Crafton Industries Harvard Case Solution & Analysis

How would you characterize Crafton's position in the carpet and rug industry?

Crafton Industries sells high priced to medium priced rugs and carpets primarily to the residential market segment. Crafton is small industry player with sales of $75 million in FY 2010, while market leader in this industry is Shaw with sales of $3025 Million in FY2009. Currenlty Crafton supplies its products through seven flooring wholesalers; the 7 wholesalers have network of 4000 retailers.

For small players in industry like Crafton it is heavily depended upon its wholesalers to distribute its products, because it cannot setup retails store unlike its competitors.

What are the pros and cons for Crafton of a wholesale vs. company distribution system from a qualitative perspective?

From qualitative perspective Crafton can sell its products through wholesalers which is the existing structure or can sell through its own distribution network.

Both option have their own pros and cons which is as follows,

Crafton can direct sales from is manufacturing facility straight to 4000 retailers which will eliminates distributor margin. This can translate to a lower price to the consumers and high profit margin to Crafton. This strategy reduces “touch points” in the supply chain, as the inventory does not need to be stored in a distributor’s warehouse prior to being reshipped to the customers. Retailers are often more credit worthy than local distributors. An added benefit is the ability for the Crafton to enjoy direct dealing with the customers, without the filtering of a wholesalers. This strategy works well for large manufacturers which maintain local production facilities in the market but in case of Crafton which is small player many factors need to be considered.

Crafton Industries, Inc Case Solution

With Crafton direct selling following are pros and cons

Pros

  • Very wide distribution, size, exposure, number of outlets, increased sales volume
  • Offers aggressive marketing and upsell opportunity.
  • Can offer personal consumer assistance, service and Crafton can produce carpets and rugs as per customer needs.
  • Create markets by offering clusters of competing brands in rugs and carpets
  • Post-sales service, added personal service
  • Consumer will know Crafton directly and will be trusted by consumer
  • Some customers like shopping stores, comparison, hands-on for customers\
  • Increased profit margins and decrease reliance of wholesalers

Cons

  • Long channel—lots of work to build network and complexity of building network will be observed by Crafton.
  • It will be an expensive option as compared to distributor selling
  • Store reputation will vary on customer service and product quality
  • Poor customer service offered by Crafton will leads to bad impression.
  • High employee turnover will be possible because of need to require additional employees

For Crafton, what are the economics of the wholesale vs. company distribution system?

By opt company distribution benefit economic benefit will flow in shape of increased sales from existing $75 million to a new level, plus margins will also increase by a good ratio. Crafton will avoid being taken over if its distribution network increases........................

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