Mgmt 6000 - Great American Knitting Mills - Gold Toe Socks Case

Great American Knitting Mills- Gold Toe Socks Case

By Peter Chen

Harvard Extension

MGMT 6000 Marketing Management

12/15/2011

Success History and Performance

Gold Toe has been extremely successful in the last few years. It was priced in the upper range for both wholesale and retail goods and with gross margin about 33% in the last few years and revenue close to $20M. Fifty-seven of the top 100 department stores sold Gold Toe and in smaller markets they had 127 department stores serving the Gold Toe brand.

The reason for their success is varied. Management believes it’s because of the high quality nature of Gold Toe socks. While this is true, since consumers prefer the high quality and willing to pay the high priced Gold Toes, this is not their entire success story. One of the primary reasons, which we’ll go into further in the next section, is its exclusive distribution that focus on few accounts. With small number of accounts, costs are lower, inventory turnover is better, and deeper relationships can be formed.

Exclusive Distribution Policy

There are a number of advantages to this exclusive distribution model. First, Gold Toe can maximize control over its service level and output. Great American Knitting Mills can have a very tight and strong relationship with account holders, which promotes dealers loyalty (some spanning decades), better forecasting, and better inventory and merchandising control. It reduces sales and advertising cost since there are fewer accounts to service. It also allows the company to be close to the market and other sales representatives. Also, many sales representatives that have been with the company for several years, stay on as employees and the business can benefit from their experiences. Gold Toe can help a store buyer who is concerned with short-term success by telling the store president the he handles the situation for maintaining success for themselves and Great American Knitting Mills in the long-run. Lastly, exclusive distribution restricts resellers from carrying competing brands, which aligns the interest of the retailers and the company.

Recent Developments

Despite being a rather fragmented marketplace with over 200 companies, the men’s socks market is highly concentrated with a few major players who represent real competitive threats to Gold Toe. Given the recent powerful growth taking places in active wear, athletic socks demand are surging, which lead the lead competitors Kayser-Rother’s Interwoven Division and Burlington Industries to forge ahead with advances in product