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Covetella as a Business in a Foreign Environment
Introduction
The analysis of case studies is essential for business and marketing management students because it shows the challenges and constraints entrepreneurs face running a business. The case study of Covetellas experience is instructive as an example of a business in a foreign but quite attractive economic environment. Besides, Covetella is a business in the fashion industry that demands a high level of creativity and sociality from entrepreneurs. The analysis of this case study will be divided into three parts: a discussion of entrepreneurial resources, value propositions, and revenues with a cost summary.
Entrepreneurial Resources of Covetella
Covetella was founded by Carol Chen, an immigrant from Taiwan to the US, who dreamed of having a business that satisfied her ambition of being an entrepreneur in the creative industry. Having experience selling cheerleading uniforms and China, Chen moved to Singapore with tens of her designer dresses, which took up a lot of space in her parents house in Texas (Dann & Orr, 2018). The reason is that Chen wanted to use these dresses in her future business project. She did not fear the risk of failing because of the low interest in second-hand clothing in Asian cultures. Thus, Chen started a website for dress rentals with the name Covetella. After that, their skills in constructing social relations helped her to find local designers and other lenders who gave her dresses for rental service (Dann & Orr, 2018). Finally, the success of Covetella was conditioned by the successful selection of the companys employers and by the decision to base their business on an in-person experience (Dann & Orr, 2018). It required Chen to become more flexible in her expectations about how the business will be structured in the future.
The entrepreneurial resource is an important concept in the modern scholarship on business management. It refers to the individual skills and abilities of creative thinking, intuition, and analytical decision-making (Dana et al., 2019). Dana et al. (2019) also incorporate the term personal social capital, that is, social bonds and communication skills. In the case of Covetella, it is hard to understand the full picture of her entrepreneurial resources. She has a creative vision and intuition on how to change her business strategy for successful operations. What seems unknown is the impact of her level of knowledge and education that she accumulated during her years in different schools and universities. Dann & Orr (2018) tell that Chen majored in economics, psychology, and fashion design at the top universities. Nevertheless, it seems unclear what concrete knowledge from these educational programs played an integral role. Finally, Chen had great communication resources because she started many social contacts in Singapore. Remarkably, Singapore was an entirely new country of living for Chen.
Value Propositions from Covetella
In this section, the discussion will be built around what Covetella provided their customers that made their business distinctive from competitors. For this purpose, the concept of value proposition will be used. Payne et al. (2020) define value proposition as a competitive advantage that companies can suggest to their customers, so companies usually determine their value proposition in corresponding marketing strategy. Considering Covetellas positioning, this company stood in a favorable position because dress rent in Singapore had not been developed. Chen admitted that Singapore is very small. Were trying to target the same 250,000 women who might use our service. This is not exciting for investors, so its the major struggle for us (Dann & Orr, 2018, p. 8). Nevertheless, Dann & Orr (2018) indicate that four other companies were also involved in the designer dress rental. The value that Covetella gave to its customers was in-personal contact in showrooms with the desire to implement a full-scale Cinderella experience for customers.
Except for the use of showrooms, Covetella provided a wide range of womens clothes which is not limited only to designer dresses. For example, some other companies in the market like Rent a Dress offered only designer dresses (Dann & Orr, 2018). At the same time, Chen, commenting on the value Covetella gave to the customers, said that we have the widest range of inventory for occasionwear and exclusive styles that you cant find anywhere else (Dann & Orr, 2018, p. 8). It helped Chen address the limited market problem by expanding the range of available clothes.
Finally, Chen performed excellently in giving her brand widespread recognition and vivid marketing. Indeed, Chen spent a lot to make her brand well-known in Singapore. Firstly, Covetella hosted several events during Singapore Grand Prix in Formula 1 (Dann & Orr, 2018). Cooperation with such global brands might give significant growth of brand recognition, especially when the host country of some global event is the place where the business operates. Dann & Orr (2018) also recognized that the advertisement of Covatella during such a large-scale event made an image of a highly successful brand with tens of thousands of customers. Although this perception may have no connection with reality, it will help newly born businesses to become recognizable. Secondly, Chen found professionals who had skills in developing brands. The most remarkable cooperation was with Valerie Lim, a model, and Miss Singapore of 2011 (Dann & Orr, 2018). In addition to being quite famous in the fashion sphere in Singapore, Lim also modeled photos of dresses for the website. Such cooperation also contributed to the value increase of Chens brand.
Revenue-Related and Cost-Related Elements in Covetellas Business Model
A case study analysis in business management is almost unimaginable without consideration of a companys revenues and costs. Revenues and costs are key metrics for understanding how a companys business model is set up. To continue the discussion, it is necessary to define what the concept of a business model means. The problem is that scholars are still arguing about the correct definition of this phenomenon (Osterwalder et al., 2005). Osterwalder et al. (2005) define it as a conceptual tool that contains a set of elements and their relationships and allows expressing the business logic of a specific firm (p. 10). In other words, it presents the outlook of how the company intends to make revenues from its operation.
In the case of Covetella, the key elements regarding its revenues are the profits from dress rental, favorable economic conditions in Singapore, and some number of clients who enjoyed Covetellas services. All the money that Covetella got came from a dress rental. Women pay for the time they used some dresses, so the used clothes items return to Covetellas showroom. What is interesting is that some people have used dresses from Covetella more than two times. Dann & Orr (2018) indicate that most businesses came from repeat customers, some of whom shopped monthly and some of whom visited annually, with the average being two times per year (p. 6). All that conditions are contextualized in the preferable business environment in Singapore. According to Dann & Orr (2018), the Singaporean government proposes different investment plans for newly created businesses, so World Bank ranks it as the easiest place to do business.
In terms of costs, Chens business avoids huge financial outlays due to the rental business strategy. All the costs include the rental of the showroom and clothes laundering. The showroom was essential for Covetella because customers needs forced Chen to change her mind about her desire to implement a minimum contact business strategy (Dann & Orr, 2018). It seems that Chen did not lose a lot of money on such a decision because the cumulative costs of shipping, which customers did not want to manage, were significantly reduced. Another considerable cost was clothes laundering, which is the combination of washing, ironing, and, if necessary, dry cleaning. Finally, there is a sense to briefly mention alternative costs that are not regular but financially demanding. The integral one here is advertisement costs that made Chens business highly recognizable. In addition, it is salaries for employers, purchase of new clothing, and so forth.
Conclusion
To sum up, the case study of Covetella helps to identify the key components of the coherent business model. Initially, the successful start of the business depended on the personal skills of Carol Chen, the founder of Covetella. Her communication skills and good knowledge of business startups helped her to succeed in the initial steps. Through Covetellas development, one could identify the key value propositions of the business: in-personal experience with clients, comfortable business opportunities in Singapore, a wide variety of clothing, and excellent marketing. Considering the revenues of Covetella, come from the payment of customers when they use services of dress rental. As for the costs, the majority of them are directed towards showroom rental, washing of clothes, and salary payments.
References
Dana, L. P., Gurau, C., Light, I., & Muhammad, N. (2020). Family, community, and ethnic capital as entrepreneurial resources: Toward an integrated model. Journal of Small Business Management, 58(5), 1003-1029. Web.
Dann, J., B. & Orr, J. (2018). Business models and fashion models: Covetella plans for growth. Lloyd Greif Center for Enrepreneurial Studies.
Osterwalder, A., Pigneur, Y., & Tucci, C. L. (2005). Clarifying business models: Origins, present, and future of the concept. Communications of the association for Information Systems, 16(1), 1, 1-25. Web.
Payne, A., Frow, P., Steinhoff, L., & Eggert, A. (2020). Toward a comprehensive framework of value proposition development: From strategy to implementation. Industrial Marketing Management, 87, 244-255. Web.
Appendix A
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