Small Retail Stores the Concept

Small Retail Stores

THE CONCEPT

Location

New York

Ela Swimwear Store

Store name: Ela

Ela represents a revolutionary concept in terms of swimwear for women, a business idea that will attempt to combine the quality of designer and stylist swimwear with the reasonable prices of regular downtown shopping. Every time that a woman needs to choose a swimwear for herself, her decision making process is usually burden from questions relating to whether the swimming suit looks good on her, to whether her partner will like it and, further on, to the even smaller issues like coloration.

Some choose to simply have a label design for them a personalized swimwear, otherwise will not afford it and prefer to spend a lot of time and nerves to select and eventually purchase a swimwear from one of the numerous department stores in the city. The aim of the Ela store is to meet both these demands at a significantly lower price than a label designer.

The first store will be open in New York. There are several reasons for choosing New York as the primary city for my business. One of these is that there is a large population in New York, so the number of potential consumers is likely to be higher than in smaller or medium-sized cities. On the other hand, unlike cities on the West Coast, for example, New York's market for swimsuit and swimwear stores is far from being saturated. Indeed, many of this type of products are generally sold only in large department stores. Rather than being individualized per each buyer in part, there is virtually a limited diversity to chose from. The need for a store with new ideas at lower prices than designer outfits is clearly seen here.

Besides the professional designer expertise we will be offering on the premises when a potential client is looking for the adequate swimwear and besides our determined emphasis on maximizing customer relations and creating a sound relationship with our clients, we will also aim at creating a portfolio of new, young and ambitious designers who will be creating products for our stores. Many of these are likely to come from countries such as Brazil, where they know the swimwear phenomenon, but have not had the chance to emerge on larger market and to produce for a larger number of clients. This will allow us to merchandise a larger variety of products, ranging from Eres swimsuits to new Brazilian designers.

Short-Term Goals

Based on the business vision to create an exclusive swimwear store and to maximize the customer relations services, we can enumerate the main strategic objectives in terms of short- and long-term goals. The short - term goals will be to create brand recognition and to ensure a solid basis for clients that can determine a constantly increasing volume of our activity. Much of the marketing activity within the first month will be directed towards fulfilling this objective. The development of the business will include importing swimwear from Brazil, as well as Brazilian designers.

Long-Term Goals

In terms of long-term goals, these will already include the diversification of our product portfolio with the inclusion of swimwear from Europe. This phase will also include a geographical expansion phase, with the inclusion of at least two other large U.S. cities with a still not fully developed market for swimwear. Financially, we plan to go with a projected 5-10% annually, but we are more interested in consolidated growth, which means that we are rather looking for a growth trend and development of the business.

II. The MARKET

In order to best analyze our market, we will need to use market segmentation techniques in order to decide on the targeted group of consumers. Our store and store products will be targeting females between 20 and 44 years. The reason this is the chosen demographics and age interval is related to the fact that we are assuming this is the age interval where women are highly interested in their external appearance and an interval when they want to be in trend with the latest fashion developments.

According to the 2000 census, 52.62% of the population was female. The population of New York was divided into the age segment we have mentioned as such: 7.37% between 20 and 24 years, 17.08% between 25 and 34 years and 15.77% between 35 and 44 years (note that these figures represent a mixed population, that is both males and females). As such, almost 40% of the city's population can be included into this category. Despite the fact that this is mixed males and females, we do not necessarily exclude male buyers from our targeted group of consumers. It is likely that such clients will be aiming to purchase presents for their wives or partners and our store will be able to provide consultancy in this sense as well. The large proportion of the population in this particular age segment encourages us that New York City is an excellent location to start the business and develop the first store.

The average income of our targeted group of consumers is a medium income, most likely between $45,000 and $60,000. We can assume that many of the individuals earning above this threshold will prefer label swimwear and, as such, will not be included in the clients we are targeting. As mentioned in the initial concept, our business is aimed at the average income consumer, who is fashion-conscious, but cannot yet afford other forms of fashion interaction such as private, well-known label designers.

In New York, the average salary was $49,480 a year, which is within the interval we have determined. There are several things we can add to this figure. First of all, we can expect a certain direct correlation between the level of salaries and the fashion-consciousness of the individual client. This is why our clients will most likely be included in the upper limit of our determined interval. On the other hand, this will have an important impact on the pricing function and the way we decide to price the products we are offering.

The socio-psychological variables are just as important in our analysis. We have already mentioned that our targeted group of consumers is fashion conscious. This means that they are following all the new trends and are willing to spend money in order to be in line with the new tendencies. On the other hand, we have also seen that there is a limit to that: since our clients are medium income earners, they will prefer to spend less than they would with label designers swimsuits and swimwear.

Further more, our potential clients also look for social acceptance and approval. They are active in society and look to their friends and peers for comments on how they dress and on how they look. This is an important variable, because it means they will be willing to ask for consultancy and opinion from a third part, namely our hired designer, who will be able to make suggestions and influence their choices.

The economic outlook for New York is encouraging for 2008. According to the data, unemployment has remained constant at around 4.6% and this trend is likely to continue in 2008 as well. This means that the city is creating enough new jobs to keep up with the new individuals entering the labor market. For our business, this means that the targeted consumers are likely to have a job during the next year as well and that their average income is not likely to change.

On the other hand, New York has always been a constant engine of economic growth in the United States. With different industries, ranging from banking and financials to manufacturing, New York will be able to support and successfully fight off any potential economic recession that may occur at a national level during next year. We are thus confident that macroeconomic changes will not affect our store.

III. FINANCIAL REPORTS

Estimated Annual Income Statement

Estimated Sales (1): $131,400

Cost of Goods Sold (2): $52,560

Gross Margin: $78,840

Operating Expenses:

Rent (3): $11,070

Office Supplies: $1,000

Store Fixtures: $1,500

POS system: $1,668

Travel: $12,000 (4)

Telephone and Internet (5): $1,140

Advertising (6): $15,000

Payroll (7): $30,000

Utilities: $5,000

Depreciation: $3,000

Taxes (8): $5,124

Total Estimated Operating Expenses: $86,502

Net Loss: $7,662

Notes

1) the swimwear will sell for an average price of $60. We have estimated an average number of 6 pieces sold daily throughout the year. It is important to note that seasonality is a factor to consider, but to a lesser degree than if the store was open in a location on the West Coast. The reason for this is that purchasing swimwear in New York can determine other activities than just going to the beach, like going to one of the numerous swimming pools in the city.

2) the cost of goods sold was estimated at $15 a piece, to which we added

15% for the consultancy on the purchase.

3) the location will be in the Lower East Side, at 89-97 Avenue C. As a small location, the price per feet steadily the same at $45.00, our costs can go down. We don't really need an extravagant space in the first year of operations.

4) Extensive travel will be required during the first year in order to setup the connections in Brazil and establish the suppliers, as well as the designers with whom the company will be working.

5) the Internet will be required so as to best communicate with the suppliers in Brazil, as well as to track progress from advertising over the Internet.

6) the advertising budget will be high only during the first year, given one of the short-term objectives we have proposed: building the company brand. This sum is likely to cover the marketing campaigns we are proposing.

7) Estimated.

8) There is a 7.5% tax on corporate income in New York City.

The loss can be explained through the fact that this is the first operational year when the company will be forced to invest in things such as extensive travel and a serious advertising campaign. It is very likely that after the first year, many of the expenses can be significantly reduced, while the company operating revenues will also gradually increase, due to more people learning about the products and services that the company is offering.

Start Up Cost

Legal/Accounting: $1,500.00

Equipment:

POS System: $1,688.00

Computer in the store: $800

Telephone: $40.00

Hangers: $230.00

Security System (clothing sensors): $1,500.00

Bags/Tissue: $400.00

Couch/Chairs: $750.00

Decorating: $800.00

Total Equipment Cost: $7,708.00

IV. MERCHANDISING/MARKETIN

The store's advertising campaign will be a successful mixture of advertising in newspapers and magazines and advertising online.

Internet

Part of the advertising budget will be used to create a business/store website, which will also provide the buy online facility. Given our targeted group of consumers, we are to believe that these are active individuals spending much of their time at work or at home in front of a computer or a laptop. We will be outsourcing the website creation to one of the lower costs countries, such as India or Eastern Europe, where the cost of creating a new website, with all the mentioned facilities, including online payment, is not likely to surpass $2,000.00.

Additionally, a local SEO will be hired to promote the store website with different search engines and to optimize its presence in Google searches for key words such as swimwear, swimsuit, summer, store, pool etc. All it services will be outsourced, as mentioned.

Part of the advertising budget will be used for online advertising. The most useful sites where the store banner can be placed are fashion or social magazines, such as Cosmopolitan. The scenario would encourage us to believe that our targeted client will take a break at work to look over the new online number of Cosmopolitan and will see our banner. Upon clicking it, our potential client will be taken to the company store website, where she will be able to browse through our products and decide on whether to make a visit to the tore or not. We can also offer online consultancy, but it is likely that she will choose to come to the store in order to be able to browse more carefully through the products and actually benefit form a face-to-face conversation with our consultant.

Newspapers and Magazines

We plan to advertise in magazines whose profile we have already previously identified as 'social' magazines. These magazines, like Cosmopolitan or Vogue, are an excellent opportunity for exposure for our business, since this is the type of magazine that our targeted potential client is likely to look through.

Participating to fashion fairs

This is a good opportunity for our business to meet potential clients, as well as potential suppliers from the U.S. And from the international market. Since presence to this type of events is generally quite expensive, we are going to be participating only in one annual such event. This should most likely be either in Brazil (where extensive travel will be done during the first year of activity) or around New York, so as to save additional travel expenses.

Promotion event in Brazil

This event can be held once or twice a year in Brazil and would provide an opportunity for the local producers and designers to present their new ideas. The company will benefit from this because it would thus be offered a possibility to have an initial selection of potential collaborators and designers who could produce the next lines of swimwear.

Pricing

Our pricing strategy is important, because the price we offer shall cover both the cost of the product itself (the swimwear), as well as the cost of the consultancy. This will be included in the former and will amount to 15%. As previously shown, the price of a swimwear will be $60, but we will have different pricing campaigns to encourage the development of a network of clients, as well as to increase the degree of customer retention.

The pricing policy is not determined by direct competition, given the fact that, as we have previously seen, this is a unique idea in New York. Depending on the volume of sales during the first year, the pricing policy may vary in time. Additionally, given the cooperation with Brazilian designers and producers, we may segment the pricing to promote a certain designer or a certain line of products.