Development of a business plan for launching an online clothing retail shop

Table of Contents

1.0 Business description
1.1 Background and history of the online retail clothing industry
1.2 Description of the product
1.3 Goals and objectives of the business
1.4 Supplier Information and agreements
1.5 Ownership structure
1.5.1 Investment of funds
1.6: Legal consideration

2.0 Business opportunities
2.1 Potential customers and geographical area
2.2 Business competitors
2.2.1 Differentiation from competitors

3.0 Marketing strategy
3.1 Costing and pricing
3.2 Marketing plan
3.3 Sales Projection

4.0 Business operations
4.1 Operational functions
4.2 Personnel
4.3 Services offered

5.0 Finances
5.1 Expenses
5.2 Revenue
5.3 Final Projections

6.0 List of references

Business plan for online clothing retail store

1.0 Business description

Online clothing retail store has been selected for developing a business plan. Some of the critical and important issues have been discussed in this section such as; background and history of the business, goals, description of the product, supplier information, agreements, ownership structure and legal considerations.

1.1 Background and history of the online retail clothing industry

The online clothing industry has doubled over the last five years, as the increasing number of users has access to broadband and smart phone and forsaken the high street (Telegraph, 2011). According to a report by Mintel, 4.3 billion £ worth of the clothes are bought online in the year 2011, up from 26 percent in the year 2010 (Telegraph, 2011). Online shoppers spent 10.1 billion pounds in November, 2013 (IMRG, 2013). On the other hand, mobile commerce is also becoming an important medium for sellers to sell their products (Capgemini, 2013). Online business has various advantages compared to traditional business, which can be seen in the figure below:

Figure 1.1 Advantages of online business

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Source: SAS, 2013.

Hence, stepping in to online clothing retail business can help entrepreneur to sustain, grow and make profits with the extremely positive market growth.

1.2 Description of the product

The business is new online clothing store, which provides comfortable and easy clothing buying solutions to men and women, through its own website and an online e-bay store. The business focuses on retail clothes and shoes for men and women, which will be available in different sizes, colours and will be designed and manufactured keeping in view the latest fashion trends of the fashion industry. In short, following products will be offered:

- Jeans (men and women)
- Shirts (Men and women)
- T-Shirts (Men and women)
- Shoes (Men and women)

1.3 Goals and objectives of the business

Goals are important to the business and they define destination and shape future of the business (Marshall, 2005). According to (Zimmerman, 2011) following are the goals of internet business, which must be taken into consideration while starting an online business:

- Providing customer service through information
- Generating leads or qualifying prospects
- Generating revenue through advertising sales
- In addition to the above goals and objectives, entrepreneur will also focus on achieving goals such as follows:
- 100 percent positive customer feedback on e-bay
- Create positive word of mouth through social networking and websites.

1.4 Supplier Information and agreements

China is the largest supplier and exporter of clothes and apparels in the world (Worldbank, 2010). Since customised clothes with the demanded quality can be imported from China at the convenient price, entrepreneur will focus on importing all the products from China due to low cost and reliable suppliers with tremendous reputation are available over the internet. Moreover, in the start-up of the business emphasis will be given to signing agreement with supplier on low price per unit of the product, to increase the profit margin. Similarly, defected pieces and return policy will also be the part of agreement with the supplier.

1.5 Ownership structure

The ownership structure followed by entrepreneur will be sole trader. According to BBC (2013); following are the advantages of sole trader:

- Generally small amount of capital is needed which reduces the initial start-up cost.
- It is easier to make decisions
- The wage will be low because there are few employees

Contrary to this there are some disadvantages as well such as; unlimited liability and bankruptcy (BBC, 2013). But keeping the business plan, objectives and goals in view, Sole trader organisational structure is best to be opted.

1.5.1 Investment of funds

All the investments will be done by entrepreneur himself, by investing from savings and using credit cards and over-draft facilities by different banks. According to (Timmons, 1990), entrepreneur must arrange all the finances by himself and should not try to find any investors. Moreover, this is a small project with low investment and high growth potential. Keeping in view the amount and future growth opportunities, entrepreneur will invest by himself.

1.6: Legal consideration

Considering legal obligations, entrepreneur first needs to get a domain name to register the website. Similarly according HM Revenue and customs, UK (2013), following is the criteria for registering sole trader business in UK:

- Self Assessment (Information about sole trader)
- National Insurance details.
- PAYE information if there are any employees in the company.

2.0 Business opportunities

This part of the business plan focuses on the critical issues related to business opportunities, such as; potential customers, geographical area and business competitors.

2.1 Potential customers and geographical area

As the online clothing shop has to offer products according to the new fashion trends, so potential customers will be both males and females between the age of 16 and 35. According to (Peterson & Tiffany, 2004), focusing one specific customer group with specific demographics is better for an online business. Similarly, All 16 – 40 years old male and females will be targeted across United Kingdom, who use internet.

Here are some latest statistics of internet users given by national statistics (2013):

Figure 2.1 Internet Users and non users by age group (years) in UK, Q1 2013

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Source: Office for national statistics, 20013.

It can be seen from the figure 2.1, 100 percent of males and females use internet between the age group 16 and 44. In the light of the data examination, selection of potential customers between the age group of 16 and 40 is ideal, as they all use internet and follow latest fashion trends. Since 100 percent of the males and females use internet between the age group of 16 to 40 years in the United Kingdom, so they all will be target across the country. As internet users between 16-40 years of age are the target group in the UK.

2.2 Business competitors

Online clothes retailers are expected to face a tougher competition in the coming year (Manhattan Associates, 2013). According to a report published by (ibisworld, 2013), there are 648 clothing stores, which are reliable and making profits. The competition is to compete and survive in the market at business start-up with these 648 stores.

2.2.1 Differentiation from competitors

Differentiation is very important in online business industry, as competition is very high due to its high growth and profitability (Tuunainen & Rossi, 2002). Bummat model bsed on (based on Järvelä & Tinnilä, 2000) to implement the overall online business plan in order to be effective, efficient and be different from competitors.

Figure 4.1 Bummat Model for customer channels

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Source: (Tuunainen & Rossi, 2002)

In analysis, (Tuunainen & Rossi, 2002) have examined that successful websites such as; feelpretty.com has used and focused on all these components, which are highlighted in the model to be successful and different from competitors and sustain in the market.

3.0 Marketing strategy

This section of the business plan discusses strategies such as; costing and pricing, sales projection and marketing plan.

3.1 Costing and pricing

According to (Bloomberg, 2013) cost of getting jeans manufactured from China and Bangladesh is 90 pence and a shirt of different design is around 0.70-1.5 pounds. Based on the cheap manufacturing costs, the price of the products will be around 10 pounds for jeans and same for the shirt, to make profits and cover all expenses and costs in the start-up. As the competitors and majority of the clothing retail shops and e-bay and from their own websites are selling from 17-20 pounds per item.

3.2 Marketing plan

According to (IMA, 2013), internet marketing consists of activities, which must be taken in to account to create successful internet marketing plan:

Figure 3.1 Activities of internet marketing

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Source: IMA (2012).

Similarly, there are some advantages of using all these activities for the marketing plan as they are very cost effective and majority of them are free. According to (The prince’s trust, 2013) Following are the advantages of using internet based marketing activities:

Table 3.2 Advantages of internet marketing activities

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Source: Prince’s trust (2012).

Hence, due to several advantages and existence of business in the online platform, all the internet activities will be used to market and advertise the online clothing brand, as shown in the figure 3.2 above.

3.3 Sales Projection

Online clothing industry is growing by leaps and bounds, with the growth rate of almost 26 % each year (Telegraph, 2011). Based on the industry growth rate, the projected growth rate of the business is 5 percent in the first year. During the first year, with passage of earning revenue and profits, more money will be invested in to the business and growth rate will subsequently increase to 10 percent in the second year and to 15 percent in the third year, due to extensive and continuous online marketing and increasing product line. It is shown in the figure below.

Figure 3.2 Sales projections in terms of year and percentage

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4.0 Business operations

This part of the business plan includes; operational functions, services offered and personnel.

4.1 Operational functions

Internet retailers must turn online visitors into buyers, to achieve that retailers must provide an online experience which influence and make consumer to buy the product (Linton, 2013). Following are some of operational functions based on article by (Linton, 2013), which will be followed by the company at-start to gain sales and attract customer and run operations of the retail shop successfully.

Table 4.1 Operational function of the retail shop

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Adapted from, (Linton, 2013).

4.2 Personnel

As the business is started up and handled by the entrepreneur himself, so there will be no personnel in start-up of the business. All the business operations will be handled by entrepreneur himself. On the other hand, Website infrastructure management, website design, mobile application and all the technology related issues will be outsourced to an information technology company, which will be available to resolve any issues in the system when needed. So the costs related to the personnel associated with the business are variable and will vary according to the help needed to call professionals to resolve any technical issues related to the website.

4.3 Services offered

The British customer is demanding more and more from the customer service they receive (Ecommerceweek, 2013). As the consumers are getting more demanding in terms of receiving customer service, hence to fulfil the requirements of the potential and existing customers, business will offer the following services to the customer so that they can be loyal and come back to buy the products and spread positive word of mouth regarding the brand. Following will be the services provided by the clothing brand:

- Dealing with customer complaints.
- Replying to queries within 24 hours of receiving them.
- Free delivery on orders above 50 pounds.
- 100 percent refund if the product is defected at buying.
- 28 days return policy.
- Loyalty memberships for regular customers.

5.0 Finances

This part of the business plan focuses on the Revenue, expenses and final projections:

5.1 Expenses

Identifying the start-up costs for a venture helps to know the amount of money needed before opening the doors of the business (Fasttrac, 2005). By examining and analysing the expenses related to the business, following are the expenses which are needed in the start –up to start the business.

Table 5.1 Expenses for starting online clothing shop

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As it can be seen in the table above, total expenses required to start-up are 10,000 pounds. While 5700 pounds are assets which includes cash in hand and inventory at start, while on the other hand 4300 pounds are expenses, which include different costs, which will incur at start.

5.2 Revenue

According to (SAS,2013), out of 88 visitors to the website, 4 of them buy the product in a day from an average retailer’s website. Hence, due to diversified online marketing, it is being assumed that, in the beginning, 4 products will sell in a day at start- up. On the basis of this, the revenue and profits have been calculated as follows:

Table 5.2 cost per unit of the product

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As it can be seen in the table above the average cost per unit is 3 pounds after including all expenses. Moreover, the monthly fixed cost is 350 pounds which includes the rent of the store, where stock is kept to dispatch for the final delivery. Hence the breaks – even which will cover all cost and bring the owner to no – profit and no loss situation is calculated as follows:

Figure 5.1 Break even analysis

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Hence 88 units are required to come to the break even position. Similarly as four units a day are getting sold, total revenue is calculated as follows:

Table 5.3: Profit calculation in one month

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As 32 units are profit for a month in terms of cash, entrepreneur will earn 320 pounds a month in start which will start increasing with passage of time, due to extensive growth rate of the industry.

5.3 Final Projections

It has been calculated earlier that the sale will increase by 5 percent in the first year, 10 percent in the second year and 15 percent in the third year. Based on that, following are the final projections in terms of sale and year.

Figure 5.2 Sales projections in terms of year and sales in pounds

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It can be seen from the figure 5.2 sales are continuously increasing every single year. In the first year sales are 1440 pounds, in the second year 15840 and in the third year 18216 pounds subsequently.

6.0 List of references

BBC (2013), ’Sole traders and partnership’ [online] Available at: http://www.bbc.co.uk/schools/gcsebitesize/business/aims/partnershipsrev1.shtml [Accessed: 28 November, 2013].

Bloomberg (2013), ’90 cents- the cost of manufacturing a jeans in bangladesh’. [Online] Available at: http://hereandnow.wbur.org/2013/07/10/bangladesh-factory-safety [Accessed: 4 December, 2013].

Capgemini (2013), ‘ £87 billion to be spent online in 2013, [Online] Available at: http://www.uk.capgemini.com/news/87-billion-to-be-spent-online-in-2013_pr2411 [Accessed: 28 November, 2013].

Ecommerceweek (2013),’ online retailers offer the highest standards of customer service’ [Online] Available at: http://www.ecommerceweek.co.uk/item.php?news_id=115 [Accessed: 7 December, 2013].

Ibisworld (2013), ’Online womens clothing sales in the UK: Market research report. [Online] Available at: http://www.ibisworld.co.uk/market-research/online-womens-clothing-sales.html [Accessed: 2 December, 2013].

IMA (Internat marketing academy (2013), ‘ developing an internet marketing strategy ’ [Online] Available at: http://www.ftvs.cuni.cz/hendl/metodologie/developing-an-internet-marketing-strategy.pdf [Accessed: 11 December, 2013].

IMRC (2013), ‘ Highest ever monthly online spend in November’ [Online] Available at: http://www.retailgazette.co.uk/articles/03341-highest-ever-monthly-online-spend-last-month-says-imrg-capgemini [Accessed: 01 December, 2013].

Linton (2013), ‘Best practices for online retail operations’ [Online] Available at: http://smallbusiness.chron.com/practices-online-retail-operations-36326.html [Accessed: 25 November, 2013].

Marshall.I.M (2005), ’Defining your business through goals and objectives: First steps for new entrepreneurs’. [online] Available at: http://www.extension.purdue.edu/extmedia/ec/ec-727.pdf [Accessed: 4 December, 2013].

National statistics (2013), ‘Internet access quarterly update: Q1 2013’ [Online] Availabe at: http://www.ons.gov.uk/ons/dcp171778_310435.pdf [Accessed: 29 November, 2013].

Price’s trust (2013 ), ‘Marketing methods’ [Online] Available at: http://www.princes-trust.org.uk/pdf/eec-workbook-page%2079-80-81.pdf [Accessed: 3 December, 2013].

SAS (2013), ‘How UK will shop: 2013’ [Online] Available at: http://www.sas.com/offices/europe/uk/downloads/retail/retail-predictions2013.pdf [Accessed: 25 November, 2013].

Telegraph (2011), ‘ online clothing sales double’ [online] Available at: http://fashion.telegraph.co.uk/news-features/TMG8451109/Online-clothing-sales-double.html [Accessed: 01, December, 2013].

Tuunainen.K, Rossi.M. (2002), ‘E-Business in apparel retailing industry: critical issues’ [Online] Available at: http://is2.lse.ac.uk/asp/aspecis/20020147.pdf [Accessed: 4 December, 2013].

World Bank (2010), ‘The global apparel value chain: ride and crisis’ [Online] Available at: http://www.researchgate.net/publication/46444042_The_global_apparel_value_chain_trade_and_the_crisis__challenges_and_opportunities_for_developing_countries/file/32bfe50d85b7f78c48.pdf [Accessed: 25 November, 2013].

Zimmerman.J (2011), ‘ Web marketing for dummies’ [Online] Available at: http://www.dummies.com/how-to/content/setting-goals-for-your-online-business-presence.navId-811455.html [Accessed: 2 December, 2013].