Modish Buddy Inc. adaptation of Business-2-Consumers Model

Executive Summary 

There is no regional culture as the world is now global and internet has offered many opportunities to bring the world closer to whatever trends are followed all over the globe. There is cable television along with global radio programs as well as the internet and e-commerce that facilitate every individual to get the popular trends of one nation and area in other far away cultures and nations. For example, a fashion brand in New York can offer the same trends and brands all over the globe to be purchased by them. The demands as well as expectations for products because of telecommunication have increased (Bollinger, 2015).

Modish Buddy Inc. (MBI) is an online e-commerce clothing brand for youth, especially targeting smaller communities and towns in the America. The brand will be offering the popular clothing and other accessories for youth in small towns and communities where those national products and fashion symbols are not offered in the vicinity.  The major difference between the MBI and other relating brands is the targeting strategy and small towns and community specifications.

The MBI’s target market is consisting of a young individual constituting both male and female groups, having range of age 11-18 years. This market listens to the online programs for youth as well as music and also takes part in sports at state and national levels (Wagner, 2016). This target market will be looking for the national trends in clothing and accessories which are offered in urban regions and have great inspiration towards those clothing and fashion trends. MBI will completely promote its e-commerce site in small towns where there is just a population of about 100,000 people or at maximum 150,000 people. This small town community will be having business for youth styles like the shops for sports products as well as CD stores which would be utilized by the MBI for advertising and promotion.

2. Business Description

Apparel retail e-commerce, including accessories, clothing as well as footwear, is acknowledged as an industry of multibillion-dollar. The revenue generation of this industry is almost $304 billion as recorded in 2009 (Statista, 2016). Clothing relating women is the largest segment within the industry as it accounts for almost 53 percent of aggregate revenue (Statista, 2015). Apparel business is acknowledged as a seasonal business and trend changes seasonally and occasionally. The market is very wide and consists of the larger retailers and brands of apparel and accessories seller as well as some small niche market seller regarding apparel and accessories. The largest e-commerce retailers in the apparel industry have an advantage over physical shops and smaller online shops since they attain better pricing from suppliers for the reason of the bulk purchases made (Wagner, 2015). All that accounts for providing better value to the online customer because of cost effectiveness and greater revenues. Smaller retailers are also located physically and online but they account for small target market and limited catalogue management.

The mission statement of the Modish Buddy Incorporation is “Offering unique fashion style for small-town America”.

The objectives of the firm are:

1. Entertainment website which is accessible and available to the small communities in America.
2. Offer a unique online shopping experience.
3. Enhanced relationships with the vendors to facilitate the speedy orders ‘delivery.
4. Creation of state of the art promotional strategy regarding the small communities and business for youth.
5. Creation of one stop shop image which is seen as trendy and attractive.

The MBI will be providing the apparel and accessory products, online for youth that are admired countrywide but are not offered within a smaller vicinity. Jan Smith and Michael Bobbi are the co-owners of MBI brand. They will be offering the cost-effective operational tactics to speedily ship offered products to the end customer. MBI will be focusing on the promotion and delivery of its products to the small towns and communities’ targeted customers having residents almost up to 150,000. The critical aspects of marketing tactics will be performance events which will enhance the online visibility e-commerce store constituting the largest base of customers. The firm will be utilizing the current businesses operating locally to serve similar customers as targeted by MBI so that the events can be sponsored in cooperation.

MBI’s website will be adopting the business model acknowledged as Business-2-Consumers which facilitates in selling the company’s products directly to its end customers (Tutorials Point, 2016). The products offered can be catalogued on the firm’s website. The product or products can be chosen by the customers and are ordered at the same time. There will be generated a notice on the website which is tracked by the business organization either through email or other messages and the order will be confirmed and processed by the firm and later is dispatched for final delivery to the customer. The diagram for the model adopted is presented below:

Source: Tutorials Point, 2016

Some of the strengths of MBI because of business model adopted are outlined below:

1. Competition is extended in local as well as global market
2. Cost-effective operations and hence better pricing
3. Selling specialized products targeted towards niches
4. Lower start up costs and hence higher profits
5. Enhanced and direct consumer communication and relationships

(Admin, 2016)

Some of the weaknesses of MBI because of business model adopted are outlined below:

1. Enhanced expectations of customers posing great pressures
2. Unpredictability regarding the search engine used by customers
3. Fierce competition from all over the globe

(Admin, 2016)

The products offered by the Modish buddy are all youth oriented and are listed below:

1. Jackets
2. Shoes
3. Sweaters
4. Pants
5. Shirts
6. Bags
7. T-Shirts
8. Hats
9. Dresses and skirts
10. Eyewear
11. Shorts
12. Time pieces

3. Market Analysis

The MBI’s target market is consisting of a young individual constituting both male and female groups, having range of age 11-18 years. This market listens to the online programs for youth as well as music and also takes part in sports at state and national levels. This target market will be looking for the national trends in clothing and accessories which are offered in urban regions and have great inspiration towards those clothing and fashion trends. MBI will completely promote its e-commerce site in small towns where there is just a population of about 100,000 people or at maximum 150,000 people.

As per the U.S. Census Bureau the number of inhabitants in teens, i.e. the age in the range of 12-17 was almost 23.4 million (Statista, 2016). This population presents almost 8.6% of the aggregate populace of the America. The yearly spending of almost $324 billion is influenced by the youth, and have disposable income constituting to $151 billion (Statista, 2016). The group yearly spends $24 billion as well as will spend $1.2 billion online in coming years (Statista, 2016). It is depicted through research that youth targeted by MBI almost spend weekly an amount equal to $82 on average on food, entertainment, transformations, and technology (Statista, 2016). This generation presents every aspect of conventional culture as well as show the speedy-developing demographic. Youth specialty clothing as well as relating items has developed into a billion dollar niche in the online business. The internet prominence with youngsters is very high and is well documented as well generated the starting of a number of online stores by companies selling to that market segment. A large portion of these brands show retail outlets in large urban areas that serve as the special vehicles for online shopping. The Internet presents a significant tool for accessible shopping regarding the MBI’s target populace. Teens or youth show the 64% population of this group employ the internet at home (Wagner, 2016). The 55% share is a major portion shared by youth, consider utilizing the Internet better than sitting in front of the TV (Wagner, 2016). Families with teens are more likely to have Internet access than other households. Online shopping by teenagers between 13 to 18 years age is expected to add up to about $300 million in current years and is accelerating at about twice the rate of online shopping by grownups. Future predictions show that youth online spending will be almost $2 billion yearly (Statista, 2016).

In coming years, a clear larger part of youthful consumers will shop online. There are major five online purchases made by young people are music, books, clothing, toys, and computer software. Over the previous ten years, there has been a significant change in populace flow in the America. The population in non-metropolitan areas has been developing at practically the same rate as the populace in urban regions. The Midwest, West Coast and the Northeast show the largest rate of development. Today, there are a great many youth who don’t live near a large urban center that offers the diversity in clothing items that the adolescent culture demands. This has created a little market niche for businesses to sell clothing and items for young people who live outside the urban areas. This is especially true in communities with a noteworthy college located in the group. Currently, just regional shopping centers offer access to the design and styles that youngsters need. Unfortunately, the concentration of these shopping center stores has been just on the mainstream of the adolescent market (Wagner, 2016). Alternative clothing and items are rarely available outside the urban area. This is true because the companies that create the clothing and items are few and sell essentially through urban specialty shops.

The Moddish Buddy will be focusing its marketing in two categories of the non-metropolitan communities:

1. Communities located in non-metropolitan areas, having populations of 100,000 people or a maximum of 150,000 people.
2. Communities of non-metropolitan area having 80,000 college going population.
3. Competitor Analysis

Remaining the largest firm offering the latest styles of footwear, clothing and accessories are critical to pulling in eager for apparel loving customers (Wagner, 2016). Otherwise the firm will leave with the excess inventory, or even in the worst situation, The firm’s brand would be at risk. Another challenge is the abundance of retail apparel shops on the Internet since these may lure nearby shoppers, making MBI to lose revenue. The benefit which is on number one for the Internet is fabricating and operating a physical area is an exorbitant endeavor (Shapiro, 2015). In the event that money is a major concern, counteract these expenses by solely selling apparel by means of the Internet and eliminate the need for an exorbitant storefront and staff. In spite of the fact that the apparel business has matured and moderate developing, it exists in a dynamic and competitive environment. Many companies are restructuring to create leaner associations and embrace new technologies, with solidification prevalent as larger companies pick up leverage in market position and cost cutting measures (Tutorials Point, 2016).

Competition in this industry is currently turned on prices. The initial two quarters of the current were especially troublesome for U.S. textile manufacturers, leading them to move to a push strategy. After two years of rising prices, pressure from foreign competition, and insecure economic conditions, leading textile manufacturers are being forced to lower their prices.

In an expansive view, the retail apparel industry competes with every single other sector in the retail business. These different sectors include electronic retailers, wholesalers, other rebate stores, shoe stores, convenience stores, and others. A number of these different sectors have combined together and there is an opportunity for the firm to operate in different divisions to increase profitability.

Some of the major competitors of the MBI are outlined below along with their strengths:

• Wal-Mart; cost-effective and lower price products
• Sears Roebuck; lower prices and extended marketing efforts
• K-Mart company; larger brand and well known
• Target Corporation; reasonable and internationally present
• The Gap; brand strength and quality along with compatible pricing
• TJX; reasonable
• Intimate Brands; image and quality is strong
• Spiegel/Eddie Bauer; image and competition outlook is strong

(Bollinger, 2015)

The competitive advantage of MBI is offering product lines that make a statement, however won’t negate a promise. The real brands are expensive and not distinctive enough to fulfill the changing tastes of the targeted customers. MBI offers items that are only ahead of the curve, thus affordable that the customers will return to the website often to check out the current new products and additions. Another competitive component is that items in this targeted market are a piece of a lifestyle statement. MBI website is focused on serving youth outside the urban areas. The firm needs to represent their style and life choices. It believes in the creation of a faithful customer base that will see MBI as a feature of their life. To facilitate that connection, the website will have a talk section where the customers can share what is happening in their communities and comment on the MBI’s offered items and suggestions of increments to the company’s product offering in the future.

4. Operations

The firm will be gathering the supplies from different brands located in urban regions and stock the most expected and demanded items and then catalogue them on its website. The customers will visit the website of MBI and will order online, the product for purchase and the firm will confirm the order and process it and final delivery will be sent to the customer through the partnered courier service. The payment would be having option of online payment as well as cash on delivery.

In the initiation phase most of the work will be done by the two owners of the e-commerce that are the Smith and Bobbi. Smith will be responsible for the MBI’s daily operation management. While Bobbi will be managing the customers and the marketing efforts are run by him. Both the owners have ten years of related business and industry experience. Smith was serving as a manager of a well known online apparel brand. He has experience of managing the team of almost 10 people and was extremely successful in cost effectiveness for the old firm. He also owns the experience of working with a local firm in his starting career. Bobbi was working in procurement and marketing departments of two different firms from last 10 years and is now all set to explore his business with inputs from old firms.

The domain name of the firm would be Modish Buddy Incorporation and the website will be developed on domain of www.moddishbuddyinc.com.  The hosting and development of the website will be done by an outsourced marketing firm. The initial marketing services will also be done by the partnered firm but later on the marketing and promotion of the website will be managed by Bobbi along with the marketing and sales manager of MBI. The firm will be regularly analyzing the marketing efforts and outcomes in the starting phase to manage the brand well (Shapiro, 2015). MBI will be promoting and advertising the website on youth magazines. The firm will also be working on planning almost 10 events popular in targeted smaller communities to enhance the website visibility to its customers. The initial focus (first year) of marketing campaign would be on the West Coast. After completion of the first year, MBI will be planning the events targeting the East Coast and the Midwest regions. MBI will also be taking part in sports events popular in the communities. The firm will be distributing the stickers of the firm as well as the T-shirts, caps, along with other promotional material as well as 30% discount on first 100 purchases. The owners will be funding the whole business plan themselves and will be sharing the profits later on.

6. Financial Statements
   The financial statements for the business plan of Moddish Buddy Clothing are presented below which will detail the break even analysis as well as projected profit and loss and balance sheet statements for the coming three years.

The Break Even analysis of the brand is presented below:

BREAK-EVEN ANALYSIS
Monthly Revenue Break-even	$27,657
Assumptions
Average Percent Variable Cost	25%
Estimated Monthly Fixed Cost	$20,615

The projected Profit and Loss Statement for the brand is presented below:

PRO FORMA PROFIT AND LOSS
	YEAR 1	YEAR 2	YEAR 3
Sales	$395,650	$610,000	$750,000
Direct Cost of Sales	$100,740	$164,000	$210,000
Other Production Expenses	$0	$0	$0
TOTAL COST OF SALES	$100,740	$164,000	$210,000
Gross Margin	$294,910	$446,000	$540,000
Gross Margin %	74.54%	73.11%	72.00%
Expenses
Payroll	$177,600	$192,600	$212,000
Sales and Marketing and Other Expenses	$0	$130,000	$150,000
Depreciation	$7,140	$7,140	$7,140
Leased Equipment	$0	$0	$0
Utilities	$6,000	$6,000	$6,000
Insurance	$6,000	$6,000	$6,000
Rent	$24,000	$24,000	$24,000
Payroll Taxes	$26,640	$28,890	$31,800
Other	$0	$0	$0
Total Operating Expenses	$247,380	$394,630	$436,940
Profit Before Interest and Taxes	$47,530	$51,370	$103,060
EBITDA	$54,670	$58,510	$110,200
Interest Expense	$13,830	$12,750	$12,570
Taxes Incurred	$10,110	$11,586	$27,147
Net Profit	$23,590	$27,034	$63,343
Net Profit/Sales	5.96%	4.43%	8.45%

The projected Balance Sheet for the brand is given below:

PRO FORMA BALANCE SHEET
	YEAR 1	YEAR 2	YEAR 3
Assets
Current Assets
Cash	$137,293	$168,118	$220,978
Inventory	$6,270	$10,207	$13,070
Other Current Assets	$19,800	$39,600	$59,400
TOTAL CURRENT ASSETS	$163,363	$217,926	$293,448
Long-term Assets
Long-term Assets	$50,000	$50,000	$50,000
Accumulated Depreciation	$7,140	$14,280	$21,420
TOTAL LONG-TERM ASSETS	$42,860	$35,720	$28,580
TOTAL ASSETS	$206,223	$253,646	$322,028
Liabilities and Capital	Year 1	Year 2	Year 3
Current Liabilities
Accounts Payable	$9,633	$31,822	$38,661
Current Borrowing	$0	$0	$0
Other Current Liabilities	$0	$0	$0
SUBTOTAL CURRENT LIABILITIES	$9,633	$31,822	$38,661
Long-term Liabilities	$128,400	$126,600	$124,800
TOTAL LIABILITIES	$138,033	$158,422	$163,461
Paid-in Capital	$200,000	$200,000	$200,000
Retained Earnings	($155,400)	($131,810)	($104,776)
Earnings	$23,590	$27,034	$63,343
TOTAL CAPITAL	$68,190	$95,224	$158,567
TOTAL LIABILITIES AND CAPITAL	$206,223	$253,646	$322,028
Net Worth	$68,190	$95,224	$158,567

 

 

References:

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http://www.triua.com/100/5-advantages-and-disadvantages-of-e-commerce.html

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https://trellis.co/blog/top-10-ecommerce-markets-by-country/

Shapiro n. (2015). How Can Retailers Confront Disruption and Avoid Extinction? Retrieved

from: http://upstreamcommerce.com/blog/2015/02/08/retailers-elude-extinction

Statista. (2016). Statistics and Facts on the Apparel Market in U.S. Retrieved from:

https://www.statista.com/topics/965/apparel-market-in-the-us/

Tutorials Points. (2016). E-Commerce – Business Models.  Retrieved from:

https://www.tutorialspoint.com/e_commerce/e_commerce_business_models.htm

Wagner N. (2016). Analysis of the Retail Apparel Industry. Retrieved from:

http://smallbusiness.chron.com/analysis-retail-apparel-industry-70514.html