An Analysis of an Arabic Online Retail Business Venture for the United Kingdom Market - Example

Introduction The number of people of Arabic origin in the United Kingdomhas grown rapidly in the recent past. This is due to the increasing number of Arabic students seeking higher education within the UK. In addition to the student population, there is also a considerable number of Middle Eastern population who have lived within the UK for a long time and already have decedents, an equally huge amount who have immigrated to the UK due to varied reasons and another equally considerable number of Islamic people who would form a market for the proposed entrepreneurial venture. There were over 2.7 million Muslims living within the UK according to the 2011 census. In addition, there were over 240,000 people of Arabic Decent living in the United Kingdom based on the same census. Of the Arabic population, more than 110,000 live within London a factor that would make targeting easier within London. Most of these people are students, businessmen and women and recent immigrants. On the other hand, there is no online platform that offers Arabic products within the UK. The potential for adequate demand and availability of supply is the fundamental idea behind the establishment of an online retail platform specifically for the sale of Arabic Merchandise. The opportunity Arabic online store The Arabic online store is a platform that is proposed to offer Arabic products fundamentally to Arabic students, residents and Muslims residing in the UK. In addition, the online store will also target any other person interested in Arabic products within the UK. The basic category of products on offer includes foods, clothes and electronics. The store will work like any other online store with capabilities for people to order for any of the products on offer online and after paying for the products, they are delivered to him/ her via royal mail. The online store will be open to all the UK residents but will specialize in the sale of Arabic products- this will be the most significant distinguishing factor from the other online stores. The products on offer will be sourced from different suppliers in Qatar and will be warehoused in Newark city from where they will be shipped to the customers who order for the products. The website will be hosted by ‘Godaddy’. Reasons for the selection of the opportunity The major reason for the identification of this opportunity is the availability of adequate demand created by the considerable number of Arabic students and workers based in the UK. In addition, the number is increasing rapidly in the last one decade. Despite the huge numbers, there still not enough Arabic stores in the United Kingdom. Further, there is no online store within the United Kingdom that specializes with Arabic products. This has created a gap between the demand and the supply of Arabic products within the United Kingdom. In addition to the huge population, the Arabic consumers are also high values consumers. This is based on the fact that they are known to have very specific yet unique tastes and preferences of products which are very distinct from the products offered in the UK market. In addition, the Arabic and Islam community is known to be very loyal in consumption of products that are Arabic due to religious or other reasons. For instance, foods such as dates and clothing such as Thawb (tunic) all have very huge religious significance. The supply of such products which are central to the Arabic and Islamic community is not fully exploited within the UK. The proposed Arabic products online retail store will make Arabic products more available to the identified communities regardless of location. Feasibility of the innovation The online store venture is very feasible. This is based on the fact that all the products on offer are readily available in the Middle East at very low costs. In addition, the channels of importing the products to the United Kingdom and subsequently delivering the products to the consumers are very advanced, effective and low costs. The fact that the proposed online platform will make the products accessible to very low costs makes the idea very feasible. The fundamental character that will set the business apart is its ability to offer Arabic products to the UK market at low prices and at the same time make the products more accessible to all the potential consumers. Simply put, online retail platform will offer Arabic products cheaper and closer to the Arabic community in the United Kingdom. Demonstration of availability of demand As mentioned earlier, the Middle Eastern population, the Arabic population and the Islamic population within the United Kingdom will form the basic market for the products offered on the online retail platform. To identify the specific number of these people and therefore the potential market size for the products, we will analyze the student and Islamic population within the United Kingdom. Number of Students in the UK from the Middle East The countries that form the Middle East include Bahrain, Israel, Kuwait, Jordan, Oman, Lebanon, Qatar, Saudi Arabia, United Arab Emirate, Syria, Yemen, the Palestinian territories, Iran and Iraq. According to the Higher Education Statistics Agency (2013), the number of students from the Middle East studying in the UK in the academic year 2012/2013 was 26,645 while that of the year 2012/2013 was 26,380. As of the 2012/2013 academic year, it indicates that there was a total of 26,380 higher education students from the Middle East countries studying in the UK. This was a 1.1% of the total student population. Among these, the number of undergraduate students from the Middle East was 12,355, while that of postgraduate students was 14,025 making up 0.7% and 2.6 % of the total student population at that level of study respectively. Number and Percentage of Muslims in the UK The 2011 census of UK revealed that the Muslim population has been on the rise in the past ten years. As of the census, the number stood at 2,706,066 million, which was 4.8% of the whole UK population (Office for National Statistics, no date). This was a 2.7% rise from the 2001 census, which indicated that the Muslim population in the UK was 1.6 million. The statistics go on to indicate that the Muslims had the youngest age profile, with the Daily mail reporting that, in every 10 children below four years of age, one is a Muslim. About one third of the Muslim population is below the age of 15 years (Davies 2014). About 17% of the Muslim population is between 16 and 24 years of age with 290,000 Muslims being between 9 and 14 years of age. 320,000 children between 0 and 4 years of age were Muslim according to the 2011 census. This supports the young profile of the Muslim population. According to statistics, the number of Muslims in various cities, in the UK, has been on the rise, for example, in Manchester the number rose by 43,700, in Bradford, the number rose by 53,800 and in Birmingham, the number rose by 93,400. However, London has the highest number of Muslims in the UK. The UK has 136 Muslim schools and 1, 600 mosques to serve the Muslim population (Ali 2013). Figure 1.1 Census Year Muslim Number UK Population % of Total Population Muslim Schools Number of Mosques 2001 1,600,00 52,042,000 3.07% N.A 614 2011 2,706, 066 62,369,00 4.80% 136 1600 The population Purchasing power Apart from the population size, another good indicator of the availability of the market is the purchasing power of the identified population. First, it is worth noting that the products the online retail platform plans to offer are consumer products such as food, clothes and electronic. Most of the products will be necessity commodities and therefore the population will only be faced with the choice on whether to consume Arabic commodities or not and not whether to consume the products at all. Additionally, the population identified above has a purchasing power equal or above the UK average purchasing power. Despite there being no data to point to this fact, it is generally identified that students have comparatively more disposable income. In addition, businessmen are also likely to have a purchasing power more or equal to the average UK population. Therefore, bearing in mind that the biggest proportion of the identified population is composed of students and businessmen and women, it is possible to conclude that the population has a purchasing power that is equal or above the UK averages (Binder, Dijker Otte & Co., 2007). Analysis of the demand Based on the population size identified above and the fact that the population is likely to have a purchasing power equal or above the UK average, it can be concluded that the identified population is capable of demanding the products and services that will be offered by the online retail platform. This idea is reinforced by the fact that trends show that the population is growing and is likely to continue growing in the near future. Additionally, the Arabic culture of consuming Arabic products will influence the demand for the Arabic products. There is, therefore, justified demand for Arabic consumer goods within the United Kingdom. Plan for launch and growth Pre-launch To make a huge impact in a short time, the business will undertake vigorous marketing- online, digital and print media marketing, before the launch. Most of the marketing campaigns will be targeted towards the niche markets. This will create awareness and suspense among the potential customers. During Launch At the period of launching the product, the business will undertake numerous expos both online and physically especially targeted towards specific potential customers for instance students and known Arabic neighborhoods. This will give consumers the opportunity to try both the website and the products on offer. After Launch After the launch period, the business will continue with targeted marketing strategies in the short term. However, to widen the scope of consumers and achieve diversification, the businesses will continually pursue online market and broaden the scope of targeted consumer groups from Arabic populations to non-Arabs and continually to new markets in Europe and eventually the whole world. Growth strategy After launching the products and services in the UK target primary customers, the business will seek to grow by diversifying product offering for the primary audience, diversification of the customer groups to include; non- Arabic populations within the UK, Arabic and non- Arabic populations outside the UK, and through pursuing market penetration to gain a bigger market share especially in the retail of Arabic products both within the UK and all over Europe. Marketing and sales plan SWOT Analysis Opportunities Arabic products retail market is unexploited Currently, the supply of Arabic products within the UK has not been fully exploited. There are only a few shops in London and Manchester that offer these products. This offers the company a chance to exploit these available opportunity. Potential for growth The business model suggested for the online shop offers the best opportunities for growth. In addition, the population of the people who form the primary target is also expected to grow rapidly in the future. The two factors coupled together gives the company a very big opportunity to grow. Little competition There is very little competition especially in the supply of the identified Arabic products. This is because a considerably small number of suppliers who offer the products in the market today as identified earlier. Threats Potential for limited growth The growth of the business may be greatly affected by the growth in the Arabic population in the UK. This is because the business is primarily reliant on the Arabic population in the UK. Rapid changes in technology may negatively affect growth Online based businesses have to be in the forefront in innovations. They have to exploit online platforms including marketing platforms. This requires very huge investments in both technologies and talented human resource. If not well predicted and adopted, changes in technology may make the investments obsolete. Strengths A strong business model The business model is very strong and has the potential to make the company break even in a short period of time and eventually grow rapidly. It also allows the company to cut a lot of operation costs and therefore increase the profit margins. Low operational costs The cost of doing business is comparatively very low compared to other models for instance setting up shops all over the UK. In addition, the initial cash outlay is considerably small. This savings will allow the company to avail goods at considerably lower prices and therefore will greatly fuel its growth. Availability of technology and talents The technology and the talent required to run the business are readily available within the UK. Therefore, the company can invest in the best websites and online technology and talent to stay ahead of its competition. Weaknesses Need to maintain a highly innovative workforce The success of an online venture is heavily dependent on the success of the business in attracting and maintaining a highly innovative and creative workforce. The costs of doing so will be very heavy especially during start up. Operation costs versus service delivery At the initial stages, balancing between reducing costs and providing quality and effective service is hard. Marketing matrix Product improvement The business will seek to gain competitive advantage through product improvement. The business will offer the products at the lowest prices and very conveniently. Market penetration The business will continuously seek to grow its market share through entry into completely new markets. Market development The basic marketing strategy will be customer targeting and market segmentation strategies. The business will primarily target Arabic customers in the UK. The target market will further be segmented to achieve clear targets among the Arabs for instance by segmenting the student population as a niche market (Luther, 2001). Diversification A longer term marketing strategy will involve diversifying both the product offering and the market for the products. The products on offer will progressively be increased while at the same time targeting non-Arabic customers in the UK and other Arabic customers in other parts of Europe. Figure 1.2 Market penetration Continuously seek to grow the market share. Product development Gain competitive advantage through offering Arabic products at the lowest prices most conveniently. Market development market segmentation customer targeting strategies Diversification continually increase product offering and the target market to include non-Arabs and other European markets Product mix The basic products that the company will offer for retail include; 1. Food and food stuffs 2. Clothing 3. Electronics The range of specific products on offer will not be limited. They will fundamentally include Arabic consumer products and any other products demanded by the customers. It is worth noting that the online platform will allow users to order for any range of products. Pricing The company will offer its products at a lower price compared to all its other competitors as a way of attracting customers. This will be enabled by the fact that the company minimizes costs. Place The business is primarily set for the UK customers. However, there will be no physical retail outlets. All the supply operations expect warehousing will be conducted online. The delivery of the ordered products will be done primarily through Royal mail. Promotion The business will widely use online marketing platforms to market its products. This platform will include targeted social media marketing among other online platforms. In addition, television adverts and digital print media will be used to create awareness among the consumers. Marketing Communication The business will primarily use online marketing media as the fundamental way of communication to the customers and potential consumers. The primary platform will be social media marketing. In addition, Television, digital and print media and expos platforms will be used to compliment online marketing platforms. Operation plan Sales order process Potential customers will shop for the products on offer online. After identifying a product that a customer requires, the website will allow the customer to add the product on a virtual cart. The customer can add a limitless number of products on the cart. The products are then prepared for shipping after the customer makes an online payment through any of the online platforms. The products will be shipped through royal mail. The payment will be effected once the customer confirms receipt of the products. Human resource plan The company will have a very talented and innovations driven workforce at all times. To attain this, the company will develop creative job positions, offer very attractive pay packs, and offer in job training and development opportunity at all times. To identify the staff, the company will administer the aptitude test to the potential employees. Organization structure The company will maintain a decentralized hierarchical structure. This is so as to spread the decision making power to as many employees is possible to spur creativity and innovations. The company will further organize teams according to the roles and the product lines. Motivations and rewards In addition to attractive remunerations, the company will offer direct financial benefits, indirect financial benefits and non-financial benefits in order to attract and maintain a motivated workforce at all times. Direct financial benefits will include pay and skills based pay; indirect financial benefits will include the social benefits that are not necessarily required to be offered legally while non-financial benefits will include the creation of an environment that motivates employees by allowing space for growth and innovations. In addition, the company will give much emphasis and offer incentives that encourage team work. A specific additional reward will be offered to enhance innovations. An individual or department that comes up with an innovation that helps the business grows. Financial plan The following is the financial projection for the business for the next one year; BUSINESS PROJECTED PROFIT AND LOSS STATEMENT Period:   Daily Weekly 4 weeks Year 1 Sales target (units)   100 700 2,800 36,400 Average order (£)   10 10 10 10             Sales income:   1000 7000 28,000 364,000             Variable costs:           Food   160 1,120 4,480 58,240 Clothing   80 560 2,240 29,120 Electronics   20 140 560 7,280 Delivery   30 210 840 10,920 Total   290 1,960 2,030 105,560 Gross profit:   710 5,040 25,970 258,440 Fixed costs:           Wages*   224 1,568 6,272 81,536 Rent   70 490 1,960 25,480 Rates   20 140 560 7,280 HLP   30 210 840 10,920 Insurance   20 140 560 7,280 Marketing   100 700 2,800 36,400 Loan refinancing   20 140 560 7,280 Other costs   20 140 560 7,280 Total   504 3,528 14,112 183,456 net profit:   206 1,512 11,858 74,984             Gross profit margin   0.59 0.59 0.59 0.59 vc per unit   2.9 2.9 2.9 2.9 Net profit margin   0.10 0.10 0.10 0.10             Breakeven sales value (£)   753 5,271 21,084 274,092             Breakeven volume   85 598 2,391 31,080 Break even analysis From the Profit and loss statement above, the break even volume and sales 85 units and 753 pounds respectively. This means that, with the company’s targeted sales volume of 100 units per day, the business covers for all its costs of operations and make a small profit as shown in the figure above. Initial cash outlay The amount of initial investment required will include the costs of setting up a website, the cost of acquiring initial stock, the cost of hiring staff among other administrative costs, and working capital requirement. Sources of funding The basic sources of funds will be personal savings. In addition, the business will enter into agreements with suppliers with the aim of creating debt financing. Any additional, funding requirements will be sourced via short term loans and overdrafts from banks. Use of online technology The proposed business will be based online. The only physical infrastructure that will utilized by the business includes the warehouse and administration offices. The following are the online technologies that the business will use; Website The business will be hosted on a website which will allow customers to shop for the available range of products and place orders. The website will be hosted by Godaddy. The proposed website will have a simple and easy to use interface, search box, allow shopping by criteria, product lists, wish lists, online payment systems icon, contact information, shopping carts, login, check out links among other features. Despite all that, the website will be kept as simple as possible. Emphasis will also be given on the website appearance and search engine optimization. The website will have a distinctive Arabic appearance complete with Arabic language capabilities. Social media marketing There are numerous ways of advertising online. The business will utilize as many platforms as possible to ensure it achieves a faster impact and uptake. Of all the platforms, social media marketing will be the most utilized. 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