BestCo Business Plan

08 Fall

Spring ‘11

Kriti Agarwal, Alex Schindele, Sami Fuller Bestco is devoted to bring the highest standard products to its customers and to become the favored shopping destination in Singapore by providing excellent prices, irrefutable quality, and an emphasis on customer satisfaction.

BestCo

Table of Contents

Executive Summary: ............................................................................................... 3

Business Description .............................................................................................. 3 Mission Statement: ............................................................................................................................................ 4 What We Provide ............................................................................................................................................... 4 Market Analysis Summary ...................................................................................... 5 Market Segmentation: ...................................................................................................................................... 5 Target Market Segment Strategy: ............................................................................................................... 5 Industry Analysis: .............................................................................................................................................. 6 Marketing Plan: ..................................................................................................... 6

Competitive Advantage: ......................................................................................... 7 Original Shopping Experience ...................................................................................................................... 7 Increased Profit .................................................................................................................................................. 8 Competitor Analysis ............................................................................................... 8 Giant ......................................................................................................................................................................... 8 Carrefour ............................................................................................................................................................... 8 Ikea ........................................................................................................................................................................... 9 Daily Flowchart ...................................................................................................... 9

Income Statement ................................................................................................ 11

Start up Requirements ......................................................................................... 11

Cost Analysis ........................................................................................................ 12

Three Year Forecast ............................................................................................. 12 Start-‐up costs .................................................................................................................................................... 13 Monthly fixed costs ......................................................................................................................................... 13 Variable costs .................................................................................................................................................... 13

Top-‐down forecast: ......................................................................................................................................... 13 Comparing Break-‐Even with the Forecasts: ......................................................................................... 13 Risks: ..................................................................................................................................................................... 14 SWOT Analysis ..................................................................................................... 14

Personnel Organization Chart ............................................................................... 16

Website ............................................................................................................... 17

Business Card ....................................................................................................... 18

Print Ad ................................................................................................................ 19

Executive Summary: BestCo’s aim is to provide a discount store in Singapore, which will provide everything at one place, at one time. The idea is similar to big box discount stores, such as Wal-‐mart and Target in the United States. The discounted department store will be aimed at the general population and therefore all products will be available at an affordable price. Our marketing’s primary aim is to reach out to as many people as possible. Our flyers and advertisements will allow BestCo to be advertised in Singapore newspapers and magazines. Our website will promote our new promotions and allow our customers to purchase online. But most of all, we are creating a brand name—BestCo. This name will ring in the ears of Singaporeans and will have a clear message—great quality and great prices. In order for this business to be successful, our customers must have trust in us. They must be able to trust us to provide them with the best possible deals without compromising the quality of their products. Our customers will also trust us to provide most things available in the market so that only one trip is necessary. We will have a loyalty program—a BestCard—so that our customers are retained. Last, but not least, BestCo will provide the ultimate shopping experience. Our ambience will be different than any other store in Singapore. Our brightly-‐lit store will have large alleyways, be organized and have a large area to provide a feeling of openness. When our customers enter BestCo, they will immediately have a feeling of security with the products they will purchase.

Business Description As the first genuine hypermarket in Singapore, BestCo aims to capitalize on the ravenous demand of the country’s growing middle class. The idea mimics that of hypermarket giants in the United States such as Target and Wal-‐Mart. Major success stories, their expansion to Asia is

inevitable, and as a result it is only natural that Singapore’s growing demand for cheap, high-‐quality goods should be answered. The planned location for this store will be in Pasir Ris, easily accessible by the Pasir Ris MRT station as well as the Tampines Expressway. The main objectives of the company include subsidizing the large initial costs from construction, stock purchases, as well as transportation equipment. With no immediate

brand recognition, BestCo hopes to establish itself within the city-‐state as a center for quality, good customer service, and a wide variety of goods that are not found anywhere else on the island. Some of the distinctive features of our company include the fact that it will at least at the beginning be the first true hypermarket in Singapore. Right now the biggest problem facing Singaporean supermarkets compared to that of Europe and America is the lack of variety of products found in its stocks. Wide variety is one of the most if not the most important aspects of our company.

Mission Statement: BestCo is devoted to bring the highest standard products to its customers and to become the favored shopping destination in Singapore by providing excellent prices, irrefutable quality, and an emphasis on customer satisfaction.

What We Provide BestCo, in true hypermarket nature, will provide a broad assortment of household goods, food items, kitchen goods, gardening tools, and a cache of items too extensive to list here. These goods will come from manufacturers that we will strike special contracts with in order to bring the goods to our customers at the cheapest prices possible. BestCo will provide a variety of high-‐quality merchandise. One of the

qualms of living in Asia as opposed to other parts of the world is that occasionally you cannot be sure of the quality of the products. BestCo will seek to provide an end to that by putting everything through rigorous quality control to make sure only the finest is brought to our customers. In addition to quality, price is another important aspect of our products. While high-‐end markets in Singapore tend to have relatively inflated prices we plan to combat that. High tariffs can be overcome by purchasing in mass-‐quantities directly from American and Chinese labels.

Market Analysis Summary BestCo’s sales should increase steadily as the market sees that a variety of items can be bought at bargain prices while maintaining quality. We will encourage consumers to buy in quantity. Our pricing will attract those on a fixed budget. Our target market is the local middle class portion of Singapore. This includes the working class and typical families who are price conscious but at the same time want quality items.

Market Segmentation: BestCo intends to provide affordable shopping items to the typical middle class family. These families want the best deals for all products and are attentive to prices. They will probably shop at BestCo once a month, as they will be buying in quantity. The family may be able to order online if they are under time constraints due to work and items can be delivered to their house. Alternatively, the family may go directly to the store and select from a wide variety of options. This target market will be reached through advertising on ubiquitous magazines and newspapers in Singapore such as the Straits Times.

Target Market Segment Strategy: We tend to focus our items on price conscious consumers who are interested in both great prices and quality. If we can attract the local middle class portion of Singapore and keep these consumers, BestCo’s brand will be created and word will be spread about our store.

Industry Analysis: With the recent recession and a volatile economy, our discount store and big-‐box store model will become popular with consumers. There are some prerequisites that must be met in order for this model to work. Firstly, the discount store has to be unique when compared to other grocery and discount stores in Singapore. Secondly, our store must provide a wide variety of items so that our customers are attracted back to the store. Lastly, our store must be organized and have an ambience of conveniences so that our customers enjoy their shopping experience.

Marketing Plan: We will have to make two assumptions about our customers. First, most people with income limitations or who are on a fixed income is a potential target. Secondly, by marketing to these two segments, we will be able to expand our brand name. Besides the items we sell, our product also includes the people we attract and the atmosphere we create. We will present BestCo—a store that is convenient to shop in with a variety of products to choose from. Ultimately, we are selling our brand name. BestCo will find the perfect balance between price and quality. We want to provide our customers with an organized shopping experience that draws them back to our store. The price scheme of BestCo uses penetration pricing to acheieve maximum profit. By have lower prices than our competitors, we will be able to sell a large amount of merchandise. BestCo will also have a “BestCard” loyalty program. Through this card, our consumers will be rewarded with points and get information about discounts. The place, or location, of Best Co will be Pasir Ris. Most of our target customers are local and because of that, our discount store needs to be readily available so we can reach out to as many people as possible. We will have two distribution channels—direct sales and through the Internet. People will be able to buy our merchandise at our

store directly and through our website. If they choose to order items through the online store, it will be delivered directly to them. To transport the items, we will have trucks and motorcycles. The promotion of our store will be communicating that quality and quantity go hand in hand. Our key messages will be those such as “Just go. BestCo” “One Place. One Time” And “Great Quality & Quantity.” We will be advertising using Print Ads in newspapers and magazines and through our website. Many of our customers will hear about our store through word of mouth and flyers that promote deals and our store. Our marketing resources will be centered on both sales promotions including displays and events, and personal sales such as an outstanding customer service and a friendly, organized environment for our customers.

Competitive Advantage: BestCo will have a competitive advantage over other big box discount stores in Singapore. It is the first of it’s kind in its field—the only store in Singapore that will have a large amount of merchandise from all over the world in an organized manner. This advantage can be broken down into two parts—an original shopping experience and an increased profit.

Original Shopping Experience Organized, clean, and convenience will differentiate us from other grocery stores in Singapore. Our store will be large—enough for all the customers to enjoy their shopping experience. Our high ceilings and wide alleyways will inevitably lead to an experience different from other grocery stores in Singapore. We will be the Target and Walmart of Singapore. Our location, near Pasir Ris, will allow us to capture a wide scope of customers (including our major market segment), giving us an advantage over other grocery stores in Singapore.

Increased Profit To increase our profits, we will keep our costs low by buying in bulk and make our prices relatively cheap. The cost for constructing the actual store will be expensive, along with the other initial investments such as inventory; however, as the business expands, profits will increase. In addition, initially, our work force will be little, and as BestCo becomes larger, we will higher more.

Competitor Analysis

Giant Market Position-‐ Giant was one of the first big box stores in Singapore, with one of the longest reputations. A hypermarket by nature, it is definitely one of the leaders of its own niche, having few direct competitors. Strengths-‐ Of all the hypermarkets in Singapore,

Giant is the one with the widest variety with household items, grocery items and tech products. It is also largely built, lighted well, and in convenient locations. It has reasonably good brand recognition throughout the island and in other countries. Weaknesses-‐ Prices are still relatively inflated, especially more than they could be due to the fact that it is a regional based company. Also, the variety is quite limited compared to that of US hypermarket. Current Pricing-‐ Prices are relatively high compared to those of the US hypermarkets mainly due to inflation and lack of competition.

Carrefour Market Position-‐ Carrefour is mainly a challenger, and one of the least widespread throughout the

country. It mainly rivals Cold Storage and Fair Price with the exception that it also contains a variety of household items and technology items. Strengths-‐ It is a strong grocery store with a wide variety of grocery products, wider than average in Singapore. It is also marketed as a High-‐End store with locations in convenient and upscale malls. Weaknesses-‐ Besides the grocery store the other sections are the store are quite lacking in variety and not as competitive as Giant Current Pricing-‐ The prices at Carrefour are relatively high compared to the other grocery stores due to the fact that is more of an upscale location.

Ikea Market Position-‐ Ikea is a niche player in the furniture industry and it specializes almost entirely in furniture with a small selection of household goods. Strengths-‐ Ikea is recognized the world over as a furniture store and faces little to no competition from other brand named stores. People trust it for its cheap, quality furniture. Weaknesses-‐ The store only sells furniture; as a result it would not be able to directly compete with us. Current Pricing-‐ Cheap for furniture, the good prices for quality is one of Ikea’s hallmarks.

Daily Flowchart

Task (Weekdays) Start Time End Time

Organization of BestCo 6:30 am 8:30 am

Opening of Store 8:30 am 9:00 am Serve Customers 9:00 am 11:00 pm Inventory and Counting

11:00 pm 12:00 am

Task (Weekends) Start Time End Time Organization of BestCo 7:30 am 9:30 am

Opening of Store 9:30 am 10:00 am Serve Customers 10:00 am 10:00 pm Inventory and Counting

10:00 pm 11:00 pm

Income Statement

Start up Requirements Startup Expenses Startup Assets Requirement Amount Requirement Amount Building Plans $2,000.00 Warehouse/facility $2,000,000.00 Employee Insurance $30,000.00 Initial Inventory $200,000.00 Initial Marketing $90,000.00 Transportation $150,000.00 Furniture and decorations $60,000.00 Initial Investment $2,532,000.00 Return on Investment 8%

Cost Analysis

Three Year Forecast

53%

11%

22%

4% 2% 7%

Costs of product

Rent

Salaries

Utilities

Depreciation

Marketing costs

Cost Analysis*

*For the hirst year of business

-‐200000

-‐100000

0

100000

200000

300000

400000

500000

600000

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Three Year Forecast

Break-‐even:

Start-‐up costs Constructing the building – S$4.5 million or more dollars

Monthly fixed costs Rent – S$80,000 Wages – S$20,000 per worker x 50? / 12 months= S$80,000 Utilities -‐ S$10,000

Variable costs Products/stock/inventory -‐ varied Marketing -‐ $50,000

The break-‐even point for the big-‐box store is the number of products equal to the monthly fixed costs divided by the profit per product. The monthly fixed cost of the store is around $200,000. If each customer buys an average of $100 worth of product in the store, and the cost of the product is $50, then each customer provides an average of $50 of profit. Dividing $200,000 by $50 gives then the store would need 4,000 customers every month to break even.

Top-‐down forecast: Though there are almost 5 million people in Singapore, it is extremely unlikely that each person would have an equal chance of going to the big-‐box store. More likely, one adult member would go to the store to shop for the entire family, so it is more important to know the number of households. There are approximately 1,146,000 households in Singapore. Of these, the middle 80% of Singapore’s income distribution are most likely to buy from the store, so there are 917,000 potential households. If advertising and the like and attract 1% of the households, there are around 9,170 people who will come to the store. If each person comes to the store an average of once a month, and the same number of people come on every day, then 305 people will come to the store every day. Bottom-‐up forecast: Not possible

Comparing Break-‐Even with the Forecasts:

The number of customers forecasted by the top-‐down approach is double the number of customers needed to break even. This suggests that the big-‐box store could have a lot of potential profit, especially if it is able to bring in many customers and reduce costs as much as possible.

Risks: There is a chance that the market size was overestimated; after all, customers have a wide variety of alternatives to choose from. The strategy might not work for a few fairly significant reasons. There are already many alternatives for customers to choose from, such as Giant, Cold Storage, or even the wet markets. Also, the low price approach might reduce revenues such that we would not break even with our costs. Customers, in addition, might think that the products sold at the store are low-‐quality because of their low price. The initial startup cost of the operation is significantly high, and business failure would result in a huge loss for any investors.

SWOT Analysis Strengths-‐ BestCo hypermarket will have the widest variety for the lowest prices compared to all the other stores. Large imports from distinguished retailers will ensure 100% guarantee of quality, not easily found in many local businesses. The store will have wide aisles, high ceilings, and be brightly lit to combat a situation like the Mustafa center which is often crowded and difficult to navigate. Weaknesses-‐ The main challenge will be finding a way to keep products low after dealing with import costs and tariffs. In addition, initial exposure must be wide so that our brand recognition will increase. In addition, massive start up costs must be offset by good sales.

Opportunities-‐ Singapore has a large market and other hypermarkets such as Giant and Carrefour have massive demand. BestCo would take advantage of this demand, which is also a thirst for assurance of good quality products that is sometimes hard to come across in local shops. Threats-‐ The main threats to our business are competitors such as Giant, Mustafa Center and Carrefour that are other hypermarkets that have similar concepts to our own. What separates BestCo is the fact that an emphasis on American-‐style consumerism is made.

Personnel Organization Chart

Website

Business Card

Print Ad

$5.01

$XXX

One Place. One Time.

Great Quality & Quantity

$XXX

$XXX

$XXX

$XXX

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$XXX

$XXX

$XXX

$XXX

Item 1 Item 1 Item 1

Documents

BestCo Business Plan