99 Cent Store Case Study
99 Cent Only Business Strategy v. The Competition
David Gold, founder and CEO says the 99 Cent strategy is "to create the shortest path possible between the customer and the sale" (Rae-Dupree, 2004). This is important in deep discount retail in order to purchase close-out and other special-situation merchandise at prices substantially below wholesale that sell at prices significantly below regular retail (Symplicity, 2005). Over the past two years, the company has suffered a $17.00/share loss on its stock (from $30 to $13.00) mainly due to declining operating margins (Domash, 2004) caused by over-optimism in the Texas market. Competitors were more deeply entrenched than their research had shown, and reduced earnings forecasts combined with declining operating margins were the sell signal for many investors in the company. Also, the need to upgrade their IT infrastructure to support expansion in its California base market was the second company downfall. The following is a summary of the company strategy:
1. Focus on brand name consumables.
2. Broad selection of regularly available merchandise.
3. Attractive and well-maintained stores.
4. Strong supplier relationships.
5. Focus on larger stores and wider demographic of value-conscious customers.
6. Welcoming and Flexible Store Hours and Policies
The Role of IT Infrastructure in Operations and Business Strategy CEO DISCONNECT WITH TECHNOLOGY
99 Cents Only strategy is supported by various technologies that must always fall into line with David Gold 's theorem that the company will not spend money on technology to gather information it will not utilize (Symplicity, 2005). Gold 's comments that he does not even have a computer in his office seems to make him technologically reluctant. The psychology of the CEO is certain to permeate the thinking of those under his leadership. His attitude may have contributed to the company 's policy of writing its own software and its reticence to
David Gold, founder and CEO says the 99 Cent strategy is "to create the shortest path possible between the customer and the sale" (Rae-Dupree, 2004). This is important in deep discount retail in order to purchase close-out and other special-situation merchandise at prices substantially below wholesale that sell at prices significantly below regular retail (Symplicity, 2005). Over the past two years, the company has suffered a $17.00/share loss on its stock (from $30 to $13.00) mainly due to declining operating margins (Domash, 2004) caused by over-optimism in the Texas market. Competitors were more deeply entrenched than their research had shown, and reduced earnings forecasts combined with declining operating margins were the sell signal for many investors in the company. Also, the need to upgrade their IT infrastructure to support expansion in its California base market was the second company downfall. The following is a summary of the company strategy:
1. Focus on brand name consumables.
2. Broad selection of regularly available merchandise.
3. Attractive and well-maintained stores.
4. Strong supplier relationships.
5. Focus on larger stores and wider demographic of value-conscious customers.
6. Welcoming and Flexible Store Hours and Policies
The Role of IT Infrastructure in Operations and Business Strategy CEO DISCONNECT WITH TECHNOLOGY
99 Cents Only strategy is supported by various technologies that must always fall into line with David Gold 's theorem that the company will not spend money on technology to gather information it will not utilize (Symplicity, 2005). Gold 's comments that he does not even have a computer in his office seems to make him technologically reluctant. The psychology of the CEO is certain to permeate the thinking of those under his leadership. His attitude may have contributed to the company 's policy of writing its own software and its reticence to
References: Coffey, B. (2002, September 30). Every Penny Counts. Forbes. Retrieved June 11, 2005, from Forbes Magazine Web site: http://www.forbes.com/forbes/2002/0930/400068_print.html Domash, H. (2004, September 19). Two Easily Detected Red Flags. Winning Investing. Retrieved June 11, 2005, from Winning Investing Web site: http://www.winninginvesting.com/two_easy_red_flags.htm Rae-Dupree, J. (2004, January 1). Case Study: 99 Cents Only Stores ' Efficient IT Infrastructure. Ziff Davis CIO Insight. Retrieved June 11, 2005, from Ziff Davis CIO Insight Web site: http://www.cioinsight.com/article2/0,1397,1456000,00.asp Symplicity. (2002). 99 Cents Only Store. In Employer Profiles (10864). Arlington, VA. Retrieved June 11, 2005, from Symplicity Web site: http://guide.symplicity.com/snapshots/10864