Introducing the do-it-yourself concept in Egypt - the case of House Wonders

Ahmed Ayman and Mahitab Mohamed Shahin

Introduction House Wonders has been operating in Egypt since June 2017 and is facing quite a dilemma[1]. Despite the intensive marketing efforts and huge budget provided by the parent company, it seems that there are still low levels of brand awareness and low in-store traffic, which leads to low sales and the fact that they have not yet reached the break-even point. Michele Seif, general manager of House Wonders, acknowledges that there seems to be a problem with the communications strategy, starting with identifying a suitable target market and then researching the most efficient and effective way to reach them

Background about the Egyptian economy On November 3, 2016, Egyptians woke up to news that might well shape the entire country's economy for coming generations; the Egyptian pound (EGP) has been unpegged to the US dollar and left solely to the powers of market supply and demand. Truth be told, it did not take a world-class economist to see that this was inevitable. Originally, the EGP was devalued to about EGP 16 per dollar, which was better than the initial forecasts of analysts and bankers of EGP 21 per US$, after having been pegged at EGP 8.8 per US$1 for little over a year, but the brutal reality was far worse. The value of the EGP kept declining until it reached about EGP 17.8 per US$1 (Torchia and Aboulenein, 2016). A wave of ruthless inflation followed as Egypt's economy depends heavily on imported goods. The Central Bank of Egypt raised interest rates, which was a textbook solution to combat inflation, but we now know that Egypt's economy needs far more than mere textbook solutions (Figure 1). The reasons the EGP needed to be devalued were actually quite logical; investors and business owners who depend on importing needed to be able to operate using a known market price for the dollar, rather than the ambiguous prices that were provided by the black market for a previous couple of years. The central bank reported that its objective was to take out any interference and allow the genuine market forces of supply and demand to take over (Alkhalisi, 2016). To a great extent, this goal has been fulfilled. Moreover, as Jason Turvey, Middle East economist at Capital Economics, explains it, "A weaker currency would also boost external competitiveness and encourage foreign investors back to the country" (Holodny, 2016). The Egyptian market is the largely consumeristic market, which means that a large number of businesses depend on importing goods, all the more reason why resolving the exchange rate predicament was a crucial objective to decrease the overall level of risk in the country. On the other hand, some businesses were affected momentously. Companies that had bought stock from foreign suppliers but had not yet paid in cash were now obligated to pay almost double the cost in terms of EGP. Budgets needed adjusting, forecasts needed revising, and the concept of depending on imports that were deeply embedded in the minds of managers was no longer feasible. The same case cannot be applied with regard to companies that have loans in foreign currency, as the central bank forbids banks operating in Egypt to give loans in foreign currency unless the borrower has the ability to earn foreign currency themselves. Consequently, this inflation started eating away from both the savings and income of Egyptians. For average consumers, who are considered to be highly price-sensitive, demand for luxurious goods, also referred to as "provocative items" fell drastically. Egyptian households now need to reassess their expenses and to try as much as possible to develop wiser and tighter spending patterns. The public, at that time, has not fully accepted that the prices of all the goods and services have now almost doubled and that their country's economy was now going through what is known as hyperinflation.

Company profile The turbulent economic conditions, along with the associated difficulties and cost of acquiring foreign currency were one of numerous issues Michele Seif, general manager of House Wonders, had to sort out before the grand opening of a multi-million EGP investment in the form of one of the largest department stores in the country specialize in home improvement and hardware projects. To get this far was certainly not easy. Michele and her team had to make a few tweaks to adapt to the new economic conditions. For instance, the devaluation and the ensuing inflation led to a significant increase in the cost of their inventory, which was reflected in a higher price for the customers. As a result, House Wonders had to resort depending mostly on imported items, they decided to go for locally manufactured goods or goods that were supplied by local wholesalers. Not only did her team manage to acquire on a prime location in one of Cairo's luxurious compounds but also managed to organize a grand opening for the store that received positive feedback from the media, customers, social media influencers, and most importantly for Michele and her team, the representatives from the holding company that owns House Wonders. The holding company, Gulf Retail House, is a huge conglomerate that operates in several sectors within the Middle-East and North-Africa (MENA) region for well over half a decade. They have the know-how to run a department store of this magnitude, and they have started and successfully guided several other brands into the Egyptian market. Their portfolio, however, did not contain a brand concerned with hardware and home improvement that falls under the category of "do-it-yourself" or DIY. DIY is considered a market gap in Egypt even though it is currently trending in Egypt. The bargaining power and connections of Gulf Retail House have provided House Wonders with several competitive edges, including better rent price for the store, better distribution for its flyers and more credibility with its suppliers, in addition connections to other subsidiaries of Gulf Retail House, some of which provide complementary products to those of House wonders. At first, Gulf Retail House thought their expertise and previous success in the MENA region was enough to give them an edge in Egypt. However, the Egyptian market is significantly different from the Gulf market in terms of income, demography and seasonality, which gave Michele and her team quite a challenge, as they cannot really implement the same strategies, solutions and campaigns that have proved successful before in other countries in the region. After the success of the grand opening, House Wonders started attracting customers, but not as many as Michele had expected.

Concept of do-it-yourself The DIY concept has existed for over 70 years now, since the front cover of Time Magazine in August 1954 was "DIY, the new billion-dollar hobby" (Fox, 2013). This industry has displayed constant levels of global growth since 2002, reaching more than $30bn in 2016 according to Entrepreneur Magazine (2016). There is a global trend and millennials are leading the way in adopting DIY projects, by combining technology, creativity and entrepreneurism. Millennials are defined by Oxford Dictionary as those reaching young adulthood in the early twenty-first century. Wolf and McQuitty (2011) define DIY as an activity "where individuals engage raw and semi-raw materials and component parts to produce, transform or reconstruct material possessions, including those drawn from the natural environment." In the years since, the term "DIY" has grown to encompass plenty of other consumer-related areas such as fashion, arts and crafts and gardening. The Home & Garden Trends Report (2017) monitored the growth of the home-owning trend for millennials and how they emphasize uniqueness in their lifestyle. Millennials seek greater autonomy in shaping their home environment (redesigning their space, handling home repair and personal gardening), and in turn, expect a supportive multi-channel shopping experience to help them achieve that. From here comes the importance of adapting the retailers' strategies to understand and serve this rising segment's personal goals. Over 30 per cent of the Egyptian population is considered millennials (The World Factbook, 2018). This creates an opportunity for DIY retailers such as House Wonders to grasp and fulfill the needs of this rising segment. IKEA has already tested the Egyptian waters when it opened in 2013, as it is the largest furniture retailer and has the concept of DIY embedded in its global operations. IKEA's success in Egypt proves that Egyptians are getting more and more acquainted with the idea of doing tasks themselves. Michele and her team studied the market well before launching House Wonders and it turned out that a certain segment has a preference for DIY projects as it helps them achieve a sense of empowerment and differentiation. Knowing that they are working on the production of a unique piece for their home or living space provides enough motivation to perform. Moreover, becoming a member of DIY enthusiasts gives them a chance to connect with others. This is specifically true for busy parents who would like to spend more time with their families. Engaging in a DIY project might be their way to reconnect with family, friends or loved ones (Wolf and McQuitty, 2011). Another reason for engaging in DIY activities is the perception of the lack of quality from professional manufacturers. There seems to be an agreement about the perception that the workforce is not highly qualified,which can influence a certain segment to make the good or perform the service themselves. The major motive for becoming a DIY user still lies in economic benefits. It is definitely cheaper to buy raw or semi-raw materials and construct your own DIY projects. As DIY might be a "lifestyle choice" and/or a reflection of financial inability to hire professionals (Williams, 2004), Gulf Retail House saw an opportunity for House Wonders in Egypt. Because Egyptian customers are very price-sensitive, and given the economic conditions, as the currency devaluation, Michele and the management team saw that DIY products present an economic solution for Egyptian consumers and decided to open House Wonders in Egypt in 2017.

Launching a campaign The main objective of the advertising campaign was to make the Egyptian market aware that House Wonders is now open and the products they carry in their inventory. The campaign used several media such as: Radio: using Arabic and English jingles to suit the target market. Also, the voices used to sing were a young male and female as this was their primary target market (new and young families). Outdoor campaign: large billboards on main high ways. Social media: initiating local pages on Facebook and Instagram to suit the Egyptian market, as they are different than the global/regional market. Roadshow truck: a truck branded with the colors and logo of House Wonders, with glass windows displaying the four main categories of the store. Monthly flyer: distributed in-store and contains a selected range of products with discounted prices and other promotions. Later, surveys by the management team showed that outdoor campaigns were the most effective, after which came social media efforts. It is, however, common knowledge that the cost of an outdoor campaign is extremely high, and the exposure is not focused at the target segments, while social media campaigns are a fraction of the price and can be directed at the target segments. Despite the fact that printed media is less popular than it used to be, a certain portion of the public, namely, the older generations, still read the newspaper at least on Fridays, which is the first day in the weekend in Egypt. House Wonders experimented with newspapers twice, the first time was with an offer that promised refunds in case the customer made purchases for a certain amount of money. The results were positive; a new, older segment on the market started visiting the store, and communicated their trusted word of mouth to other members of their families. The second time House Wonders placed a newspaper ad was without an offer, and the results were not as positive as the first one. Ever, like the launch, House Wonders has focused on pulling customers to their store through initiating DIY projects related to current events: such as decorating a Christmas tree and constructing a Gingerbread House. This marketing effort was planned to attract young families with children and it also reinforces the store concept. Shopping experience at house wonders Michele and her team are well aware of the benefits of creating a joyful experience for their target market and how this will provide the brand of House Wonders with a sense of exclusivity. They consider one of their main competitive advantages is the in-store unique shopping experience. Michelle's team wants to give the customer "the extra mile" that other competitors do not give. As House Wonders has different department and a huge variety of products, it provides its customers with the opportunity to engage in workshops and try the products for themselves. Even the staff hired have to have certain background education or experience related to the department in which they work. Moreover, a lot of effort has gone into the orientation and training for the employees working in House Wonders. As part of the effort to create long-lasting relationships with customers, employees were directed to be friendly and helpful, yet professional at the same time. Michelle was even very proud to point out one specific case: "for example, the salesperson working in the gardening section of the store has a degree in agricultural engineering, so he is literally the go-to guy who can help customers in the store, and answer any questions they might have about the plants later on after they have made the purchase." Not only does House Wonders sell tools that would make gardening easier but also they go all the way by providing seeds for fruits and vegetables to enable customer to go through the entire experience of gardening. Another section of the department store was designed so the customers can experience the feeling of working in what Michele referred to as a "workstation" where all the relevant tools and supplies can be used with the assistance and guidance of professionals in the field. The workshops are often designed in collaboration with a number of the suppliers of House Wonders. Not only do they help show the customers the most efficient use of the products on display but also they increase the public's awareness of the brand and customer engagement as well. When it comes to home electric appliances, a selection of the appliances is unboxed and connected to electricity so the customer can literally try out the appliance before making the purchase. In a nutshell, the store is designed and equipped to give the customer the "feel" of owning or using most of the items on display. An additional aspect that Egyptians value within a department store is convenience; customers have access to a wide range of products under one roof, and a variety of prices for the same product. "So, for example," Michele points out, "House Wonders has three different kinds of gardening gloves, one at a price that is less than $2, another at the price of about $5 and a third one that would cost the customer around $15." This offers customers the convenience of not having to look elsewhere as there is a product for each budget. As their target market entails families and not just individuals, House Wonders feels obliged to engage every member of the family. The kid's area has played a vital role in keeping the kids occupied while the parent(s) are busy in one of the workshops trying out the products. To take a break, House Wonders has a coffee shop inside the store, selling one of the best coffees in the area. This has attracted new clientele to the store who might not have stepped into the store otherwise; it could even be considered a profit center by itself. Michele and her team do their best to maintain a unique experience throughout the three phases of the customer experience; pre-sales, in-store interaction and after-sales phase. They understand, for instance, that maintaining their existing customers is key to positive word-ofmouth and that the cost of retaining and existing customer is much cheaper than acquiring new ones. House Wonders provides an 18 months guarantee on selected products wherein the case of damage, the customer would be able to exchange it without any hassle. It also offers its customers the promise of "price match," which means the store will refund the difference in price if customers proved they found it cheaper elsewhere. This increases the customer's confidence in the brand name. Moreover, House Wonders gives 30-day exchange/refund instead of the regular 14 days. This is all part of its efforts to retain its regular customers, and segment the brand as one that puts customer experience and comfort as top priorities. House Wonders also focuses on corporate deals; including special discounts to employees working in selected reputable firms, which will positively impact word of mouth. Another dimension of corporate deals was a special discount provided to homeowners of residential compounds in close proximity to the store. The third version of corporate deals was to work with other firms that sell complementing products and agree a certain deal in which House Wonders can distribute flyers in the other firms' store. After all this investment, Gulf Retail House requires a certain amount of return. So far, the parent company has been generous with the requests of House Wonders in terms of marketing expenses, but eventually sales have to justify the expenses.

A trend in the Egyptian market: growth of social media users As all successful managers in today's business world, Michele understands the importance of solid, reliable data when making important business decisions. A few weeks earlier, Michele subscribed to the daily "infographics bulletin" on Statista.com. She usually checks those e-mails late at night before she goes to sleep. One day, the infographics bulletin was showing the number of active Facebook users, a tremendous 2.32 billion (Statista, 2018) around the world. This got her interested as to how popular is Facebook and social media platforms in general. She believed that investigating further might give her an insight that was not visible before. When she researched the number of social media users, the Global Digital Report showed that 53 per cent of the Middle East area population are active social media users, and according to the report, this number is increasing by 11 per cent each year. Michele started wondering about how House Wonders can grasp such opportunity, all the research shows the rise in the number of internets and social media usage rates in the region and Egypt more specifically. She started to dig deeper and found several interesting statistics; for instance, Statista records 39 million active users on Facebook in October 2018. Moreover, according to a report released by Nielsen (2011), 60 per cent of people who use three or more digital means of research for product purchases learned about a specific brand or retailer from a social networking site. On a deeper look, the average time spent by Egyptians on the internet is a little more than 8 h per day, about half of which is spent accessing the internet through mobile phones. Even though this was not the case a few years back, forecasts show that Egyptians' usage of the internet will only increase; the January 2018 year-on-year change in the number of internet users in Egypt was 41 per cent, which is the highest among all the countries surveyed (Global Digital Report, 2018). Furthermore, out of the 8 h spent daily online, an average of 3 h is spent on social media platforms in Egypt. Such statistics show the increased usage and the power of the medium that could be used by House Wonders in Egypt. Therefore, House Wonders has a good opportunity to make use of the target market's preference to use social media. Current dilemma and future challenges House Wonders has the advantage of having it all under one roof. However, as the concept of DIY is relatively new to the Egyptian market, House Wonders is struggling to instill it in the Egyptian culture. The entire region and the Egyptian market, in general, is infamous to its severe resistance to change, which means that enormous effort has to go into making DIY projects more attractive and offering them as a fun project to do home. Head-to-head competition within the same category of home improvement is almost nonexistent in the market, which would theoretically leave the lion's share of this growing market unoccupied, though there are many other sources of indirect competition. Historically, Egyptians have predominantly resorted to hiring skilled labor to do home improvement projects for them. This notion is so deeply infused in the Egyptian culture that they have proverbs about it. Historical evidence also supports this in several countries in the MENA region; for instance, the same dilemma was faced by IKEA when it was first introduced in the Kingdom of Saudi Arabia back in 1983 (Brewer Smith Brewer Group, 2019). Another way to look at it is that Arabs, in general, do not prefer doing handiwork. There are several reasons for that such as lack of self-confidence, lack of free time or lack of patience and tolerance for errors; thus the eventual solution would be to hire skilled labor. In this context, skilled labor includes a wide range of professionals; from carpeting to plumbing, painting and gardening. These are readily and abundantly available in the Egyptian market, yet the majority of them are working within the informal sector of the economy or what some might call "freelancers." Naturally, there are consequences of operating in an underground economy, such as subjective, varying prices for the same services rendered instead of an agreed-upon price range by the market. Moreover, informal businesses have significantly fewer expenses; they do not pay taxes and have much less overhead than a large department store, which is going to be reflected in a lower price for their market offering. Indirect competition also includes other stores that have specific categories sold by House Wonders, such as hardware stores that sell raw and semi-raw material, which are considered the backbone of DIY projects, stationeries that sell coloring kits and tools, plantations and farms that sell gardening tools, etc. These are all available at various stores, which makes the fact that all these products are under one roof a unique selling point for House Wonders. The greatest competitive threat nonetheless is the recent entry of online retail giants such as Amazon into the Egyptian market this year, who also offer some of the products offered by House Wonders, and perhaps, for a lesser price. Although a huge amount of capital was spent on establishing and designing the store, the fact remains that there is still low store traffic, even on weekends. Perhaps, the fact that the store is located near a shopping mall and not inside it is affecting the number of customers entering the store. Some of them do not even know where the entrance is located! However, House Wonders is working on increasing the signs leading to the store, in addition to opening another entrance door right on the street, where customers can see it better. There are several strategic issues that House Wonders needs to address to achieve more sales and brand awareness in the Egyptian market. It is currently struggling because it is not achieving enough sales to be able to spend more on marketing. Part of the suggested change is to change the initial target segment, from Class A and B+ to targeting the majority of the Egyptian market, who reside in lower socioeconomic classes. By focusing on providing better prices than their competition, and a wide variety of the categories, House Wonders may have a chance in spreading awareness and grabbing the public's attention. "To put it simply," concluded Michele, "how can we break the clutter?"

Question 1 [35 Marks]

From the introduction paragraph to the case study, it is clear that House Wonders faces a financial dilemma that seemingly stems from an unfocused communication strategy. It is your task to assist House Wonders to lift the brand awareness and reach break-even.

The project: Suggest a market segmentation strategy that will, when implemented, change the brand awareness and financial position of House Wonders.

In your answer, suggest market segments based on information in the case study as well as what you consider could be viable market segments. Your suggested market segments must be motivated very well.

The next step is to select specific market segments that will be targeted from the segments initially suggested. The selection of target market segments should be based on sensible economic reasons for House Wonders. Please motivate the selection of specific market segments to target. Develop a positioning statement/grid for each of the target market segments. Then describe in detail what message you will use to make sure that you address the positioning statement that was formulated.