Perspectives of Apparel Retail Stores Development - Example

Business plan: Apparel Retail store

• Introduction

Known for its rich sense of fashion, the UK market is one of the largest fashion destinations in the world. Starting from designer to casual wear, the UK market is known for its exquisite sense of fashion.. The UK apparel and footwear retail industry has evolved and consumption has increased from what are known as the fast fashion retailers. The fast fashion retailers are known for their low prices and rapid stock turnaround (Berg, 2011). The consumers want to keep their wardrobe updated with the latest fashion trends.

In this paper, a business plan has been provided to establish an apparel retail store that offers shirts as its basic product. An analysis will be provided on the steps needed to start a business and to sustain in the long run.

• Literature Review

Planning a business requires the entrepreneurs to go through every aspect of the business before starting it, understanding the risks and the points of failure. Entrepreneurship is the ability and the willingness to develop a business , organise it and manage it, by considering all its risks(Stokes et al., 2010).

Entrepreneurship leads to a process that transforms the society and market and creates value for an individual (Stokes et al., 2010).

The following are the main features of entrepreneurship (Stokes et al., 2010):

• The environment which leads to entrepreneurship
• People who are engaged with it
• The behaviour which entrepreneurs display
• Creation of organisations
• Finding the opportunities and exploring them
• Innovation that is radical, transformative and incremental
• Understanding the risks at all levels of the social, personal and organisational level.
• Adding value to the society

Strategic planning can help the business in analysing the market and they developing a proper path following which the business can be established (Stroh, 2014). This helps the entrepreneur in developing an idea about the market, the competitors present in it, the risks involved with the market, the investments required to function in it and if the business plan is feasible enough to endure in the market n the longer run (Stokes et al., 2010). Strategic planning has morphed over the time, but it is basic agenda has remained unchanged, that is, to help the entrepreneurs in creating a feasible plan and structure for their businesses (Stroh, 2014).

Industry Analysis

Understanding the market is the primary step before starting any business. This will help in providing an insight into the market, and help in understanding the factors that are responsible for it to properly function in the market.

• • Micro Market:

Performing a basic market research always helps the company in understanding the market before it steps into it. This is particularly helpful in understanding the customer needs, preferences and demands. This also helps the company in understanding the customer expectations and generating a rough idea about the

The GDP of United kingdom in the last 10 years has only grown each year. The following graph shows the growing trend in GDP.

Image 1: Growing Trend of GDP in UK

(Source: Statista, 2016)

The growth trend shows that the economy in London UK is on a constant rise. The GDP per capita PPP was recorded the highest in 2007, when it was $38164.02. In 2014, it was 212 percent of the world’s average. This immense growth of the economy only shows the extent to which the market provides an opportunity to grow and the capability and willingness of people to buy new products (Trading Economics, 2016)

Image 2: GDP per Capita PPP

(Source: Trading Economics, 2016.)

The total value of the UK retail industry was 339 Billion Pound in the year 2015, with 290,315 retail outlets across the country (Retail Economics, 2016).Having a substantial influence on the economy, the UK retail industry is fast growing and employs a significant part of the UK population. As per 2015, around 2.8 million people were employed in the industry which is around 75% of the total working population (Fashion United, 2016).

Maddox Street is one of the trendiest corners of the city of London. Known for its fashionable crowd, lively events and one of the most sought after office venues, this avenue has a huge crowd of office goers passing by every day. Starting the retail store here will not only provide a constant footfall that is required to maintain a daily average sale in the shop, but will also provide ideas about the latest fashion and demands of the customers. As, the retail store will be dealing with only shirts (men and women), the target segment in the beginning will be office goers, in the age group of 25-55. Later, as per demands and response of the market, the store can expand its product range to accessories or other apparel categories.

• • Gap

Service quality is one of the important points associated with both public as well as private sectors. This is associated with the extent to which any particular service given by any organization able to meet the expectations as well as needs of the consumers (Zahari et al., 2008; Shahin and Samea, 2010). In past two decades, service quality has become a main area of consideration to for various organizations mainly due to its significant influence on ROI, level of consumer satisfaction, gaining high profit and customer loyalty and lowering the operating cost for the organization itself (Seth and Deshmukh, 2005).

According to Seth and Deshmaukh (2005) here are few common GAP associated with any industries:

Gap 1: This type of gap arises when the service provider or the management has a wrong perception about what the customer wants whereas there is a different expectation about the service in the minds of the customers. In this case, a gap can arise if there is a wrong perception about the services that the customers expect in the retail store.

Gap 2: This gap is faced when the management perception about the customer need is correct but the service being provided is not as per the industry standards. An example in context of the retail shirt store is that the perception of the management that the people would prefer to have something to drink in summer is correct, but instead having a facility of soft drinks, they just offer regular water may not be meeting the expected service standard.

Gap 3: This gap represents the breach between the specification of service promised and the actual service provided. In context of the retail store, this can be unavailability of the stock that has been advertised.

Gap 4:The way the representatives speak of the offering of the brand, helps build an expectation in the minds of the consumers. Here difference between the expectations of the customers and the service offering is represented. In this case, this can be the difference in the quality of fabric or price of the shirts that was mentioned and the expectation of the customers built on the basis of what was communicated to them.

Gap 5: This is the type in which the customer misinterprets the quality of service that was provided. The customers may misinterpret the service being provided in the retail stores. For example, the retail store may keep a record of every customer to ensure that they get a personal care, by keeping in touch with them, but the people may take it as a promotional technique.

• Give regards while the customers are leaving and invite them to revisit.

The Competitive Start Fund (CSF) is aimed at providing support to high potential start-ups. The following are the steps to successfully apply for fund (Psantoro, 2016).

• To start with, it is important to register with the revenue commissioners and get a tax registration number.
• The second step is to get a general tax clearance certificate from Revenue Commissioners. Every business is entitled to this certificate if the business is up to date.
• Getting a bank account is another important step.
• Memorandum and Articles
• Getting a lawyer.
• Identify verification documents
• Statutory books

• • Care Model

American and European literature emphasizes the role of faith-based organizations in the sphere of social, educational, medical services etc. which resultant in the development of faith oriented social initiatives in the organization. This feature is evident from various characteristics such as mission and vision of the organization, source of fund for development and expansion of the businesses well as handling of available human resources (Wagner, 2008; Chavez and Wineburg, 2008; Cojocaru, et al., 2011; Sandu,2011). Based on this concept CARE model is being designed which is associated with following four points

• Consecutiveness: In context of the shirt store, all the available connection has to be used. For example, if there is anyone in contact who has experience in apparel retail industry, that person has to be contacted.
• Aspiration: This is the stage, where we find if the business is interesting enough. The person starting the shirt store needs to find out if the business is interesting and will run for a long time.
• Risk Toleration: At this stage it is decided how much risk the shirt store business will be able to take.
• Expertise: The management is organising people and events. Proper training should be acquired in managing apparel retail store.

• • 7 SM Model:

The 7 SM model consists of the basic questions that helps in forming the business model. In case of the retail store, the 7 SM model will be described as below:

• Who?

The target customers are office goers in the age group of 25-55 years.

• What?

The plan is for setting up an apparel retail store, dealing with shirt.

• Why?

The growth opportunity is very high in the apparel retail sector.

• When?

The project will be started as soon as the funds are available, in around 6-7 months.

• Where?

Location chosen for the project is Maddox Street, London.

• Which?

The main product will be shirts for both men and women.

• How?
  • At this stage the business plan is formed by the retail shirt store. An Engine diagram explains this process clearly.
  • Engine Clock diagram:

For the apparel retail store, the following will be the procedure for starting the business and running it:

• Finding a suitable location to open the store:
• Connecting the required supplies: electricity and machinery
• Selecting the right people to work for the store
• Selecting the required equipments
• Selecting the raw materials
• Promotion of the shirt store
• Training the staff
• Preparing for the order customer orders.
• Staff will apply for the customer fitting process.
• Staff will apply for the customer need and questions process
• Bill is given and feedback is received
• Macro Analysis

It is important to understand the external environment in which a company functions, in order to deal with the risks that the market offers. The PEST analysis provides the factors that the external environment functions (Thomas, 2007).

• • PEST Analysis:

PEST analysis framework is helpful to provide a detail understanding about various key external factors which the organization cannot control but can change their strategies to counter the effects of those factors and the changes associated with the same (Thomas, 2007). Without information of the major drivers for change, decisions related to business policy or strategies can be less effective and in long run can hamper the business performance as well (Lunn, 2010). The major external factors are:

Image 3. PEST Analysis

(Source: Author’s Creation)

• • Porter’s Five Forces:

Porter’s five forces determine the competitive environment of the industry in which the company functions (Roy, 2011).

Image 4. Porter’s Five Forces Model

(Source: The Data Group, 2013)

Image 5: Porter’s 5 Forces: Industry Analysis

(Source: Author’s Creation)

• Primary Market Survey:

Basic market research is very important for understanding the standards of competition in the market (Beall, 2010).

In order to understand the customer preferences of shirts and to get an idea of the services that people expect at the retail stores, a survey was conducted. A sample size of 30 was chosen and these people were given a questionnaire to answer (Refer Appendix 1 to 6).

• Business plan

The following business plan has been provided based on the above analysis.

Competitive analysis: The apparels market in London is highly competitive. With major players in the market like H&M, Tesco, Debenhams, Marks and Spencer etc. ruling the market, people have a high inclination towards big brands. Also, they usually want their wardrobes to be upgraded with the latest trends.

• • Segmentation, Targeting and Positioning

• Target market: The target market is chosen to be office goers, both men and women. The ideal age for the target market will be 25-55 years. The location selected is Maddox Street, which has a large number of fashionable office goers passing by every day. This will ensure a good number of footfalls of the target customers and increase the probability of sale.
• Segmentation: Demographic segmentation is used here. The office goers between the age group of 25-55 are the potential customers.
• Positioning: Shirts, which are the primary products offered at the store, are positioned as low price and high quality in the market.

• • 4 P’s analysis

• Product: To begin with, the main offering of the retail store will be shirts, for both men and women in formal as well as casual categories. The company can later expand into apparels and accessories, depending upon the response of the target market.
• Promotion: Various methods of promotion that can be used are sales, seasonal discounts, online promotion, television advertisements, newspaper advertisements holding events at public places etc.
• Pricing and Quality control: The company should use competitive pricing strategy, as there are many big players in the market. Also, providing the customers with good quality products will define its standard in the market, which will ensure repeat purchase, later.
• Place: The place where the store will be located is chosen to be Maddox Street in London. Reason for choosing this place is easy availability of the potential customers.

The following are important factors that have to be implemented in the store.

• Interiors and Merchandising: Interiors and merchandising are other important factors to lure customers into the store. The company should design the store keeping in mind the target market and their needs. For example, categorising the shirts on the basis of colour and size will help the customers in looking for products on the basis of their preferences of colour or size.
• Competitive advantage: In the fashion industry, production lead-time gives an effective competitive advantage.
• The reduction in production Lead-time.
• Low cost. The customers always appreciate low- priced good quality products.
• Economies of scales: Dealing with suppliers who will be ready to provide discounts on large volume purchases.
• Quality: Focusing on the quality of the products can develop another competitive advantage.

• Service: The in store services that the company can provide are efficient and aware staff that would be able to help the customers with their queries in an effective way, facilities for the people who accompany the shoppers, to relax. Constant assistance with the products and style advisors who would guide the customers with their purchases, a return desk where the customer should be able to return the product if they are not satisfied and the return falls under the terms and conditions of the company.
• Business Strategy

Porter’s Five Forces, PEST analysis and GAP, the business strategy is formed for the shirt retail store. These models are used as they provide a detailed understanding of the external environment in which the company functions and provide an analysis of the service GAP that may provide an opportunity to its competitors.

The London market is highly competitive and the threat of substitution is high there, but it is equally favourable for the business because of its low supplier bargaining power.

First important step is to analyse the market and what its requirements are. Also, developing an approach towards the competitors and creating a sustainable competitive advantage is important here. The shirt retail store may focus on the quality of the fabric and try incorporating new designs into its products.

The next stage is placing the products in the market, keeping the competitors in mind. The company should focus on positioning itself as the low cost player. The company should also try to maintain standard of the services being provided in the retail stores in order to reduce the service GAP that may lead the competitors to take benefit of it.

• Budget and Finance
  • Budget:

Image. 6

Set Up cost

Image. 7

Maintenance Cost

Image. 8

Advertising cost

Total Budget=265100 +79200 +5500=349800 pounds

• • Finance

Table 1: Projected Cash Flow Statement

Beginning

Q1

Q2

Q3

Q4

YR1

Q1

Q2

Q3

Q4

YR2

TOTAL

Cash on hand (beginning of month)

0

136,985

140,785

139,585

107,880

107,880

113,680

137,480

158,060

181,060

CASH IN

Capital

349,800

349,800

0

Cash sales

8485

30,000

35,000

24,495

12,000

30,000

26,780

29,200

187,475

TOTAL CASH RECEIPTS

358,285

30,000

35,000

24,495

0

12,000

30,000

26,780

29,200

0

537,275

Total cash available

0

358,285

166,985

175,785

164,080

107,880

119,880

143,680

164,260

187,260

181,060

CASH OUT

Rent

0

0

Equipment #1

150,000

150,000

Equipment #2

8,000

8,000

Equipment #3

7,000

7,000

0

Staff (skill #1)

2,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

16,000

Staff (skill #2)

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

8,000

Staff (skill #3)

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

8,000

0

Raw materials #1

50,000

20,000

30,000

50,000

150,000

Raw materials #2

0

Raw materials #3

0

Miscellaneous

2,300

2,200

2,200

2,200

2,200

2,200

2,200

2,200

17,700

SUBTOTAL

221,300

26,200

36,200

56,200

0

6,200

6,200

6,200

6,200

0

364,700

TOTAL CASH PAID OUT

221,300

26,200

36,200

56,200

0

6,200

6,200

6,200

6,200

0

364,700

Net Cash (Surplus or Deficit

0

136,985

140,785

139,585

107,880

107,880

113,680

137,480

158,060

181,060

181,060

(Source: Author’s Creation)

Image.9

(Source: Author’s Creation)

• Break Even Units

Break Even Points in Units = Fixed Cost /

(Sales Price per Unit- Variable Cost per Unit)

Let the approximate value of sales price per unit be: 3 Pounds

Lat the variable cost per unit be: 1.5 pounds

Break Even Points in Units =265100 / 1.5 = 176734 Units

• Payback:

The company initially invested 349800 pounds.

Assuming the yearly cash inflow to be:

Year Amount Cumulative Cash flow

0 (349800) (349800)

1 100800 (249000)

2 200000 (49000)

3 250000 201000

Payback period:

=2 +(49000/ 250000)

=2 +0.19

=2.19 Years = 2 years approximately

• Risk Analysis:

There are a number of financial risks involved with operating in a particular market. Those are

• Market risk: In this type of risk, there is a fluctuation in the prices of financial instruments. In this case, the company can face risk of fluctuation in the price of stocks, bonds etc.
• Credit risk: Credit risk refers to the inability of the borrower to pay back the borrowed amount. The apparel retail company can face credit risk when the suppliers are unable to pay back the borrowed amount.
• Liquidity risk: This is the type of risk in which an asset cannot be bought or sold quickly. The company can face this type of risk, if it possesses any asset which cannot be liquidated in the market easily.
• Operational risk: This type of risk occurs due to any failure in the operation of the company. In this case, for example, any failure to replace the stock on time can be considered to be an operation risk.

• Recommendation

The retail store can take the following steps to improve its business and survive in the market in the long run:

• Though the store is dealing only with shirts, it should keep itself updated with all the latest trends in the fashion. Also the designers should try to incorporate new latest designs into the shirts.
• Finding ways to benefit from economies of scale will help the company in pricing the shirts at the lower range, finally benefiting the customers.
• The customers’ service at the store should be well trained in order to effectively solve the problems and queries of the customer.
• Providing other services like guiding the customers in choosing a style that will suit them will also help in enhancing the business.
• Conclusion

Entrepreneurship is the process of starting something that transforms the society and the individual. The market of London has experienced good economic growth and political stability since the beginning of time and provides a perfect opportunity for the business to grow. London market is highly competitive and the shirt retail store must develop an effective competitive advantage in order to sustain in the market in the long run. The paper provides an analysis of the market condition in London. Also, strategies are developed for the retail store to function properly in the market and survive there. Finally, recommendations are provided to further develop the retail store and improve its performance.

• Reference List

Beall, A. E., 2010. Strategic Market Research: A Guide to Conducting Research that Drives Businesses. Bloomington: iUniverse

Berg, A., 2011. Fast fashion: Navigating the global apparel market. [PDF] Mc Kinsey and Company. Available at: < https://www.mckinseyonmarketingandsales.com/sites/default/files/pdf/global_apparel_market_fashion_international.pdf> [Accessed 13 June 2016]

Cojocaru, D., Cojocaru, S., and Sandu, A., 2011. The Role Of Religion In The System Of Social And Medical Services In Post-Communism Romania. Journal for the Study of Religions and Ideologies, 10 (28), pp. 65-83.

Fashion United, 2016. UK Fashion Industry Statistics.[Online] Available at: < https://fashionunited.uk/uk-fashion-industry-statistics> [Accessed 13 May 2016]

Lunn, E.M.T., 2010. An exploration of the relationships between specific political, economical, social and technological factors and greenhouse gas emissions produced by the Pulp and Paper Industry in the United Kingdom from 1990 to 2006. Earth & Environment,5, pp. 1-39

Psantoro, 2016. Enterprise Ireland’s Competitive Start Fund (CSF) – 7 Key Tips. [Online] Venture Legal Services. Available at: < http://venturelaw.ie/2013/12/04/enterprise-irelands-competitive-start-fund-csf-7-key-tips/> [Accessed 13 May 2016]

PWC, 2016. UK Economic Outlook - March 2016. [Online] Available at: < http://www.pwc.co.uk/services/economics-policy/insights/uk-economic-outlook.html> [Accessed 13 May 2016]

Retail Economics, 2016. UK Retail Stats and Facts. [Online] Available at: < http://www.retaileconomics.co.uk/library-retail-stats-and-facts.asp> [Accessed 13 May 2016]

Roy, D., 2011. Strategic Foresight and Porter's Five Forces. Munich: GRIN Verlag

Sandu,A., 2011. Organizational Spirituality. Comments on C.A.R.E Model for Organization Development & Transformation. Social Research Reports, 19, pp. 103-115.

Seth, N. and Deshmukh, S.G., 2005. Service quality models: a review. International Journal of Quality & Reliability Management, 22(9), pp. 913-949.

Shahin, A. and Samea, M., 2010. Developing the Models of Service Quality Gaps: A Critical Discussion. Business Management and Strategy , 1(1), pp. 1-11

Statista, 2016. Gross domestic product at current market prices of the United Kingdom (UK) from 2000/2001 to 2014/2015 (in million GBP). [Online] Available at: < http://www.statista.com/statistics/281744/gdp-of-the-united-kingdom-uk-since-2000/> [Accessed 13 May 2016]

Stokes, D. R.,Wilson,N. and Mador, M., 2010.Entrepreneurship . Andover: Cengage Learning EMEA

Stroh, P.J., 2014. Business Strategy: Plan, Execute, Win! New Jersey: John Wiley and Sons

The Data Group, 2013. Business Intelligence Data Source. [Online] Available at <http://www.data-group.com.au/business-intelligence-data-sources> [Accessed on 13 June 2016]

Thomas, H. 2007. An analysis of the environment and competitive dynamics of management education. Journal of Management, 26 (1) pp. 9-21

Trading Economics, 2016. United Kingdom GDP per capita PPP. [Online] Available at: < http://www.tradingeconomics.com/united-kingdom/gdp-per-capita-ppp> [Accessed 13 May 2016]

Wagner, A., 2008. “Religion and civil society, a critical reappraisal of America’s civic engagement debate”. Nonprofit and Voluntary Sector Quarterly, 37 (4), pp. 625-645.

Zahari, W., Yusoff, W., and Ismail, M., 2008. FM-SERVQUAL: a new approach of service quality measurement framework in local authorities. Journal of Corporate Real Estate, 10 (2), pp.130-144

• Appendices

Appendix 1

Formal & Casual Shirt Preference between Male & Female Workers

(Source: Author’s Creation)

Appendix 2

Regular & Branded Shirt Preference between Male & Female Workers

(Source: Author’s Creation)

Appendix 3

Number of Purchases Made between Male & Female Workers

(Source: Author’s Creation)

Appendix 4

Graph 4

Pre, Early, Mid & Old Workers Response in Relation to Product, Packaging & Service

(Source: Author’s Creation)

Questionnaire

Appendix 5

S

Seven Questions

Answers- tick or cross?!

Other thoughts and ideas

After giving the Welcome script above, give an introduction to the interview?:

Circle answers for speed!

Possible answers

Possible answers

1

Do you prefer branded formal shirts over regular ones?

YES

NO

2

How many times in a month do you buy shirts?

Refer TAR

Refer TAR

3

Was the last shirt you bought a formal shirt or a casual ?

Formal

Casual

4

Do you find the background music at the stores to be relaxing while shopping?

YES

NO

5

Do you like the quality of the shirt that you bought?

YES

NO

6

Does the customer care at the stores handles your queries effectively?

YES

NO

7

Any suggestions?

Refer Appendix 6 below

Refer Appendix 6 below

Appendix 6

i) List and number of the interviewee questioned

ii) Male or Female observation

iii) Interviewee’s observed age: PEMO; Pre Worker: Student; Early Worker: 20-30yrs; Mid Worker: 30-50; Old Worker: 50-70

iv) Do you prefer branded formal shirts over regular ones?

v) How many times in a month do you buy shirts?

vi) Was the last shirt you bought a formal shirt or a casual ?

vii) Do you find the background music at the stores to be relaxing while shopping?

viii) Do you like the quality of the shirt that you bought?

ix) Does the customer care at the stores handles your queries effectively?

x) Any suggestions?

#

M/F

PEMO

Y/N

#?

Last?

Packaging

Product

People

Any other

i)

ii)

iii)

iv)

v)

vi)

vii)

viii)

ix)

x)

1

M

E

Y

4

Formal

Y

Y

N

Free WIFI within the store

2

M

E

N

2

Casual

Y

Y

N

Free WIFI

3

F

P

N

3

Casual

N

N

Y

Kids playing area

4

M

M

Y

7

Formal

Y

Y

N

Designers for suggesting styles

5

M

E

N

1

Casual

N

N

Y

Tailors for fitting

6

M

O

Y

2

Formal

Y

Y

N

Free snacks

7

F

O

N

6

Casual

N

N

Y

Tailors for fitting

8

F

E

Y

5

Formal

Y

Y

N

9

M

M

N

4

Casual

Y

N

Y

10

F

P

Y

3

Formal

Y

N

N

11

M

P

Y

2

Casual

Y

N

N

12

M

E

N

3

Casual

N

Y

Y

Free wifi

13

F

M

Y

4

Formal

Y

N

N

14

M

O

Y

1

Casual

N

Y

Y

15

M

M

N

6

Casual

Y

N

N

Experts for suggesting styles

16

F

P

Y

3

Formal

N

Y

Y

Tailor for fitting

17

M

P

N

1

Casual

N

N

Y

18

F

E

N

2

Formal

N

N

N

Kids’ play zone

19

M

M

Y

3

Formal

N

Y

N

20

M

O

N

1

Casual

Y

N

Y

Kids playzone

21

M

M

N

6

Formal

N

N

N

22

F

P

Y

6

Casual

N

Y

N

Knowledgeable customer care

23

M

M

Y

3

Casual

N

N

Y

24

M

E

Y

1

Formal

Y

N

N

25

M

O

Y

4

Casual

N

Y

N

26

F

E

Y

4

Formal

Y

Y

N

Free wifi within the store

27

M

E

N

2

Casual

Y

Y

N

28

F

P

N

3

Casual

N

Y

Y

Kids playing area

29

F

M

Y

5

Formal

N

Y

Y

30

M

P

Y

1

Casual

Y

N

N