Monday, April 05, 2010

Sun Tzu - War On Business Part 3 (Plastered 8)

Part 3 of Sun Tzu is also set in Beijing, China; but this time it focuses on a T-Shirt retailer called Plastered 8 (“P8”). This small business is located in a shophouse near a popular tourist belt and is headed by a Briton called Dominic Johnson-Hill (“Dominic”). He has been living in Beijing with his wife (Laura) for the past 17 years and is reasonably fluent with the Chinese language, so this helps in communicating with the locals and, we shall see, in getting his new T-shirt designs as well.

Essentially, the business designs T-Shirts with bold and progressive designs and then on-sells them to customers who enter the shop. Iconic images around Beijing are put on funky-looking T-Shirts as designs, capturing a significant amount of creativity (mostly coming from Dominic). Unfortunately, the business has stayed stagnant over the years and has not grown (though it is still profitable). The problem has been identified by James Sun as competition, which comes in the form of nearby shops who shamelessly imitate the designs and ideas which Dominic has painstakingly searched for. Dominic is a tireless entrepreneur who will be personally involved (same problem as in Part 2’s CCC) in trawling the streets of Beijing for ideas with which to put onto his T-Shirts to make them eye-catching and funky. (Note: Once again, numbers such as number of T-Shirts sold, gross margins and revenue figures are not provided in this program).

James Sun interviews some passers-by on the street and their reply was that P8 did not differentiate itself much from the competition, and they do not feel that P8’s designs are unique or ground-breaking. This is due to the intense copying which other shops have started to do, and so the main differentiator in this case would be price. In fact, P8 is feeling the heat here and is starting to advertise for 2 T-Shirts for the price of 1. James feels that once a business starts competing on price without product differentiation, it is the beginning of a downhill battle in which all players will lose. On a side note, this is akin to price wars initiated by telcos or airlines in which only the customer benefits (but not the companies itself). Dominic himself has admitted he is not a “numbers guy” and is more focused on designs and ideas, hence the business has been unable to grow.

In the War Room, James once again enlists the help of Yifei Li and together they both inform Dominic that he needs to differentiate his brand from the competition. They suggest using music to bring the brand to a wider audience, and for him to create a sub-culture with his T-Shirts which will then sell well as it will cater to a particular market segment. Dominic agrees to the re-branding exercise and promises to make use of music to cement his brand amongst the youth and to project a more “hip” and “cool” image.

5 weeks later, Dominic has enlisted the services of one of Beijing’s Top 10 rock bands to supply them with P8 T-Shirts, and also to perform in a venue along one of Beijing’s busiest streets. The costs of this event are not mentioned, but the important fact is that it will provide an immediate boost to visibility for the brand and also Dominic’s T-Shirt designs.

The concert proceeds smoothly and helps to cement P8’s T-Shirts as cool, hip and decidedly underground. By targeting such a niche segment, P8 has differentiated their brand from all the other wannabes out there who are simply copying and pasting designs without much originality. A website has also been created for selling P8 T-Shirts online to further boost sales, in addition to walk-in customers to the brick and mortar store front. This two-prong approach will increase P8’s reach and customer base as the proportion of customers who do online shopping is steadily increasing.

The lessons to learn here are as follows:-

1) Delegate and Segregate – Similar to the lessons in CCC, Dominic has to learn how to delegate some of the more menial work to his Management Team, and to segregate duties properly so as to avoid inefficiencies and duplication. He himself, being a designer, should use his ideas to inspire rather than getting down and dirty to look for new designs. This can be “outsourced” to other designers who can come up with innovative ideas as well.

2) Leverage on Branding – Throughout the program, I get the feeling that Dominic is a competent designer and businessman but he somehow under-estimates the power and influence of branding, to his detriment. His P8 brand does not have a clear brand identity and was becoming lost in the cacophony of brands being churned out like a factory floor out in Beijing’s streets. In order to regain control again, he needed to do proper and targeted branding which includes events and sustained A&P activities.

3) Price is not a competitive edge – In the early part of the program, Dominic can be seen putting up a sign for a discount on P8’s T-Shirts, essentially under-cutting his competition. This had the potential to escalate into a price war, and would be disastrous for all players in the industry. Competing on price alone is NOT a competitive advantage unless you can produce much more cheaply than all your competitors, which was not the case for P8.

4) Identifying relevant niche segments – It was interesting how James and Yifei Li mentioned that P8 needed to lock arms with music and create a brand identity. In a way, they are encouraging Dominic to identify and relate to niche segments which can help the brand to thrive and grow.

Overall, I feel that Dominic had become wiser from the experience, and has begun to see things in a different light after receiving advice from James and Yifei in the War Room. He now realizes that he has to do more to differentiate his brand and grow his business. Competition will always inevitably set in and one must always innovate and think of ideas on how to differentiate one’s brand from the copycats. It’s a never-ending process and that is what characterizes the job of a business owner. He must always be vigilant for changes in the competitive landscape and industry and react accordingly, otherwise he will be left behind in the dust.

Part 4 of this series shall cover business owner Kavita, and he clothing business Asian Woman based in Singapore.

Please visit Plastered 8's website at


JW said...

Hi MW,

thanks for sharing.

I read with interest this portion:

"James feels that once a business starts competing on price without product differentiation, it is the beginning of a downhill battle in which all players will lose. On a side note, this is akin to price wars initiated by telcos or airlines in which only the customer benefits (but not the companies itself)."

To me, price wars by telcos or airlines are not analogous to what is happening in the T-shirt business. The main reason is because of the high fixed costs to telcos and airlines.

In fact, when Starhub first come into the mobile phone picture and started a price war, in the end, all three telcos reported increased profits and customer base. One of the factors is because when prices were high, market penetration wasn't that high. ===> part of my A level economics personal case study, which eventually led me to buy Starhub lots :)

I would compare detrimental price wars to the market of supplements in online shops in Singapore. I've decided against joining this field because of the intense price war that is happening right now with no product differentiation; the products aren't created by the shops! Every online shop sells the same product, with the main sources of differentiation in their product ranges and delivery service.... Sourcing online for the cheapest shop isn't a very hard thing to do...

Musicwhiz said...

Hi JW,

Thanks for the tip! I learnt something today.