GB500 Unit 10 Integrative Capstone Paper Example

Two Product Lines, One Online Store, Three Lenses: A Unit 10 Integrative Capstone on a Gear Maker's Channel Decision

[Student Name]

Purdue University Global

GB500: Business Perspectives

Unit 10 Integrative Capstone Paper

[Instructor Name]

[Date]

Larchwood Gear, its retailers and every figure are composite and illustrative; the sources cited are real.

Executive Summary

Larchwood Gear should open its own online store, but only for two product lines, tents and sleeping bags, for the first twelve months, priced at the same advertised prices its retailers use. Three reasons support this. Marketing evidence shows unmet demand from customers already searching for the brand. Finance shows that each direct sale earns about $15 more in contribution per $100 of retail value than a wholesale sale, enough to cover the launch, provided retailer sales do not fall sharply. And operations shows the warehouse can handle single orders for two lines with modest changes, but not for the full catalog in peak season. A full launch would risk the retailer relationships that produce 94 percent of sales and would overload the warehouse.

The Decision

Larchwood sells about $86 million a year of tents, sleeping bags, packs and camp furniture through about 400 outdoor retailers, at wholesale prices near half of retail. Its three largest retail partners account for 34 percent of sales. The company sells nothing directly except a few close-out items at a warehouse sale. The leadership team is asking whether to open an online store and, if so, how far to go.

The Marketing Lens

Philip Kotler and Kevin Lane Keller describe channel design as a choice about which customers to reach and what service level each channel must provide, made with attention to conflict among channels (Kotler & Keller, 2016). The marketing question is whether a direct channel reaches customers that retailers do not.

The evidence suggests it does. Searches for the Larchwood brand name average about 41,000 a month, and the company's website, which offers only a store locator, receives about 120,000 visits a month. About 18 percent of visitors use the locator and then leave the site; surveys of a sample of those visitors show that a third did not find a nearby retailer stocking the item they wanted. Tents and sleeping bags are the lines where retailers carry the narrowest selection, often only a few models out of fifteen. A direct store for those lines would serve customers who are already looking and not finding.

Marketing also sets a limit. The three large retail partners have said, informally, that they would reconsider shelf space for a brand that undercuts them online. Kotler and Keller note that channel conflict is most damaging when a manufacturer competes on price with its own resellers (Kotler & Keller, 2016). So the store must sell at the same advertised prices as retailers.

The marketing lens says the store should exist, and the same lens says it must not compete on price, which is what keeps the finance and operations cases realistic.

The Finance Lens

On a wholesale sale, $100 of retail value brings Larchwood $50 of revenue, against product cost of about $28, leaving $22 of gross profit. On a direct sale at the same retail price, Larchwood earns $100 of revenue. Subtracting product cost of $28, fulfillment and shipping of about $12, returns of about $8 and digital marketing and platform fees of about $15 leaves $37 of contribution, about $15 more than the wholesale sale.

For the two-line launch, the finance team projects first-year direct sales of about $4.2 million at retail value, adding about $630,000 in contribution compared with the same goods sold wholesale. One-time costs for the store platform, photography and a packing area total about $380,000. In Brealey, Myers and Allen's terms, the store must be judged on the cash it adds net of any sales it takes from the existing business (Brealey et al., 2023). The biggest such loss would be retailer sales. If the launch caused retailers to cut Larchwood orders by even 2 percent of total sales, about $1.7 million at wholesale, the lost gross profit of about $750,000 would erase the direct channel's gain. That is why the marketing lens's condition matters: price parity is what keeps retailer losses small.

The Operations Lens

Larchwood's warehouse ships pallets and cases to retailers. Picking single orders for consumers is a different operation: each order must be picked by the item, packed with care and shipped by parcel. Sunil Chopra and Peter Meindl explain that a direct channel shifts fulfillment from a few large shipments to many small ones, raising handling and transportation costs per unit (Chopra & Meindl, 2019).

A test week in which warehouse staff picked mock consumer orders found that, with a dedicated pick area and two packing stations, the warehouse could handle about 600 single orders a day. Two lines would produce about 250 orders a day in normal months and about 1,100 in the peak weeks before summer. For the full catalog, peak demand would exceed 3,000 a day. Heizer and his coauthors advise that capacity plans should be set against peak demand or include a plan for overflow (Heizer et al., 2020). For the two-line launch, a third-party logistics provider can handle peak overflow at a known cost per order. For the full catalog, the warehouse would need a redesign.

How the Lenses Constrain Each Other

Each lens alone points somewhere different. Marketing alone might launch every line, since customers search for all of them. Finance alone might favor the highest-margin lines regardless of retailer reaction. Operations alone might delay launch until the warehouse is redesigned. Together, they point to a narrow launch: the lines where retailers stock least, sold at parity, in volumes the warehouse can handle with overflow help.

Implementation Timeline

In months one to three, build the store, set up the pick area and sign the logistics contract, and tell the three large retailers about the launch and the price parity policy before it happens. In months four to twelve, run the store for tents and sleeping bags. At month twelve, review direct sales, retailer orders and warehouse performance before deciding whether to add packs.

Risks

Retailer reaction is the largest risk; the response is advance notice, price parity and a referral link to retailers for products the store does not carry. Fulfillment errors could damage the brand; the response is a dedicated pick area and a packing checklist. And demand could fall short of the $4.2 million projection; the platform's costs are modest enough that a smaller result would still recover them within two years.

Conclusion

The question was whether Larchwood should sell directly. The answer is yes, narrowly, in a way all three functions can support.

References

Brealey, R. A., Myers, S. C., & Allen, F. (2023). Principles of corporate finance (14th ed.). McGraw Hill.

Chopra, S., & Meindl, P. (2019). Supply chain management: Strategy, planning, and operation (7th ed.). Pearson.

Heizer, J., Render, B., & Munson, C. (2020). Operations management: Sustainability and supply chain management (13th ed.). Pearson.

Kotler, P., & Keller, K. L. (2016). Marketing management (15th ed.). Pearson.