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Hardware Retail Franchise Sample Business Plan

Your hardware retail franchise will be off to a good start with a business plan similar to this example.

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Hardware Retail Franchise Business Plan

Executive Summary

Last year Wilusa Magazine surveyed current downtown residents and found that hardware stores are one of the top ten things needed to make downtown a great place to live.  The same reasons that make downtown a great place to live also make it a great place to work.

The demographics of home ownership have changed radically in downtown Indianapolis.  Today’s hardware store, which more and more is dominated by the “big box stores”, is cold, uninviting, and usually involves substantial driving time from downtown Wilusa.  Hisarlik Hardware is uniquely positioned to take advantage of this new fact of life.  Conveniently located to serve the Troas, Sinope Bay, Miletus Square, and Lycia areas, as well as all of Arazawa Township, Hisarlik Hardware offers parts, materials, and advice to tackle any home or do-it-yourself (d-i-y) project, whether the customer is a complete novice or a contractor.  The focus is on helping the customer identify what they want and need as soon as they enter the store.

Through the use of superior personal customer attention, great product selection, and reasonable prices, Hisarlik Hardware will capitalize on this promising opportunity.  A location is being secured that offers excellent traffic with a built-in magnet for urban dwellers–downtown’s only grocery store sharing the parking lot.  The Building Blocks parent organization will help efficiently lay out and plan the store to increase sales and give the customers the utmost in attention.  Hisarlik’s management team has a wealth of business, financial, and mechanical experience that will ensure a great investment and the overall success of the venture.  The projected growth rate for Hisarlik Hardware is quite steady and has the potential to grow exponentially along with the increase in residential development downtown.

Hisarlik Hardware will produce positive cash flow its first year of operations.  Hisarlik will also produce a net profit in its first year of operations.

1.1 Objectives

There are four major objectives of this business plan, of which three are immediate and the fourth is of a longer-term nature.

  1. Determine the feasibility of a downtown hardware store.
  2. Develop the strategy to open, manage and grow a profitable downtown hardware store venture.
  3. Establish a firm budget to operate and manage the business from concept to start up to operation, with good cash flow and consistent profits.
  4. Explore potential growth in downtown market and evolve new sources of business.

1.2 Mission

Hisarlik Hardware’s mission is to create a downtown hardware store that is reliable and convenient.  A store that offers great service and selection of hardware and home improvement products in a customer friendly environment.

Hisarlik Hardware will cater to downtown residents, downtown property managers, downtown businesses, contractors, and suburban commuters.  Our customers will become loyal because of the great advice, prompt service, good staff attitudes, the overall quality of the shopping experience, and the fact that we consistently have solutions for their needs.

1.3 Feasibility of the Business

Hector Priamson and Troy Enterprises went through a long and thorough process of looking at different business ventures that would allow them to go into business and be a long-term success.  Through this process retail hardware became a potential opportunity.  The following items are considered “must have” items in order to make Hector Priamson and Troy Enterprises not only feasible, but a tremendous success.

An industry that is healthy, resistant to economic swings, and allows an entrepreneur to influence the stores results.
A market that can deliver the kind of potential that will allow a store to be profitable.
A store location that will be easy for customers to find, allow easy access, plenty of parking and have economic terms that allow the store to be successful.
A successful and cooperative “partner”, such as Building Blocks, a national hardware co-operative, that will help research, plan, market, and operate a hardware store.
A financial package that would allow the business to begin operations and operate in terms that would be realistic and successful for all involved whether it was private investors or the bank.
Participants must possess the business skills, a strong work ethic, and a level of competitiveness required to make the business a success.

Building Blocks provides all of the tools and Hector Priamson possesses the financial, entrepreneurial, mechanical, and management skills needed to be successful in this business.

1.4 Keys to Success

  • Hardware Industry:  The Home Improvement industry has been consistently growing at a rate of 7% per year for the past decade according to the US Department of Commerce, with total US Sales of over $313 billion in 2002. While the economy has fluctuated up and down over the past decade, the growth of the hardware industry has continued to grow at the same pace.  The “Big Box” stores have also created a “Do-it-yourself” mentality in this country, a mentality that has a positive effect on the independent hardware store.
  • Location:  The proposed location for Hisarlik Hardware is Troas Marketplace, a retail and commercial property on the corner of E. Anglia St. between N. Umberland St. and N. Mercia Blvd.  Troas Marketplace primary tenants are Scamander’s Food Market located across the parking lot and Buckbasket Cleaners adjacent to the proposed site.  Scamander’s is a huge draw.  Scamander’s is the only grocery store in downtown Wilusa.  The location of this store is known to all downtown residents, one block from the trendy and hip Wessex Avenue.  The Troas Marketplace offers plenty of parking, very important for a downtown location, as well as easy access to the parking lot from E. Anglia St. or N. Mercia St.  E. Anglia St. is a major eastbound thoroughfare east of downtown.
  • Urban Products:  The location in downtown Wilusa will require a different product mix than a suburban store.  There will be a unique product demand from urban dwellers.  Building Blocks will be a big part of determining the mix of products that will be right for the urban market through their IAIS program (Inventory Always In Stock).  Hisarlik Hardware will be in touch with, and focus on, the downtown urban market, delivering products that are applicable to local customers, and marketing these items at competitive prices.
  • Commercial Customers:  Hisarlik Hardware will also focus on becoming the hardware products source for every building and business in downtown Wilusa.  We will work hard to establish relationships with property managers and service personnel.  There are also plans to set up a delivery service to the downtown business market making it even easier for customers to get the products they need, when they need them.  While Hisarlik Hardware may be convenient and easy to access, potential customers may not find it to be convenient to leave their offices.  There will be an emphasis to establish business accounts for each of these customers to make doing business easy for them.
  • Building Blocks :  It is crucial to have a co-op like Building Blocks behind efforts to open a store like Hisarlik Hardware.  They provide all of the tools to be successful in the hardware business including research, floor plans, marketing, and systems and instructions for operating a hardware store.  To become a Building Blocks Member (Member of the Building Blocks Co-op) really means they will provide an entrepreneur a “business in box”, yet allow the members to control their own business.  There are extensive marketing programs that have been built based on input from members to help generate sales, increase traffic and ultimately increase profits.
  • Service and Convenience:  Service and Convenience are the keys to success in this business.  They are also the strengths of independent hardware stores.  The store needs to be easy to get to and easy to use when the customer walks inside.  Our personnel have experience in high-end client hospitality.  This experience will be invaluable in dealing with customers and clients.  We will also keep meticulous records on what customers are looking for that we do not currently have in stock.  As discussed earlier, a delivery program will be developed to make it easy for business customers to receive products without leaving the office.  We will also market to the suburban commuter who works downtown and can take advantage of the convenience of stopping on their way to or from work.  Happy hour specials to encourage shopping after the five o’clock whistle will be instituted.
  • Repair/Project Resource Area:  Hisarlik Hardware will leverage the strength of an established reputation for superb service built by other Building Blocks Co-op member stores.  It is a reputation that has positioned Building Blocks to be the leading independent hardware stores (from Consumer Checkbook, Aug 2003), and filling the gaps in the “Big Box” retailers one-size-fits-all offerings.  The Resource area will allow the customer to ask for help or directions as they enter the store.  This area will also offer assistance as they start a project, help in finding what they need, sharing know-how in completing a project, and advice on how to get a project done.  Store employees will be knowledgeable in home repairs/projects, home improvement, and mechanical repair and retro-fit.  In addition, the resource area will be used to conduct short training sessions and demonstrations in home repair and home improvement projects.
  • The Tool Room Rental:  A rental business will be established under the Building Blocks’ “The Tool Room Rentals” tool rental program.  This will not only help with the initial cash flow, but will also be a source of additional sales as every tool will need accessories to go with the rental.  We will also think about party rental items to be included in the rental inventory.  Building Blocks will aid in developing the right rental product mix for this urban market.

All of these keys will be combined to drive sales and ultimately the bottom line…net profit.

Company Summary

In the company summary section, we will review the Troy Enterprises business and corporate entity and ownership, the role of Building Blocks in the business, the proposed location, and the start-up costs and funding.

2.1 Start-up Summary

Hisarlik Hardware has worked very closely with Building Blocks Hardware to establish a detailed start-up cost list.  Building Blocks’ knowledge, track record and expertise have been invaluable in setting up this venture.

2.1.1 Start-up Expenses

The start-up costs of Hisarlik Hardware, as detailed below, will consist primarily of inventory, equipment and fixtures.  Hector Priamson will invest cash, benefits and labor to the start up.  Investors will contribute substantially.  The company will secure an SBA 7(a) loan to be paid back on a 7-year amortization.

There is an amount budgeted for leasehold improvements which is intended to make minor modifications to the proposed site to prepare it for opening.  These improvements include replacing missing ceiling tiles and cleaning, polishing, or redoing the floor tile.  It is anticipated that the new floor tile can be laid over the existing tile at a substantial savings with no loss in quality or durability.

2.2 Building Blocks’ Role

With the merger of Kadmus, Homer & Company and Delphi/Ouroboros, Building Blocks is a cooperative comprised of members who are entrepreneur-retailers.  Building Blocks is committed to empowering the independent retailer by setting industry and market standards with their niche businesses and unique brand of creative marketing, wide product assortment, award winning merchandising and technology, and quality training and business expertise.  Building Blocks’ buying power of more than $2.5 billion annually helps pass on benefits to independent members.

Building Blocks has been a world leader in the hardware industry in product selection and customer service for do-it-yourselfers since 1948.

Vision
To be the best-in-class provider of products and solution choices that drive our members’ and our co-op’s profitability.

Mission
To provide:

  • Choices of retail and commercial solutions to drive members’ sales and profits
  • Assortments to support the solutions
  • Operational excellence in the delivery of products and solutions

2.2.1 Market Reseach

Building Blocks has a wealth of experience and know-how on opening new hardware stores, with 6,567 stores worldwide.  Building Blocks has become a leader in determining what factors make a hardware retailer successful.

Building Blocks currently uses a service called Yorikle.  This service is used to define the demographics and the expenditure potential of new markets.  For Hisarlik Hardware, the report was run on a one-, two-, and three-mile radius around the proposed location.  The report showed an exceptional amount of business (only reporting households, the study does not include property managers, businesses, or commuters), especially considering that there is no direct competition in the area.  The reports also get very specific as far as what the potential market is for hardware overall as well as specific categories within a store.  There are also numbers reports for the expected growth in the area over the next five years.

2.2.2 Planning

Building Blocks supplies professional design services to maximize merchandisable space and traffic flow.  Services include fixture plans, interior signage and decor, merchandising plans, lighting, basic site plans, and exterior storefront elevations. These plans are custom developed for each location and each store’s footprint.  The associated costs are included in the start-up costs.

A unique plan will be done for the proposed site for Hisarlik Hardware.  This process will begin as soon as the lease for the property is signed.

2.2.3 Support

Building Blocks provides a variety of support to all current members as well as prospects seeking to join the co-op.  The support comes to members in the form of retail consultants, knowledge, profit building programs, retail automation, training, advertising & promotion, a national brand, buying power, semi-annual markets, and an operations and distribution network.

Retail Consultant
Every member and prospect is assigned a retail consultant who works with them on an ongoing basis.  There is also a retail operations specialist who helps prospects open new stores.  There are regional marketing staff that are available as well as individual Building Blocks staff for individual marketing programs.

Knowledge
All specialists share their wealth of personal knowledge as well as having access to Building Blocks’ cumulative knowledge and experience.  Building Blocks has made this model work since 1948.  It works very well and enables members to be very successful business people and has made Building Blocks the largest retail hardware co-operative in North America.

Proven Profit Building
Building Blocks makes available a large number of programs that entrepreneurs can choose to participate in.  They include retail pricing systems, electronic order entry systems, commercial and industrial sales, category specific planograms, and direct mail circulars, just to name a few.

2.2.4 Retail Automation

Building Blocks leads the industry in automating their stores.  Building Blocks has brought their stores into the future with the automation which is made available to members.  This is a strength of Building Blocks and a service that is available to all of their members.  This automation helps the members in many different ways including inventory control, ordering, sales, and accounts receivable, all tied together in one system called Delian.

Experienced technical support personnel work with members to ensure current retail automation capabilities are compatible with Building Blocks’ existing system.  Building Blocks’ existing system is Delian, an industry leading software program based on Triad Eagle for Windows platform.  Delian is an easy-to-use, easy-to-learn tool that contains up-to-the-minute ordering and inventory accuracy, point of sale, accounts receivable, and much more.  It contains all the daily business tools needed to manage Hisarlik Hardware.

  • Inventory:  Building Blocks’ industry leading retail merchandise approach is designed to organize a store’s departments, maximize space by removing non-selling inventory, ultimately freeing up valuable floor space.  This unique concept accommodates the needs of customers by featuring the right merchandise assortment proven to increase overall profits.  Category specific guidelines and planograms maximize retail sales and inventory turns.  IAIS is based on the best selling items from the most successful Building Blocks stores.
  • Ordering:  Building Blocks has made ordering easy.  The Delian program helps track the needs and generates the necessary inventory levels.  Orders can be placed through the Building Blocks electronic order Entry System.
  • Pricing:  Building Blocks’ Retail Pricing System enhances the ability of each store to maintain a competitive price image while maximizing profitability.  Building Blocks’ Retail Consultant will help establish retail pricing which results in increased sales opportunities and profit margins based on downtown Wilusa.

2.2.5 Training

Building Blocks has educational programs which they call Building Blocks University.  Programs have been growing year after year and last year they offered certificate programs for new members.  There are four required courses and four Building Blocks University workshops and seminars.  There is also required course work for any member that is opening a The Tool Room Rentals as part of their program.

There are five core programs for new store owners which make up the initial training.  They are:

  • Certificate of Business Management
  • Certificate of Marketing Management
  • Certificate of Ownership Management
  • Certificate of Retail and Sales Management
  • Certificate of Human Resource Management

When a member opens a The Tool Room Rentals business there is also required training that applies only to The Tool Room Rentals.  There is also a wide range of do-it-yourself programs that are on CD-ROM and video.

2.2.6 Advertising and Promotion

Building Blocks’ marketing programs are second to none in the industry.  They include every tool needed to be successful in the retail hardware business.  They include Power Events, interior and exterior signage, online programs, and custom circulars.

Every member store is assigned a field marketing manager.  The marketing manager makes the members aware of the marketing tools available and how best to use them.

There are marketing strategy programs, programs that increase traffic, increase transactions, and those that merely build the brand.  All are made available, and it is the savvy member who uses the right programs and spend their advertising dollars best.  Based on the marketing experience Hisarlik Hardware has, this is a strength most start-up businesses do not possess.

  • Marketing Strategies:  The field marketing managers work with each member to determine the needs and issues for each store.  They look at the market penetration and awareness in the market.  As this information is gathered, a list of strengths and weaknesses is developed and programs designed to work on each of the objectives.  A very basic local store marketing tool kit is given to each member.  This is designed to show members what has been successful and basic marketing information that can be used on the local level.  There are also national programs that support what is done on a local level.  They include national television, radio, and newspaper.
  • Increasing Traffic:  Building Blocks has also developed programs designed to drive traffic to the stores.  They include bargain of the month, circulars, Yellow Page programs, and local television, radio and newspaper.  Circulars play a huge role in local advertising.  There are three ways to get the circulars in the hands of the consumer, newspaper insertion, ADVO circular distribution and direct mail.  Each of these programs have different costs associated with them and different penetration in the market.  Circulars can be designed for an individual store.  They are all customizable and can be generated in any volume necessary.  Building Blocks also plans four Power Events throughout the year which are nationally advertised programs supported by television, radio and print.  In 2003, Building Blocks saw a significant increase in traffic and bottom line during each of the Power Events.
  • Increasing Transactions:  Programs have been developed to increase the amount of each transactions.  There are display shelving end caps, wing panels, and clip strips that help increase sales on these specially priced items.  There are also online sign making programs that help members produce professional signs and save money on creative and printing jobs.  Muzak is a program of in-store audio and messaging which customers cannot ignore, and that drives them to specials and promotions they may not have been aware of.
  • Brand Building:  The brand building programs are designed to reinforce the established Building Blocks name, both on the interior and exterior of the store.  Programs have also been designed for vehicle graphics.

2.2.7 National Brand

For over 40 years, the name Building Blocks has stood for trust, service and fair prices.  Building Blocks’ brand positioning statement is “Building Blocks is the best place to get just what you need to complete home repair and maintenance projects quickly and easily.”  It is a name with heritage and integrity.  Consistent national media and the fact that Building Blocks is the largest co-op of independent hardware store owners, has established Building Blocks as a recognizable name in retail hardware.

The bottom line is people know that the Building Blocks name means hardware.  That is an asset new businesses work for years to establish.

2.2.8 Buying Power

An independent hardware store cannot compete in the current market, without a co-op behind them.  A Building Blocks member has the benefit of $2.5 billion in buying power which is passed on in savings and profits.  That makes Building Blocks the largest co-op of its kind in North America.

This is the main factor in making sure all Building Blocks members are getting products at the best possible prices to enable them to maximize profits.

2.2.9 Semi-Annual Markets

Building Blocks holds semi-annual markets where members can buy products and plan purchases for the upcoming seasons.  Markets are held in March (Fall/Winter) and October (Spring/Summer).  Members are informed of new items and trends in the industry at these markets enabling them to make good purchasing decisions.  There are also programs which allow members to make purchasing commitments at large cash savings.

2.2.10 Operations and Distribution Network

Building Blocks has established a network of strategically placed distribution centers throughout the United States to assure timely deliveries regardless of where the store is located.  Trucks deliver at least once per week and twice if necessary.  This is a huge benefit, because this process allows excess inventory to sit in the distribution center as opposed to the store shelves.  Over 64,000 items can be purchased on a per piece basis enabling stores to get whatever quantity is needed at any time.

2.3 Company Ownership

Troy Enterprises, Inc. is a privately-held S corporation, currently 100% owned by its founder and president, Hector Priamson and his wife Andromache Eetion.  The company will be operating under the name of Hisarlik Hardware.  There are expected to be investors in the new venture.  Individual investors will own no more than 15% of Troy Enterprises, Inc.  These investors will provide investment in the way of seed cash to help start the business and none of the investors will be active participants in any management decisions.

In order to make Troy Enterprises, Inc. financially viable, there are three major factors necessary to get the business up and running.  First, a feasible concept.  We have found that with Building Blocks in the downtown Wilusa market.  Second, the business needs someone to manage it.  It needed a professional with a good deal of experience to operate and manage the business.  This manager needs a sound financial background as well as an entrepreneurial spirit.  Third, the business needs financial support.  This support will come from three different sources.  Hector Priamson will invest time and some capital to start the business.  There is a need for investors to help with the initial capital to allow the business to have enough equity to get off the ground.  The final piece of financial support is the faith and commitment of a financial institution to loan the remaining funds that are needed to operate the business.

2.3.1 Hector Priamson

Troy Enterprises, Inc. founder and president is Hector Priamson.  Hector is a resident of Ilion.  He is married to Andromache Eetion who is currently a realtor with Ahhiyawa, Hatti & Company.

Hector will spend 100% of his time on this new start-up venture.  Hector has a wealth of experience in business.  He started his career straight out of college with a very exclusive “Big Eight” Accounting firm.  While with  Manapa Tarhunda and Co. Hector earned his CPA license.  His interests led him to Wilusa, where he became involved in one of the city’s unique industries, Samothracing.  He started on the accounting side of the racing business and soon broke out into the part of the business that generates the revenue, sponsorship sales.

His career led him to Trireme Racing Group where he served as the Vice President of Business Operations.  He led the turn-around of this team and company solidifying major sponsorships with companies like Corinthian Leather, Medusa-Gorgon Oars, and Posidon Libations.  He served in that position from 1996 through 2001.  During that period of time, Hector also served on the CURRAGH Franchise Board (rules making board of the sanctioning body).  His reputation and success led him to the top marketing position, Vice President of Sales and Marketing.  Hector served in that capacity from December of 2001 through July of 2003, at which time he left the company to pursue his current business, Troy Enterprises, Inc.

Hector’s expertise in the entrepreneurial business of oarsports will be invaluable in his new venture.  He has a keen sense of finance, marketing, management of inventory, accounting and bookkeeping practices, and staff management.  This experience will be invaluable in leading Troy Enterprises and making sound business decisions in the future.

Hector’s resume, as Confidential and Proprietary information, has been omitted from this sample business plan.

2.4 Company Locations and Facilities

When Hisarlik Hardware began this project the key component was the location.  Hector Priamson/Troy Enterprises and Building Blocks  felt several criteria were crucial to making this venture a success.  The ideal size was determined to be between 7,500 and 10,000 sq.ft.  The price per square foot was important because the economics obviously had to work.  Adequate parking and easy access were must-have criteria while searching for locations.  A location with only street parking was not considered an alternative.  Being located on a major thoroughfare with visibility is important to get the store recognized as a solution for hardware.  Adequate signage that traffic can recognize is key.  Additionally, intangibles such as other commercial neighbors and the neighborhood makeup were considered.

Based on these criteria, a site at 310 East Anglia Street is was selected.  It is part of the Troas Marketplace.

This property shares a parking lot with Scamander’s Food Market and Buckbasket Cleaners which is the most important of the intangible factors.  This Scamander’s generates $12.0 million in revenue and is Scamander’s most successful store in Wilusa.  Scamander’s is the only grocery store in the downtown area, and is an icon in the downtown residential community.  In discussions with Scamander’s, they said the Troas store has much more traffic than their other locations.  They have found the average customer visits the Troas store every two days versus once a week for the others.  Hisarlik feels this is a huge advantage for its venture as this will drive more traffic, more often to the Troas parking lot.  Scamander’s is in the middle of its lease for this property and seems pleased with the results.  Hisarlik does not anticipate this advantage changing by a move by Scamander’s, whose lease extends through the year five.

The proposed site has plenty of parking spots and excellent access from eastbound Anglia Street and northbound Mercia Blvd.

Signage marquees sit on both streets as well as on the north, west, and south sides of 310 East Anglia Street.  Furthermore, the location is perfectly set on eastbound Anglia Street, which is one of the major thoroughfares.  There is a driveway entrance and exit to Anglia Street.

The proposed site is ideal in size measuring 9,509 sq. ft. and was formerly an Osco Drug store that was closed as Osco downsized their Wilusa operations.  According to the landlord, the closing of this location by Osco had nothing to do with the location, but rather, a change in priority within the company.  The property needs very little in tenant improvements in order to be open for business.  The terms of the lease are currently being negotiated.  It is anticipated that Hisarlik Hardware will retain the property within the budgeted guidelines.  There were many properties that were investigated; however, for the stated reasons this is the best option as of last November.

The neighborhood has gone through major renovation over the past 10 years.  It is now a rejuvenated upscale neighborhood.  There is also major new development around the proposed site.  There is a brand new condominium development directly across East Anglia Street.  The development is called Lemnos Square.

There are three other new condominium developments under construction that are one block away.  They are Troas Terrace, The Anatolia, and The Konya.

The proposed location is one block from the successful Wessex Avenue District.  Wilusa has done a fantastic job in bringing in new business and culture into this area of downtown.

According to Wilusa Downtown Inc., Downtown has seen record demand and occupancy levels, driving the surge of residential development.  This has led to more than 615 new residential units currently in the pipeline.

The city of Wilusa is also reviewing plans for the former Cressida Agora site.  The plans all include a large number of residential and retail sites on the 29 acre site.  This site is located 2 blocks south of the proposed location.

Development downtown is happening in many different ways.  There is commercial, residential, as well as government development currently in process or planned.  All of these things add to the desirable nature of the proposed site.  We would be “right in the middle of it.”

Products and Services

Hisarlik Hardware will offer traditional retail hardware.  These products include electrical supplies, automotive, hardware, housewares, lawn and garden, building supplies, paint, plumbing, tools and rental.  There are other small services that will be offered including key cutting, glass cutting, and other small repairs.

Hisarlik will work with Building Blocks to develop the right product mix.  The initial order of inventory will take into account the fact that this is an urban store and the product mix may contain different items than a suburban store.  Hisarlik Hardware will rely on Building Blocks’ expertise, knowledge, and their IAIS inventory management program in developing this initial order.

3.1 Product and Service Description

Hisarlik Hardware will stock traditional retail hardware items.  The product mix will be changed slightly from suburban stores.  The history of the store will then be used along with IAIS to develop the right product mix that takes advantage of the available square footage and maximizes profits.

Hisarlik Hardware will open a The Tool Room Rentals store within the hardware store.  This is a program that will help cash flow as well as increase sales of rental accessories and support items.

Hisarlik will also have key cutting, glass cutting, and other small services like screen repairs.

3.1.1 IAIS

IAIS stands for Inventory Always In Stock.  This is a program that was developed by Building Blocks based on feedback from their members.  The members were looking for assistance in managing their departments and knowing what is selling and what is not.

This program has the following benefits to members who take part in it:

  • ORGANIZE departments with a more consistent merchandise assortment
  • REMOVE non-selling inventory
  • FREE UP valuable floor space
  • INCREASE a store’s overall profits.

Building Blocks delivers to member stores IAIS merchandising guides, assortment guides, and recommends what inventory to carry and what not to carry.

This is an invaluable tool for a new member because the new store can rely on the history of current stores to help in their merchandising.

3.1.2 Retail Pricing System

Hisarlik Hardware will once again rely on Building Blocks to deliver the correct pricing for the market.  As discussed earlier, low cost is not one of the main factors for customers to shop at a convenient hardware store location.  Hisarlik will continue to work with Building Blocks to charge the right price to maximize profits.

3.2 Future Products and Services

Hisarlik Hardware will listen to its customers to understand what other needs are not being met.  Those needs could include additional store locations in the future and an expansion of products and services offered at the current location.  There may be other businesses that can be offshoots of retail hardware that help service or provide convenience to Hisarlik customers.

Market Analysis Summary

The Market Analysis looks at potential customers and potential business.  Hisarlik Hardware explored the market segments, their needs, and did a marketing analysis.

The need for this venture was looked at first.  Does downtown need a hardware store?  The answer was a resounding yes.

Once the need was established, Hisarlik needed to analyze the make up of its customers, who and how many.  Who is the potential customer?  How many potential customers are there?

Once it was determined that there was a need and who the customer is, the next step was to figure out how to make them Hisarlik Hardware customers.  How to get the potential customer in the store?

4.1 Market Segmentation

There are six major market segments:

  • Downtown Residents:  Downtown Residents will make up as much as 40% of the potential business of the store.  This is an ever growing and expanding group.  Downtown Resident levels are at an all-time high.  There are also major projects like the former Cressida Agora site and the Troilus Townhomes in downtown Wilusa that will increase the numbers of residents.  Wilusa Downtown, Inc. estimates there are currently 615 new residential units currently in the pipeline.  In addition, 91 renovation permits were issued last year on existing downtown residential structures.
  • Property Managers:  Every residential building and every commercial building downtown has a property manager that keep the properties in good repair.  These property managers all need supplies and materials that are conveniently available.  These managers will be able to rely on Hisarlik Hardware to stock what they need.  Hisarlik feels the store will prove to be a quick, easy, and convenient way to fulfill the needs of these property managers.  Hisarlik and Building Blocks both feel paint and paint supplies will be a big percentage of what these property managers will buy.  The City of Wilusa estimated there was $18.0 million in paint and wallpaper Retail Sales in 2002 (within a three mile radius of the proposed location).
  • Contractors:  As stated earlier, there were 91 renovation permits and 615 new residential units under construction in the last year.  The new residential units represented $261 million investment in downtown.  Hisarlik Hardware will work to become a reliable supplier to these contractors working in the area.  We will also open early in the morning to help supply and be a convenient source for the contractors who start work early each day.
  • Downtown Business:  Every downtown business will need supplies from time to time.  The City of Wilusa states there are 2,861 businesses located within one mile of the proposed location.  As of the time of opening the focus will be to sell this group traditional retail hardware supplies.  As the business is established, Hisarlik will work to develop the Commercial Supply Network for these businesses.
  • Suburban Commuters:  Since the proposed location is on a major Eastbound thoroughfare (E. Anglia Street) out of the downtown, the potential is encouraging for Suburban Commuters to stop on their lunch hour or on their way home from work.  Research tells us that these commuters will be in search of good service and convenient shopping, things they may not find in their suburban neighborhoods.
  • Commercial Sales:  This could be the largest growth area of business that Hisarlik Hardware will have.  As Hisarlik develops a positive reputation, there will be a push to activate the MRO (Building Blocks’ commercial and industrial supply network).  Once again with so many businesses located downtown there is an infinite amount of business.  There are also a large number of Federal, State and Local government entities located downtown.  These is also one major university and several major hospitals within two miles of the proposed location.

4.2 Target Market Segment Strategy

Each market segment is unique and requires different marketing to attract them.

  • Downtown Residents:  The proposed location really takes care of this segment by itself.  Because the proposed location shares the parking lot with Scamander’s (the only grocery store downtown) it will act as a magnet to bring people to Hisarlik Hardware.  Scamander’s estimates customers visit their store every 2-3 days, which is fantastic for traffic.  Based on discussions with Scamander’s they are willing to work with Hisarlik to develop co-op programs to work together to build both businesses.  There will also be direct mail programs and circulars to downtown residents to convert old habits as the business is started.  There will also be a Building Blocks loyalty program implemented called Building Blocks Rewards.  This program not only gives valuable research data, but also helps the store learn buying habits of the regular customers.
  • Property Managers:  It is expected that this group also has a significant need for downtown hardware and will find the store by word of mouth.  Hisarlik will not rely on that.  There will be a sales program to set up accounts with property managers and let them know about great service that is available.  A list will be developed to pursue and court in order to build this business.  Keeping in mind this group is in search of convenience and ease of shopping, having a delivery option will also be important to this group.
  • Contractors:  Hisarlik Hardware will have to go out and pursue this group.  Hisarlik will have to visit job sites and let contractors know that Hisarlik is an option and the most viable option available.  Delivery and hours of operation will be very important to this group.
  • Downtown Businesses:  There will be a direct mail program set up to make these businesses aware of the store and that it is an option for their hardware needs.  The key to this group is awareness.  They will also be looking for an easy and convenient way to get hardware items.
  • Suburban Commuters:  The direct mail program to offer hardware convenience to businesses will also create awareness with the suburban commuters.  However, it is thought that the biggest attraction will be the outdoor signage.  There will be signs on E. Anglia St. and Mercia Blvd.  Both streets are high traffic areas and should create a good deal of awareness.  Awnings are also thought to be an option on the Anglia St. side of the building.  The color will not only be a change to what traffic is used to seeing but also exposure for the business.
  • Commercial Sales:  This segment is going to come down to hard work.  It will require a dedicated sales person calling on potential customers and developing relationships with Commercial customers to turn this segment into a strong revenue stream.

4.2.1 Market Needs

Downtown residents have already expressed the need for a local hardware store, as is documented in the April 2003 issue of Wilusa Magazine.  Residents recognize the need and will be supportive of a retailer answering their concerns.  The data that has been supplied to Hisarlik Hardware (by Yorikle, a market research firm used by Building Blocks ) shows there is a population of nearly 53,000 people and more than 20,000 households within two miles of the proposed location.  The analysis provided by Yorikle states the area could support a 19,000 sq. ft. store.  We are proposing a 9,500 sq. ft. store.  In other words, there is enough business in this area to support a store twice the proposed size.  The report has also found there is more than $2.5 million of potential sales revenue, based on the number of households alone (not including any of the other segments).  The potential is expected to grow to more than $3.0 million by 2007.

Hisarlik Hardware believes the key to the need analysis is that all of the research and potential was measured by households, and households only.  The households only make up one segment of the potential business the store expects to generate.

4.2.2 Market Trends

When Hector Priamson initially looked at the hardware business, one of the most important factors was the fact this industry seems to be immune to significant fluctuations in the economy.  Based on information from the US Department of Commerce, the home improvement retailing industry has consistently grown at a rate of 7% for the past decade and similar growth is expected for the foreseeable future.

In the 1990’s the growth in the industry was attributable to strong home sales, economic prosperity, and significant amounts of home renovation.  Since 2000, growth has stayed at the same levels even though some of these factors have changed.  Growth since the year 2000 was attributable to low interest rates and refinancing.  According to the Federal Reserve Board, 35% of all refinancing goes to home improvement.

What does the future hold?  93% of all Americans plan to stay in their current homes and 78% of homeowners plan to undertake home improvement projects in the next year.  How much will they spend?  69% of homeowners plan to spend as much or more in the coming year than they did last year.  Home improvement budgets have grown 31% since the year 2000.

4.3 Service Business Analysis

Hisarlik Hardware is being encouraged by Building Blocks to enter the equipment and party rental business upon opening the store.  Based on conversations with other members, the rental component has been an overwhelming success adding to cash flow of the business as well as increasing traffic to the store.  Reports of success unanimously talk about the fact that “renters” need tools and accessories to go with the rental equipment adding to the overall profitability of the store.

In the downtown market, the make-up of the rental inventory will vary a bit from what a suburban store might have.  Hisarlik Hardware will work with the Building Blocks Rental people to determine the inventory.  Hisarlik will rely on the knowledge and expertise of Building Blocks.

An investmentm is required upon opening for the initial purchase of the equipment to rent.  Building Blocks has the necessary training and computer support to make this a very logical addition to the traditional hardware store.

4.3.1 Competition and Buying Patterns

The “Big Boxes”, such as Lowe’s, Menard’s, and Home Depot have had a significant effect on the Home Improvement industry.  According to the National Retail Hardware Association, based in Wilusa, the Big Boxes have expanded the market, increasing consumer participation in home improvement.  However, the National Retail Hardware Association feels that the Big Boxes are nearing a saturation point, and in the future, they cannot open many more stores without it affecting and threatening other current Big Box locations.

“This competition has not kept independent hardware stores, home centers, and lumberyards from prospering.  These stores are much more professionally operated than they were just a decade ago, and most posted strong profits last year.”
—NRHA, 2004 Market Measure

Independent Hardware stores need to focus on their strengths.

Service.  88% of consumers have a favorable opinion of small business vs.  61% for big business (the lowest since 1993).

Convenience.  Consumers want to get everything they need in one trip to the store.  The Independent hardware stores are able to do this, because they work with their customers.

“There are four ways to compete

Assortment & Variety
Service & Experience
Convenience
Price

But price is only one of them.”
—M.  Chandler, a retail industry consultant

4.3.2 Main Competitors

Hardware
There is no immediate local competition.  The nearest hardware store is 1.8 miles away on South Hasan Dag Avenue.  The store is a small, 4,000 sq.  ft., and isn’t current in its products or presentation.

Because of the lack of product and poor shopping presentation, residents do not consider this an option for hardware.  The next closest hardware store is 2.7 miles away.  There are several stores that are 3 to 4 miles from the proposed site.  Studies say customers do not want to travel more than 3-7 minutes to a location.  While these stores could serve the need, their location does not make them a viable option to downtown residents because of distance and neighborhoods.

The “Big Box” stores such as Lowe’s, Home Depot, and Menard’s are built to serve suburban Wilusa.  The closest Lowe’s is 12.5 miles and 17 minutes west of Hisarlik Hardware’s proposed location.  The nearest Home Depot is 10.5 miles or 16 minutes west of Hisarlik.  Menard’s is 9.3 miles and 14 minutes east of the location.  There are no stores that are convenient to the downtown market.  To get to any of these, customers must plan on spending 30-40 minutes of driving roundtrip at a minimum before even walking into the store.  Hisarlik Hardware will be a 2-3 mile drive or 5-10 minutes maximum travel to the store.  This convenience will be a major selling point for the business.

From discussions between Hisarlik Hardware and the parent company of Building Blocks, regarding the possibility of a “Big Box” store opening in the downtown area, it seems unlikely due to the size of the potential market, cost, and lack of real estate, to build such a structure in Arazawa Township.

Rentals
An analysis of competitors in the equipment and party rental field is similar to that of the hardware industry.  There is one competitor that is southeast of downtown, 1.5 miles from the proposed location.  The company, Best Rentals, Inc., handles equipment and party rentals.

Tent rental has one competitor that is downtown.  An factor in tent rental may be the clean new equipment and, once again, great service available from Hisarlik.  American Tent and Awning is located 1.8 miles from the proposed location.  One advantage for Hisarlik in tent/party rental is that a customer can cover more bases with the variety of equipment and supplies from a rental and hardware store versus a company that focuses solely on tent rental.

The closest tool rental company is 2.3 miles from the proposed location.  Hisarlik Hardware feels that significant progress can be made into the tool rental business because of convenience.  Hisarlik expects to be a fantastic solution for contractors working downtown who need equipment for the day or for the project.  Residents downtown have smaller homes and condominiums, consequently they do not have room to own bulky or large quantities of equipment.  This is expected to be a benefit for the rental business.

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Retail

Retail Discount Store Sample Business Plan

Before you open your retail discount store you will require a business plan similar to this example.

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Retail Discount Store Business Plan

Executive Summary

The Dollar Store is a start-up retail store in Bend, Oregon that provides interesting merchandise options at bargain prices. Financing will come from the private investments of owners Ted Brinkman and Jim Spencer. They will donate equity that will be cleared at the end of 36 months. Dividends will be paid quarterly on the outstanding equity.

The Dollar Store will be incorporated as an LLC corporation. This will shield the owners from issues of personal liability and double taxation. The investors will be treated as shareholders and therefore will not be liable for more than their personal investments. The majority owner Ted Brinkman, will contribute from his personal savings toward this business venture. With an agressive marketing plan The Dollar Store expects to experience steady growth as it becomes more familiar to the general public.

With the financing in place The Dollar Store will be able to successfully open and maintain operations through year one. The large capital investments of the owners will provide the public with a unique and innovative store that will cater to the needs of those on fixed incomes such as low income families, the elderly, and the large student population in the Bend area. The successful operation of the Dollar Store will provide a customer base that will allow it to be self-sufficient.

1.1 Objectives

  • To provide a wide range of merchandise at reasonable prices.
  • To achieve a healthy profit margin within the first year.
  • To achieve a modest net profit by year two.
  • To be an active and vocal member of the community, and provide continual re-investment through participation in community activities and financial contributions.

1.2 Mission

The Dollar Store provides a variety of interesting merchandise options at bargain prices. Dedicated to customer service the Dollar Store will give its patrons the kind of service that is respectful and prompt. Employees of the Dollar Store will also be treated in a professional manner with a rewarding work environment and fair compensation. The Dollar Store wants each customer to feel as though he/she has gotten Fifth Avenue treatment at a bargain price.

1.3 Keys to Success

To succeed in this business we must:

  • Sell a broad range of products.
  • Provide for the satisfaction of 100% of our customers.
  • Be an active member of the community.
  • Encourage customer input.

Company Summary

The Dollar Store sells products and provides excellent customer service for the general public. We have leased a retail store which we use to market and merchandise our products. It is located one mile from Main St. on River Way in Bend, Oregon. The company was incorporated on January 2.

2.1 Company Ownership

The Dollar Store is a privately held corporation. It will be registered as a Subchapter S, with ownership Ted Brinkman (60%), Jim Spencer (40%).

2.2 Start-up Summary

The building will be leased with a down payment of $3,000 on a four year lease.

Start-up costs will be financed through a combination of owner investment and short-term borrowing. The start-up chart shows the distribution of financing.

Other miscellaneous expenses include:

  • Marketing/advertising consultancy fees  for assistance in designing our grand-opening ads and brochures.
  • Legal fees for corporate organization filings.
  • Retail merchandising/designing fees for store layout and minor renovations.

Products

The Dollar Store sells a variety of quality discount merchandise. The types of merchandise we will carry will include items such as dishware, household goods, toys, cosmetics, candy, greeting cards, and a list of items too exhaustive to list here. A dedicated staff is committed to providing excellent customer service.

The merchandise is purchased from a variety of well-known manufacturers such as Procter & Gamble, General Mills, American Greetings as well as a number of other generic branded companies. Shipments arrive on a daily basis. We will continue to find new product lines that can be added to our inventory.

We are able to sell products at very low prices, because we will purchase items from discontinued lines, seconds, over runs, etc., that cannot be sold to a manufacturer’s usual retail customers.

Market Analysis Summary

We expect sales to increase steadily as consumers find that they can purchase a variety of quality items at bargain prices. We intend to tap into the retail market with pricing that will encourage quantity buying, and our pricing will attract consumers on fixed budgets.

Our target market is the lower income portion of the Bend and Redmond community. This includes working class individuals, the elderly, and students, many of whom are price conscious and looking to find a value for their dollar.

4.1 Market Segmentation

The market analysis pie chart shows potential customers and the company’s target markets. The Dollar Store intends to provide affordable shopping alternatives to working class families with incomes under $25,000, for elderly people on fixed incomes, and also a large student population that tend to be on strict budgets. Bend makes up the largest market segment. We expect this market to grow at a rate of 10% per year. This market constitutes the general public who are looking for affordable merchandise at bargain prices. Redmond constitutes the second largest market with a fast growing retirement community. There are also many bedroom communities that shop in the Bend area that will add to the percentage of consumers.

4.2 Target Market Segment Strategy

We focus on the price conscious consumer who is looking for value as well as quality. Both the Bend and the Redmond groups will be marketed to as they are isolated populations which do most of their shopping in the greater Bend area. If we can attract and keep these consumers the word will continue to spread about what our store has to offer.

4.3 Industry Analysis

In an ever changing economy the discount store model is becoming more popular with the consumer. Providing a large selection of bargain-priced items is our intended goal.

4.3.1 Competition and Buying Patterns

Consumers demand quality customer service, fair pricing, and a convenient location.

Competition is very tough with customer service and location key components. The selection of merchandise a store provides is also very important.

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Gift Novelty Souvenir Sample Business Plan

This sample will make sure that the business plan for your gift or novelty store contains the right elements.

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Gift Novelty Souvenir Business Plan

Executive Summary

Yeti Card & Gifts (Yeti) is an established retail business that offers a wide range of cards and gifts. Yeti’s motto is “Fun, Functional, & Funky, that’s Yeti.” Yeti opened two years ago as a retail gift store specializing in Asian gifts and home decor. Yeti quickly out-grew its original space and is now located in the Wigman Hospital/Physicians & Surgeons South Building, open Monday through Saturday 10 am – 6 pm. Yeti is currently finishing tenant improvements on their second location, a space in University Heights. The grand opening is slated for July 4th.

The Market
Yeti has been successful in doing something that no other retail card/gift store has been able to do, successfully appeal to two distinct target market segments. Yeti’s first target segment is university students. This segment is identified by their younger age and higher disposable income relative to their household income. For many students, the years at university is the first time they are living away from home and away from their parent’s often watchful and restrictive eyes. This means that students like to use their disposable income to its full potential, sometimes (unfortunately for them) beyond their financial means. There are over 38,833 potential customers in this market segment.

The second distinct segment that Yeti has been successful in appealing to is the university faculty and staff, Wigman Hospital staff, and the greater Cleveland Heights/University Heights community. This segment is an older, more mature market relative. They are looking for a safe and friendly atmosphere that provides a sense of nostalgia mixed with youthful excitement. This segment has over 191,590 potential customers.

Competitive Edge

Yeti’s competitive edge is their ability to effectively serve both market segments at the same time, a feat that no other gift/card shop has been able to do. Yeti has accomplished this by leveraging two competitive advantages. The first element is a wide product selection that appeals to both target markets. Yeti’s other motto, “Risque not Raunchy” captures this idea well. While some of the products come close to pushing the limits of good taste, nothing is offensive or outrageously obscene. This creates an atmosphere that has an edge, but one in which anyone would feel comfortable. This wide product span helps allow Yeti to serve two distinct sets of customers. A wide product selection is not inherently enough on its own to serve two customer segments however. The second element of their competitive edge is the high level of customer service that supports the broad product selection. The store provides outstanding service to customers who feel like they are truly welcome and enjoy the entire shopping experience. All of the Yeti employees are trained to create a helpful, gracious, welcoming experience for all customers. The sales staff recognize that it is their job to provide the customer with whatever type of assistance they may need. The customer will leave the store feeling that Yeti exists to cater to their individual needs.

Having been open now for almost two years, Yeti Cards & Gifts has proven that they have been successful in meeting the needs of two distinct customer segments. The Yeti concept is being led by the husband and wife team of Dan and Ishada Gordon, both of whom bring a wealth of experience and skills to the company. Yeti is currently preparing for the grand opening of their second location and its overall growth looks quite promising. Sales forecasts indicate revenue of $169,000 for Year 3 and $180,000 for Year 4 with net profit of 5.96% and 7.59% respectively.

1.1 Mission

Yeti Cards & Gifts’ goal is to provide new and exciting products in an environment that is fun and friendly for customer and staff alike. Customer service is our #1 priority.

“Fun, Functional & Funky, that’s Yeti.”

1.2 Keys to Success

The keys to success are:

  • Offering items of a high quality-value relationship which are not available everywhere. This is essential for maintaining the niche market sectors mentioned in the Executive Summary.
  • Advertising and promoting in areas that our target customer base will learn about our store.
  • Continuously reviewing our inventory and sales and adjusting our inventory levels accordingly.

1.3 Objectives

Yeti has two objectives for the organization. The objectives are lofty, yet achievable. By developing and tracking progress toward the goals, the organization will push everyone to perform their best.

  • Open a second store in the University Heights community, increasing visibility and sales potential.
  • Open a third store in Year 4.

Company Summary

Yeti Card & Gifts is a retail gift store specializing in cards, health and beauty products, novelty, candy, beverages, and Japanese products. Yeti currently has two locations, their current store located at the Wigman Hospital/Physician & Surgeons South Building, and a University Heights community store (opening soon) in the Madison Plaza in-between existing tenants Starbucks and Noah’s Bagels.

2.1 Company Ownership

Yeti Cards & Gifts is a single member Ohio registered L.L.C. owned wholly by Dan Gordon.

2.2 Company History

Yeti was originally founded two years ago. The popularity of Yeti was quickly apparent and the business out-grew the location. The business soon moved into the Wigman Hospital/Physicians & Surgeons South Building to take advantage of the 1,144 square foot highly visible retail space. The Wigman location was chosen to leverage its high density of people. Wigman Hospital is Cuyahoga County’s largest employer. On the east side of Yeti is The Case Western Reserve, the state’s largest private university with over 20,933 students, faculty, and employee. The move to the Wigman building was also strategically timed to fill the vacancy of Jabberwocky Cards & Gifts which had just closed their doors.

Yeti is currently in the tenant improvement stage of opening their second store in University Heights. This 800 square foot store is located in the Madison Plaza in-between Starbucks and Noah’s Bagel. This location was chosen because of the high traffic counts (1,800) and the close proximity to two nationally known tenants.

Products

Yeti carries a wide range of products chosen to be aligned with the private motto of “Risque, not Raunchy.” Yeti’s products can be grouped into five main categories: cards, health and beauty, novelty, candy and beverages, and Japanese products. The following list shows examples of products within their respective categories:

Cards (vendors include: Winking Moon Press, Tetter Saw Cards, Mik Wright, Clayboys, Mojo Ryzen, Image Connection, Unusual Cards, Cara Scissoria, Shag/Roger La Borde, Paper Troupe, Palm Breeze, Smart Alex, and Classico San Francisco)

  • Birthday (boy, girl, romantic)
  • Blank
  • Wedding
  • New baby
  • Get well
  • General humor
  • I love you
  • Engagement
  • Missing you
  • Friendship
  • Encouragement
  • Sympathy
  • Postcards

Health and Beauty (vendors include: Blue Q, Fridge Fun, San-X, Tsukineko, T-n-T Candles)

  • Hand soap
  • Body wash/detergent
  • Shampoo
  • Moist towelettes
  • Lip balm
  • Moisturizer
  • Bubble bath
  • Body powder
  • Glitter ball/lotion
  • Compact mirror
  • Foot/hand/body cream
  • Large & small tampon case
  • Air freshener
  • Tweezers
  • Temporary body tattoos
  • Candles

Novelty (vendors include: Accoutrements, Hobbs & Dobbs, San-X, Lantor, Dark Horse, Blue Q, O.R.E., Three by Three, Lucy Lu, Hot Properties, Fridge Fun)

  • Stationary
  • Wigs
  • Glasses
  • Picture frames
  • Hats
  • Coffee mugs
  • Bags
  • Purses
  • Clocks
  • CD cases
  • String lights
  • Bookmarks
  • Action figures
  • Antenna toppers
  • Magnets
  • Key chains
  • Toothpick/toothbrush holders
  • Mist makers
  • Toilet seats
  • Stickers
  • Clothes hampers
  • Whoopee cushions
  • Squirt guns

Candy and Beverages (vendors include: Garvey, Hobbs & Dobbs, Golden Pacific, JFC Trading)

  • Hello Kitty Hi-Chew & Jelly candy
  • Gummi Bears/Army Guys/Hamburgers/French Fries/Donuts
  • Now & Later
  • Big Hunk
  • Bottle caps
  • Jolly Rancher
  • Blow Pops
  • Sugar Daddy
  • Nerds
  • Tangy Taffy
  • Sweet Tarts
  • Smarties
  • Sixlets
  • Dorks
  • Shock Tarts
  • Ducle de Leche
  • Abba Zabba
  • Sour Patch
  • Rocky Road
  • Runts
  • Spree
  • Gum
  • Soft drinks
  • Jones
  • Suntory-CC Lemon
  • CC Grape
  • Natchan (honey lemon, apple, grape, fruit punch flavors)
  • Woolong tea
  • Asahi cold asian tea drinks
  • Kirin cold tea drinks (milk tea, lemon tea)
  • Milk, coffee
  • Otsuka Pocari Sweat
  • Sokenbi-cha
  • JT peach water
  • Sapporo fruit & milk
  • Cream melon soda
  • Caffe latte
  • Citrus mix
  • Green tea
  • Chinese tea

Japanese products (vendors include: San-X, Masudamasu, Enadi, Kitamura, Tokyo-Inn, Etoile Kaito, Okutani)

  • Stickers
  • Plush toys
  • Bottle caps
  • Movie merchandise
  • Mouse pads
  • Cell phone accessories
  • Zipper pulls
  • Patches
  • Animation fun packs

Market Analysis Summary

Yeti has identified two distinct market segments for each of the two different stores. For the Cleveland Heights location there is the Case Western Reserve University students and the Wigman Hospital/Cleveland Heights community. For the University Heights location there is the John Carroll University students and the local community.

Age is a significant determinant in differentiating between the different segments. The student segments are generally of a lower age than the surrounding community.

4.1 Market Segmentation

Cleveland Heights Store

Case Western Reserve community

20,044 students total. Largest private university in Ohio.

  • Female students, 53.6% of student population (10,747)
  • This group makes the most “lifestyle” purchases. They are either buying for themselves to give their living space a personal touch, or buying items as a gift for a friend or relative.
  • Male students, 46.4% of student population (9,297)
  • Male students are known for their infrequent shopping habits. They make occasional purchases. These occasional purchasers will need to be converted into impulse buyers. This can be accomplished by offering more items that appeal to their sense of independence.
  • Case Western Reserve Univ. faculty (889) and employees
  • This segment makes less frequent purchases than the students

Wigman Hospital community/Cleveland Heights community
Wigman Hospital is the county’s largest employer. Administrative offices have recently been moved to this location, further consolidating the hospital into a dense employer.

  • Wigman Hospital community. Total population 2,700.
  • Higher income levels than students
  • Their work site is in very close proximity to Yeti, less than a block.
  • Cleveland Heights community. Total population 140,550. Ages:
  • 15-19: 11,585 (8.4%)
  • 20-24: 17,390 (12.6%)
  • 25-34: 20,591 (14.9%)
  • 35-44: 18,656 (13.5%)
  • 45-54: 20,184 (14.6%)
  • 55-59: 5,864 (4.3%)

University Heights Store

John Carroll University community 18,789 students total

  • Female students, 47.6% (8,937)
  • This group makes the most “lifestyle” purchases. They are either buying for themselves to give their living space a personal touch, or buying items for a friend or relative to give as a gift.
  • Males students, 52.4%, (9,852)
  • Male students are known for their infrequent shopping habits. They make occasional purchases. These occasional purchasers will need to be converted into impulse buyers. This can be accomplished by offering more items that appeal to their sense of independence.
  • John Carroll Univ. faculty (830) and employees
  • This segment is likely to make fewer purchases than students

University Heights community. Total population 51,040. Ages:

  • 15-19: 5,662 (11.5%)
  • 20-24: 9,896 (20.1%)
  • 25-34: 7,317 (14.8%)
  • 35-44: 5,991 (12.1%)
  • 45-54: 5,570 (11.3%)
  • 55-59:1,603 (3.3%)

4.2 Target Market Segment Strategy

The market segments were chosen for two specific reasons, location/proximity and customer demographics, specifically age:

Location/Proximity
In the case of both the Cleveland Heights and University Heights stores, the location is quite convenient to both the students and the surrounding communities. As our days become busier and busier, with less and less free time, we tend to choose stores that are the most convenient. The more convenient the location, the more free time that we have for ourselves.

Cleveland Heights. The store is within several blocks of a large university campus. Students are continually walking off campus, looking for food, shopping, and diversions from school, all convenient enough so that they can easily get back on campus for the next class. For the Wigman Hospital community, the largest single employer in Cuyahoga County, Yeti is located below their offices. Many people can just walk downstairs to the ground floor, and at most they may have to walk a block to get to Yeti. Customers who need to do a bit of shopping on their break or before they leave for home are able to get to Yeti within five minutes.
University Heights. Again, location is key in University Heights. The store is also only a few blocks from the large campus making it quite accessible to students, faculty, and campus employees. Yeti was able to secure a desired location within Madison Plaza, one of the premier shopping areas. The fact that Yeti is situated next to Starbucks is significant. Starbucks is nationally known for their real estate prowess, in addition to their marketing. Starbucks is very good at choosing good retail locations for their stores, a prime reason that they have closed so few poor performing stores in their history. On the other side of Yeti is another national retail tenant, Noah’s Bagel. Being surrounded by two national tenants, one of them being the mighty Starbucks is quite material. Additionally, this retail space has customer daily walk-by traffic of 1,800, an impressive number.

Customer Demographics
University communities, both Case and John Carroll. While students do not have the highest household income, since the majority of their time is spent in school instead of working, they have a very high rate of disposable income. This can be explained by two reasons. First, when students enter university, this is often the first time that they are no longer under the watchful eye of their parents, who have controlled or affected the purchasing behavior and lifestyles of their offspring. For many of the students, they suddenly have more freedom in the lives and how they spend their money.

A second explanation of this phenomenon is that students tend to spend money in a short-sighted manner. The overwhelming majority of students receive financial aid and it is uncommon for all of the money from financial aid to be spent solely on books and tuition. Frequently a good portion becomes their disposable income. Many students take the viewpoint that if they are going to be taking on debt to complete school, then a little more debt, which provides them ample disposable income, is OK, as they will eventually pay it off years down the road when they are making good money. These two explanations offer insight into why students, those with low household incomes have high levels of disposable income. Yeti recognizes this reality and caters to these students with products that appeal to them.

Surrounding communities, both Cleveland Heights and University Heights. The members of the community population, older than the university students, want a safe and friendly atmosphere where they can enjoy a sense of nostalgia mixed with youthful excitement. The problem with most card and gift shops is their inability to cater to a wide cross section of the population. They are either too hip or trendy and turn off the more mature crowd, or they are too safe and secure so that only your grandparents would shop there. This “hallmarkification” of gift and card shops is quite common as evidenced by (name omitted), (name omitted), and (name omitted). Yeti has been successful in appealing to both the young and hip crowd (students) as well as the more mature crowd (university faculty, Wigman staff, and the surrounding city communities). Yeti has accomplished this feat in part by offering a wide product selection with the two target segments in mind and offering every customer benchmarked customer service, a way of treating customers so that every customer that enters the store recalls their experience as a pleasant experience that exceeded their expectations.

4.3 Industry Analysis

As mentioned in the previous section, gift and card shops typically fall into two distinct categories, trendy and hip shops that appeal to a younger crowd, and conservative, “hallmarkified” stores that appeal to an older, safety conscious crowd. It is unusual for a store to be able to straddle both categories successfully.

Some stores will try by just carrying merchandise that appeals to the other category, but this approach rarely works. In addition to having the merchandise for the desired market segments, the store must have the look, feel, and customer service to make each market segment feel like they are wanted, that make them feel like they are the typical individual that the store is catering to. Please review section 5.1, the competitive edge for more information on how Yeti is able to accomplish what most in the industry has been unable to.

4.3.1 Competition and Buying Patterns

Competitor #1
Pros: Massive purchasing power (over $30 million in sales last year including a computer and book department); good location; guaranteed customers from the sale of text books.
Cons: Little to no parking; poor customer service; difficulty in selling anything but conservative merchandise for fear of being offensive; youthful customer base keeps adults away.

Competitor #2
Pros: Good location next to Case Univ.; good selection of women’s apparel; established customer base.
Cons: Little to no parking; very poor customer service; lack of diversity in customer base with young women being their primary customer.

Competitor #3
Pros: Chagrin River Center tenant; plenty of parking; a national chain; average customer service.
Cons: Primary customers are 12-19 year olds; too loud background sound system; main focus is on apparel (T-shirts); little to no advertising.

Competitor #4
Pros: Capitol Mall tenant; plenty of parking; national chain; large selection of movie paraphernalia.
Cons: Merchandise selection focused on too small of a customer base; poor customer service; little to no advertising; distance from Case Univ. requires car or bus ride.

Competitor #5
Pros: Eighth St. Market tenant; average amount of parking; established customer base.
Cons: Poor customer service; poor merchandise selection.

Competitor #6

Pros: Two stores within walking distance of John Carroll Univ.; established customer base; large merchandise selection.
Cons: Merchandise selection focused on older customers; too much merchandise clutters aisles and creates claustrophobic conditions.

Competitor #7

Pros: Large national chain with ample parking; large selection of goods; average customer service.
Cons: Cannot respond to customer requests and the latest trends; focused on general merchandise, not cards and gifts; distance from John Carroll Univ. requires a car or bus ride

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