Hannah's Hats Case Study:

Hannah's Hats is an online childrens hat retailer with a brick-and-mortar store in Chicago, Illinois. The company has 27 employees and was founded by Harry Hannah in 2015. At that time, Hannah was a single father of 3-year-old twin boys. Hannah's Hats was a success and at the end of 2015, sales hit $ 1 million. The company topped $4 million in sales after the winter of 2020 (mid-March 2021).

Harry Hannahs Story:

Working as a freelance childrens clothing buyer, Harry could work from home and be a stay-at-home dad to his twins, Harry, Jr. and Harold. This was important to him and to his wife, Harriet, a software designer whose job involved a great deal of travel. However, on one cold night in November, Harry was contacted by local police who informed him that his wife had been killed in an auto accident. She was returning home after seeing a client in the Chicago suburb of Arlington Heights.

Devastated by the news, Harry did everything he could to keep himself together for the kids. He needed help; he decided to send them to daycare three days a week so he could deal with getting his new life together. Every day Harry noticed the caretakers trying to find the children's hats and mittens when he came to take the boys home. Harry noticed that many of the children had mitten clips that seemed to help reduce the number of lost mittens. The hats, however, were another matter.

Chicago winters are exceptionally bad for children because the wind whips across Lake Michigan and freezes every part of the face that has moisture, especially the mouth. While many of the childrens coats had attached hoods, this was not enough. Parents used wool scarfs tied around the childrens faces (below the eyes) to stop the painful feeling of the cold. The scarves were awkward and bulky for the children who often pulled them off or dropped them in their travels. Harry decided to design a hat that could be attached with Velcro onto a coat hood or a coat collar and designed to fit closely around the mouth, nose, ears, and eyes of a child just like a ski mask. The hat could be easily attachable relegating the need for scarves to the past. Harry knew the hat could come in a variety of colors and have various child-friendly designs.

Several months passed. Harry discovered that payments from Harriets workmens compensation and her life insurance would provide him and the children some financial freedom for years if invested wisely. Harry thought a better way to change his familys life would be to invest some portion of the money in his hat idea. Founded as a small storefront shop near Marshall Fields, Hannahs Hats also developed a loyal following online. Through its creative use of social media, sales took off. Harry expanded his product line to include matching winter gloves and socks.

Beginning in the fall of 2017, Harry, flushed with success from his childrens hats, decided that the design could be adapted to work for adults as well. The company invested $150,000 in new designs and inventory for attachable hats for adults. By offering seasonal products for the whole family, Harry thought Hannahs Hats would triple its sales by the end of 2019.

With visions of becoming a destination store like LL Beans flagship store, Hannahs Hats moved from its old store near Marshall Fields to a large space on the Navy Pier. This cost Hannahs Hats $25,000. Harry also moved the warehouse from a 10,000 sq. ft. space near the old store to a 20,000 sq. ft. space closer to his home in Arlington Heights. This location was considerably further from the store.

As the boys grew older, Harry left most of the work to his staff. He set out to increase the sales through travel and spent most of his time marketing products through several marketing channels. He was determined to have his hats available to every possible cold weather clothes customer. He introduced numerous marketing initiatives, including a partnership with Blizzard Relief, an organization intended to increase awareness of the clothing needs of the homeless during massive cold weather storms.

To sustain these efforts, Hannahs Hats bulked up its marketing staff which consisted of Hannah and three of the employees who worked in a small office within the warehouse. Gradually, the marketing team grew to 5 full-time employees with a dedicated IT person managing the company's website and E-sales orders.

From 2017 to 2019, Hannahs Hats grew at an annual rate of 35 percent. Hannahs talks and marketing pitches to large retailers attracted the attention of two investors. The investors told Hannah that with their help they could grow the company to be a $75 million dollar business. Hannah began to think bigger, If the investors think they can grow Hannahs Hats to be a $75 million-dollar business, why cant I? This goal became his new objective. Hannah doubled his marketing trips and went after Walmart and Target to broaden his customer base. Although both companies liked his product, they felt that a cheaper version was needed to meet their target customers.

Hannah continued his heavy marketing plan but despite his effort sales began to flatten. Expenses grew higher, especially with the adult hats. Hannah knew he had to change his plan fast or they would be in trouble. He sought expert help to gain some idea of his companys current position. The following conclusions were reported to Hannah.

Finances:

~The rate of overall sales growth had declined from 35% annually to 20% by the end of winter 2020 (mid-March 2021).

~The childrens hats had increased sales by 11% over the last year.

~Adult hat sales have dropped by 20% over the last year.

~The company was still growing but at a slower rate.

~Operational expenses for the company increased by 8% last year. Much of which was due to increased advertising and other marketing expenses (5% increased operational expenses in the new retail location and warehousing taking up the rest).

~ E-sales were up by 25% with sales of childrens and adult hats being about equal.

Opportunities:

~Investor interest

~E-commerce growth.

~Big store interest if a cheaper line were developed

~New product line for Summer

Threats:

~LL Bean entering the childrens market with a similar product

~Chinese e-commerce competition with a cheap line.

Harry Hannah reviewed the report and instinctively knew that he had to restructure his growth plans. A decision had to be made that would position Hannahs Hats for better growth potential. Using the information in this case study and the MDQ model, help Harry make his decision and position his business for future growth.

Decision Statement: What strategies can Harry implement into Hannah's Hats to improve sales growth and increase competitive advatnage within the market?

In Building the Decision, the decision maker will create FOUR viable alternatives. The case study mentions several obvious alternatives, such as: Partnering with the investors or increasing E-commerce sales. However, NONE of these alternatives are strong enough on their own to meet all the objectives HH would like from the decision. Harry must look for ways to combine them with other possibilities to make stronger alternatives. The expectation is to create alternatives that are creative, demonstrate critical thinking, use additional research, and meet as many of the objectives as possible.

• Discuss in one paragraph the type of information that Hannah's Hats needs to gather to make a decision. Discuss the biases and traps that should be avoided in gathering, selecting, and interpreting information. Watch your predisposition to select information that is in your comfort zone or might lead to a problem solving approach rather than a decision making one.
• Create FOUR possible alternatives for Hanna's Hats. Discuss each of these alternatives in separate paragraphs by explaining the alternative in detail, pointing out the biases, and potential consequences.