Retail StoreRetail Store ~ ~ Business Business

PlanPlan

Lorelei GressLorelei GressAdele McIntoshAdele McIntoshKaren BowditchKaren Bowditch

Shanda SedgwickShanda Sedgwick

Outline ~Outline ~

OperationsOperations Human ResourcesHuman Resources Marketing StrategyMarketing Strategy Financial AnalysisFinancial Analysis Business Feasibility Business Feasibility

"To support the growth and competitive advantage of the "To support the growth and competitive advantage of the Saskatchewan food and beverage processing industry by Saskatchewan food and beverage processing industry by

providing our members with relevant and current programs providing our members with relevant and current programs and services."and services."

Mission Statement Mission Statement ~~

Operations ~Operations ~ LocationLocation RetailRetail

ConsignmentConsignment Non-consignmentNon-consignment

Inventory is Inventory is broken into 5 broken into 5 categoriescategories

Operations ~ Operations ~ Organizational Organizational StructureStructure COO:COO:

SFPA and Retail StoreSFPA and Retail Store Contracted ServicesContracted Services

Marketer:Marketer: SFPA and Retail StoreSFPA and Retail Store Contracted ServicesContracted Services

Controller:Controller: SFPA and Retail StoreSFPA and Retail Store SalarySalary

Store Manager:Store Manager: Retail Store Retail Store SalarySalary

Staff:Staff: Retail StoreRetail Store HourlyHourly

SFPA Board of Directors

9 Elected Members3 Appointed Members2 Associate Members

Chief Operating Officer

Marketplace Controller

Marketer

Store Manager

Marketplace Staff1 full-time, 3 part-

time

Marketing ~ Marketing ~ Targeting & Targeting & PositioningPositioning Targeting: Targeting:

40-60 yr old Saskatchewan women40-60 yr old Saskatchewan women Middle-high income, educated Middle-high income, educated

womenwomen Positioning:Positioning:

Home-grown, Home-made, high Home-grown, Home-made, high quality productsquality products

Wholesome imageWholesome image Marketing Mix (4P’s)Marketing Mix (4P’s)

Products Products PricePrice PlacePlace PromotionPromotion

Marketing ~ Marketing ~ Channels of Channels of DistributionDistribution

One-step channel distribution for vendors One-step channel distribution for vendors productsproducts Producer → Store → ConsumerProducer → Store → Consumer

Two-step channel distribution for owned linesTwo-step channel distribution for owned lines Producer → Wholesaler → Store → ConsumerProducer → Wholesaler → Store → Consumer

Challenges: shipping frozen foodChallenges: shipping frozen food

Sell products via:Sell products via: Direct salesDirect sales Purchase orderPurchase order E-commerceE-commerce

All these marketing channels work well for Retail All these marketing channels work well for Retail Store and at least one of the target marketsStore and at least one of the target markets

Marketing ~ Marketing ~ S.W.O.T.S.W.O.T.Strengths Weaknesses

•Association with the SFPA •Not enough advertising•No production costs •Technological weakness•Store nicely laid out, clean •Rely on SFPA•Friendly and knowledgeable staff •No slogan / not catchy logo•Supported financially by the SFPA

Opportunities Threats•Aging population •Alberta made

•Upper age bracket still working •Main streaming brings food into bigger stores

•Higher wages = more spending •Producers don't grow•Ex-Saskatchewan residents •Technology = more competition•Have uniqueness above other specialty shops

•Selling online

Marketing ~ Marketing ~ Promotion and Promotion and AdvertisingAdvertising

Brochures $450Newspapers $24,000Television $19,200Radio $6,360Billboards $6,000Total Advertising $56,010

Promotional Goods $527 SMM 2006 budgetWeb Page $5,000Travel Expenses $1,500Trade Shows $400Total Promotion $7,427

Total Marketing Expenses $63,437

Advertising

Promotion and Development

*$500 per month

FundNetSMM 2006 budgetSMM 2006 budget

Brochure Place amt 5000 brochures*1.25 ad per week*6 one-min spots/ week*6 one-min spots/ week

Promote gift Promote gift baskets:baskets:

Office giftsOffice giftsSponsorship Sponsorship Holiday giftsHoliday gifts

New changes:New changes:Improve existing website Improve existing website and brochuresand brochuresAdvertise on billboardsAdvertise on billboardsTourism (hotels, airports)Tourism (hotels, airports)

Financials ~ Financials ~ Owner EquityOwner Equity

Equity Working Capital $22,719Total Land & Eqipment Cost $1,500Production Equipment Beginning Balance $7,261CARDS Funding $50,000

Total Equity $81,480

Owner’s equity in 2007 is $81,479. Owner’s equity in 2007 is $81,479. $50,000 remaining of CARDS funding.$50,000 remaining of CARDS funding.

Financials ~ Financials ~ Economic Economic ForecastForecast

Ten year planTen year plan 5% annual increase in 5% annual increase in

sales for first 7 yearssales for first 7 years 3% annual increase in 3% annual increase in

sales for last 3 yearssales for last 3 years Annual Inflation 2%Annual Inflation 2% Consignment are the Consignment are the

largest % of sales largest % of sales sold as gift basketssold as gift baskets

Gift baskets are used Gift baskets are used as a marketing toolas a marketing tool

Financials ~ Financials ~ Financial Financial FeasibilityFeasibility

Year 2007 2009 2011 2013   2015Sales $550,000 $630,873 $723,637 $830,041 $916,166Cost of Sales $434,370 $483,864 $525,559 $571,914 $605,563Gross Margin $115,630 $147,009 $198,078 $258,127 $310,603Expenses $264,745 $256,162 $266,542 $277,026   $288,633Net Income (loss) Before Tax -$28,888 $16,000 $60,773 $115,275 $161,981Income Tax $0 $0 $6,077 $11,528   $16,198Net Income (loss) After Tax -$28,888 $16,000 $54,696 $103,748   $145,783Net Cash Flow to Equity $29,900 $15,375 $54,338 $102,977   $145,842   

Net Present Value (NPV) $124,798  Internal Rate of Return on Equity

Investment (IRR) 41.2%      External Rate of Return on Equity

Investment (ERR) 24.6%      

Financials ~ Financials ~ Breakeven Breakeven AnalysisAnalysis

SMM Breakeven Analysis

0

2

4

6

8

10

12

14

1 2 3 4 5 6 7 8 9 10

Year

Con

sign

men

t Pric

e

Base Case

Cash Flow

Net Income

NPV

Charge higher price in first 4 years to Charge higher price in first 4 years to break-even on a net income basisbreak-even on a net income basis After year 4 prices can be lowered as seen After year 4 prices can be lowered as seen by cash flow and net income by cash flow and net income

Financials ~ Financials ~ Sensitivity Sensitivity AnalysisAnalysis

5% change in base value5% change in base value Worst caseWorst case

Retail Store not profitableRetail Store not profitable Best caseBest case

Small increase in price = large increase in IRRSmall increase in price = large increase in IRR

Variable Worst Case - 5%

Base Case Best Case +5%

Consignment Units Sold 47500 50000 52500Consignment Retail Price 9.50$ 10.00$ 10.50$ IRR 3.0% 41.2% 91.4%

Saskatchewan Made ... Saskatchewan Made ... Saskatchewan ProudSaskatchewan Proud

QuestioQuestions?ns?

Pricing ~ Pricing ~ Consignment Example Consignment Example

1.54 x on cost, 35% on sell1.54 x on cost, 35% on sell Vendor brings in a jar of jam to sell for $6.50Vendor brings in a jar of jam to sell for $6.50 Retail Store takes $6.50 x 1.54 = $10.00 shelf Retail Store takes $6.50 x 1.54 = $10.00 shelf

price price The vendor makes $6.50 and Retail store makes The vendor makes $6.50 and Retail store makes

$3.50 at this point$3.50 at this point 35% on sell refers to the $10.00 shelf price x 35% on sell refers to the $10.00 shelf price x

35% = $3.50 SMM profit35% = $3.50 SMM profit Retail Store takes an additional 10% from the Retail Store takes an additional 10% from the

wholesale price for admin/advertising purposeswholesale price for admin/advertising purposes $6.50 (wholesale price) x 10% = $0.65 therefore $6.50 (wholesale price) x 10% = $0.65 therefore

the vendor actually only makes $5.85 ($6.50 - the vendor actually only makes $5.85 ($6.50 - $0.65 = $5.85)$0.65 = $5.85)

Retail store makes $3.50 + $0.65 = $4.15Retail store makes $3.50 + $0.65 = $4.15

Pricing ~ Pricing ~ Corner Gas ExampleCorner Gas Example

1.77 x on cost, 43% on sell1.77 x on cost, 43% on sell Wholesale price of a t-shirt $13.50Wholesale price of a t-shirt $13.50 To determine the shelf price $13.50 x 1.77 = To determine the shelf price $13.50 x 1.77 =

$23.89 shelf price$23.89 shelf price Therefore a profit of $23.89 - $13.50 = $10.40 Therefore a profit of $23.89 - $13.50 = $10.40

profit profit $23.89 x 43% = $10.40$23.89 x 43% = $10.40