Over the years, consumers in the US had shifted toward digital commerce , which hampered the sales of companies like VSI that were primarily brick-and-mortar businesses. The situation became dire in the early 2010s. VSI’s growth declined from high single digits in 2011–2012 to low single digits in 2013–14 and came close to zero in 2015 (0.1%).

Ironically, in 2015, the company’s online sales growth also faltered to a negative (-0.6%). One of the key reasons for that was the emergence of Amazon as the key competitor for the company in several of its product categories. For example, in 2015, in the protein powder segment, Amazon’s subscription grew by 3% on a y-o-y basis, as per market research firm 1010 data . This helped it to even surpass former market leader bodybuilding.com . ..

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WHAT THE COMPANY DID

As part of its reinvention, VSI renegotiated supply contracts and strove for stronger partnerships with its vendors in order to improve product availability and enhance its competitiveness. It also used data analytics for designing strategies related to profit performance, vendor community, stores, price and promotion analysis. In addition, it focused on introducing new brands and expanding existing brands to establish new points of differentiation for customers...

IMPACT OF REINVENTION STRATEGY

There was a 3.9% rise in total net sales in 2016 as compared to 2015. Watts added, “Our top-line growth is not yet where we want it to be as fourth quarter comparable sales (2016) were disappointing, but generally in line with our expectations.” However, VSI saw a fall of 11.8% in total net sales in 2017, as compared to 2016 (Refer to Exhibit III for Comparison of Net Sales of VSI). In 2017, as the earning per share was below expectations, the share price of the company also dropped sharply. By the end of 2017, VSI’s share price was US$ 3.51, a 90% fall from a high of US$ 64.13 in 2013. Analysts attributed the poor results to the failure of VSI to properly implement its ‘reinvention strategy’. ..

OPTIMISM ABOUT FUTURE GROWTH

Despite the failure of its reinvention strategy, VSI did not give up hope of turning around its business. Watts thought that even though the company had not achieved its financial targets, it had considerably reduced its costs and enhanced its margins. .

EXHIBITS

Exhibit I: Product Categories Offered by VSI
Exhibit II: Features of SPARK Auto Delivery
Exhibit III: Comparison of Net Sales of VSI for the Years 2016 and 2017 (in millions of US$)
Exhibit IV: Details of the New Base Plan of VSI