Mikel Retailing 2y3d69

The American College of Greece Module: MK3156 – Retailing Instructor: Chris Galanis Karagiannis Eleftherios Submission date: 18/07/2014

Mikel Coffee S.A. – Retailing Project

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1. Information of Mikel Company

1.1.

Company’s background

Mikel Coffee Company is a Greek coffee company based in Larissa. The owner, Eleftherios Kyriakakis is a very knowledgeable person in the coffee industry because of his working experience in a cafe since 1996 and some first business steps in that field (Our Company, 2014). At the age of 23 he already had a night club and two café in Thessaloniki. At 2008 and at the age of 29 he opened the first Mikel coffee store in Larissa. The response and the positive of the customers helped him to continue the hard work and create one of the biggest chain store coffee companies in Greece. Moreover, Mikel has a “motto” that comes from the acronym of the business name is «Maybe it's knowledge entering life» (Το success story του καφέ Mikel, 2013). 1.2.

Company’s size

After the success of the first store in Larisa, a few months later Mikel started opening café all over Greece beginning from the biggest cities such as Veroia, Kozani, Katerini, Karditsa,Trikala, Giannena and Agrinio. At 2012 opened the first store in Thessaloniki and in June of 2013 followed a store in Athens. After six years of operation, Mikel has 90 stores all over Greece with most of them located in Athens and Thessaloniki (Μα ποιος είναι ο Mikel; 2014). Until the end of 2014, Mikel will have 100 stores in Greece with 40 of them in Athens according to the company. There are 1500 employees in all the stores covering the positions needed. Also, Mikel has two buildings, one in Larissa and another one in Athens in order to organize the company’s 2

operations. It is important to mention that almost half of the stores all over Greece are franchised stores and this is one of the reasons of the quick expansion of the company. It is possible the opening of new franchised stores in London, Paris, Konstantinoupoli and Dubai. The cost of the franchise is 150.000-170.000 euro for a small store 250.000280.000 euro for a medium and 350.000 euro for a big one. Mikel Company collects 5% of the revenues from each franchised store as a franchise royalty (Mikel: Επέλαση στην Αθήνα – 40 σημεία το 2014, 2014). “Franchising is a contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a retail outlet using a name and a format developed and ed by the franchisor” (Levy and Weitz 2010, p.63). In 2013, they were at the first place in Greece and in Europe in consumption of Illy coffee with almost 170 tons. The Company’s profit for this year was 2,25 million euro and for all the stores was 24,9 million euro (Λ. Κυριακάκης: Γνωρίστε τον Λαρισαίο που..., 2014),(Mikel: Επέλαση στην Αθήνα – 40 σημεία το 2014, 2014). 1.3.

Product categories

Each retailer has its own product mix which is a composition of products offered to customers in order to satisfy their needs. Furthermore, the width of the product mix is the number of different product lines the retailer have and the depth of the product mix is the number of different products each product line has (Hult, Pride and Ferrell 2012, p.295). The width of Mikel stores has 5 main categories where each of them has some subcategories. These categories are defined as sandwiches, sweets, hot drinks, cold drinks, juices and beverages. The depth of each category is different but the sum of the depth of all products is 124 (Our Company- delivery service, 2014)

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Width

Sandwiches Sweets Hot drinks

Cold drinks Juices and beverages

French breads

Cookies

Espresso

Espresso

Juices

Koulouri Thessalonikis

Cakes

Cappuccino

Cappuccino

Beverages

Tost

Special

Special

Croissants

Chocolate/Tea

Chocolate/Tea

Several coffees

Several coffees

Fresh Milk

Special

Depth Categories

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2. Retailing strategy of Mikel Retail strategy results from 3 elements: 1) The target market of the retailer, 2) The specific use of retail format in order to satisfy customer’s needs, and 3) Through which techniques and bases the retailer will create a competitive advantage against competitors (Levy and Weitz 2010, p.134). Because of the franchise policy which has the same rules for every store, they are all follow the same retailing strategy. 2.1.

Mikel’s target market

Target market is defined as the market segments through which the retailer has to focus its resources (Levy and Weitz 2010, p.134). Most of Mikel stores have the same target market because, they focus on the same groups of people. Someone can find stores in the most central places of Greece. The geographic target for every chain store is people from the local area that want to drink or eat something. There are also stores which are in big public streets with a lot of traffic flow that target to people that go to their jobs. Specifically for the store of Halandri the geographic target market is this city, which is a suburban of Athens. The demographic target of the Halandri store is businessmen who are ing the street going to their jobs, students, police people because of a discount they have and sales people from the shops of the area. The age of most of the customers is between 18-35 years old and their income is characterized as low or middle being between 6.000 and 20.000 euro per year. All the Mikel stores address more to young people because of their new recipes of coffees and the youthful and happy environment of the stores (Interview citation).

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2.2.

Retail format

The retail format of a retailer shows the operations needed in order to satisfy the needs of the target market. The retail format includes the merchandise, the pricing strategy, the services offered, the promotion and the advertising which will be analyzed later in the project (Levy and Weitz 2010, p.134). Mikel can be categorized as a good and service retailer because, offers drinks and food to the customers but also provides a service from within the stores. Mikel stores offer delivery service that undertakes the order of the customer and send him whatever he chose from the catalog (Our Company, 2014). A store of Mikel that does not provide delivery service is the store of Syntagma because, there would be too many orders that cannot be serviced properly. Another way Mikel uses to satisfy their customers is by take-away, where people who are in a hurry can make their order from within the store and very quickly get their order. Also, all the stores provide service. They have tables and couches in a very friendly and modern environment where people can relax and enjoy a coffee or a snack (Interview citation). 2.3.

Competitive advantage

The term sustainable competitive advantage is referred as an advantage towards the competition that exists for a long period of time and cannot easily be copied (Levy and Weitz 2010, p.134). Some ways for the retailers to create a competitive advantage are: to have loyal customers, to have good manage of human resources, to offer unique products, to have a good customer service, to be in the right location and to have good information and distribution systems (Levy and Weitz 2010, p.137). Through my interview in the chain store of Halandri the supervisor informed me that all the stores of

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Mikel have develop the same competitive advantages because they are all operating in the same way under the franchise “umbrella”. The most important competitive advantage of Mikel is the quality of the products. They use the most expensive coffee blend in Greece to create their coffees. Quality is the most significant rule for them (Interview citation). Another competitive advantage of Mikel is the uniqueness of the products. They have their own recipes for the coffees, by using 32 different syrups (Λ. Κυριακάκης: Γνωρίστε τον Λαρισαίο που…, 2014). Also, they use only evaporated milk to make their coffees, that is something new in the taste of the consumers because most of the cafés use fresh milk (Interview citation). Moreover, an important competitive advantage is the location they chose to open a store which is always in central spots of the town. Another important element is the well trained employees. Each employee has been trained for a specific position. Finally, Mikel Company has another competitive advantage which is the organization structure (Interview citation). 2.4.

Location strategy

A retailer, in order to gain a sustainable competitive advantage is to choose the right location. A customer always takes into consideration the location of the store he wants to visit (Levy and Weitz 2010, p.199). Significant elements for the success of a retailer are the high traffic flow of pedestrians and cars and the accessibility, which is how easily the customers can reach the store and then leave. Also, another important characteristic is the visibility of the store, which is how easily people can see the store when they are ing. (Levy and Weitz 2010, p.223-224).

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Mikel stores are located always in high traffic flow streets with good accessibility and are visibility. This has strategic importance because, most of the customers are businesspeople who want to get their order quick and go to their jobs. Also, even if someone is not a frequent customer and do not know the Company, he will stop to get a coffee because of the visibility. A significant factor for the opening of a Mikel store in Halandri was the big growth of the local market in the recent years. This means that more people are coming to Halandri for shopping and for work so there are more potential customers. Moreover, it is important for Mikel stores not to have very close to them well known competitors like Venetis. (Interview citation). 2.5.

Merchandise strategy and Category management

Category management exists in retailing when a group of products are broken down and categorized based on its similarity (Levy and Weitz 2010, p.332). Mikel has two main groups of goods, the drinks and the foods category. In the drinks category there is a variety of coffees, juices and beverages. Moreover, in the food category a customer can choose a sandwich or a sweet. A part of Mikel Company is the Georgia Fresh Flavors which creates fresh goods for all the Mikel stores. Georgia is located into Larisa. This part of Mikel prepares fresh baked goods, like cakes and muffins. Some goods that the stores of Athens receive from Larisa are the tea and the ice creams. Therefore, Mikel cooperates with some suppliers for some raw materials, like coffee and for some goods that Georgia does not provide. The most important supplier is the Kafea Emporiki Techniki S.A. This Company supply Mikel stores with huge amounts of Illy coffee and chocolates. The sandwiches that are created by the employees of each store use ham and turkey only from Ifandis Company. Also, the croissants are provided from the 8

Delifranche Hellas A.E. Finally, all the cups for the take-away and delivery service come from the Cafeways Company. All the suppliers are well known into Greece for the good quality of their goods and products. Mikel stores along with the franchise stores have to provide the same variety of products from the same suppliers. When the sales man of the store has the option to advice a customer about what he can purchase, he always try to sell the most expensive goods and also goods that are created by Georgia (Interview citation). 2.6.

Pricing strategy

Mikel uses the strategy of non-price competition. Non-price competition exists when a retailer does not focus on the price of the products but emphasizes on the products quality, the unique features, the promotion, the service, the packaging or other elements that distinguish its products from other retailers (Hult, Pride and Ferrell 2012, p.570). Mikel Company distinguishes its products because of the high quality offers and the well-known brand name it wants to develop. From the beginning of the operations as a retailer they have keep the prices stable, knowing that they have not a competitive price. But the price compared to the quality and all the services offered is very logical (Interview citation). 2.7.

Direct and indirect competitors

Direct competitor of a retailer is another retailer who offers similar products and services. An indirect competitor is another retailer that offers slightly different products and services but satisfies the same needs of the customer (South-Western Cengage Learning, 2011). Mikel stores face direct competition from retailers such as Coffee 9

Island, Starbucks, Venetis S.A. and Grigoris Mikrogeumata and Everest S.A. These retailers have the same target group with Mikel and fulfill the same needs of consumers. Coffee Island provides the same categories of products with Mikel but focuses more to take-away and delivery than to service in the store. Venetis has created a section in the business called Caffee Veneti, which follows approximately the same strategy with Mikel. Moreover, Mikel faces indirect competition from retailers such as McDonald’s and the independent café of each area. McDonald’s are more food retailers but also they provide coffee, juices and beverages to the consumers.

3. Retailing Mix

3.1.

Information Technology

Mikel stores are using information technology in order to be more efficient. The store in Halandri has electronic database that includes all the products available of the inventory. Every time a transaction occurs, automatically the database is informed and updates the availability of the inventory of every single product. The database of the products has 124 different barcodes that represent the variety of the products. Another tool of information technology used is the PDA ed by the TwinSoft Athens which is a company software company. The waiter of the store by using the PDA has the

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ability to send the order directly to the barista who prepares it. Thereby, the benefit is the efficiency that makes the service much quicker (Interview citation).

3.2.

CRM applications

Customer relationship management is a process that based on customer’s information, marketer identifies customer preferences and behavior. This helps to recognize and develop the right products and services to satisfy the customer needs (Rygielsk, 2002 cited in Mehrdad, H, & Seyedeh Faezeh Sadati Seyed, 2013). Mikel identifies customer preferences by using various techniques. Through scanning the barcode of every products sold, they identify which products are more likeable to customers. Another CRM application is the complaint form that every store has. Customers can write what problems they faced, which products and services they like or not. In every store the supervisor has the obligation to ask the customers who are served if their order is as they expected to be. If there is an unsatisfied customer, his or her order will be replaced with a new one without any extra charge (Interview citation). Moreover, Mikel uses social media to communicate with its customer’s. Every store and also the whole company have a Facebook profile where customers can give some advices or express their opinions. Finally, Mikel gather information from its own website. It has a section where customers can send a message by using mail (, 2014). Through all these techniques, Mikel Company gathers all the information needed in order to create or maintain the most likable goods and services offered and keep their customers loyal. 11

3.3.

Promotion Mix

Mikel uses a variety of techniques to promote its Company. Promotion is necessary for every new company in order to create awareness about its existence. Nowadays, social media help companies to become known and recognizable by consumers. Mikel uses Facebook, Twitter and Instagram to promote its goods and services by posting photographs which present them. Another very significant way Mikel uses to promote its goods is the products sampling. Halandri store, at the first week of operations gave over 1.000 free coffees to people in the local area (Interview citation). Thereby, local people informed that a Mikel store opened in the area and Mikel created potential customers. Moreover, Mikel had organized a party in Kifisia, where offered free coffees to people and had as a guest a famous Greek singer. This, created buzz and gave prestige to the company. Also, Mikel distributes brochures that include all the goods offered. Furthermore, Mikel promotes its products from within its stores. They give souvenir magnets to the customers and all the employees wear clothes with the brand name on it. Also, all the new products are being promoted by the employees of each store and from banners on the tables (Interview citation).

3.4.

Human Resource Management

Employees of Mikel stores have a particularized hierarchy and are organized on the same bases. Each employee has his own role and position in the store. Every store has a supervisor who is responsible for the proper functionality of the store and the productiveness of the employees. In the hierarchy, after the supervisor comes the 12

production manager. The responsibilities of the production manager concern the supervision of the quality of drinks made by the barista. The positions which are on the same level of hierarchy are the cashier, the waiter, the barista, the delivery and the employee in the kitchen. Halandri store has one employee who covers each of those positions except from delivery position which has two (Interview citation). Each employee is employee who is hired by Mikel has to follow a training session. For the stores of Athens, the training takes places in the central building of Mikel in Athens and for the other areas all over Greece the training is in Larissa. The training lasts for a month and each employee is being prepared for a specific position. Also, when they start working in the store they follow some guidelines from the most experienced employees if it is needed (Interview citation). Moreover, there are some motivational techniques used, in order to encourage employees become more effective. Firstly, Mikel stores provide a bonus on the salary of an employee if he is very good on his position. Secondly, if a position in a store is available, the most effective employee will be promoted. Thirdly, a good employee will be rewarded with trust from his supervisor (Interview citation). It is important to mention that everything in Mikel is made by following specific rules, which have been taught during the training. For example, baristas has to make coffees following a specific way and the service is made under a certain retinue. All employees have to wear a uniform and they have to change it every day with a clean one (Interview citation).

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3.5.

Supply chain management

Supply chain management is a set of techniques that organizes effectively and efficiently transaction between the retailer and their stores, warehouse, suppliers, manufacturers, and also at the right quantities, the right time and the right location (Levy and Weitz 2010, p.278). Mikel Company own two buildings, which composed by offices and warehouse. The first one is in Larissa and the second one in Athens. Also, in Larissa’s building takes place Georgia Fresh Flavors too. All the products of Georgia are created in Larissa. These are distributed to the close areas and to the warehouse of Athens or some of them go directly to stores. Furthermore, Mikel collaborates with some suppliers. They have their bases in Athens so, they send supplies directly to each store of Athens. Mikel collaborates with companies who have their own trucks and offer delivery services and undertakes all the transportation needed (Interview citation). All the stores have their stock in the store. Specifically, Halandri store has a stock that lasts for 10 days. Anytime during the day they can be informed about the availability of the stock they carry, because of the barcode scanning of the products (Interview citation). 3.6.

Service mix

Mikel’s stores offer delivery service, which is very helpful and important for people who cannot come to the store. There are too many customers who are working and

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cannot leave their jobs. Delivery service is very fast and includes all the goods that a customer could buy himself from the store (Our Company, 2014). 4. Strengths and Weaknesses There are some significant tools on which Mikel Company base his successful performance from 2008 to 2014. An important factor for the success of the company was the competitive advantages. Mikel offers high quality coffees, when at the same time competitors have lower quality coffees. Another factor of success is the unique way of creating a coffee. They use evaporated milk and have 32 different syrups. The combination of these plus the quality and the knowledge of the employees, lead to a very good outcome. Another factor of the successfulness of the company resulting from the human resource management. Mikel emphasizes on the good training of the employees before start working in the store. Training is very important because, employees develop all the required skills and knowledge to become effective in their positions.

Mikel has not weaknesses that make the company weak against competitors, but can make some improvements in order to gain a bigger market share. The product that Mikel sells more frequently is coffee. The consumer takes into consideration two variables: the quality and the price. The price of the coffee in Mikel stores is higher than the competitors’. For example a cold espresso freddo costs 2 euros and in Venetis costs 1,5 euros, both for take-away service. Mikel would increase its profits if decrease its prices but maintain the high quality of the products. Finally, another improvement could 15

be to create an information system or online application which will allow consumers to make their orders online via their mobile phones or personal computers. So far, only one Mikel store located in Thessaloniki has created a mobile application through which people can make their order choosing from an online catalogue and receive their order in every place they are within the serving area of the store.

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5. Bibliography Our Company, the story of MIKEL, viewed 15 July 2014, < http://www.mikelcc.gr/en/our-company/ >

Το success story του καφέ Mikel, 2013, viewed 15 July 2014, < http://thessalianews.gr/index.php?option=com_content&view=article&id=26858:success-story-mikel&catid=54:business&Itemid=93 >

Μα ποιος είναι ο Mikel;, 2014, viewed 15 July 2014 < http://www.athensvoice.gr/article/taste-voice/%CE%B8%CE%AD%CE%BC%CE %B1%CF%84%CE%B1-%CE%B3%CE%B5%CF%8D%CF%83%CE%B7/%CE%BC %CE%B1-%CF%80%CE%BF%CE%B9%CE%BF%CF%82-%CE%B5%CE%AF%CE %BD%CE%B1%CE%B9-%CE%BF-mikel >

Mikel: Επέλαση στην Αθήνα – 40 σημεία το 2014, 2014, viewed 15 July 2014

Levy M. & Weitz B., 2010, Retailing Management, 7th edn, McGraw Hill, International Edition.

Λ. Κυριακάκης: Γνωρίστε τον Λαρισαίο που... κρύβεται πίσω από την αλυσίδα Mikel!, 2014, viewed 15July 2014,

Hult G. Tomas M., Pride William M., Ferrell O.C., 2012, Marketing, 16 th edn, International Edition, South-Western Cengage Learning.

South-Western Cengage Learning, 2011, viewed 16 July 2014,

Mehrdad, H, & Seyedeh Faezeh Sadati Seyed, M 2013, 'Effect of Knowledge Management on Success of Customer Relationship Management in Eghtesad Novin 17

Bank of Tehran', International Journal Of Business Management & Economic Research, vol 4, no. 6, pp. 840-841.

, SHARE YOUR "MIKEL" EXPERIENCE WITH US!, viewed 16 July 2014.

Personal Interview, Supervisor of Halandri Mikel store, 10 July 2014.

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