Eureka.com, an online customized gift shop start-up, is planning to scale-up. This case study looks at the company’s performance in terms of operating and financial strategy.
Sinan Erzurumlu and Yaman Erzurumlu
Harvard Business Review (BAB467-PDF-ENG)
April 01, 2019
Case questions answered:
- What were the main challenges facing the company and what were the solutions to these challenges (e.g., new policy, investments, acquiring new talents, applying new measurement matrices …etc.)? Use a timeline and detail your agreement or disagreement with its decisions.
- Discuss the company’s performance in terms of operating and financial strategy.
- What are the Key Success Factors for this company?
- What would you suggest for the company to grow?
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Case answers for Eureka.com: Moving From Start-up to Scale-up
Case Study Analysis: Eureka.com
Esra Maya is the CEO and founder of Eureka.com (Eureka). The company is located in Istanbul, Turkey. It specializes in the provision of customized gifts to individuals as well as professional marketing products for other companies. Besides, the company advertises products for artists and markets. By 2018, Eureka had more than 15,000 products on its site (Babson College, 2019). Eureka has grown significantly and needs restructuring its business model. The following discussion is a case analysis for Eureka.
Background of the Case – Eureka.com: Moving From Start-up to Scale-up
Eureka.com serves a wide range of customers, which requires the CEO to divide her attention and resources between different categories of the market. Maya had identified the dynamics and opportunities for offering products with low margins. However, the variation in the needs of the customers resulted in the complications of the order fulfillment process. Maya had invested in the establishment of sales outlets in shopping malls across the city, but the venture failed. She realized the need for growing organically and readjusting the supply side of her company.
The management team was requested to survey the market and demand forecast. Maya was exploring the segment that would differentiate her brand and the need for an operational strategy for increasing the number of stock-keeping units (SKUs). The findings of the survey suggested that marketplace products such as trademark designs and artist drawings could make up the sales in 2019 and a maximum of 30% in total sales with a weekly variation of 278 (Babson College, 2019).
Customized products could make 60% of total sales with a deviation of 348, with “fun and cool” orders making up to 20% of the transactions with a variation of 70. It was apparent that Eureka was growing rapidly and needed the operations needed to serve the different segment as well as their growth and earning potentials.
Eureka.com was facing a problem of investment. It was apparent that the company needed a more systematic business model to address its growth challenge. Despite being funding in 2012 to buy printing machines, acquiring its largest competitor, and maximizing its operations, it failed to achieve the targeted brand recognition (Babson College, 2019). As a result, the company shut down its physical channels in 2014 since the outlets did not generate enough revenue. The company required holding on-location inventory and management of new distribution networks to run these stores.
In conclusion, the management of Eureka established that online and physical channels required managerial skills and experience in marketing and managing operations, which promoted to focus on online sales.
The company should address the problem of investment by focusing on its strength. As a business grows, it needs to leverage areas of uniqueness and strength, and the need for capitalizing on the factor that makes the company stand out from the competitors (Gold, 2018).
Eureka.com has established that it has a competitive advantage in using the online channel. The company needs to entice and engage the audience with benefits that are oriented to its strength. An example is improving customer experience by developing an app that enhances their engagement with the company. The company needs to invest in business intelligence. It involves the collection of information that pertains to all the aspects of the company. The data can include expectations of customers, the supply chain, as well as the forces of demand and supply.
This strategy is necessary as a business grows since its operations become more complex. Business intelligence can support Eureka in maximizing efficiency in gathering and analyzing business intelligence to make informed decisions. When used productively, the strategy can support sustained and substantial scale growth of a company, which is the foundation of efficiency and productivity.
Eureka.com was facing a growth challenge. In 2016, the company channeled 500,000 Turkish Lira to purchase the copyright for using characters from Marvel, Disney, Lord of The Rings, and Harry Potters (Babson College, 2019). It allowed customers to identify their predesigned items and order a custom design, which offered a perception of creating their own products, where they would then receive the items with their favorite characters.
The company also contracted local prominent local cartoonists and artists for permission to use their creations in the branding the items. As a result, these local stakeholders were merged on an online marketplace (Pazaryeri), from where they could market their works using the website of the company. Eureka.com was receiving orders for small and medium-sized corporations that demanded promotional and customized products.
The company has made bold and creative efforts to partner with global brands and local artists in addressing its growth challenge. However, the issue can further be improved by showcasing the top-selling items of the company, such as personal notes and sweatshirts. The effort should include giving the customer some directions and a category of the best seller on the homepage of its website.
Some customers may window-shop on the website without a definite idea of what they intend to purchase. The strategy is ideal in attracting impulse purchases, primarily since the company sells a wide range of products, which can be a challenge for some customers to browse all the available items. It is also ideal in promoting items that have higher margins.
The company faced the challenge of inadequate use of evidence-supported decisions. The failure of the physical sales channel was an indication that the company needed to rely heavily on quantitative analysis in making its strategic decisions. The management needed to accept failures.
Previously, the company did not focus on new ways of increasing growth and reaching the customers. The business was now moving to large scale production and needed a systematic approach to decision making. This approach is an ideal strategy that can prevent significant losses. For example, it could have saved the company from the time and financial losses that it experienced in opening a physical channel that was later closed.
The company can address the challenge of decision making by incorporating evidence-based practices. This approach entails the use of both quantitative and qualitative methods in decision making. It supports traditional skills such as critical thinking in making the most informed and accurate decisions (Rousseau & Briner, 2014).
The approach is a combination of data and evidence from various sources. A common one is scientific findings that are mostly based on research, evidence from stakeholders, organizational experiences as well as professional judgment, all to answer a common problem. It would involve gathering information from all these sources to help Eureka.com answer the question of investing in the physical channel.
This approach is a form of risk management by reducing it through intensive analysis of the problem. Using the best available evidence relies on the knowledge that is derived from scientific evidence, which results in accurate decisions.
Eureka lacked a definite sourcing and inventory policy. This challenge hindered the CEO in managing the capacity allocation and the levels of inventory. This problem resulted in Maya exploring the past information of up to 360 operating days on three categories of products seeking a solution. The products were the custom sweatshirt that would be used for business and individual customers, and the Market place mug that was designed by renowned artists. The other category was the “fun and cool” items that majorly included trophies.
Eureka needed to develop a definite supply and inventory policy. This policy is a framework that…