Hannah's Hats is an online children's hat retailer with a brick-and-mortar store in Chicago, Illinois. The company
Hannah's Hats is an online children's hat retailer with a brick-and-mortar store in Chicago, Illinois. The company has 27 employees and was founded by Harry Hannah in 2015. At that time, Hannah was a single father of 3-year-old twin boys. After five years, sales were $1 million. The company topped $7 million in sales after the winter of 2020.
Working as a freelance children's clothing buyer, Harry could work from home and be a stay at home dad to his twins, Harry, Jr. and Harold. This was important to him and to his wife, Harriet, a software designer whose job involved a great deal of travel. However, on one cold night in November, Harry was contacted by local police who informed him that his wife had been killed in an auto accident. She was returning home after seeing a client in the Chicago suburb of Arlington Heights.
Devastated by the news, Harry did everything he could to keep himself together for the kids. He needed help; he decided to send them to day care three days a week so he could deal with getting his new life together. Every day Harry noticed the caretakers trying to find the children's hats and mittens when he came to take the boys home. Harry noticed that many of the children had mitten clips that seemed to help reduce the number of lost mittens. The hats, however, were another matter.
Chicago winters are exceptionally bad for children because the wind whips across Lake Michigan and freezes every part of the face that has moisture, especially the mouth. While many of the children's coats had attached hoods, this was not enough. Parents used wool scarfs tied around the children's faces (below the eyes) to stop the painful feeling of the cold. The scarves were awkward and bulky for the children who often pulled them off or dropped them in their travels. Harry decided to design a hat that could be attached with Velcro onto a coat hood or a coat collar and designed to fit closely around the mouth, nose, ears, and eyes of a child just like a ski mask. The hat could be easily attachable relegating the need for scarves to the past. Harry knew the hat could come in a variety of colors and have various child-friendly designs.
Several months passed. Harry discovered that payments from Harriet's workmen's compensation and her life insurance would provide him and the children some financial freedom for years if invested wisely. Harry thought a better way to change his family's life would be to invest some portion of the money in his hat idea. Founded as a small storefront shop near Marshall Fields, Hannah's Hats also developed a loyal following online. Through its creative use of social media, sales took off. Harry expanded his product line to include matching winter gloves and socks.
Beginning in the fall of 2017, Harry, flushed with success from his children's hats, decided that the design could be adapted to work for adults as well. The company invested $150,000 in new designs and inventory for attachable hats for adults. By offering seasonal products for the whole family, Harry thought Hannah's Hats would double their sales in three to five years.
With visions of becoming a destination store like LL Bean's flagship store, Hannah's Hats moved from its old store near Marshall Fields to a large space on the Navy Pier. This cost Hannah's Hats $25,000. Harry also moved the warehouse from a 10,000 sq. ft. space near the old store to a 20,000 sq. ft. space closer to his home in Arlington Heights. This location was considerably further from the store.
As the boys grew older, Harry left most of the work to his staff. He set out to increase the sales through travel and spent most of his time marketing products through several marketing channels. He was determined to have his hats available to every possible cold weather clothes customer. He introduced numerous marketing initiatives, including a partnership with Blizzard Relief, an organization intended to increase awareness of the clothing needs of the homeless during massive cold weather storms.
To sustain these efforts, Hannah's Hats bulked up its marketing staff that consisted of Hannah and three of the employees who worked in the warehouse. Gradually, the marketing team grew to 5 full-time employees. Additionally, Hannah hired an IT person to handle the online sales.
From 2017 to 2019, Hannah's Hats grew at an annual rate of 35 percent. Hannah's talks and marketing pitches to large retailers attracted the attention of two investors. The investors told Hannah that with their help they could grow the company to be a $75 million dollar business. Hannah began to think bigger, "If the investors think they can grow Hannah's Hats to be a $75 million-dollar business, why can't I"? This goal became his new objective. Hannah doubled his marketing trips and went after Walmart and Target to broaden his customer base. Although both companies liked his product, they felt that a cheaper version was needed to meet their target customers.
Hannah continued his heavy marketing plan but despite his effort sales began to flatten. Expenses grew higher, especially with the adult hats. Hannah knew he had to change his plan fast or they would be in trouble. He sought expert help to gain some idea of his company's current position. The following conclusions were reported to Hannah.
- The rate of overall sales growth had declined from 35% annually to 25%.
- The children's hats had increased sales by 11% over the last year.
- Adult hat sales had dropped by 22% over the last year.
- The company was still growing but at a slower rate.
- Operational expenses for the company had increased by 8% last year. Much of which was due to increased advertising in a more expensive mode (5% and increased operational expenses with the new location and warehouse taking up rest).
- E-sales were up by 25% with sales of children's and adult hats being about equal.
- Investor interest
- E-commerce growth
- Big store interest if a cheaper line were developed
- New product line for Summer
- LL Bean entering the children's market with a similar product Chinese e-commerce competition with a cheap line
- Discuss the potential biases that others within the case study may have regarding this decision if they were involved in the decision-making process.
- Example: If a potential investor were involved, how might they introduce bias into the decision and what would that bias look like? If the IT involved with e-sales were involved, what potential bias would that individual bring to the decision?
- After you have introduced some of the biases that these individuals may bring to the decision, discuss what data each could potentially collect that would be biased or "skewed" to support their position in the decision.
- Discuss the potential benefits to having this external input from these different individuals. What could they bring to the table that would benefit Harry in his decision-making?