men’s apparel & accessories - ebizplan

PACKERS – Business plan

©EBizplan, 2007 - 1 -

A BUSINESS PLAN FOR

PACKERS MEN’S APPAREL & ACCESSORIES

January 2008

EBizplan was commissioned and assisted by the owner to research and

write this business plan


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Name of business: PACKERS Men’s Apparel and Accessories

Owner: Mr. J Bond

Legal person: A Closed Corporation (CC)

Registration no In process

Physical Address: Here Village Mall

Postal Address: PO Box, 11111, OnSite, 22222

Telephone number: 123 456 7890

Facsimile: 098 765 4321

Cell phone number: 000 111 444 5555

Email address: [email protected]

Date of submitting: January 2008


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EXECUTIVE SUMMARY ................................................................................... - 5 -

INTRODUCTION ................................................................................................. - 6 -

AIM OF THIS BUSINESS PLAN ......................................................................... - 6 -

MACRO ENVIRONMENT................................................................................... - 6 -

ECONOMIC ENVIRONMENT ............................................................................ - 6 -

TECHNOLOGICAL ENVIRONMENT ................................................................ - 7 -

DEMOGRAPHICS ............................................................................................... - 7 -

POLITICAL ENVIRONMENT ............................................................................. - 7 -

INTERNATIONAL ENVIRONMENT ................................................................. - 8 -

THE SOCIAL ENVIRONMENT .......................................................................... - 8 -

THE CLOTHING INDUSTRY ............................................................................. - 8 -

Size and Growth of the Clothing and Foot-Ware Industry .............................. - 8 -

Concentration & Characteristics..................................................................... - 9 -

Main Participants ......................................................................................... - 10 -

Suppliers...................................................................................................... - 10 -

Consumers ................................................................................................... - 10 -

Cost structure ............................................................................................... - 10 -

PROFITABILITY OF THE CLOTHING RETAIL INDUSTRY ......................... - 11 -

Barriers to entry ........................................................................................... - 11 -

Expected rivalry........................................................................................... - 11 -

Power of the consumers in the Clothing Retail Market ................................ - 11 -

Power of PACKERS .................................................................................... - 12 -

Substitutes ................................................................................................... - 12 -

COMPETITORS ................................................................................................. - 12 -

SWOT of the Independent Clothing Store .................................................... - 13 -

The “Big 5” Competitors ..................................................................................... - 13 -

SWOT – the “Big 5”............................................................................................ - 21 -

INTERNAL ENVIRONMENT OF PACKERS ................................................... - 22 -

THE BUSINESS ................................................................................................. - 22 -

Legal person ................................................................................................ - 22 -

Regulations .................................................................................................. - 22 -

Location of PACKERS ................................................................................ - 22 -

How will it do its business? ......................................................................... - 22 -

MARKETING ACTIVITIES ............................................................................... - 22 -

Price ............................................................................................................ - 23 -

Product ........................................................................................................ - 23 -

Service......................................................................................................... - 23 -

Access ......................................................................................................... - 23 -

OPERATIONS .................................................................................................... - 24 -

Structure of PACKERS................................................................................ - 24 -

Management ................................................................................................ - 25 -

Job descriptions ........................................................................................... - 25 -

Employer/employee agreement .................................................................... - 25 -

Basic conditions of employment .................................................................. - 25 -

Training ....................................................................................................... - 25 -

Remuneration .............................................................................................. - 25 -

The culture of PACKERS ............................................................................ - 26 -

FINANCIAL MANAGEMENT .......................................................................... - 26 -

Financial requirements ................................................................................. - 26 -


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Sources and applications of funds ................................................................ - 26 -

Assumptions ................................................................................................ - 26 -

Start-up expenses ......................................................................................... - 27 -

Projected income statement year 1 to 3 ........................................................ - 28 -

Projected Cash-flow without capital funding ................................................ - 29 -

Projected Cash-flow with capital funding ..................................................... - 30 -

Balance Sheet: C.W. Welsford ..................................................................... - 31 -

SWOT ANALYSIS ............................................................................................. - 32 -

COMPETITIVE STRATEGY ............................................................................. - 32 -

CONCLUSION ................................................................................................... - 33 -

APPENDIXES .................................................................................................... - 34 -

APPENDIX A THE LSM measuring scale .......................................................... - 34 -

APPENDIX B: THE BIG 5: A COMPETITIVE COMPARISON ........................ - 34 -


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EXECUTIVE SUMMARY

PACKERS will be a new value added brand in South Africa’s men’s clothing sector.

Owned by J Bond, an experienced apparel merchandiser, the brand will offer something

different to South African men by making the shopping process for them more

personalised, but quickly – also with the option of the Internet as shopping channel.

Designed and manufactured locally, the PACKERS brand will be differentiated by high

quality and a distinct character.

The South African macro business environment is getting tougher for all retailers. The

high prices of fuel and food, plus the effect of a rise in prime interest every two months

have stalled the growth in retail sales recently. Consumers are now cutting back on less

expensive discretionary products. The major retailers, the Big 5 (Foschini, Edgars,

Truworths, Mr Price and Woolworths) are feeling the effects more. Independent clothing

retailers, with a personalised, committed client base, will be effected less during this

economic downswing. The sales value of the Clothing and Foot-ware Industry was

approximately R50 billion in 2006. The industry is divided into two with the concentrated

major retailers claiming 52% of the sales. The remaining 48% of the market is shared by

fragmented independent clothing retailers.

Located in the Here Village Mall in Centurion, PACKERS will target men older than 18

in the LSM 7 to LSM 10 consumer lifestyle group. The upcoming black middle class

segment in South Africa will receive special attention. The size shop will be around 300

m2. Sales of R6, 2 million are forecasted for the first year with a trade density of R20,

633. Internet sales for the first year are estimated at R620, 000 (10% of retail sales). The

operating profit is estimated to increase from 8% for year one to 20% and the end of year

three.

PACKERS will have an organisational culture oriented toward its customers. It will be

supported by training the staff how to take care of the customer’s needs in a friendly,

respectful manner. It will organically grow its business by creating brand awareness and

doing more transactions via the Internet. The Internet as retail channel will offer more

opportunities in future because of better, cheaper and broader band connectivity and also

the steep growth of Internet users in South Africa and Africa.

Although the future of PACKERS success will be in e-tailing, the “brick and mortar”

store in Here will help the brand discover its value proposition and will serve as a place

where customers can feel, smell and enjoy internally the brand.

PACKERS will offer value for a neglected segment of the clothing market. Digital

technology is changing the way we live, and do shopping for ever. For the men finding

shopping in a mall as a frustrating waste of time, PACKERS will help them by choice of

retail channels.


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INTRODUCTION

Apparel and textiles products are consumed largely for what they mean rather than for

what they do. Many intangible dimensions affect consumers' evaluations of competing

products thus it is imperative for design-oriented businesses to understand the factors that

affect consumer demand and preferences. Also do consumers no longer fit neatly into

marketing segments, but are rather “instaviduals” who jump between many segments

during the week, and even during the course of the day. J Bond, an experienced apparel

merchandiser, has noticed these changes in consumer behaviour and recognised an

opportunity to offer specialised apparel for adult men in an upmarket location and

virtually over the Internet. To realise this opportunity, J will open a retail apparel shop for

men in the Here Village Mall and introduce his home brand “PACKERS”. The mission of

PACKERS is as follows:

Create an excellent, middle-class shopping place.

Offer convenience and high quality services at honest prices.

Employ the best workers, motivate and train them, and keep them happy.

Keeping strict control over operating costs to maintain a good profit margin.

Follow a growth strategy to increase sales continuously.

AIM OF THIS BUSINESS PLAN

This business plan has two objectives:

1) It will be used to demonstrate the viability of the business, and the skills and

knowledge of the entrepreneur in order to obtain funds to start and grow the

business;

2) It will serve as a guide for the entrepreneur to run his business strategically and

profitably.

MACRO ENVIRONMENT

The macro-environment contains variables that directly or indirectly exert an influence on

the business and market environment. The apparel retail industry is directly influenced by

trends and legislation in the macro-environment.

ECONOMIC ENVIRONMENT

The South African economy is still expected to grow by an average of about 5 percent a

year for the next three years. However, the pace of economic expansion is expected to

cool somewhat in 2008, reflecting the impact of tighter monetary policy and slower

growth in developed markets. Although the economic outlook remains positive for 2008,

the growth will be lower because of higher commodity prices, a weaker rand, and (as a

result) higher inflation, higher prices and high interest rates. These trends will affect

consumer spending. Woolworths recently reported in a trading statement that its clothing

sales has fallen, also suggesting a further rate increase will negatively affect sector.

Foschini announced early in January 2008 that sales at comparable stores for the three

months to December rose 0.4 percent from a year earlier. But taking into account the

store's own inflation rate of 3 percent, this gave a real decline of 2.6 percent. This

indicates that consumers are now cutting back on less expensive discretionary products.

Eskom is on record as saying that power rationing will remains a demand-management

reality for the next seven years. To keep trading, many businesses will be forced to use


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generated power dependent on diesel or petrol. This not only flies in the face of greening

principles, but is estimated to cost more than five times more. Rising petrol prices will

also impact on the running costs of shopping malls.

Retailers will not be able to carry the burden of these increased running costs alone;

ultimately consumers will bear the brunt of establishing these independent power sources.

TECHNOLOGICAL ENVIRONMENT

Technology influences all businesses and many individuals in South Africa. The digital

technology has reshaped the way we perceive the world and also the way we live. The

success of businesses now and in the future will be how quickly they adapt their business

models to make use of the opportunities that the digital era offers. Advances in

technology pose opportunities to apparel retailers. It includes interactive communication

with individual clients via the Internet. Here the customers preferences can be captured

thus procurement can be customised. Also are websites likely to become increasingly

used as a means of distributing goods to customers.

DEMOGRAPHICS

The demographic spread of the population in South Africa is quite skew. Most of the

economically active population of South Africa lives and works in or near the big cities.

The most densely populated of South Africa's nine provinces, is Gauteng, 9.6-million

people (20.2% of the total population) occupying just 1.4% of the country's land area.

With both Johannesburg and Pretoria within its boundaries, Gauteng is almost entirely

urban. In 2005, many South African living in townships expressed the desire eventually to

move to the suburbs. This prediction has proved correct, with the number of black

middle-class families living in suburbs in South Africa's metropolitan areas growing from

23% to 47% in the past 15 months.

South Africa's black middle class has grown by 30% in just over a year, with their

numbers increasing from 2-million to 2.6-million and their collective spending power

rising from R130-billion to R180-billion. In comparison, white South Africans' annual

collective buying power increased from R230-billion to R235-billion. Twelve percent of

South Africa's black population account for over half (54%) of all black buying power.

This compares with 10% accounting for 43% of black buying power 15 months ago.

The lifestyles and shopping trends of a generation whose median age is now 16 will

determine the fortunes and finances of South African managers and retailers for the next

20 years. Those who understand the widespread changes about to take place, embrace

them and adapt will reap the benefits of this group’s enormous spending potential. Those

who do not will be left behind

POLITICAL ENVIRONMENT

Little has changed in the way South Africa has been governed over the past few years.

The Consumer Protection Bill, legislation that is designed to provide protection for

consumers against bad business practices, may upset many retailers and manufacturers.

Section 68 of the Bill introduces ‘strict liability’, which gives consumers the right to

claim compensation on a no-fault basis, meaning that if a consumer is dissatisfied with a

product, he or she will not have to prove where blame for the faulty product lies.


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The National Credit Act is affecting retail businesses directly. Sales growth is under

pressure as chain stores battle to issue new accounts. In the first half of this year, retailers

issued credit more freely in the run-up to the introduction of the new National Credit Act

at the beginning of June. This act has however little effect on cash only retailers.

Local clothing manufacturers all but close down because of cheap imports from China.

The SA government introduced quotas on clothing imports from China. It had led

retailers to buy more products in South Africa, boosting local manufacturers. Early

indications reflect that total clothing imports from January to May have declined by about

15 percent in volume and value terms compared with the same period a year ago.

However, big retail department store is now importing clothing from India and

Bangladesh to sidestep the quota restriction. The effect is mostly at the lower end of the

market.

INTERNATIONAL ENVIRONMENT

Overseas investors will value South Africa as an attractive investment opportunity as long

as we’ve got a stable government and sustain the current economic growth. However, the

dominance of the big local department- and discount retail stores has proven over the

years to be a barrier for global clothing retail brands to enter. The highly competitive

environment of global trade in the apparel industry is however also felt with the local

industry.

THE SOCIAL ENVIRONMENT

More than 40% of people living in the rural areas must survive on R7 or less a day. This

poverty, combined with the devastating affect of HIV-AIDS on rural societies cause for a

lot of human suffering. The prevalence of violent and organised crime in shopping centres

across the country has been a growing concern of government, business and the public.

THE PHYSICAL ENVIRONMENT

Global Warming. In the capricious world of fashion, where hemlines, fabrics and colours

fall in and out of favour with breathtaking speed, designers and retailers have always

relied on one constant — the orderly changing of the seasons But now it seems the

seasons have become as fickle as fashion. the length of seasons is changing the earlier

onset of spring and later arrival of autumn have shaved roughly two weeks from the

year’s coldest period. That change is starting to rewrite decades-old rules in the clothing

industry, which says that it loses several million rand a year because of the unexpected

swings in temperature

THE CLOTHING INDUSTRY

The textiles, clothing and footwear industry in South Africa is mature, and well-established.

STRUCTURE OF THE CLOTHING RETAIL INDUSTRY

Size and Growth of the Clothing and Foot-Ware Industry

The sales value of the Clothing and Foot-ware Industry was approximately R50 billion in

2006. It is a slow growing industry


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Concentration & Characteristics

The Clothing Retail industry is divided in two distinct sectors: 1) A concentrated industry

sector where the large retail department- and discount stores such as Edgars, Foshini’s

and Mr Price compete nation-wide; and, 2) The fragmented independent clothing retail

outlets which consist of hundreds of store labels, offering mostly specialised products to a

niche market.

The national retail clothing department and discount stores

In South Africa, big clothing department and –discount stores are concentrated and

dominated by a few big players. They also have recognisable brands. Large retailers, such

as department stores, full-line discounters and national/regional chains, are able to price

apparel at lower rate due to superior commodity handling capacity and resulting economy

of scale. Chains have far more buying power, using a wide range of manufacturers, and

thus have a large variety of clothing from which to choose. They are importing cheap, low

quality apparel in huge quantities from China, India and Bangladesh and then

merchandise them as commodities. The chains pay comparatively little for their space,

because they have the muscle, take a large area and negotiate a favourable rent. They are

also providing credit facilities to their customers with terms (six to 12 months interest-

free) that are a huge attraction to customers.

The Independent Clothing Retail Outlets

The fragmented Independent Clothing Industry is dominated by local stores and hence

there is low brand loyalty shown by the consumers. There are thousands of Independent

Clothing Retail (ICR) shops throughout South Africa. The ICRs support local designers

and manufactures. There garments is of high quality and targeted to the upper end of the

consumer market. Although record sales and profits during the past six months have been

reported by the big discount retailers and department stores, ICRs recorded little increase

in sales. The large chains are killing the independents with their Chinese imports selling

at ridiculous prices. Also, ICRs have few manufacturers from which to choose from thus

finding it difficult to stock a decent variety of ranges. Independents, who stock 95 percent

local merchandise, with between a dozen and two dozen ranges work on a 100 percent

mark up or less, whereas chains work on a 180 percent-plus mark up with their cheap

imports.

Seasonality

In South Africa, the peak months for clothing retail are February, June, September,

November and December. During March and August there will be clearance sales.

Changes in temperature have caused seasonal shifts that cause havoc when it comes to

ordering new stock. Retailers expect to turn at least 70% of their stock a season.

Retail Channels for Clothing

Haute Couture – leading outlets of expensive custom made high fashion;

High Street Fashion - Cheap clothes sold by high turnover low margin stores

Up Market Department Stores - a retail establishment which specialises in selling a wide

range of products, including clothing, without a single predominant merchandise line.

Discounted Fashion Stores - price apparel at lower rate due to superior commodity

handling capacity and resulting economy of scale.

http://en.wikipedia.org/wiki/Retail


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Discounted Non Fashion Stores – providing low priced commodity like apparel to the

lower income consumers

Independent Apparel Stores – home label retailers focusing on a niche market.

Main Participants

Record profits have been announced by many of the large retail clothing chains over the

past few months. Edgars, the biggest clothing retailer locally, posted an increase of 68

percent in headline earnings per share, with a 29 percent growth in retail sales. Truworths

has delivered compound growth of 36 percent per year in dividends over the past seven

years. Headline earnings a share in the year to June increased by 32 percent to R1.448,

which brings the compound growth to 31 percent a year over the past three years.

Foschini, the country’s third biggest clothing retailer by market value, said headline

earnings a share were up by 51,6 percent on 30 March and retail sales growth increased

by 19,7 percent. Alas, this current booming retail environment by and large applies only

to the large chains. This current booming retail environment by and large applies only to

the large chains, while independent retailers are being squeezed out of existence. A large

number of independents interviewed reported abysmal sales, one recorded increased

sales, while others had average sales

Suppliers

Big clothing department and –discount stores source most of their garment from the east

(China, India, and Bangladesh). On the other hand, source the Independent Clothing

Retailer almost all of its garments locally. The import of cheap garments from China by

the big has caused a dramatic decline in the local manufacturers of clothing. The

Independent Clothing Retailer has now got a few manufacturers to choose from finding it

difficult to stock a decent variety of ranges. The quota that the SA government installed

on garments from China prompts one of the big retailers to respond. Edgars, South

Africa’s largest mass retailer, has thrown its weight behind the local design industry by

launching a clothing line that features seven South African designers.

Consumers

One of the strongest consumer trends is a flagrant disregard for the age gap rules. At the

lower age range, pre-teens (or tweens) as young as eight are following fashion trends with

an obsession that puts their older siblings to shame and have substantial buying power.

The 30- (and even 40- ) somethings are hanging onto their youth (and the associated

fashion trends) for all they’re worth. This raises a whole bunch of new challenges and

opportunities for fashion brands. Older age groups often have plenty of spending power.

The result of this trend is likely to be a rise of more premium youth brands catering for

the increased shopping budgets of older audiences. Saviour faire consumers, these days,

are more willing to take outrageous risks to achieve their ultimate fashion goal –

individuality. An important new consumer segment is the “Black Diamonds” and refers to

South Africa’s two million-strong black middle class which is growing at an estimated

rate of 50% a year, and currently has an annual spending power of R130-billion,

Cost structure

The main items contributing to the cost structure of a clothing retailer are:

Start-up costs;

Occupancy costs;


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Salaries & wages;

Costs to purchase merchandise;

Marketing costs.

PROFITABILITY OF THE CLOTHING RETAIL INDUSTRY

The clothing retail industry is highly competitive and mature. The dominance of the

department- discount retail stores in the market to gain scale economies, has caused

consumers to expect to pay low prices for high fashion garments. A mature and well

defined discount store channel has increased the price-sensitivity of consumers in the

clothing retail industry. Independent Clothing Retailers could not or should not try to

compete against the big department- discount retail stores. Instead they should focus on a

specialised offering emphasising customer relationship practices. The profitability of the

market where PACKERS will conduct its business may be influenced by the following

factors:

Barriers to entry

New entrants to the industry bring new capacity, the desire to gain market share, and

often substantial resources. The seriousness of the threat of entry depends on the barriers

present and on the reaction from existing competitors that the entrant can expect.

To enter the market where the big department- discount retail stores in compete will be

very difficult, if not impossible. Their control of the channels, manufactures and price

sensitive consumer will require a huge investment of resources from anyone daring to

take the step upward in the formal sector, barriers to entry surely exist. Brand

establishment and access to retail sites may be considerable obstacles. Even international

competition is wary to take on the local big department- discount retail stores. There is a

growing expectation that large foreign retailers would shortly enter the local market. They

will however only open a few flagship stores rather than pose a nationwide threat to the

company's stores.

New entrants in the Independent Clothing Retailer market will find it difficult to stay in

the market if they are not differentiated. Also is prime store location scares and

expensive. I will take a lot of resources to build a new (local) brand, especially with

competitors in the nearby. E-Tailing is however lowering the barriers of new entrants that

want to use the Internet as a retail channel.

Expected rivalry

When PACKERS enters into the market, fierce rivalry from incumbent stores may be

expected. A price war may result in the forced closure of smaller outlets. The “winner”

usually takes a long time to recover. By offering specialised products in a niche market,

or using additional distribution channels, PACKERS may avoid the initial rivalry of

independent competitors. PACKERS should however immediately start to build on its

brand to create enter barriers for prospects in its niche market.

Power of the consumers in the Clothing Retail Market

Bargain hunters and price sensitive consumers usually shops at discount stores and will

not be targeted by PACKERS. The brand conscious/price equals value shopper will uses

his power to demand honesty, respect, dignity, trust and fairness. He will then reinforce


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PACKERS by showing their loyalty and commitment and not to worry too much about

the price.

Power of PACKERS

PACKERS will have a customer-centric strategy to align its business processes and IT to

build a meaningful value proposition for its customers. By only listening to its customers

it can create an intimacy that will differentiate PACKERS from its competitors and new

entrants.

Substitutes

Substitute products are products that take the place of a traditional purchase and take a

portion of market share away from retailers. Most of the substitutes for the retail industry

come from “non-store competition”. These include home-shopping networks, catalogues,

and Internet sales. PACKERS may use the Internet and catalogue sales to diversify its

retail channel.

COMPETITORS

Although PACKERS will not compete intentionally with the big department- discount

retail stores, PACKERS’s main rivalry will be from clothing stores similar to it, in the

same shopping centre or neighbourhood. This competition has no little or no brand

loyalty, and relies heavily on the support of the local market. The profile of a typical

independent clothing store may be as follows:

Profile of Independent Clothing Stores

Owners Usually a family business or entrepreneurs running the

business as a one-man venture, a partnership, close

corporation or private company.

Trading Independent Clothing Stores do most of their business

transactions on a cash basis. They use local suppliers.

Size Relatively small, mostly single outlets.

Customers Highly involved, novelty/fashion conscious

Access Mostly suburban shopping centres or local shopping malls.

Trading hours As specified in the lease agreement.

Personnel Owner managed with some support.

Price Home brands are marked up 100%; whilst the margin on

local manufactured garments is around 40%. They

emphasis the quality/price/value for money equation to

their customers.

Product Focussed or specialised, local.

Service Personalised, informative.

Marketing One-on-one, local press, website

Organisational culture Customer orientated.

Profitability Gross margins between 40% and 50%

Strategic intent A focus strategy centred on primary and secondary

attributes.


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SWOT of the Independent Clothing Store

Strengths Weaknesses

Flexible;

Personalized products and services;

Serve niche markets more easily

Little or no brand awareness;

Restricted resources.

No bargaining power with suppliers;

Limited promotional activities;

Lacks strategic intent

Opportunities Threats

Differentiation by innovation

Focused E-Tailing

Commoditisation of the retail clothing

industry.

Big department- discount retail stores

targeting niche markets with a focus

strategy;

Demise of the older, smaller shopping

malls

The “Big 5” Competitors

The five retail concerns that dominate the market for clothing and accessories to the

masses are Foschini, Edgars, Truworths, Mr Price and Woolworths. A detailed table

indicating their position in the market can be seen in the Appendixes.

Foschini

The company is regarded as one of the foremost independent chain store groups in the

country. The company’s success is strongly driven by its desire to provide the right

merchandise to the respective target markets of all its trading divisions, and its skill in

achieving this objective has resulted in a successful track record. The Foschini group

believes that teamwork coupled with professionalism in all aspects of retailing will

continue to be the foundation for the future.

Trading place

Foschini has stores in all the major shopping and neighbourhood shopping centres in

South Africa and elsewhere. Although they have a website, their customers can not do

their shopping over the Internet.

Foschini has 674 men’s and women’s clothing stores with a trading area of 236 436 m2.

There are 191 men’s only retail outlets (Markhams) with an average trading area of 305

m2. The number of square meters per employee for Markhams is 37. The trade density for

Markhams is R19,548, compared to Foschini (women’s clothing) of R16,336. The

difference between the trade density of Markhams and Foschini is because of higher

markdown percentage that Foschini allowed. Store occupancy cost is after employment

the highest cost item for Foschini.

Size and market share

Foschini achieved sales of R7,23 billion during their previously reported financial year.

They have the highest gross profit margin (42%) of the Big 5. This may be ascribed to


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their primarily focus on the clothing and accessories market which contributed R4 billion

toward the sales. Foschini did however not indicate what their market share for men’s and

women’s clothing for that period was.

Target markets

Foschini reported financials separately for women and men clothing, and valuable

information regarding their retail tactics for the men’s clothing segment was obtained. For

every R1 spend on men’s clothing at Foschini, R2.60 was spend on women’s clothing.

This may indicate that the husbands of the wives shopping at Foschini do not necessarily

buy their garments there. In spite of a relative low markdown on the men’s clothing

(10.4%), the growth in sales was 18%. Foschini target the LSM 7 to LSM 10 consumer

group with a wide range from sport to smart for men, aged between 18 and 35. The black

middle class of South Africa enjoys special attention.

Objectives and strategies

Generic strategies

Foschini strives to maintain a cost leadership advantage by pursuing integration

strategies. The differentiation strategy they pursue is similar than their competitors,

although they want to establish a unique style as stand alone differentiator.

Growth strategies

Foschini wants to grow its business through by establishing new stores or by making

existing stores bigger. They want to offer more credit facilities and benefits to increase its

customer base and sales. Special attention is given for optimal productivity to release

resources for further growth. New products and brands are innovated n order to pull

different markets. By focussing on the customer’s needs and wants, Foschini grows

organically by satisfying it.

Obtaining growth by credit sales

Foschini has more than two million active accounts which represent 67% of its total sales.

The arrear debtors as a percentage of the debtors book is however 25% of which 6.6% is

written off yearly as bad debt. Bad debt is the third biggest cost item for Foschini. Nether

the less they plan to continue to growing their credit sales.

Marketing strategy

Product

Foschini offer a variety of brands which are trendy and fashionable. Their offering is wide

and deep and they take care to prevent out-of-stock situations. They are continuously

reinventing, revitalising and repositioning their brands in order to stay ahead in a very

dynamic market. Foschini procure their stock mainly from local and European suppliers.

Lead times, supplier conformance and replenishment are particularly paid attention to.

The stock turn of Foschini was disappointingly 3.2 during 2007.


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Promotion

Foschini makes use of the following promotion tactics: Window displays, publicity, a

website, National TV, Magazines and communication with their customers through the

monthly statements. They also inform their clients via email of promotions or new

products/fashion trends.

Price

By offering high quality products to higher income markets, Foschini has a value for

money pricing strategy.

Distribution

Foschini distributed 44,1 million units during 2007. The group’s distribution centre is

near its head office in Cape Town. The distribution costs for 2007 was 1,57% of turnover.

Edgars (Edcon)

Edcon is a multi-brand retailer with a dominant sub- Sahara footprint with customers

across the entire formal sector of Southern Africa. Edcon has 34% market share for

formal clothing, footwear and textile market. They have stores in all major locations and a

database of more than four million customers.

Trading place

Edcon has stores in all the major shopping malls, city centres and high streets. Edgars has

a website and a portal where customers can do their shopping online.

Of the 909 retail stores that Edcon has, 240 are for retail clothing. The average size of the

clothing retail stores is 1971 m2 with 54 m2 allowed per employee. The trade density is

R15,810 which is similar to that of Mr Price (R15,846) but way lower than Truworths

(R28,481) and Woolworths (R53, 503). Store occupancy cost is high at more than 16% of

turnover.


Edcon achieved sales of R16,3 billion with a gross profit margin of 39%. Their operating

margin is 13% which is about half of Foschini and Thruworths but marginally higher than

Mr Price and Woolworths. Edgars rely on economies of scale to make money cost

effectively. Edgars is the market leader with a market share of 34% (2006).

Target markets

Edcon targets the LSM 3 to LSM 10 consumer group through two divisions: 1) a discount

division, JetMart targeting the LSM 3 to LSM 6 consumer groups; and 2) department

store divisions, e.g. Edgars, targeting the LSM 7 to 10 consumer groups. Although

Edcon offer clothing for both men and women, it did not distinguish between them in

their annual report.


©EBizplan, 2007 - 16 -


Generic strategies

Edcon also strives to maintain a cost leadership advantage by pursuing integration

strategies. The differentiation strategy they pursue is similar than their competitors, with

their scale economies advantage the sole differentiator.

Growth strategies

Edcon aggressively open new stores to grow organically and will acquire other businesses

to increase their footprint and customer base.


Edcon is the leading provider of credit for clothing with more than four million active

accounts representing 63% of its sales. The arrear debtors as a percentage of the debtors

book is 9% of which 8% is written off yearly as bad debt.

Marketing strategy

Product

Edgars offer multiple brands which are also trendy and fashionable. Their offering is wide

and deep and they want to mange the stock turn better (6.1). Brand awareness is Edgars’s

main tactic to maintain and grow customers. Edgars procure their stock locally, in Europe

and also in China. Lead times, supplier conformance and replenishment forms part of

their procurement strategy.

Promotion

Edgars makes use of the following: Window displays, publicity, a website, National TV,

Magazines and communication with their customers through the monthly statements.

Price

Pricing is centrally controlled making it difficult for individual stores to react quickly to

the competitor’s promotion tactics.

Distribution

Edcon’s distribution unit handled over 275 million units during 2006 at a logistic cost of

R1,22 per unit.

Truworths

Truworths, is one of South Africa’s leading fashion retailers with over 250 stores in South

Africa and 14 franchise operations in Africa and the Middle East. Truworths forms part of

Truworths International which has collectively more than 400 stores in South Africa. The

Truworths International Retail Group also incorporates Identity, YDE and Uzzi.

Truworths International has an unwavering commitment to its core business of

merchandising and retailing fashion clothing and accessories.


©EBizplan, 2007 - 17 -

Trading place

Truworths has stores in all the major shopping and neighbourhood shopping centres in

South Africa and elsewhere. Customers can also do their shopping over the Internet.

Truworths has 422 clothing stores with men’s and women’s clothing departments. The

average size of the stores is 443 m2, with the average size of the men’s clothing

department 99 m2. Truworths allows 32 m2 per employee to take care of its customers.

The trade density at Truworths is R28,481 per m2. Store occupancy cost is 7% of

turnover.


Truworths achieved sales of R5,3 billion during their previously reported financial year.

They have a healthy gross profit margin of 40% with an operating profit margin of 24%

(similar to Foschini). The high gross profit is probably the result of the import of cheaper

merchandise from China. Truworths reported a market share of 16% for its men’s

clothing and 20% for its women’s clothing offering. The growth for men’s and women’s

clothing was 24% and 21% respectively.

Target markets

Truworths also reported financials separately for women and men clothing. For every R1

spend on men’s clothing at Truworths, R2 was spend on women’s clothing. This ratio is

better than Foschini’s. The wives shopping at Truworths quickly visit the men’s

department to buy clothing for their husbands, conveniently under the same roof.

Truworths is focusing its marketing mix on the young affluent people.


Generic strategies

Truworths is the only member of the Big 5 to pursue a focus strategy. The result of this

strategy is apparent with high gross- and operating margins, with Truworths not needed to

markdown anything. The differentiation strategy they pursue is similar than their

competitors.

Growth strategies

Truworths wants to grow its business through by establishing new stores or by making

existing stores bigger. They want to offer more credit facilities and benefits to increase its

customer base and sales. New products and brands are innovated in order to pull different

markets. By focussing on the customer’s needs and wants, Truworths grows organically

by satisfying it.


Truworths has more than 1,5 million active accounts which represent 73% of its total

sales. The arrear debtors as a percentage of the debtors book is however 15% of which

7% is written off yearly as bad debt.


©EBizplan, 2007 - 18 -

Marketing strategy

Product

Truworths offers multiple brands which specifically directed to trends and fashions in its

target market. Their offering is wide but not deep. They strive to get brand commitment

from there customers through brand integrity. Truworths procure their stock only from

local suppliers and they make exclusively use of local designers. Forming and

maintaining a fruitful partnership with local suppliers is at the fore-end of Truworths’s

product strategy. Their stock turn is 5.

Promotion

Truworths makes use of the following promotion tactics: Window displays, a website,

SMS, National TV, Magazines and communication with their customers through the

monthly statements.

Price

Truworths price its merchandise competitively.

Distribution

At the core of the supply chain is the Truworths Distribution Centre (TDC), a 30 000 m2

facility which operates as a distribution facility rather than a warehouse. TDC does not

hold large volumes of stock, with only a small percentage of its capacity devoted to stock

replenishment. The balance of the stock is delivered by suppliers to TDC and then takes a

few days to reach stores.

Mr Price

Mr Price Group Ltd is one of South Africa’s major value retail chains. The group is

divided into six retail chains, focusing on clothing, footwear, accessories, jewellery and

home wares. These chains are made up of two operational divisions: the cash division and

credit division. Mr Price Group’s retail chains comprise Mr Price and Miladys in the

apparel department and Mr Price Home and Sheet Street in the home department.

Trading place

Mr Price has stores in all the major shopping and neighbourhood shopping centres in

South Africa and elsewhere.

Mr Price Group Limited and its subsidiaries operate 761 stores across Southern Africa.

The average size of the stores is 421 m2. Mr Price allows 40 m2 per employee in its stores.

The trade density at Mr Price is R15,846 per m2. Store occupancy cost is 13% of turnover.


Mr Price achieved sales of R5 billion during their previously reported financial report

with a good gross profit margin of 40% not supported by an operating profit margin of

10% (similar Edcon and Woolworths). The lower operating profit may be ascribed to the


©EBizplan, 2007 - 19 -

discount nature of the business. Mr Price did not report figures regarding their market

share. They did however report an annual growth in clothing retail of 22%.

Target markets

Mr Price is about casual fun and relaxed fashion for the whole family. This value retail

chain offers casual clothing, intimate wear and accessories for kids and adults at

affordable prices. Mr Price targets the LSM 4 to LSM 7 market, offering affordable

clothing to its clients.


Generic strategies

Mr Price is the price leader of the industry. By procuring also products cheaply from

China and India, it can afford to retail its clothing at a lower price. The differentiation

strategy they pursue is similar than their competitors.

Growth strategies

Mr Price wants to grow its business through by establishing new stores or by making

existing stores bigger. New products and brands are innovated n order to pull different

markets. By focussing on the customer’s needs and wants, Mr Price also grows

organically by satisfying it.


In contrast with the other members of the Big 5, Mr Price does more cash transactions

(89%) than transactions on credit (11%). It acknowledge however than it has to increase

the number of its card holders in order to stay competitive in the market.

Marketing strategy

Product

Mr Price offers only a few house brands, offering its products wide and deep. They are

continuously building their brand to get more customers committed to the brands. Mr

Price tries to keep a balance to procure their stock local as well as overseas suppliers.

Promotion

MR Price has for long been involved in sponsoring sport teams, - a competitive

advantage. Mr Price makes use of the following: A website, publicity, catalogues,

National TV, and Magazines.

Price

Mr Price price competes on price.


©EBizplan, 2007 - 20 -

Distribution

The systems and logistics teams of Mr Price implemented and supported business

processes which managed over 120 million units of merchandise in the 2006 financial

year. The group entered into a lease for a new 35 000 square metre distribution centre at

the Riverhorse development just north of Durban, and this was officially commissioned

towards the end of the current financial year. The centre will operate as

the main distribution facility for the Mr Price and Mr Price Home divisions, which

together account for over 80% of the group’s merchandise volumes

Woolworths

Woolworths is a respected retail chain that offers a selected range of clothing, home ware,

food and financial services, all under its own brand name. Men, women and children’s

clothing is known for its exceptional quality and durability, and all items have labels that

indicate materials used and country of manufacture.

Trading place

Woolworths has stores in all the major shopping and neighbourhood shopping centres in

South Africa and elsewhere. Customers can also do their shopping over the Internet.

Woolworths has 200 department stores with men’s and women’s clothing and food

departments. The average size of the stores is 1738 m2. Woolworths is well populated

with staff, allowing 18 m2 per employee in its retail operations. The trade density at

Woolworths is R53,503 per m2, the highest by far in the Big 5 group. Store occupancy

cost is a low 4% of turnover.


Woolworths achieved sales of R18,6 billion during their previously reported financial

year. They have a healthy gross profit margin of 34% with an operating profit margin of

only 10%. Woolworths reported a market share of 16% of the clothing market with a

growth of also 16% for its clothing offering.

Target markets

Woolworths offers a powerful brand, aspiration, capable of appealing to a widening

spread of customers who desire quality, style and innovation at prices which offer a fair

deal.


Generic strategies

Woolworths is pursuing a differentiation strategy. It differentiates itself on the quality of

its products. Woolworths also appeal to the market niche that takes environmental

concerns into consideration when buying their goods.


©EBizplan, 2007 - 21 -

Growth strategies

Woolworths organically grows its business through by establishing new stores or by

making existing stores bigger. They want to offer more credit facilities and benefits to

increase its customer base and sales. By increasing their productivity, Woolworths will

save on resources which render opportunities for further growth.


Woolworths has more than 1,5 million active accounts which represent 32% of its total

sales. The arrear debtors as a percentage of the debtors book is however 17% of which

7% is written off yearly as bad debt.

Marketing strategy

Product

Woolworths offers a single brand which personalise the quality of the product or service.

Their offering is wide and deep. They build their brand to get commitment from their

customers. Woolworths procure their stock only from local and China suppliers. Forming

and maintaining a fruitful partnership with suppliers is at the fore-end of Woolworths’s

product strategy. Their stock turn is 18.

Promotion

Woolworths makes use of the following tactics: Window displays, a website, SMS,

National TV, Magazines and communication with their customers through the monthly

statements.

Price

Woolworths price its merchandise according the price: quality principle.

Distribution

The new world class 78 000 m2 Midrand distribution centre came into operation, as

planned, from February 2007. This multi-functional facility consolidated seven

distribution facilities in Gauteng and provides capacity for years to come.

SWOT – the “Big 5”


Financial leverage;

Selling to the masses

Close relationships with local suppliers and

designers;

Can survive the risk of fashion;

Little space to differentiate;

Must monitor the other members of the Big

5 closely.


Globalisation

Credit products.

Competition from overseas;

Integration threat.

Changes in socio-economic environment


©EBizplan, 2007 - 22 -

The Big 5 competes with each other to get the business of the masses. The majority of

them offer attractive credit facilities to lure customers to their shops. They then use the

millions of customer’s personal data to “be in their face” with direct marketing (with

invoices each month), emails and sms. The Big 5 did however change their sector in a

commodity market. The independent retailers use and may use this opportunity to

customise and personalise its product offering.

INTERNAL ENVIRONMENT OF PACKERS

The internal environment of PACKERS concerns the business, clients, suppliers and

intermediaries.

THE BUSINESS

Legal person

PACKERS will be owned by a closed corporation, with Cian Michel Welsford the

principle.

Regulations

PACKERS will do its business within the regulations as stipulated in the business act.

Location of PACKERS

PACKERS will be located in the Here Village Mall, Centurion, Gauteng. Centurion is

strategically situated between Johannesburg and Pretoria and its main access routes link it

to every important centre in Gauteng. The main railway line also runs through the heart of

Centurion, thereby confirming Centurion's role as the urban anchor of Gauteng. Centurion

is home to a multi-cultural population of 134 000 and it provides jobs to 50 000 people.

20% of Centurion's economically active residents fill managerial posts, whilst 43%

pursue a career in the professions. 62% of the residents are economically active.

How will it do its business?

PACKERS will be a small (250 m2) men’s clothing retail outlet. Its trading hours will be

the same as what is stipulated by the owners of the Here Village Mall. The store offer a

narrow and shallow range of mostly locally manufactured men’s garments, doing one-on-

one selling to men in the upper consumer segment (LSM 10). PACKERS will also have a

web presence where customers can obtain product information and even purchase goods

via the Internet.

MARKETING ACTIVITIES

In order to structure the marketing activities logically, the five attributes of a commercial

transaction, price, product, service, access, and experience will be used. The promotion

strategy will be touched on at a subsequent heading.


©EBizplan, 2007 - 23 -

Price

The first responsibility of PACKERS is to have a pricing strategy that will cover the fixed

and variable cost and also provide profit for the owner. Price can however be part of the

competitive advantage of PACKERS. The consumer segment that PACKERS will target

feels that an “honest” price is more important than “lowest” price. Price should not

fluctuate from day to day and the pricing strategy should be communicated externally to

the customers as well as internally to the employees. Information about price is most

important before the customer will buy his clothing. The higher the education level, the

more critical is the attitude of the consumer – they are then more sensitive to quality:

price relationships.

Product

PACKERS will only sell men’s clothing from local manufacturers and design. Its goal is

to introduce an own brand contributing between 20% and 30% of the sales during year 1.

Consistently good merchandise quality will compliment the reliable high quality products

that PACKERS will offer. Customers with the highest level of income are the most

fashionable orientated. The smart and fashionable product range will include all men’s

garments and accessories except shoes. The products will have labels with additional

product information on display. By obtaining detailed information about individual

customers through the Internet or catalogue, PACKERS will have the opportunity to offer

customised product and service to its customers. Increasing the sales of its own label will

put PACKERS in control of its supply channel as far as quality and delivery is concerned.

Service

PACKERS will differentiate itself on the service it offers to its customers. Customers will

be fairly treated as individuals. In order to ascertain customer satisfaction, information

and satisfaction policies will be put in place. A competitive advantage for PACKERS will

be to allow it customers to, within reason, allow them to unconditionally return

merchandise.

Access

Today’s customers are multi-channel savvy using a combination of different shopping

channels to meet their needs.

The shop

Although men are less concerned about access factors than women, women are often the

“gate-keepers” concerning the buying of their partners clothing. PACKERS will have a

clean shop where it will be easy for customers to “navigate”. PACKERS will through

display boards on its website give directions to its store for customers to find it easy. The

store will also be located close to other outlets that interest men. Special provision will

also be made for handicapped customers. Customers will also be allowed to do online

shopping in the shop with automated checkout point in order for them to save time.

Product catalogues will be mailed to senior customers as this is their preferred way to buy

clothing. Most of the clothing on display will be for the attention of men between 24 to 35

years old, because they enjoy shopping for clothing. Special attention should be given to

the “Generation Y” customer (up to 24 years old), because they have a dislike in

department store shopping.


©EBizplan, 2007 - 24 -

The virtual shop

E-Commerce will take an increasing share of retail sales; and is going to get easier, more

enjoyable and safer in the years to come. This trend has prompt retailer shop owners to

consider e-commerce strategies. Doing business over the Internet will be important for

most o PACKERS’s customers. Men find it convenient and cost efficient to e-tail. Men

does not like the time “wasted” while doing shopping. By doing the shopping online, they

can cut their shopping time by at least 75%. Men, more than women, use the Internet to

search for product information. PACKERS has budgeted 10% of its retail sales to be over

the Internet for the first year. PACKERS also have an interest in a courier firm which may

come in handy with the delivery of its products.

Catalogue

The baby-boomers and senior customers are more likely to purchase their clothing

through mail or catalogue. This is because as the customer gets older, the enjoyment of

shopping for clothes declines. Product catalogues will be mailed to the older customers or

via direct mail.

Experience

PACKERS will be a nice, comfortable and cosy shop. Its staff will treat the customers

with respect and in a courteous manner. All transactions will be done fairly in order to

establish a closer relationship with the customers. Care will be taken to deliver on

promises, especially concerning “out-of-stock” situations. For the male customers, the

shopping process will be made simple, quickly and efficient. He may even order the

clothing via the Internet before collecting the items at the shop, or receiving it at his

convenience delivered.

OPERATIONS

Cian Michael Welsford will be the principle member of the CC that owns PACKERS. He

will fulfil the role of top management.

Structure of PACKERS

Owner

1 Store Manager

2 Cashiers 3 Shop Assistants 1 Cleaner

1 Channel Manager


©EBizplan, 2007 - 25 -

Management

The Owner

He will fulfil the role as general manager. The Store Manager and Channel Manager will

report to him.

The Store Manager

Responsible for the day-to-day running of the shop. He/she will supervise the cashiers,

shop assistants and cleaner.

The Channel Manager

He/she will manage and maintain the website. The promotional and procure functions will

al be his/her responsibility i.e. developing and distribution of the catalogues, sponsoring

and public relations and management of the procurement process.

Job descriptions

Employees of PACKERS will be provided with job descriptions stipulating their job

duties and responsibilities.

Employer/employee agreement

Employment contracts will be agreed on and introduced according to the guidelines given

by the Department of Labour www.labour.gov.za.

Basic conditions of employment

Basic Conditions of Employment applies to all employers and workers and regulates

employment conditions such as leave, working hours (ordinary, Sundays and public

holidays), employment contracts, employee records, deductions, pay slips, overtime, and

termination. Again PACKERS will use the guidelines of the Department of Labour to

implement its rules and policies

Training

The training and development of the employees will form an important part of the

business’s strategy to survive and grow. The employees will be trained about the products

and categories, their benefits and how to use it. They will also be trained how to assist

customer in the correct (respectful) way.

Remuneration

PACKERS will offer the new employees a market related salary package. Annual salary

increases will be determined by the owners.

http://www.labour.gov.za/


©EBizplan, 2007 - 26 -

The culture of PACKERS

The organisational culture will be developed and reinforced as an orientation towards

client welcome and service. A culture of achievement will further ensure that the vision

and mission of PACKERS realise. All employees will be learned to understand the

positioning of the PACKERS brand and what their role is in supporting it.

Consultants

The services of the following will be engaged on an on-going, part-time basis:

Accountant

Management consultant

FINANCIAL MANAGEMENT

Financial requirements

The closed corporation that owns PACKERS needs operational capital and capital to

establish the business.

Sources and applications of funds

The funding will be sourced as follows:

R1,140,000 to open and run the shop.

R760,000 own contribution

Financial control will be done in according to the general standards of accounting

practices.

Assumptions

Sales Month 1 is January 2008 – to allow for seasonality

Cost of Sales

(COS)

A figure of 55% COS, was used.

Value added tax

(VAT)

VAT was not taken in consideration when calculating

the cash flow figures.

Interest Based on prime plus 2% (16% per annum), over 60

months

Personnel The business will start with its full staff component


©EBizplan, 2007 - 27 -

Start-up expenses

Jackeries Start-up costs

R Vat Vat incl

Equipment

Computer POS 30,000 4,200 34,200

Security 30,000 4,200 34,200

Shopfitting 370,000 51,800 421,800

Signage 20,000 2,800 22,800

Stock 200,000 28,000 228,000

Opening promotion 20,000 2,800 22,800

Website Developing 10,000 1,400 11,400

Working capital 120,000 - 120,000

Totals 800,000 95,200 895,200

Own contribution 550,000

Required 250,000


©EBizplan, 2007 - 28 -

Projected income statement year 1 to 3

Income Statement Three Year Summary

Year 1 Year 2 Year 3 Totals

Sales

Sales 6,190,000 7,118,500 8,186,275 21,494,775

e-Sales 619,000 742,800 1,067,775 2,429,575

Total Sales 6,809,000 7,861,300 9,254,050 23,924,350

Less Cost of Sales

Cost of Sales

Cost of Sales 4,268,966 4,745,667 5,116,422 14,131,054

Total Cost of Sales 4,268,966 4,745,667 5,116,422 14,131,054

Gross Profit 2,540,034 3,115,633 4,137,628 9,793,296

Operating Expenses

Accounting Officer 6,000 6,600 7,128 19,728

Advertising 36,000 41,400 47,610 125,010

Bank Charges 20,427 23,491 27,015 70,933

Cell Phones 18,000 20,700 23,805 62,505

Centurion Municipality 18,000 19,800 21,384 59,184

Cleaning Material 1,440 1,584 1,711 4,735

Consulting Fees 12,000 - - 12,000

Insurance 76,000 87,400 100,510 263,910

Interest 31,444 28,507 21,515 81,466

Loan Repayment 72,000 72,000 72,000 216,000

Member's Fees 207,840 239,016 274,868 721,724

Rent 750,000 825,000 907,500 2,482,500

Maintenance 3,600 3,960 4,277 11,837

Salaries and Wages 309,168 340,085 367,292 1,016,544

Stationary 6,000 6,600 7,128 19,728

Telephone and Fax 30,000 34,500 39,675 104,175

Travel Expenses 6,000 6,600 7,128 19,728

Courier costs 24,760 27,236 29,415 81,411

Promotion discounts 86,932 95,625 103,275 285,831

Packaging 12,000 13,200 14,256 39,456

Internet costs 12,000 13,200 14,256 39,456

Total Operating Expenses 1,628,679 1,880,104 2,063,235 5,658,949

Income / (Loss) Before Tax 911,356 1,235,530 2,074,393 4,221,278

Income Tax 227,839 308,882 518,598 1,055,320

Nett Income / (Loss) 683,517 926,647 1,555,795 3,165,959

Cumulative Nett Income 683,517 1,610,164 3,165,959


©EBizplan, 2007 - 29 -

Projected Cash-flow without capital funding

YEAR 1 Seasonality 0.03 0.06 0.26 0.04 0.05 0.08 0.12 0.08 0.08 0.07 0.06 0.07 1

Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Total

Cash Flow

Sales

Sales 185,700 371,400 1,609,400 247,600 309,500 495,200 742,800 495,200 495,200 433,300 371,400 433,300 6,190,000

Other 1,548 3,095 13,412 2,063 2,579 4,127 6,190 4,127 4,127 3,611 3,095 3,611 51,583

Loans - - - - - - - - - - - -

Investment - - - - - - - - - - - - -

Total 187,248 374,495 1,622,812 249,663 312,079 499,327 748,990 499,327 499,327 436,911 374,495 436,911 6,241,583

Expenses

Startup 800,000

Accounting Officer 500 500 500 500 500 500 500 500 500 500 500 500 6,000

Advertising 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000

Bank Charges 557 1,114 4,828 743 929 1,486 2,228 1,486 1,486 1,300 1,114 1,300 18,570

Cell Phones 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000

Lekwa municipality 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000

Cleaning Material 120 120 120 120 120 120 120 120 120 120 120 120 1,440

Consulting Fees 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000

Insurance 6,333 6,333 6,333 6,333 6,333 6,333 6,333 6,333 6,333 6,333 6,333 6,333 76,000

Interest - - - - - - - - - - - - -

Loan Repayment - - - - - - - - - - - - -

Member's Fees 17,320 17,320 17,320 17,320 17,320 17,320 17,320 17,320 17,320 17,320 17,320 17,320 207,840

Rent 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 750,000

Service fee 1.75% (purchase) 2,708 5,416 23,470 3,611 4,514 7,222 10,833 7,222 7,222 6,319 5,416 6,319 90,271

Repairs and Maintenance 300 300 300 300 300 300 300 300 300 300 300 300 3,600

Salaries and Wages 25,764 25,764 25,764 25,764 25,764 25,764 25,764 25,764 25,764 25,764 25,764 25,764 309,168

Stationary 500 500 500 500 500 500 500 500 500 500 500 500 6,000

Stock 154,750 309,500 1,341,167 206,333 257,917 412,667 619,000 412,667 412,667 361,083 309,500 361,083 5,158,333

Telephone and Fax 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000

Travel Expenses 500 500 500 500 500 500 500 500 500 500 500 500 6,000

Total Expenses 1,081,353 439,368 1,492,803 334,024 386,696 544,711 755,398 544,711 544,711 492,040 439,368 492,040 6,747,222

Nett Profit / Loss ( - ) -894,105 -64,873 130,009 -84,361 -74,617 -45,385 -6,408 -45,385 -45,385 -55,129 -64,873 -55,129 -1,305,639

Bank Begin - -894,105 -958,978 -828,969 -913,330 -987,947 -1,033,331 -1,039,739 -1,085,124 -1,130,509 -1,185,637 -1,250,510 -1,250,510

Bank End -894,105 -958,978 -828,969 -913,330 -987,947 -1,033,331 -1,039,739 -1,085,124 -1,130,509 -1,185,637 -1,250,510 -1,305,639 -1,305,639


©EBizplan, 2007 - 30 -

Projected Cash-flow with capital funding

YEAR 1 Seasonality 0.07 0.06 0.07 0.06 0.07 0.1 0.06 0.07 0.1 0.08 0.11 0.15 1

Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Total

Cash Flow

Sales

Sales 433,300 371,400 433,300 371,400 433,300 619,000 371,400 433,300 619,000 495,200 680,900 928,500 6,190,000

Internet sales 43,330 37,140 43,330 37,140 43,330 61,900 37,140 43,330 61,900 49,520 68,090 92,850 619,000

Loan 250,000

Investment 550,000 - - - - - - - - - - - 550,000

Total 1,276,630 408,540 476,630 408,540 476,630 680,900 408,540 476,630 680,900 544,720 748,990 1,021,350 7,609,000

Expenses

Startup 800,000

Accounting Officer 500 500 500 500 500 500 500 500 500 500 500 500 6,000

Advertising 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000

Bank Charges 1,430 1,226 1,430 1,226 1,430 2,043 1,226 1,430 2,043 1,634 2,247 3,064 20,427

Cell Phones 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000

Centurion Municipality 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000

Cleaning Material 120 120 120 120 120 120 120 120 120 120 120 120 1,440

Consulting Fees 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000

Insurance 6,333 6,333 6,333 6,333 6,333 6,333 6,333 6,333 6,333 6,333 6,333 6,333 76,000

Interest 2,620 2,620 2,620 2,620 2,620 2,620 2,620 2,620 2,620 2,620 2,620 2,620 31,444

Loan Repayment 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000

Member's Fees 17,320 17,320 17,320 17,320 17,320 17,320 17,320 17,320 17,320 17,320 17,320 17,320 207,840

Rent 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 750,000

Maintenance 300 300 300 300 300 300 300 300 300 300 300 300 3,600

Salaries and Wages 25,764 25,764 25,764 25,764 25,764 25,764 25,764 25,764 25,764 25,764 25,764 25,764 309,168

Stationary 500 500 500 500 500 500 500 500 500 500 500 500 6,000

Telephone and Fax 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000

Travel Expenses 500 500 500 500 500 500 500 500 500 500 500 500 6,000

Courier costs 1,733 1,486 1,733 1,486 1,733 2,476 1,486 1,733 2,476 1,981 2,724 3,714 24,760

Promotion discounts - 32,599 - - - - - 54,332 - - - 86,932

Packaging 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000

Internet costs 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000

Total Expenses 937,121 169,268 137,121 136,669 137,121 138,476 136,669 137,121 192,809 137,573 138,928 140,736 1,739,611

Nett Profit / Loss ( - ) 339,509 239,272 339,509 271,871 339,509 542,424 271,871 339,509 488,091 407,147 610,062 880,614 5,069,389

Bank Begin - 339,509 578,781 918,290 1,190,161 1,529,671 2,072,094 2,343,965 2,683,475 3,171,566 3,578,713 4,188,775 4,188,775

Bank End 339,509 578,781 918,290 1,190,161 1,529,671 2,072,094 2,343,965 2,683,475 3,171,566 3,578,713 4,188,775 5,069,389 5,069,389

- 31 -

Balance Sheet: J BOND

Assets Liabilities

Current assets Current liabilities

Cash on hand 760,000 Accounts to pay -

Balance of bank accounts Income tax due -

Monies owned to you Interst payable -

Furniture & fittings Overdraft bank account -

Credit card balance -

Total Current Assets 760,000 Total Current Liabilities -

Non-current assets Non-current liabilities

Motor vehicles Bond outstanding

Land and buildings Loans outstanding

Total Non-current assets Total Non-Current

Liabilities

Other assets Other liabilities

Saleable surities None

Total Other Assets Total Other Liabilities

Total Assets 760,000 Total Liabilities -

Nett value 760,000

- 32 -

STRATEGIC INTENT OF PACKERS

SWOT ANALYSIS


Principle has extended experience in the

clothing retail industry.

Location in Here Village Mall is amidst

target market.

E-Tail strategy will give foothold to expand

into the Internet channel

Customer orientation

Unknown brand – will take time and

resources to create brand awards with

consumers


Becoming the leading e-Brand for men’s

apparel

Horisontal integration by one of the Big 5

that wants web-presence and a distinct

mens Brand

COMPETITIVE STRATEGY

Generic strategies

PACKERS will follow a focus strategy in a niche of the men’s clothing market. It

differentiates itself on the quality of its products, ease to shop and a choice of retail

channel. Growing e-tailing will also give PACKERS cost leadership advantages.

Growth strategies

PACKERS will organically grow its business by creating brand awareness and doing

more transactions via the Internet.

Growth by the ease of shopping

PACKERS will through the Internet give its customers a wide product range to choose

from. They will also be able to cash pay for it conveniently over the Internet. This easy

way to do shopping, especially for men, will see web transactions for PACKERS increase

over time.

Marketing strategy

Product

PACKERS will offer customised, quality products under a single brand (similar to

Woolworths’s brand strategy). The focussed offering will be narrow, but with wider

choices within a product category. PACKERS will only procure their stock from local

suppliers. Forming and maintaining a fruitful partnership with suppliers are key to

PACKERS’s product strategy.

Promotion

PACKERS makes use of the following promotion tactics: Window display, a website,

local press, pamphlets and publicity. In order to create awareness the e-tail opportunities

- 33 -

for its customers, PACKERS should promote its website strongly online as well as

offline.

Price

PACKERS will price its merchandise according the price: quality principle.

Distribution

PACKERS will have a suitable size warehouse for its merchandise. The warehouse will

serve as a dispatch for its e-sales and catalogues sales. The merchandise will be

transported by courier to the clients. The shop in Here will serve as a “brick and mortar”

location for customers to experience the brand.

CONCLUSION

PACKERS will offer value for a neglected segment of the clothing market. Digital

technology is changing the way we live, and do shopping for ever. For the men finding

shopping in a mall as a frustrating waste of time, PACKERS will help them by choice of

retail channels.

Sincerely yours.

Douw Gerbrand Steyn

EBIZPLAN

14/12/07

- 34 -

APPENDIXES

APPENDIX A THE LSM measuring scale

APPENDIX B: THE BIG 5: A COMPETITIVE COMPARISON

- 35 -

Foshini Edgars Truworths Mr Price Woolworths

Department store ● ● ●

Discount store ●

Stand Alone Clothing Retail Store ● ●

Franchisees ● ●

Clothing

Single brand ●

Multiple brands ● ● ● ●

Clothing

Trendy ● ● ● ●

Fashionable ● ● ● ●

Men ● ● ●

Smart ● ● ● ● ●

Casual smart ● ● ● ● ●

Casual ● ● ● ● ●

Leisure/Outdoor ● ● ● ● ●

Sport ● ● ● ● ●

Niche/theme ●

Women ● ● ● ●

Men/women in one store ● ● ●

Demographic targets

LSM 3 - LSM 6 ● ●

LSM 7 - LSM 10 ● ● ● ● ●

Younger than 18 ● ● ● ●

Between 18 - 35 ● ● ● ● ●

Older than 35 ● ●

Black Middle class ● ● ● ● ●

Geograhical

Neighbourhood centre ● ● ● ●

Regional Centre ● ● ● ● ●

Mega Centre ● ● ● ● ●

Branches national ● ● ● ● ●

Branches Africa ● ● ● ● ●

Branches overseas ● ● ●

- 36 -


Marketing

Channels

Stores 1322 909 422 761 200

Square meters (m2) 380615 1032000 187000 316000 347647

Number of clothing retail stores 674 240 422 472

Number of Men only stores/departments 191 232

Number of Women only stores/departments 386 237 172

Area clothing retail stores 236436 473000 198524

Area Men only stores/departments 58230 22942

Area Women only stores/departments 178206 164058

Average size clothing retail stores 351 1971 443 421

Average size Men only stores/departments 305 99

Average size Women only stores/departments 462 344

Number of staff (clothing retail stores) 6683 8680 5762 4920

Total number of staff Men only store/dept 1560

Total number of staff per Women only store/dept 5123

Number of m2 per staff member Clothing Retail 35 54 32 40 18

Number of m2 per staff member Men only store/dept 37

Number of m2 per staff member Women only store/dept 35 42

Internet

Web presence ● ● ● ● ●

e-Tailing ● ● ●

Only online catalogues

Customer interaction? ● ● ●

Broad approach ● ●

Focus/niche

Catalogues ● ● ●

Media

Window displays ● ● ●

Publicity ● ● ●

Website ● ● ● ● ●

Emails ●

SMS ●

National TV ● ● ● ● ●

- 37 -


Press

Own magazine ●

Magazines ● ● ● ●

Products

Wide and deep ● ● ● ●

Wide but not deep ●

Out of stock situations ●

Strategy for slow moving stock ●

Packaging design ●

Logistic costs per unit 1.22

Supply line automisation ●

Brand

Reinventing/Revitalising ●

Building ●

Extending ●

Repositioning ●

Awareness ● ●

Commitment ● ●

Integrity ●

Procurement

Local suppliers ● ● ● ●

Local designers ● ● ● ●

Import Europe ● ●

Import China ● ● ● ●

Supplier strategies

Lead times ● ● ●

Conformance ● ● ●

Replinishments ● ●

Merchandise pipelines ●

Partnership ● ● ●

Sales

Payment options

Mostly Cash, Little credit ●

Cash and credit ●

- 38 -


Mostly Credit, Little cash ● ● ●

Pricing

Central management ●

Competitive ●

Discount prcing ●

Customers

Segmentation ●

Strategy

Formal Strategic Planning ● ● ● ● ●

Generic

Low-cost Leadership ● ● ●

Differentiation

Quality Staff ● ● ● ●

Product quality ● ● ● ●

Always In stock ● ● ● ●

Value for money ● ● ● ● ●

Customer Store Experience ● ● ● ● ●

Service excellence ● ●

Innovation ● ● ● ● ●

Scale economies ●

Customer needs and wants satisfy ● ● ● ●

Unique style ● ●

Technology use ● ● ●

Customisation ●

Environmental friendly ●

Focus ●

Growth

Organic growth (new stores/bigger stores) ● ● ● ● ●

Organic growth (new customers/more sales) ● ● ● ● ●

Organic growth (new markets) ● ● ● ●

Growth through improved productivity ● ● ● ●

Growth through product/brand expansion ● ● ●

Growth through product diversification ● ● ●

Growth through product innovation ● ● ● ●

- 39 -


Mergers and acquisitions ● ● ●

Customer focus orientation ● ● ● ●

Human resources

Organisational culture

Customer orientation ● ●

Number of staff 15000 18753 5950 14000 19344

Men's retail 1560

Women's retail 5123

Performance measurements ● ●

Reward system ● ● ● ● ●

Share option ● ● ● ●

Performance bonusses ● ● ●

Black Economic Empowerment (BEE) strategy ● ● ● ● ●

BEE Progress ● ● ● ● ●

Staff retension strategy ● ● ●

Retension bonusses ● ●

Skill shortage ● ●

Succession strategy ●

Staff Development ● ● ● ●

Learning cost (% of payroll) 3.3%

Turnover% 12%

Wellness program ● ●

Values

Honest, open, ethical ● ● ● ●

Treat people with dignity and respect ● ● ●

Equal opportunity & development ●

Consistent standards for improvement ● ●

Energy ●

Integrity ● ● ●

Performance

Sales 7,230,000,000 16,316,000,000 5,326,000,000 5,007,591,000 18,600,000,000

Trade density 18,996 15,810 28,481 15,846.81 53,503

Sales per employee 482,000 870,047 895,126 357,685 961,538

Sales Growth Y-Y (%) 12% 20% 27% 24% 23%

- 40 -


Gross Margin 3,036,600,000 6,301,000,000 2,166,000,000 2,028,074,355 6,398,400,000

Gross Margin per m2 7,978 6,106 11,582.89 6,418 18,405

Gross Margin per employee 202,440 336,000 364,034 144,862 330,769

GP% 42% 39% 40.7% 40.5% 34.4%

Operating profit 1,782,300,000 2,098,000,000 1,272,000,000 534,065,000 1,800,000,000

Operating margin 26.1% 12.9% 23.9% 10.7% 9.7%

Market share 31.4%

Men's Clothing 16% 15.5%

Women's Clothing 20%

Sales Clothing Retail 4,050,100,000 8,575,000,000 3,039,000,000 3,431,000,000 6,985,000,000

Men's Clothing 1,138,300,000 977,000,000

Women's Clothing 2,911,800,000 2,062,000,000 776,000,000

Sales Ratio Women:Men 2.6 2.1

Growth in Sales Clothing Retail 22.0% 16.2%

Men's Clothing 18.6% 24.0%

Women's Clothing 11.6% 21.0% 21.0%

Markdown % of turnover 0.7%

Men's Clothing 10.5%

Women's Clothing 15.1%

Retail sales: Cellular phones and air time 126,000,000 1,713,800,000

% of Retail turnover 1.7% 20.0%

Growth in retail space 8.9% 12.0% 12.0%

ROE 32.5% 42.0% 50.0% 35.1%

Stock turn 3.2 6.1 5 18.5

Credit sales

Number of active accounts 2163000 4000000 1574000 362774 1599000

% sales on credit 67% 63% 73% 11% 32%

Size of debtor's book 2,235,200,000 3,718,000,000 2,100,000,000 236,788,000 3,748,000,000

Arrears debtors % to debtors book 25% 8.6% 14.6% 16.5%

Bad debt as a % of credit sales 2.6% 3.4% 3.6% 6.6%

Net bad debt written off as a % of debtors book 6.6% 9.4% 6.6% 6.9%

Want to grow credit sales ● ● ● ● ●

Want to slow credit sales

External financial services ● ● ●

% of Turnover 5.1% 3.1% 5.3%

- 41 -


% of Gross profit 6.9% 4.0% 3.9%

Cost structure

Store occapancy costs 7.1% 16.7% 7.0% 4.3%

Employment 9.3% 12.0% 10.5% 13.1% 11.4%

Bad debt as a % of turnover 2.3% 2.2%

Promotional costs 2.9%

Prospects

Number of new stores 13 39 69 43

men’s apparel & accessories - ebizplan

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