Achica

Product Model






Achica

Achica is an online retailer company with a niche in luxury home-ware goods; it is an example of a product business model, offering discounted luxury good products to ‘exclusive members’ (who must sign-up by email to join). Achica connects this dyadic relationship by providing a website that entices retail consumers, who are interested in luxury goods, via limited sales promotions (usually lasting for 3 days) on selected products. In-turn, luxury good firms are given the opportunity and ability to move more slow-moving inventory items.

Achica handles payments, refunds, exchanges and any further customer issues. Achica scales its business by growing the community of ‘exclusive members’ interested in luxury goods, which then drives a stronger demand for inventory. By the end of 2015, co-founder Griffiths says Achica hopes to gain 5 percent “of the UK’s £10.7bn homewares market”; this would amount to roughly a £500,000 turnover in the UK (Rushton, 2011).

HISTORY

Achica was launched in 2009 in the UK by the co-founder of Asos, Quentin Griffiths, and former CEO of TradeDoubler, Will Cooper (Rushton, 2011). In 2011, Balderton Capital bought equity stake in Achica. This carries significant weight, as Balderton is known for investing in firms early-on “if it believes they have global potential” (Rushton, 2011). In 2014, Landsdown Partners (one of the largest hedge funds globally) also acquired an equity stake in Achica (Anderson, 2015).

This ‘global potential’ is already being actualized: as of first quarter of 2015, Achica is focusing on overseas growth, doubling its workforce, despite most of Achica’s sales coming from the UK (Anderson, 2015). Achica reported a 50% increase in sales to £56m at the end of 2013; however, the large influx of admin expenses (including the surge of additional workforce for global expansion) caused Achica to report a loss. Gross profit for 2013 was reported as £7.4m; the recorded loss was for £6.97m (Anderson, 2015).

As of May of 2014, Achica had three million members throughout the UK and Europe (Sillitoe, 2014). The website operates in a variety of languages, including Spanish, German, French and Polish (as well as English) (Sillitoe, 2014). They are also buying offices in France and Spain (Sillitoe, 2014). Achica competes directly with other luxury stores (brick-and-mortar and e-commerce) as well as indirectly with other discount e-retailers (such as Asos, Secret Sales, etc.). However, luxury goods on Achica cost, on average, 70% less than they would in traditional brick-and-mortar stores—giving Achica its niche (Rushton, 2011). The success of other discount companies in luxury retail, such as Ventée Prive and Secret Sales, helped instil an aim for similar success but in the home-wares sector (Rushton, 2011).

CUSTOMERS – WHO THEY ARE:

Achica connects two groups of customers: retail consumers (for luxury home-wares) as well as luxury good firms and brands willing to sell their products at a discounted rate, short-term, in order to get rid of slow-moving inventory.

ENGAGEMENT – VALUE CREATION PROPOSITION (INCLUDING NETWORK EFFECTS):

Achica creates value for both customers in different ways:

For retail consumers: it gives consumers the option of affordable luxury goods, which is especially relevant given the ever-evolving trend of online bargain shopping. Additionally, Achica, while offering pre-made products (and thus using a “bus” or scale-based engagement model), offers strong customer experience: through each additional purchase, Achica is able to recommend or suggest specific promotions, based on customers’ previous shopping behaviours/patterns. Since each flash sale only lasts for a limited period of time, this entices customers to visit the site time and time again. Retail customers also have the ability to opt-in to weekly and/or daily emails to stay up-to-date on upcoming sales.

For luxury good providers: the primary benefit for firms is the ability to move slow-moving inventory and potentially gain additional revenue from items that otherwise would have been a loss (if out of season, etc.).

DELIVERY – THE VALUE CHAIN:

Achica’s website provides an online platform/catalogue, which matches retail customers to luxury goods on offer, sets prices, handles payment and deals with any customer complaints/refunds/exchanges/etc. Achica liaises with luxury good firms/brands to gain inventory at low-cost, and handles the purchase, warehousing and inventory management of goods purchased from the luxury retailers.

According to Giftware Association (GA):

Before a promotion takes place, Achica agrees with the supplier how many items we will be made available for sale – say 100,000 items. A time for the promotion (which may be sometime ahead) is also agreed. Once the event has happened, the supplier must be prepared to deliver all of the promised 100,000 items, if they have all been sold, or, failing that, however many have been sold, in one drop to Achica’s warehouse in Oldham within five to seven working days. Once the delivery is done they can present their invoice, which Achica guarantees to pay immediately. The consumer, because he or she is getting a bargain, is prepared to wait between 15-17 days to receive their Achica purchase. (Giftware Associations (Giftwrap Interview), 2014).

By creating membership exclusivity, there is a reduced chance that consumers will feel tempted to bargain-shop or compare prices through other e-retailers. Moreover, since the buy-in for ‘members’ resides in 70% discounts (on average), this creates stronger brand loyalty. Once a consumer decides on a purchase, s/he clicks on the product desired, putting it into the purchase basket on his/her individual account. Delivery and payment method details (PayPal or debit/credit) are entered a confirmation email is then sent. Delivery is handled by third party logistics providers.

MONETIZATION – VALUE CAPTURE:

Customers pay for purchased goods using debit/credit cards and/or through PayPal within the individual online account portals. Without contacting Achica directly, it appears that the luxury retailers do not pay to have their products listed (no additional fees). Instead, it appears that Achica simply buys the product at discount from luxury retails and then passes on this discount to consumers.

Disclaimer:

Written by Kelsie Langley and edited by James Knuckles under the direction of Prof Charles Baden-Fuller, Cass Business School. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. © 2016

Published 20 April 2016



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