A Sporting Goods Store - Research Paper Example

 A Sporting Goods Store Introduction Our proposed company is a sporting goods store that will manufacture a line of clothing for sports enthusiasts, carry known brands of sporting equipments, and accessories for fishing, hunting, hiking, and camping, aside from being a service center for these equipments. It is a combination of a retail, manufacturing and service business. At this point, we are still on the concept stage. Methodology/Analysis Our shirts will be customized, carrying our own brand and logo, but the designs will be done according to the theme of the sports events and idea of customers. Each design is unique as it will represent the theme of each event. As a shirt manufacturer, it will be a specialty store because we will use high materials. As a retail outlet, our store will carry known brands of hiking, fishing, and camping materials, as we plan to work for distributorship and licensed agreements with named brand owners. We will also set up a service and maintenance department that will repair sporting equipments that people bought from our store. As these items are costly, our maintenance will add value to them. Our Products will be sourced from sporting goods manufacturers and wholesalers and then sold to the general public via our retail store. Target markets are people of ages 18 and above, residents of Des Moines, and with average income of $35,000 and above. Study showed these people have the capacity to spend, and enjoy active sports life. Hiking, fishing, and camping are simple outdoor activities that people enjoy. Since our company is in the locality, it will be ready to serve their needs as a one stop shop for outdoor sports. In order to penetrate our target market, we will consider a tie up with schools, sports organizers and clubs for a city wide sports campaign like a city hiking day, hunting and fishing competition once every 6 months. We will also encourage sponsorship and media coverage. Our start-up costs and capital needed is estimated at $250,000. Start - capital will be provided by four partners at $25,000 each and the balance of $150,000 will be borrowed from the bank. Bulk of this fund will be used for capital expenditures, inventory, and maintenance and operating expenses for the first months of operations. It is expected that sales in the following months will provide the needed cash flows for operations. Our financing will be both debt and equity. Conclusion We plan to pursue this business since based on our projection; it is not a losing proposition. The first months of operations will be difficult for the start-up of our business, but we will keep our expenditures to a minimum so that our cash flows will not suffer and we do not have to borrow some more. Initially, sports organizations in the area that we have approached are excited with the idea and many of our friends have encouraged us to continue with the proposal. The difficult economy each one is experiencing is not a convenient excuse for people not to go into sports. By initiating sports events, we will be encouraging local tourism, increasing awareness of people in importance of physical fitness, and at the same time, promoting our products along the way. We thank you for reading our proposal, and we are ready to entertain your inquiries anytime Feasibility of establishment of a sporting equipment store in a local community PRODUCT AND SERVICE Mission, vision and objectives. Company will be called Gunsmoke”, and will be headquartered in Des Moines, IA. Mission of the company is to be finest manufacturer and retailer of sporting goods as well as to be best service center of sporting in Des Moines, IA towards this, company vision is to provide our customers best shopping experience and satisfaction in our service”. During the next three years, financial goals are to obtain financing to establish manufacturing facilities, retail outlets, service centers, and to obtain revenue of at least 50% each year. Non-financial goals is to introduce the line of products and service package of the company to the community; to enter the geographic sites of the Des Moines area; and to develop a successful internet site while developing relations with retailers and customers. Purpose of the product/service Gunsmoke will be a manufacturer of customized shirts, retail store and a service center that will provide a wide assortment of quality brand name of sporting goods. It will continually bring to our customers best shopping experience either on line or at our retail stores. As a Service Center, it will also provide maintenance and services for sporting equipments to give value to their equipments. Services covered are gun maintenance and repair to ensure longevity and reliability of its use; Co2 refills; Fishing Line Winding, and camping equipments. Stage of development Stage of development The project is still in the concept stage. At this time, we are doing a market research and finalizing plans for the design and construction facilities of our store. Equity from partners will be ready by May, so construction of store starts at once. License agreements and distributorships agreements is expected to be finished by June. Government Permits and municipal licenses will be given by May. Release of loan is expected by June, so inventory purchases begin. It is expected that the store will be operational by July. Product limitations Climate and season, fashion trends, style and popularity of brands dictate sale of our products. Baseball caps and T-shirts sell more on summer while vests and jackets are saleable in cold months. Products may not stay in the shelf for more than 3 months. Product life cycle might affect shelf life because fashion trends are changeable each season. Proprietary rights Gunsmoke will work for a License Agreement with established brands and manufacturers to carry their products in the store. A license agreement will allow our company to use the product but does not allow us to use patent rights. Concepts, designs, and artworks made by the company belong to its proprietary rights and must be protected. Related services and spin-offs On line ordering system and free delivery. A website will be set to provide an on line marketing. We will also provide for Annual Service maintenance package for sports equipment. Production We are in the process of establishing our supply chain of suppliers and determining our inventory capacity and line of products. Ownership Since the company needs investors, it will be formed as a Limited Partnership. As limited partnership, partners serve only as investors, do not actively participate in the operations, and do not assume a great deal of liabilities as general partners. SWOT ANALYSIS Current market size The sporting industry is reported to be concentrated. Hoovers (2013), a company that offers proprietary information, stated that the industry is concentrated wherein 55 % are held by large companies. Study showed that profitability of the company depends on marketing and merchandising skills of its people. Study also pointed out advantages of large ones because of its ability in stocking a wide variety of goods; and that the only way small ones can compete is by being a specialty store, offering repair services, or by serving a local market and by having experienced staff and workers. Growth potential  Several analysts argued that the biggest opportunities in the sports industry today is in the high-value opportunities for sports fan; equipment and apparel of high value and exciting designs. They believe that exercise and fitness programs appeal to baby boomers, customers still want to play, but they will only buy at reasonable costs. (Plunkett Research, 2013). IBIS WORLD (2013), a market industry research firm found out that the arena for sporting goods have changed over the past two decades. It said that the rise in national sporting chain has created an opportunity for department stores and mass merchandisers to aim for a share of the sporting industry. IBIS reported an industry revenue of $49 billion, and an annual growth of 0.1%. In this, we can safely conclude that the sporting industry is in the growth stage because of the developing interests in national sports participation. Industry trends The interest on sports is universal and it means different things to many people. To one, it could mean gambling, to another, it is recreation; to athletes, its fame and fortune, and to business people, it is a venue for lucrative investments. Data gathered by Plunkett Research (2013) estimated sale of U.S sporting goods amount to $41 billion yearly, and total US sports market sale would be $400 billion up. Competition profile. Competition in this industry is keen. Study of First Research revealed that the US retail sporting industry has about 20,000 companies with combined revenue of $38 billion. Accordingly, most of these retail stores specializes selling on sporting goods, athletic and fitness wear, fitness equipments, and related products. Major US companies are Big 5, Cabela’s, Dick’s Sporting Goods, Hibbett Sports, REI, and Sports Authority. Competitive advantage of our company is the personalized service it brings to customers. Prices are competitive. It will follow suggested retail pricing of manufacturers as standardized pricing is set in the distributorship agreement. Being in the city, our geographic location would be near our market. Our strength lies in our proximity to clients which will be an advantage in tie up of events. Our weakness is being a start- up, we have to do a great deal of promotions so that we will be noticed. The industry is captured by 55% of big sports company, and our market share will be limited to small start-ups. Start-ups face barriers in its entrance to the industry which are large start-up costs, sufficient inventory may be prohibitive, and a large share of effort will be done to create consumer interests. Customer profile Des Moines has a population of 206,599 as of 2011. Out of this number, 24% are under 18 years, and 11% are over 65 years, and 51% are female. 85% of this population is literate, having graduated from high school and others with a college degree. This segment of consumers is a select demographic group of well-educated and successful individuals. They may be single, married and have families. They belong to the middle income class household with an average annual income $38,000. According to economists’ views, people who belong to this bracket have enough money to afford good life and lead active lifestyles. Study show that they would like to be associated with high quality products but are cost conscious and are not willing to pay premium price for a brand. As of 2007, the total number of registered firms in the city is 15,997. This could be a good number of prospects for our company. Customer benefits Gunsmoke will offer customized services to its client. It will provide unique design fitted for each occasion, such company sports events, outings and others. It will also offer high quality branded products that is recognizable by consumers Efficient maintenance service Maintenance will provide added value to sports equipment Target markets Priority markets Colleges and universities ITT Technical Institute Strayer University University of Phoenix DeVry University Sports Teams and organization Market penetration Product/service will be sold to customers through advertising, promotion, catalogs, direct mail, and thru internet and social network sites Marketing mix plans include sales promotions, public relations, and non-traditional strategies such as organizing activities trail hiking, fishing contests, and other outdoor activities. Product strategy: For every sporting activity, company will offer a complete line of apparel that includes t-shirts, baseball caps, vests and jackets. It will bear unique designs of the event, colors and, slogans. It may also expand logo and designs customized to customers own idea. Distribution strategy. Product is planned to be marketed in specialty stores, own company stores, and sporting goods in Des Moines. Delivery and pick up of items for repair may be arranged. Promotional strategy. Company will communicate to retailers and consumers in many ways. It will use social media facilities, advertising, internet and direct mail. It will also hire marketing staff to visit schools, universities and sports organizations and clubs for promotions. Key Success Factors Strategies to be used as key success factors are offering of incentives for increased use; advertising other uses of product; adjusting prices, tie ups with sports organization, sponsoring of events, distribution of promotional items during events, and holding of contests for designs and logo to encourage community participation PRODUCTS items PRICE Fishing Baits, fish attractants, fishing apparel Rods fishing line fishing tools Ave. price $300 Hunting Air guns, ammunitions, hunting accessories Ave. price $200 Camping Tents, camping accessories, knives and tools. Luggage, lighting, outdoor cooking Ave price $300 Apparel Customized shirts $2 same as industry Service/maintenance Co2 refills, sharpening of knives, fishing line rewinding, others Ave. $10 Price assumptions: Our pricing list is not available yet since distributorship is not finalized. But definitely, it will be similar as manufacturers have suggested retail prices. Prices are set on the average lot, but retail per item could be arranged later. Done only for purpose of computations. SALES ESTIMATE: Assumption to increase by 10% every year Product/service Target no of customers YEAR 1 YEAR 2 YEAR 3 Fishing -$300 1033 309,900 340,890 374,979 Hunting $200 1033 206,600 227,260 249,986 Apparel $2 20,659 41,318 45,450 49,554 Camping$300 1,033 309,000 340,890 374,979 Service/main $10 1033 10,330 11,363 12,499 Total Sales 877,148 968,853 1,061,572 Population of Des Moines is 206,599, 5% is the target market for all products; 10% for apparel. Cost of goods sold Assumption 70% of revenue Product/service Year 1 Year 2 Year 3 Fishing 216930 238623 262485 Hunting 144620 159082 174990 Camping 216930 238623 262485 Apparel 28922 31815 34687 Service/main 0 0 Total cost of goods sold 607,402 668,143 734,647 GROSS MARGIN: sales minus cost of goods sold Product/service Year 1 Year 2 Fishing 92,970 102,267 112,494 Hunting 61980 68178 74,996 Camping 92970 102267 112,494 Apparel 12396 13635 14,867 Service/main 10330 11263 11,263 Gross profit 270,110 298,410 326,114 Gross margin = Gross profit/revenue 30% A high gross profit is desirable since there will be enough funds left for operating expenses. Marketing expenses Year 1 Year 2 Year 3 Salaries & wages - marketing 61824 61824 61824 Benefits & taxes - marketing 9273 9273 9273 Commissions, reps & contractors 1236 1236 1236 Advertising - broadcast 285 285 285 Advertising - brochures/ posters 285 285 285 Advertising - direct mail 285 285 285 Advertising – other 285 285 285 Marketing – print 285 285 285 Marketing - samples/trade shows 285 285 285 Other marketing expenses 100 200 200 Total marketing expenses 74143 74243 74243 2 Marketing employees @ $2576 mo. Advertising expenses pegged at 1,700@year for 6 advertising items Administrative expenses Year 1 Year 2 Year 3 Salaries & wages 49,536 49536 49536 Benefits & taxes 7,070 7070 7070 Meals & entertainment 500 500 500 Dues & subscriptions 0 0 0 Professional fees 1,500 1,500 1,500 Accounting/bookkeeping 1,200 1,200 1,200 Travel/automotive 2690 2,690 2,690 Other administrative expenses 2,200 2,200 2,200 Total administrative expenses 64,498 64,498 64,498 2 Administrative personnel @ $2064 mo. General expenses Year 1 Year 2 Year 3 Bank charges 200 200 200 Credit card fees 0 0 0 Interest 4,500 4,500 4,500 Insurance 1,500 1,500 1,500 Office supplies 300 300 300 Other supplies 300 300 300 Postage Telephone 1,200 1,200 1,200 Utilities 1,200 1,200 1,200 Rent/ Mortgage & real estate taxes 24,696 24,696 24,696 Repairs & maintenance 300 300 300 Taxes & licenses 1,500 1,500 1,500 Other general expenses 1,000 1,000 1,000 Total general expenses 36,696 36,696 36,696 3% int.charges for $150,000 loan Based on prevailing commercial space rental of $1800 and above per mo.(City Feet.com) The Premier Source for Iowa Retail Space. http://www.cityfeet.com/cont/iowa-retail-space Source for taxes & licenses:City Applications http://www.cityapplications.com/business-licenses/IL-Illinois/biz-DesPlaines.html Profit before interest and taxes Product/service Year 1 Year 2 Year 3 Sales 877,148 968,853 1,061,572 – Cost of goods sold 607,402 668,143 734,647 = Gross Margin 270,346 300,710 326,925 – Marketing expenses 74,143 74,243 74,243 – Administrative expenses 64,498 64,498 64,498 – General expenses 36,696 36,696 36,696 = Gross profit* 95,009 125,273 151,488 *Profit before interest and taxes Start-up costs Year 1 Petty cash 500 Register cash 500 Opening inventory 100,000 Rent (last month's) 2,850 Security deposit 200 Telephone deposit 200 Utilities deposit 400 Other deposits and start-up costs 1,500 Total start-up costs 106,150 Cash items and inventory are calculated guess since price list of inventory is not yet available. A large amount of money is need to pay for products to be sold at the opening Start-up expenses Start-up expenses are any expense incurred prior to the first day of sales. Start-up expense Year 1 Fictitious name costs 500.00 Business filing fee 1,000.00 Corporate tax prepayment 1,500.00 Activation fee 200.00 Legal & consulting fees 1,200.00 Accounting fees 1,200.00 Federal tax ID 150.00 Sales tax permit 1,200.00 Salaries & wages -training/setup 1,500.00 Office supplies 1,000.00 Business supplies 1,500.00 Printing- cards, stationery, brochures 800.00 Pre-opening advertising 900.00 Other start-up expenses 550.00 Total start-up expenses 12,700.00 Capital expenditures Year 1 Equipment 10,000 Furniture 5,000 Leasehold improvements 10,000 Vehicles 40,000 Total capital expenditures 65,000 2 vehicles @ 20,000 Pitfalls being too optimistic that customers are easy to acquire, or having too little market for the product Building the work teams. Ability to reach milestone before cash runs out. Strengths Specialty store Local store Needed capital AMOUNT OF CAPITAL NEEDED Capital expenditures 65,000 Start up expenses 12,700 Start up cost 106,150 Total 183,850 4 partners are ready to invest $25,000 each = $100,000.00 Loan from the bank =$150,000.00 Alternative sources are credit cards, credit lines from companies, personal loan Entrepreneur's role As one of the founders, I will assume the role of a managing partner, while the rests will be considered investors and are limited partners. Business plan A business plan should be written so that we can create our organizational structure, conduct in depth market and consumer research, prepare proformas, and develop operating and control system. Research on strategies for advertising, promotions and sales. Decisions on participations of partners as each has own expertise, aside from being investors and limited partners. License potential Since we are only starting, and a small company, products or royalty rights should not be given to another company and is considered not appropriate. Corporate partners Business structure and ownership of the company is a limited partnership. Liability of a partner in this type of business is up to the extent of his share of ownership, and they are not responsible for debt obligations. As such, they do not have any kind of management responsibility. Proprietary rights At this time, we do not have any proprietary rights or licenses to be sold to other parties. Infrastructure members Key Advisors are partners of the company. A nominal service fee of $1,200 each as advisors will be charged. 1 lawyer 1 accountant 1 IT specialist 1 marketing specialist Bibliography .City Feet.com. The Premier Source for Iowa Retail Space. 2013. 03 May, 2013. http://www.cityfeet.com/cont/iowa-retail-space City Applications Apply for a Business License. 2013. 03 May, 2013. http://www.cityapplications.com/business-licenses/IL-Illinois/biz-DesPlaines.html First Research. Sporting goods industry profile. 01 April 2013. 15 April 2013. Hoovers. Sporting Goods Stores Industry Overview. 2013. 15 April 2013 http://www.hoovers.com/industry-facts.sporting-goods-stores.1551.html Ibis World. Sporting Goods Stores in the US. Market Research Report. January 2013. http://www.ibisworld.com/industry/default.aspx?indid=1079 Plunkett Research. Sports Industry Market Research. 2013. 15 April 2013. United States Census. Des Moines County Quick Facts. January 2013. 14 April, 2013 .(City Feet.com) The Premier Source for Iowa Retail Space. http://www.cityfeet.com/cont/iowa-retail-space Source for taxes & licenses:City Applications http://www.cityapplications.com/business-licenses/IL-Illinois/biz-DesPlaines.html Source for taxes & licenses:City Applications http://www.cityapplications.com/business-licenses/IL-Illinois/biz-DesPlaines.html Read More