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Swinburne University of Technology Sarawak Campus MUHAMMAD BABUR FARRUKH & SAAD ZAFAR IQBAL
La Perla is an Italian influenced lingerie boutique that will provide high quality lingerie in a wide array of sizes and styles with exceptional customer service. The store is expected to be located in a proven retail center called Suria KLCC Shopping Mall in Kuala Lumpur, Malaysia where the demographics are suitably upscale, traffic counts are high, and compatible retailers offer qualified traffic and potential referral business.
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Company Background
The company was founded in 1954 by Ada Masotti in a small confection lab named LApe. The name is inspired in the jewellery that came with the garment and the box. In 1960s the company started a revolution in the underwear tradition with the introduction of coloured pieces and leaving behind the white style. By the 1970s La Perla started to used technology in its production and the elastic strap, tulle, pleated polyester or silk-like microfibers were some of the most important breakthroughs; also at this decade the firm launched its swimwear line, expanding their business into different segments. With the arrival of Alberto Masotti (son of Ada) as the new President, the companies started its global expansion and enlarge its brand into different business such as perfumes. At the arrival of the last decade of the century La Perla opened its first boutique store in Milano, the capital of fashion in Italy, and launched its Pret-aPorter division. This was a result of the global trend amongst fashion houses in the world through a democratization of fashion and luxury that boost revenues across industries. By this time, the company also started to have liaison with art, in this decade the famous photographer Mario Parizotto. In the 21st century La Perla decided to change its looks to a more minimalistic approach by relying on Sigurd Steinunn designs. In 2004 was a special year for the company as it celebrated its 50th anniversary with the debut of the Pret-a-Porter catwalk in Milano. In 2008, La Perla was acquired by JH Partners, a private equity firm from San Francisco that specializes in investments on luxury brands. From 2010-2011, the collections of the company will be divided in four areas: La Perla, La Perla Villa Toscana, Studio La Perla and Miss Studio La Perla. Emilia-Romagna develop a unique characteristic, unlike other industrial districts, the region from the beginning of the industrial development had a strong emphasis on collaboration due to the genesis of its creation. The region has strong socialist backbone that promoted cooperatives and small and medium enterprises with a large incentive to collaboration; this added the strong network necessary to become an Industrial district. The historical context help the development of entrepreneurship in small and medium enterprise in the post war Italy through external factors (Marshall Plan) and internal dynamics that supported the flourishing of the fashion companies in the region. Specifically in Bologna/Regio-Emilia/Modena (BREM) the development of the industrial district was quite different than for other cities in the region. In this sense, the industrial district of BREM had a unique advantage compare to others; the horizontal diversification in the district had strengthen the collaboration and enlarge the concentration of industries. BREM has a strong heritage in the production of textile and clothing with the presence of established fashion houses such as Bluemarine, Max Mara, Sergio Rossi, Bruno Magli, Mandarina Duck and Piquadro. Also, the district has attracted major companies as foreign investors in the fashion business such as: LVMH investing in Bologna through the following firms, Calzaturificio MA.FR SRL, Baldinini SRL and OMAS S.R.L. Polo and Ralph Lauren investing in PRL Fashions of Europe S.R.L. also located in Bologna. Arpels investing in Redwall Italia Rossi 1924.
Fortunately, Kuala Lumpur offers many neighborhoods with upscale demographics. This bodes well for a store like La Perla which is selling the type of lingerie that is a desired luxury rather than a necessity. We are very fortunate that within one of the best neighborhoods in Kuala Lumpur metro area, we have found the perfect location for it in Suria KLCC Shopping Mall. Suria KLCC is Malaysia's premier shopping center, located at the base of the PETRONAS Twin Towers in the Kuala Lumpur City Centre. It has shops on 6 floors, with anchor tenants Isetan, Parkson Grand, Cold Storage Supermarket, Tanjong Golden Village, Signature's Level 2 Food Court and Marks and Spencer. "Suria" is a native Malay word derived from Sanskrit "surya", meaning "sunshine". It houses mostly luxury and fashionable shops such as Alfred Dunhill, Burberry, Calvin Klein, Chanel, DKNY, Emilio Pucci, Emporio Armani, Giorgio Armani, Gucci, Hugo Boss, Jimmy Choo, Louis Vuitton, Marc Jacobs, Miu Miu, Paul Smith, Prada, Rolex and Versace. There are also a 12 screen cinema, a concert hall, the PETRONAS Art Gallery, and a Science Discovery Centre.
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Industry Analysis
Mass merchandisers lead the women's innerwear market in share, as they do in a variety of consumer products. Mass merchandisers not only offer the convenience of one-stop shopping for a variety of needs, but they are increasing their selection of designer labels at lower prices. Department stores hold second place in terms of market share, offering a wider variety of merchandise, more high-end products, more hard to find sizes, and, if you're lucky, some customer service. La Senza is the leading specialty chain and garners approximately a 29% share of the Malaysian bra market, according to NPD Group. The rest of the women's intimate apparel sales are primarily through non-chain specialty stores, other national chains and Internet/direct mail (catalog sales). All of these stores lack the quality and innovation which La Perla brings to the table.
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Trends
The U.S. Intimate Apparel industry appears to be healthy. Women's Wear Daily reported that for the 12 months ending October 2009, total volume in dollars was up 4.3 percent, and total volume units were up 6 percent. The largest percentage increases came from the daywear category with sales up 27.1 percent and units up 27.5 percent. Women's Wear Daily reports that department stores and chain specialty stores are losing market share, around the world. We assume that much of that erosion is a result of the increasing confidence in Internet shopping and where available, specialty retailers. IAEs recognize that a specialty boutique such as La Perla will offer excellent customer service, product knowledge, personal fitting service, custom order options and wonderful product. Innovations in textiles and manufacturing have caught consumer's attention. Seamless undergarments that permit a greater range of motion and a smoother silhouette as well as new generations of microfibers that keep a body warmer, cooler or drier have encouraged consumers to seek out garments and fabrics that meet and exceed their demands.
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Threats Slow recovery from recent economic downturn. Talk of Victoria's Secret adding lines from international designers in the near future. Victoria Secret is already available in KL International airport.
Marketing Strategy
Marketing Objective Generate awareness through various marketing communications tactics to generate customer trial visits in support of the business goals and objectives for La Perla. 1. Utilize print advertising to generate awareness among the target audience and to emphasize key shopping periods. 2. Ongoing use of direct marketing to keep La Perla top-of-mind among a portion of the target audience at all times. 3. Develop and implement on-going in-store promotions, guerrilla marketing tactics and crossretail marketing to generate on-going awareness, trial and repeat visits to La Perla. 4. Employ strategic placement on the Internet. 5. A big parties and lavish events organized/funded on behalf of La Perla, the week before it opens. 6. Appoint a brand Ambassador
Tactics
Print advertising Employ key print advertising vehicles to build awareness among the target market: Advertise in Malaysias Premier Sunday magazine on an on-going basis to generate awareness as well as advertise call-to-action messages during key shopping periods, e.g. Christmas holidays, Hari Raya Holidays, Chinese New Year Holidays, wedding/bridal season. Advertise in the annual weddings magazine to create awareness amongst the all-important wedding/bridal audience.
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Special Shopping Event mailings will be generated to reach a higher percentage of the target audience in the trade area. These events will include the all important 4th quarter holiday shopping season and mark down events. For these events, we anticipate mailing to as many as 1,500 to 2,000 customers and prospects minimum. As La Perla generates its track able customer data base, we will utilize direct mail to target specific interests, whether that is based on particular products, brands or seasonal purchases. A "preferred customer" mailing list will also be utilized to inform those important friends in advance of special shopping events. We intend to implement a birthday program and quarterly trunk shows to also be driven by direct mail. Low or no-cost "guerrilla" marketing This will be a key strategy in the first 12-24 months that La Perla is open for business. Cross-promotion/marketing with complementary stores in Suria KLCC - We will create incentives for the nearby women's apparel and specialty stores to refer their customers to La Perla. Whether that is by honoring a similar sale incentive (percentage off retail) or limited time discounts to employees, we will find ways to make it worth the effort to send their customers to our shop.
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Parties for promotion Local night clubs will be funded to advertise the La Perla night, with small events to be hosted by the DJs. Gifts will be provided for the participants, which will help in introducing the brand to the party goers. One night before the Grand Opening there will be a fashion show at a 5 star hotel where models will promote various ranges that La Perla will offer.
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Amber Chia (born December 14, 1981) is a Malaysian model. She was born in Ipoh, Malaysia, but grew up in the city of Tawau, in Sabah, East Malaysia. She began her modeling career at seventeen in Kuala Lumpur. She gained exposure after being a finalist in the 2004 Guess Watches Timeless Beauty Contest, which was a model search for Guess Watch's brand ambassador. She has appeared in her local Sony, LOreal, and Mitsubishi advertisements. Chia was subsequently voted Model of the Year by the Malaysian International Fashion Awards in 2004 and 2005. Her most defining features are her pouty lips and her curvaceous figure.
Sales Strategy
1. Offer personalized customer service by well-trained, well compensated and appreciated employees. Develop customer relationships and loyalty that creates a desire for return visits. 2. Utilize the QuickBooks POS system to record customers' contact and purchase information, enabling us to follow up with direct mail and/or phone calls to communicate special events and the arrival of new products of interest. 3. Offer a 14-day exchange policy to give customers an option to return undesired selections without losing revenue from the sale. 4. Establish two major markdown events per year and promote the events to customers and prospects. These events will be used to move old inventory and create a special reason to visit La Perla. Except for during the markdown events, merchandise will be sold at full price to maintain the integrity of the quality products we are offering. We do not want to train our customers to wait for a sale. 5. Net purchases of 250$(750RM) and above will be delivered free of cost. 6. Network with bridal shops throughout Kuala Lumpur City to promote gift registry and the personalized attention that La Perla offers brides and their wedding parties. 7. Employees will receive added incentive to help meet/exceed customer service and sales goals.
Sales Forecast
La Perla projected average transaction is $250(750RM). This figure was derived using a couple of different sources. Were projecting a rate of growth of 15% in year 2 and 20% in year 3. This will come from garnering a larger market share based on increased awareness, positive word-of-mouth recommendations, and customers adopting La Perla as their exclusive lingerie outlet, as well as increased offerings in high demand areas such as maternity and hard-to-find sizes.
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Personnel Plan
We owners, Babur Farrukh, Sheikh Saad Zafar Iqbal and Akmal Khan are ready to work full time and have decided to share profits only. There will be on qualified manager who will draw a full time salary of $30,000 (90,000RM) per annum. We will appoint 3 part time sales people with a salary of $8,800 (RM 26,400) each. These sales people will provide professional bra fitting service. The salaries are expected to increase every year with improved performance.
Financial Plan
A line-of-credit up to $18,200 will be used to cover any monthly cash-flow shortage and greater than anticipated inventory requirements. Sales growth is expected to be aggressive with projections of sales increases of 15% in year two and 20% in year three. Profits will be reinvested to reduce debt, expand product lines and increase personnel, as and if needed. La Perla is a retail store, and will not be selling on credit. La Perla will accept cash, checks and all major credit cards. Marketing and advertising will be no greater than 4% of sales. A tax of 24% on profit will have to be paid.
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Financials
Following are the profit and loss account, cash flow statement and the balance sheet for the proposed operation. Many of the figures are approximations, although they have been taken from researches and data finding missions. Pro Forma Profit and Loss Sales Direct Cost of Sales Other Costs of Goods Total Cost of Sales Gross Profit Expenses Payroll Marketing and Advertising Depreciation Lease Rent Packaging Cell Phone Travel Web Design Insurance Credit Card Fees QuickBooks Other Start-up expenses Franchise Cost Total Expenses Profit Before Interest and Taxes Taxes Incurred (24%) Net Profit Year 1 $600,000 $300,000 $0 $300,000 $300,000 $56,400 $35,000 $3,000 $60,000 $5,000 $2,500 $1,000 $2,250 $1,420 $2,500 $10,110 $3,000 $26,300 $400,000 $608,480 ($308,480) $0 ($308,480) Year 2 $690,000 $325,000 $0 $325,000 $365,000 $59,000 $30,000 $3,000 $0 $5,000 $2,500 $1,000 $1,200 $1,000 $2,600 $11,626 $0 $0 $0 $116,926 $248,074 $59,538 $188,536 Year 3 $720,000 $350,000 $0 $350,000 $370,000 $61,300 $34,000 $3,000 $0 $5,000 $2,500 $1,000 $1,200 $1,000 $2,800 $13,604 $0 $0 $0 $123,204 $246,796 $59,231 $187,565 Year 4 $800,000 $397,000 $0 $397,000 $403,000 $62,600 $36,000 $3,000 $0 $5,000 $2,500 $1,000 $1,200 $1,000 $3,000 $14,204 $0 $0 $0 $129,504 $371,920 $89,260 $282,660 Year 5 $912,000 $412,000 $0 $412,000 $500,000 $64,900 $38,000 $3,000 $0 $5,000 $2,500 $1,000 $1,200 $1,000 $3,200 $15,908 $0 $0 $0 $135,708 $364,292 $87,430 $27,6862
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Pro Forma Cash Flow Year 1 Cash Received Cash from Operations Cash Sales Subtotal Cash from Operations Year 2 Year 3 Year 4 Year 5
$600,000 $600,000
$690,000 $690,000
$720,000 $720,000
$800,000 $800,000
$912,000 $912,000
Additional Cash Received Sales Tax, VAT, HST/GST Received $0 New Current Borrowing $0 New Other Liabilities (interest$250,000 free) New Long-term Liabilities $0 Sales of Other Current Assets $0 Sales of Long-term Assets $0 New Investment Received $0 $850,000 Subtotal Cash Received Expenditures Expenditures from Operations Cash Spending Subtotal Spent on Operations Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Dividends Subtotal Cash Spent Net Cash Flow Cash Balance Year 1 $56,400 $56,400
$0 $0 $0 $56,400
$0 $0 $0 $59,000
$0 $0 $0 $61,300
$0 $0 $0 $62,600
$0 $0 $0 $64,900
$796,300 $631,000 $658,700 $737,740 $847,100 $600,000 $1,231,000 $1,889,700 $2,627,440 $3,474,540
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$32,113 $0 $0 $32,113 $129,552 $161,665 $21,750 ($38,960) $16,277 ($934) $160,732 ($934)
$35,623 $0 $0 $35,623 $117,697 $153,320 $21,750 ($22,684) $36,241 $35,308 $188,628 $35,308
$36,001 $0 $0 $36,001 $104,729 $140,730 $21,750 $13,558 $39,627 $74,935 $215,665 $74,935
$41,042 $0 $0 $41,042 $90,544 $131,586 $21,750 $53,185 $58,891 $133,826 $265,412 $133,826
Paid-in Capital $21,750 Retained Earnings ($38,550) Earnings ($410) Total Capital ($17,210) Total Liabilities and Capital $154,115 Net Worth ($17,210)
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Chart: Highlights
1,000,000.00 900,000.00 800,000.00 700,000.00 600,000.00 500,000.00 400,000.00 300,000.00 200,000.00 100,000.00 Year 1 Year 2 Year 3 Year 4 Year 5 Sales Gross Profit Net Profit
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Table: Expenditures by Age of Lingerie Purchasers Nightwear/Bra/Panties/Night/Bras/Panties/Shape 18+ <$50 $50-99 $100+ <$50 $50-99 $100+ <$50 $50-99 <$50 $50-99 $100+ 13.1 10.8 14.5 10.4 12.8 10.1 10.2 11.5 14.0 12.0 12.6 10.1 8.5 8.3 10.0 11.1 7.8 9.5 9.3 8.6 9.2 8.3 9.0 10.2 10.0 9.9 9.9 16.9 9.6 10.8 13.2 10.3 10.3 9.9 10.6 13.2 9.9 12.7 9.2 11.0 10.5 10.0 12.4 10.7 11.4 10.7 10.2 12.0 11.23 13.1 11.9 6.7 10.6 11.9 17.7 11.3 15.1 11.5 12.9 16.2 10.0 8.9 10.2 10.9 10.5 13.6 11.1 10.5 12.4 10.4 12.3 11.4 8.9 10.1 13.2 13.2 9.8 11.5 8.7 10.1 10.1 9.8 11.0 9.2 6.9 8.7 8.1 9.1 8.6 7.4 7.7 8.0 7.0 8.0 7.6 8.5 5.4 5.1 5.4 6.4 5.7 5.1 4.0 5.4 3.8 5.4 4.7 4.0 4.3 4.1 2.2 2.8 4.4 3.8 2.5 4.4 2.1 4.3 3.3 2.4 3.9 3.0 2.1 1.5 3.6 2.8 1.8 2.9 2.4 3.3 2.8 1.5 7.9 5.4 3.4 0.0 6.2 3.6 1.5 6.4 2.1 6.3 3.1 1.4
18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75+
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$60,000 $5,000 $3,000 $1,000 $1,000 $2,500 $300 $600 $20,000 $1,000 $3,000 $400 $2,500 $2,250 $0 $102,550
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Table: Start-up Funding Start-up Funding Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required Assets Non-cash Assets from Start-up Cash Requirements from Start-up Franchise Cost Cash Balance on Starting Date Total Assets Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities (interest-free) Total Liabilities Capital Planned Investment Investment CashAkmal, Babur and Saad Investors Other Additional Investment Requirement Total Planned Investment Loss at Start-up (Start-up Expenses) Total Capital Total Capital and Liabilities Total Funding
$0 $0 $0 $250,000 $250,000
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Table: Market Analysis Market Analysis Year 1 Potential Customers Women 25-59, RM 75K+ Women 18-24 Bridal Total Growth 5% 20% 0% 1.07% 82,529 7,140 45,000 134,669 86,953 8,568 45,000 140,521 91,614 10,282 45,000 146,896 96,525 12,338 45,000 153,863 86,953 8,578 45,000 140,531 Year 2 Year 3 Year 4 Year 5 CAGR 1.31% 4.69% 0.00% 1.07%
Table: Sales Forecast Sales Forecast Year 1 Sales Lingerie Other Total Sales Direct Cost of Sales Lingerie cost Other Subtotal Direct Cost of Sales $600,000 $0 $600,000 Year 1 $300,000 $0 $300,000 Year 2 $690,000 $0 $690,000 Year 2 $325,000 $0 $325,000 Year 3 $720,000 $0 $720,000 Year 3 $350,000 $0 $350,000 Year 4 $800,000 $0 $800,000 Year 4 $397,000 $0 $397,000 Year 5 $912,000 $0 $912,000 Year 5 $412,000 $0 $412,000
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Sales
1,000,000.00 800,000.00 600,000.00 400,000.00 200,000.00 Year 1 Year 2 Year 3 Year 4 Year 5 Sales
Table: Sales
Cost of Sales
500,000.00 400,000.00 300,000.00 200,000.00 100,000.00 Year Year Year 1 3 5 Cost of Sales
Table: Personnel Plan Year 1 Year 2 Year 3 Year 4 Year 5 $30,000 $32,000 $34,000 $35,000 $37,000 $8800 $9000 $9100 $9200 $9300 4 5 5 5 5 $56,400 $59,000 $61300 $62600 $64900
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