.

L

iterature

Rev

iew

Mass

t

ige

Pos

it

ion

ing

According to Silverstein and Fiske (2003), the members of the 47 million American householdsthat comprisethe middle class market(people earning $50.000 and more in annual income, are broadly educated and have travelled around the world), have about $3.5 trillion ofincometo spend– and potentially meansthey are willingto pay premiums of 20% to 200% for well-crafted goods and of superior quality. As a consequence ofthis phenomenon thatis also happening worldwide, companies must adaptits strategiesin ordertofulfil consumers’ needs and aspirations. Furthermore, new categoriesinthe market arise andinside a premium positioning,companiesareableto buildthesocalled Masstige oreven, Mass Prestige brandsthat will offer goods placed between massandclass(Silversteinand Fiske 2003), beingless expensivethantraditionalluxury goods (Kitchen et al. 2008).

Kitchen et al. (2008) stated a masstige positioning as a veryinnovative and effective strategy due to the combination of a perceived prestige, different from middle-range products, but, at the sametime, with prices slightly abovethe comparable middle-range brands.

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Figure 1: Example of a masstige strategy.

Source: McKechnie, S., Devlin, J., Ennew, C. & Smith, A. (2012). Effects of discountframingin comparative price advertising. European Journal of Marketing, Vol. 46 Iss 11/12 pp. 1501-1522.

Fromtheempiricalstudy designedtoinvestigatethe positioningstrategies of Calvin Klein and Ralph Lauren, the authors Kitchen et al. (2008), were able to find evidence that indeed, these brands are perceived by customers as being more closetothelevel of prestige of traditional luxury brands than to middle-range brands but, in terms of price, are much closer tothelatter. However,thereis a clear needtorespectthe equilibrium between prestige differentiation and a reasonable price premium in order to avoid brand dilution and maintain the aspirational aura around it since, if well perceived, customers will be willing to pay the extra valueifthey really wantit (Yeoman and McMahon-Beattie 2005).

How Price Promotions Influence Premium-Product Brands

As promotional pricingis defined astemporarily pricing products belowthelist pricein order toincrease short-run sales (Kotler et al. 2008), some negative effects onthe brand may occur (Montaner and Pina 2008).In an attemptto assess boththesales impact andthe brand perceptionsthatresultedfrom differenttypes of price-promotionactivitiesinthe premium automobile market, Zoellner and Schaefers (2015) performed two studies that comprised the following price-promotion categories:

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! Figure 2: Price-Promotion Categories.

Source: Zoellner, F. & Schaefers, T. (2015). Do Price Promotions Help or Hurt Premium-Product Brands? Journal of Advertising Research 270-283.

The main results of the studies can be summarised as the following (Schaefers and Zoellner 2015):

�!Direct-price reduction has a stronger positiveimpact on sales (eventhoughthis effect was diminished when a precondition was added);

�!Conversely, when introducing a precondition in an indirect-price reduction, evidence showedthat sales were higher;

�!The promotion activities that are familiar to the consumer (i.e. common promotions that the customer is used to) were found to be less harmful for the brand image of companies;

�!In terms of both sales and brand perception, the best strategy to achieve higher sales and no negativeimpact on brand prestigeisthetype 1 – direct-price reduction without a precondition.

�!Fromthese results, managers are advisedto use price-promotion strategies with direc t-price reduction whenthe objectiveistoincrease sales and, as a way of decreasingthe probability of diluting the value of the brand and premium perceptions accordingly, promotionsthat are well-known should be employed.

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On

l

ine

Pr

ic

ing

Strateg

ies

Price can be defined, in a narrower approach, as the amount of money charged for a product or service, and more broadly, it is the sum of all the values that consumers exchange for the benefits of having usinga product orservice(Kotler et al. 2008). Nowadays,information technologychangedthe way marketers use pricingstrategies,especiallyin online markets, given the Internet role as an information equalizer that leads to price transparency – in the sensethat both buyersandsellerscan viewcompetitive pricesfortheitemssoldin online markets (Strauss and Frost 2014). According to Wilson-Jeanselme and Reynolds (2005), this competition derives from the combination of reduced barriers to product information, easier accessto a higher number of potential suppliers andincreasedthreat of substitutes. Therefore, since consumers are ableto search as many web sites asthey wantin a short period oftime,in orderfor onlinetransactionsto be profitable, visitors ofthe online platform haveto be convertedinto actual buyers (Wilson-Jeanselme and Reynolds, 2005).

Chan, Chengand Hsien(2011) have performedastudyinan onlineshop ofaconsumer peripherals retailer in order to assess the implications of establishing pricing and promotion strategiestoenhanceits profitability andalso,conclude whetherclusteringcustomersinto differentclasses hasaneffectintheresults.It has beenshowedthat,first ofall,thesales performance aftertheimplementation of pricing and promotionstrategiesis considerably higherthan beforetheimplementation. Second ofall,thereis nosignificantevidencethat customers of differentclasses prefer different promotion optionsandthirdly,the profitrate does not change after the implementation of such strategies, meaning that the use of pricing and promotional strategies is strongly recommended, as this will not change future gains of the companies (Chan, Cheng and Hsien 2011).

Consumer Perceptions and Effects of Discount Framing

Retailers often use comparison pricesin ordertoincrease the perceived value ofits offers and consequently,encouragecustomersto buya product(Chandrashekaranand Grewal 2003). Thisstrategyimpliescomparingasale price withsome higherreference pricetoshowthe consumerthesuperior value ofthefirst offer giventhereduced price(McKechnie et al. 2012). Furthermore,theidea of“framingeffects”is based onthefactthat people’schoices can be affected bythe way a situationis described (Frisch 1993). Accordingtothe findings of McKechnie et al. (2012), discount formatinfluencesthe assessments of value ofthe offer for bothlow and high-price goods and more specifically, percentage discounts work forlow-price products and absolute discounts work for high price products.

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D

ig

ita

l

Market

ing

and

the

Inf

luence

of

M

i

l

lenn

ia

ls

Digital Marketing can be described as the practice of promoting products and services using digital distribution channels, and is also known as e-marketing (Smith 2011). As the Internet becamethefastest growingadvertising medium ofthis decade(Ha 2008),a newapproach centered on customer orientation(OC), has been used more and more among managers (Mogos 2015). The author further statesthatthe positive performance ofthis approachis due tothe use of processes – like data collection, datastorage, data processing,analysisand discrimination – thatareaimedtotransform operationalresultsinto valuable knowledgein orderto aidtop managementinthe decision making process, regarding marketing strategiesto adopt (Mogos 2015).

Strauss and Frost(2014) arguethatin orderfor companiesto assess whetherthey have reachedits objectives,itis necessaryto measureitsresults. Therefore,inthecontext of e-marketing, the performance metrics used to evaluate the effectiveness of Internet Marketing caninclude, clickthroughrates, web server statistics, changesin awareness, changesin purchase intent, return on investment (ROI), changes in engagement levels, sales conversion rate,inboundinquiryrate, among others(Strauss and Frost 2014: Source: 2011 Annual Survey of Market Research Professionals).

According to Smith (2011), Millennials are an essential ingredient in the development of e-commerce since they have grown up socializing and making purchases online. More specifically,this generationis keen of more personalized messages(Smith 2011)that were provedtoincreasethelevels ofe-loyaltyshowed bycustomers, whichconsequently, hada positiveimpact on word-of-mouthand willingnessto pay more(Srinivasan, Anderson, & Ponnavolu 2002). As a way of personalizing a relationship with a customer, online recommendations are one of the tools that can be used by companies, and Millennials often lookto peers as a way of determining and decidingthe merit of either aweb site or a product itself(Smith 2011). Alch(2000)furtherstatesthatthis generationfeels control overthe Internetandthey will benefitfromalargetechnological gap betweenthemselvesandtheir parents, consequently representing a more powerful and influential cohort than any previous generation.

When analysing which types of digital marketing strategies are preferred by Millennials and which ofthem willinfluencetheir behaviour,(Smith 2011) cametothe conclusionthat marketers should use side-panel ads and offer coupons, in order to appeal to this generation,

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and do not use any kind of pop-up advertising or un-closable windows to avoid irritating the customer. Furthermore, the author discovered that they also like to watch advertisements on Youtube, are attracted to brightly coloured graphics, can potentially visit your web site more if you offer competitive prices and shipping rates and finally, Millennials are pronetointeract with your company by providing online reviews – which you can enticethemto do by giving them sometype of reward. Therefore,thereis huge potential for marketersto understand what drives behaviourfrom Millennialsand, whentakingallthese dimensionsintoaccount,the effectiveness ofthe digital strategies applied willincrease.

On

l

ine

Consumer

Behav

iour

Solomon(2015) definedconsumer behaviourasthestudy ofthe processesinvolved when individuals or group select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires. However, when considering online consumer behaviour, one needstotakeintoconsiderationthatthe onlineconsumer performsallthe activities ofatraditionalconsumer onacomputer, whileshe/heinteracts withasystem – being the latter a commercial web site – and so, it is also a computer user at the same time (Koufaris 2003). Therefore, there is a need to understand the behaviour of online visitors in order for web sites designers to be able to develop more efficient e-commerce platforms that are basedinthese behaviours (Chebat and Richard 2015).

Kahn and Menon (2002) have performedto experimentsthat have shownthatthe stimulation and pleasantnessinitially encounteredin a web site will have carry-over effects on subsequent shopping behaviour – more precisely, when consumers are exposed to a pleasing web site in aninitial stage,they are morelikelyto engagein further shopping behaviours. Conversely,if the web sites encountered initially are higher in stimulation and information load, consumers will belesslikelyto browse,less willingto examinethem and finally,lesslikelytotake part in promotional offers.

The authors, Chebat and Richard(2015), have developed a conceptual model of online consumer behaviourthat consideredtwo personality variables, need for cognition (NFC) and optimum stimulationlevel (OLS) andincluded six major variables (online cognitions relatedtothe functional characteristics of a web site likeinformativeness and effectiveness of informationcontent, – categorized by Eroglu et al. (2001)as high-taskrelevantcuesinthe context of onlineatmosphericcues – onlineemotions thatcomprise pleasure,arousaland dominance, online entertainment,– categorized by Eroglu et al. (2001) aslow-task relevant

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cue – whichis relatedto hedonic characteristics, flow thatis a state occurring duringinternet navigation, online attitudes thatcontain both website attitudesand productattitudes,and purchaseintentions) andtheirinterrelationships.

Figure 3: Model of online consumer behaviour.

Source: Chebat, M. O., Richard, J. C., (2015), Modeling online consumer behaviour: Preeminence of emotions and moderatinginfluences of needfor cognition and optimal stimulationlevel.Journal of Business Research 69 (2016) 541-553

The mainresults ofthisstudyshowedthecrucialrole ofallthree dimensions ofemotions earlyin visitingthe website,thetwocognitive measures ofeffectiveness ofinformation content and informativeness, flow, entertainment and finally, web site attitudes (Chebat and Richard 2015). Furthermore, dominance played a major role in the model, the relationship of arousalto pleasureis also positive and significant,flow has showntoimpact purchase intentions in a direct manner and web site attitudes are determined by effectiveness, dominance, pleasure and entertainment, proving that the latter variable should be an integral part of all modelling effortsinthe online environment (Chebat and Richard 2015).

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Ana

lys

is

and

D

iscuss

ion

In this section of the Teaching Note instructors will have access to a complete plan of how class discussion should be organised,in orderto makeit as valuable and enriching as possible for both parties.

Sincethe market categoryisrelatively newinsidethe onlineindustry, thereisa needto understandthe majorforcesthatareshaping boththeinternalandexternal dimensionsthat influencethe decisions made bythe company. Therefore, the firsttwo questions are intended to provide a background context ofthe mainissues comprisingthe market andthe company’s assetsthan canleadto a more strategic planning of future marketing activities, withthe main goal of clearly definingthecommunication and pricing decisions raised inthe next questions. Furthermore,topics such as Digital Marketing, Online Consumer Behaviour and Online Pricing Strategiesshould beapproached bystudentsinadvance,sothattheycan beableto discuss Chic by Choice’s case studyin class.

Followingthisreasoning,theinstructorsareencouragedtostartthe discussion ofthecase study byan overviewandsummary ofthelatter, withthe main objective of providing an understanding of whatarethechallengesfacedatthetime,the dynamicssurroundingthe company and the possible paths to pursue. Finally, after this preliminary analysis, discussion should followthe suggested assignment questions proposed.

1. Perform anindustry analysisin whatconcernsthis new marketcategory of online fashion rentals using Porter’s Five Forces framework.

This preliminary question hasthe main goal ofallowingstudentstofamiliarise with one of the mostimportant methods for analysingthe dimensions oftheindustryin orderto, not only assess its potential profitability, but also, to make more coherent marketing decisions. According to Porter (1979), competition in an industry is not solely defined by the competitive players that fight for the same share of a particular market but rather, by several competitive forces andthe underlying economics oftheindustry itself.

The nature of competitionin anindustry varies accordingtothelevel of five basic forces: (1) thethreat of potential entrants,(2) the bargaining power of suppliers,(3) the bargaining power ofcustomers, (4) thethreat ofsubstitutesand (5) therivalryamongexisting playersinthe industry.Therefore,this analysis can be very useful,sinceit can give someinsights aboutthe nature oftheindustry andthe surrounding environments.