BUSINESS PLAN FOR A BASIC ECOMMERCE SK8 2 YOUR FATE

Jacobo Romero Roig UNIVERSITAT POLITÈCNICA DE VALÈNCIA

ESCOLA POLITÈCNICA SUPERIOR D’ALCOI

GRAU EN ADMINISTRACIÓ I DIRECCIÓ D’EMPRESES

Contenido EXECUTIVE SUMMARY .................................................................................................................. 2

BASIC DATA ABOUT THE COMPANY .............................................................................................. 3

PRODUCT DESCRIPTION ................................................................................................................ 3

MARKET AND COMPETITORS ANALYSIS ........................................................................................ 4

TABLA RESUMEN PEST .............................................................................................................. 4

DEFINITION OF THE TARGET AUDIENCE .................................................................................... 5

5 FORCES OF PORTER MODEL ................................................................................................... 5

ANALYSIS OF MARKET ATTRACTIVENESS .................................................................................. 5

MAIN COMPETITORS ................................................................................................................. 7

WEB DEVELOPMENT PLAN ............................................................................................................ 8

MARKETING AND SALES ................................................................................................................ 8

OBJECTIVES ................................................................................................................................ 9

STRATEGIES ............................................................................................................................... 9

SPECIAL FEATURES IN DIGITAL MARKET ................................................................................. 10

ORGANIZATION AND MANAGEMENT (HUMAN RESOURCES) .................................................... 10

LOCATION AND PREMISES ...................................................................................................... 10

EQUIPMENT ............................................................................................................................. 10

INVENTORY .............................................................................................................................. 11

SUPPLIERS ................................................................................................................................ 11

PERSONNEL AND HUMAN RESOURCES ................................................................................... 11

FINANCIAL PROJECTIONS AND FUNDING REQUEST .................................................................... 12

EXECUTIVE SUMMARY

On this project we are introducing to you a business plan for a basic ecommerce. It is a

fictional ecommerce called Sk8 2 your fate and is a new brand of clothed based on the urban

style of 80s and 90s, focused on young people. We outsource the production and end the last

part of the process, and finally sell it to the final customer delivering it from our warehouse,

since we don’t sell on stores.

We are now going to prove the viability of this business idea. For that, first we will talk about

the basic data of the company. Then, we will descript the product. Later, we will talk about the

market and the competitors, defining the target audience, using the 5 forces of Porter model,

the analyzing of market attractiveness and the main competitors. Also, we will introduce the

web development plan. In marketing and sales we develop the objectives, strategies and

special features of digital market. Now we talk about organization and management, including

location and premises, equipment, inventory, suppliers, personnel and human resources, and

finally, financial projections.

Probably the most serious threat for the company is the independence way of Catalunya, that

can affect their sales. Through 5 Forces of Porter we can see the threats and opportunities of

the more immediate context of the company. From the PEST Analysis we obtain threats and

opportunities from the outer context.

Knowing threats and opportunities we have to know strengths and weaknesses, at an intern

level. Then, we can set objectives and strategies to achieve those objectives. We will organize

the resources in order to achieve these objectives and finally we organize and manage those

strategies and resources to get the best of it, making financial projections.

For the end of this long list, we assume that our incomes are higher than our expenses, so it is

viable to apply it (we have to take in account that the majority of data are invented, so maybe

in some aspects it should seem incredible).

BASIC DATA ABOUT THE COMPANY

“Sk8 2 your fate” is a producer and seller of shorts and other clothes from Gandia. We are a

crew of 6 people with a very simple purpose: to commercialize 80s and 90s style clothes, with

their alternative image, to bring back those great days to everybody. We will create clothes

like the ones Knuckles (The Offspring), Mark Hoppus (Blink-182), Dave Brownsound (Sum 41)

or other 80s-90s American punk-rock stars used to dress.

It is a company with three partners, to be able to face the first expenses in an easier way. Our

mission: to bring back the great days from 80s and 90s urban alternative cultures to everybody

through clothes. Some short-term strategies are the establishment of a good position and

image of the brand in the customer’s mind and or to achieve the profitability of the company.

A long-term strategy could be to be known all around Europe in a period of 4 years. Our

products will be marketed to young people, between 15 and 30 years old, who like 80s and 90s

urban style clothes and all the lifestyle associated to it.

This industry is barely growing at a very little rhythm, as far as some years ago this urban style

almost disappeared and now is beginning to grow up some groups of people who like this

lifestyle. In the short term, this kind of clothes seem like they are not going to succeed, but we

will create a brand image that will revert this situation. On the long term, probably this kind of

clothes will become trendy for young people.

The most important strengths of the company are the orientations on different study fields of

each one to a multidisciplinary group, making it able to create and work at almost very

temperature in Earth.

PRODUCT DESCRIPTION

Our product consists in a diversity of clothes, mainly shorts, based on 80s-90s urban

alternative style. The product life is quite long, because it is not a product with a programmed

life or a determined number of uses. I don’t think it would need intellectual property, because

the clothes we produce don’t have any difference on the form or shape to the normal ones,

but only on the colors and patterns or draws. Prices for our clothes will be cheap: the price of

producing each piece plus a 15% more, so we will be the cheapest brand of this kind of clothes

in the market.

MARKET AND COMPETITORS ANALYSIS

The target audience is young people between 15 and 30 years old, who like the 80s and 90s

urban alternative lifestyle and their clothes.

To analyze the market attractiveness we will have to use the PEST analysis:

TABLA RESUMEN PEST THREATS OPPORTUNITIES

Polithic-legal factors -Catalan independence (Catalan company). -Adaptation of the products to each market uses.

-I.S. relatively low. -Spain into EU. -Helps and programmes in favor of PYMES and entrepreneurs -Incentivation of investing on I+D.

Economic factors -Low incomes generally. -The energy in Spain is very expensive.

-The majority of companies are PYMES, some of them with outstanding informatics programs. -Spain is into EU.

Social factors - Catalan indepence (Catalan company). -Spanish population is elder. -Trendy clothes designed by Young people of Gandia.

Technological factors -Poor investment on Spanish information systems (concerning associated ).

-Technologies and innovation poorly developed poco desarrollado (concerning competitors). -Little investment on information systems for Spanish companies (concerning competitors).

We can see there are more threats than opportunities. Political-legal factors have more

opportunities for our company, while the biggest amount of threats is located among social

and technological factors.

The estimated market size is around 4% of Spanish population. Around 1.880.000 people.

DEFINITION OF THE TARGET AUDIENCE

5 FORCES OF PORTER MODEL

THREATS OPPORTUNITIES

COMPETITORS IN

THE SECTOR

-Low knock-out barriers. -Low growing rhythm of the sector.

- Low knock-out barriers.

SUPPLIERS

-Vertical forward integration

could occur, it is needed a

little investment.

-Concentration mode mid-high.

CLIENTS

-Integración vertical hacia

detrás muy improbable.

-Very high concentration grade.

-Very high product differentiation.

Add value of fabrication in Spain and

protecting the environment.

POTENTIAL

COMPETITORS

-Barreras de entrada bajas.

-Non-existent sector reprisals.

SUBSTITUTIVE

PRODUCTS

-Substitutive product: normal

traditional socks.

-They can not go obsolet, but

in time they break and you

need to buy new ones.

-Cheaper prices.

-Low change cost, it requires of a

little investment.

ANALYSIS OF MARKET ATTRACTIVENESS

To be able to analyze market attractiveness, we will use the threats and opportunities

detected previously in PEST Analysis and some strengths and weaknesses from 5 Forces of

Porter Model.

THREATS OPPORTUNITIES

- Towards vertical growing is possible.

- High attractiveness of the sector.

- Low entrance barriers.

- Substitute product: normal socks.

- Catalan independentism.

- The majority of the clothes from 80s

are popular only among Young

people.

- Ageing population.

- Low growing rythm of the sector.

- Concentration suppliers’ grade mid-

high.

- High differentiation of the product.

- Backwards vertical growing: almost

imposible.

- No probabilities of reprisal on the

sector.

- Low prices leader.

- Low cost associated with switchin.

- Spain pertains to EU.

- Economic and fiscal dates to PYMES

and entrepreneurs.

WEAKNESSES STRENGTHS

-Product focused to young men in eaged

countries.

-Little company with no capacity for big

promotion expenses.

-To produce in Spain is more expensive than

in other countries as f.e. Eastern Europe

ones.

-Being a little company doesn’t allow them to

expense or invest a big lot of money.

-Market scale fairly big.

-Effective promotion with no cost, with

people that promotes the brand.

-To buy online or through shops is cheap and

effective.

-They produce on demanded product to save

costs.

-They don’t have their own shops, so they

save a lot of money.

-Differentiation strategy mixed with costs

leadership.

MAIN COMPETITORS

Main competitors will be all the clothes companies that sell or produce clothes from 80s-90s

style:

- Vans

- Element

- Emerica

- Fallen

- Volcom

- Famous Stars and Straps

- Fillow

- Dickies

- Etc.

All of them would compete completely, as we produce and sell all kind of clothes, even if our

most important production is about shorts. We can consider indirect competitors all the

producers of clothes of any kind.

To compete with them, looking at our strengths and opportunities we found before, you can

see our brand will be cheaper than our competitors, and a better and cheaper promotion

based on differentiation and famous people.

Factor Me Strength Weakness Competitor:

Volcom Competitor:

Fillow

Importance to

Customer

Products Very good

X Better Better 1

Price Very good

X Worse Worse 3

Quality Good X Equal Equal 2

Selection Good Worse Equal 4

Service Good Equal Worse 4

Reliability Good Equal Worse 3

Stability Good Equal Worse 5

Expertise Good X Better Better 3

Company Reputation

- X Better Better 2

Location Good X Better Better 4

Appearance Good X Equal Equal 2

Sales Method

Good Worse Worse 4

Credit Policies

Good Equal Equal 5

Advertising Very good

X Worse Worse 1

Image Very good

X Worse Equal 1

WEB DEVELOPMENT PLAN

We will create a domain: www.sk82yourfate.com, registering it on Realtime Register, and also

will contract a payment hosting for Windows, located in a Data Processing Center. Our web

page will be a dynamic one, with a catalog ran by a unique program that collects the product

data from a database.

On the development, the website architecture will have the following sections: home page,

contact, how to arrive, who we are?, gallery, products, Registration/Login, FAQ, shopping cart

and news. They will be presented as a menu, where you can go from any of them to any other

in every moment. Inside who we are? section there will be a pic and a little statement for each

one of the workers of the company, and if you click on the pic, it will appear more info about

him/her (social media, his/her work in the company, etc.). On a sidebar there will be some

banners with ads of products related to ours. The header has to present our logo and, on the

right, a search engine and the possibility to change the language (Catalan, Spanish, English,

Portuguese, French, Italian and Deutsch) and on the footer, the contact information, copyright,

etc.

The catalog of products will consist in photographs with brief descriptions and comments from

the users.

It will have links to our social media: Facebook, Instagram, Twitter and Youtube.

When you go into the shopping cart you will see the shipping costs, the delivery address, the

taxes, the return period, the availability of the product and the delivery time. The payment

options accepted: Paypal or debit/credit bank card (Visa, Mastercard).

The graphic design will contain several references to skate style and 80s-90s urban style

(photos and drawings).

All of that things, always trying our best to be friendly-user.

For the programming, we will use an existing CMS through, for example, Magento.

MARKETING AND SALES

PRODUCT: The product, different kinds of clothes, will be original, in order to differentiate the

brand. Accomplishing a standard of quality, but not of a very high quality, because otherwise

the prices would be much higher than what we want. All of the products will include a

variation of our logo, to improve brand image.

PRICE: We want to be price leaders, so the prices will be lower than our competitors. For a

standard, we will set it on the cost price + a 15%. To achieve this we will outsource the first

parts of the production.

PLACE: We will sell only through our webpage, delivering the products to the customer’s

house. At least for the beginning of the business. In this way, we save costs of maintenance of

physical stores.

PROMOTION: The big part of the promotion will be done by famous people and social media

influencers, who will get paid by us to wear our clothes and promote it. We will also sponsor

some sports teams and big music events. Our presence in social media has to be huge,

participating every day through Facebook and Instagram, and interacting with the users in

Twitter. Also, we will upload reviews and promotional videos to Youtube.

OBJECTIVES

The only objectives for the first year will be to allow differentiating the company products

from those of its competitors and being perceived as “unique” in the customer's mind, and, as

a consequence, to achieve being among the 3 best sellers in the market for this kind of clothes.

STRATEGIES

As commented before, pricing strategy will consist on being price leaders of the market.

Usually, this type of products are a little expensive, so we will reduce our prices in a quantity

enough for not being a problem for us.

Product strategy: the product has a quality into certain standards. We don’t want to be “the

bad product” of the list, but at the same time, we neither want to be the best quality ones in

the market.

Concerning the place strategy, we will have a little office in Gandia, our city, from where we

will control all the processes of the business. As it is an online business, we are not selling in

physical stores for the moment, but delivering at house. We will need a retail outlet, and we

would try to find it in Gandia or some little town around it (like Almoines, Real de Gandia or

Palma de Gandia).

Promotion strategy has been commented before: famous people and influencers will get paid

to wear our clothes and usually do reviews about them. We will also sponsor sports teams like

MotoGP Honda or Valencia C.F. and big music events, like Download Fest in Madrid. In

addition, our presence in social media has to be constant and consistent, using Twitter to

interact with users’ questions, and Facebook and Instagram to show up our products and to

tell what we are doing. In Youtube we can upload video reviews of products and promotional

videos for events.

SPECIAL FEATURES IN DIGITAL MARKET

We need some digital objectives to get to success in our ecommerce business. The first digital

objective, for our first year as a business, could be to achieve a good presence in search

engines, appearing among the 10 first results in Google when you look for our name. We

should try to increase time after time the number of visitors of our website, to put links to our

page from other webs of similar products, expand our geographical area constantly and to

realize a good maintenance of our website during all the year. For this, we will need to use

SEM or SEO, but probably to begin SEM is more interesting if we have enough money to pay it,

through ads in Google and a list of keywords.

ORGANIZATION AND MANAGEMENT (HUMAN RESOURCES)

LOCATION AND PREMISES

We will only need an office local and a warehouse. For the office we can use a family local out

of use in the center of Gandia. It may need some reforms but is quite well to begin to operate

there. Attaching to the warehouse, we should rent a little industrial plant and set some

shelves.

EQUIPMENT

We will need three computers (one for the accountant, another for an administrative in charge

of exports and imports, and another for the promotion manager), some shelves, three

desktops and three chairs to begin.

INVENTORY

We will keep the minimum storage possible. As we outsource the production, we only need to

do in Spain the adding of the logo patches. We will order to our suppliers the minimum

quantities according to client orders, to avoid storage in warehouse as far as possible, reducing

costs.

SUPPLIERS

We will look for our suppliers among the Spanish textile manufacturers, and maybe create a

new company in order to be our supplier.

PERSONNEL AND HUMAN RESOURCES

The business will be managed by the three associated founders, it is: Jose Monllor, Jaume

Jiménez and me, Jacobo Romero. Jose has experience in a manufacturer of shoes, similar to

this one, and Jaume has experience in a business dedicated to clothes sale. If any of us leave

the business for any reason, the other ones will buy his part, equally divided and will continue

with the business.

We will have 3 workers (apart of the 3 managers, that also work as the rest). The tasks of

everyone are not strictly fixed, because it may be changing attending to the priorities since we

get to know who works better in each position.

We should need a manager for the promotion area (social media, contact with influencers,

advertising, etc.), a manager of sales and purchases (in contact with suppliers and controlling

client orders), manager of “production” (in order to prepare orders to deliver) and a person in

charge for the warehouse. The other two persons will be rotating helping there when it is

necessary in each moment.

FINANCIAL PROJECTIONS AND FUNDING REQUEST

For the first year we think it won’t be required outer funding. The initial costs to engage the

business are not very high, so we the three managers can afford it by social capital

contribution. The quantity we will need approximately to engage the business is around

€15,000. That is, €5,000 each one.

- Start-up expenses: €3,000.

- Furniture: €1,000.

- Website: €3,000.

- Computers: €1,800.

- Domain registration: €50.

TOTAL START-UP EXPENSES: €8,850.

- Cost of products: €2,000.

- Transport: €1,000.

TOTAL COST OF SALES EXPENSES: €3,000.

- Sales manager: €12,000

- Promotion manager: €12,000

- Production manager: €12,000

- Person in charge of warehouse: €10,000

- Employees: €10,000

TOTAL STAFF EXPENSES (ANNUAL): €44,000

- Rental: €110,000

- Utilities (electricity, water…): €3,600

- Web hosting: €600

- Insurance: €800

- Software licenses: €1,200

TOTAL INDIRECT EXPENSES (ANNUAL): €117,600

- Search engine positioning: €600

- Facebook Campaign: €3,000

- Instagram Campaign: €2,000

TOTAL PROMOTION EXPENSES: €5,600

TOTAL EXPENSES: €179,050

EXPECTED PROFITS (1st YEAR): €300,000

RETURN ON INVESTMENT: +67.55%