the history shoppe~executive summary v4

Making history come to life.

Matthew J. Feczko 263 Washington Street #3 Wellesley, MA 02481 [email protected]

Executive Summary Dated: December 4, 2002

The components of this business plan have been submitted on a confidential basis. It may not be reproduced, stored or copied in any form. By accepting delivery of this plan, the recipient agrees to maintain its confidentiality and return it upon request. Do not copy, fax, reproduce or distribute without permission.

Copy #: ________________ Distributed to: ____________________

THE

HHIISSTTOORRYY SHOPPETM

Welcome to The History Shoppe

Opening the heavy mahogany-stained door, you see the pages of an old history book come to life as you are immersed in the themes that have shaped history over the years. As you scan the room, certain areas of the shop open up due to subtle yet focused lighting, revealing a revolutionary war era globe, an authentic civil war rifle encased in glass, a World War I Captain’s parade uniform proudly displayed on a mannequin, and to your immediate right, a map of present day Afghanistan surrounded by the most current research and writing. The History Shoppe brings alive the experience of following the red bricks of the Freedom Trail in Boston, walking the rolling grounds of Gettysburg, or even taking in a museum tour explaining how present day Afghanistan has been shaped over the past thousand years. By merchandising products ranging from books to authentic reproductions of globes & maps in the context of the historical event, The History Shoppe brings alive the feeling of being there, all in a relaxed, intimate setting. The History Shoppe is finally bringing together the emotional experience of being able to see & touch the things that shaped history while satisfying the intellectual depth of history enthusiasts. The store’s theme areas, including many major historical subjects such as Classical (Roman and Greek), American Revolutionary War, Civil War, World Wars, Vietnam, European (specializing in Irish and English history), Asian, and Maritime are designed to give the store guest a comprehensive look at history. Fundamental to our success is the availability of the best books and most current thinking on history, however, we go beyond a bookstore and offer the best movies and biographies on video and DVD, authentic prints and artifact replicas. Thoughtfully displayed in context, The History Shoppe experience solves the disparate searching and seeking of the history fan, and creates a place for him to find everything in one place. Gift buying for the history buff’s family will be as easy as stopping in the store, strolling over to the area of interest and choosing from a variety of unique, quality items the history buff will cherish. Whatever the historical topic may be, guests will find that The History Shoppe will have a variety of unique and interesting products that will provide an entertaining and educational shopping experience.

The History Shoppe, Making History Come to Life.

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THE


1.1 Company Overview

The History Shoppe (the “Company” or “THS”) plans to create the ultimate history experience for history enthusiasts and casual fans of American and world history. The store will provide one-stop-shopping, offering a wide selection of history books, videos/DVD’s, maps, prints and other unique historical merchandise. The key to the THS experience will be the effective blending of a retail store, museum and community center. The intimate store will have an inviting and comfortable atmosphere, combining the classic feel of a traditional bookstore with the relaxed environment of a coffee shop. The Company will open its first store in the historic town center of Lexington, Massachusetts, less than fifteen miles outside of Boston.

1.2 The Opportunity History enthusiasts have a difficult time shopping in today’s marketplace. Finding historical products requires visiting several retail outlets across multiple channels, and may lead to failure in locating specific items. There is no central marketplace for historical products: books are bought at traditional booksellers, videos at Blockbuster or online, maps/prints at specialty stores and historic reproductions at museum shops. As a result of this diffuse buying experience, customers are faced with poor selection and inadequate customer service. 1.3 Market Demand

The market for historical products in the U.S. is substantial. The history book market alone is estimated at $500-$800 million in size, representing approximately 25 million books sold per year. The overall video industry is a $20 billion market, with sales and rental each representing about $10 billion. While it is difficult to determine the history component of the video market, the History Channel's Collector's Choice edition set of videos, for instance, sold over 1.4 million in copies in a recent quarter1. Finally, most of THS’ remaining product categories fall under the general gift industry, which is estimated at $55 billion. The segment of the gift industry in which THS will compete represents approximately 30% of the gift industry total, or $16 billion. THS’ primary target audience is substantial. The company will be targeting consumers with the following characteristics: male, 35-55 years old, income over $50,000 per year, and college educated. Our analysis indicates that there are approximately 7.9 million

1 Brandweek, March 2001

The key to the THS

experience will be the

effective blending of a retail

store, museum and

community center.

The history book market alone

is estimated at $500-$800

million in size…

10

15

20

25

30

Total Units

(millions)

1991 1996 2001

History Books Sold

(in millions)

Ipsos

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households2 in the U.S. who have these characteristics and are interested in history. These consumers tend to be avid readers, they frequently watch documentaries and they enjoy traveling. Additionally, there are over 175,000 people3 interested in history in the Boston area alone, and Boston attracts over 12 million tourists4 per year, many of whom travel to Boston for their historic interests. The store will also have a significant secondary audience, comprised of current and ex-military, gift-buyers, history teachers and students. As a result of this research, THS believes there is significant demand for its product offering amongst its primary and secondary target customers. 1.4 Overview of Experience

By creating the first retail store focused on history, The History Shoppe intends to make shopping easier for history enthusiasts by offering one-stop shopping for all their book, video, and history-related needs. THS will create the ultimate experience for people interested in American and world history. Experiential retailing is a recent development in retailing whereby companies are trying to create lasting and memorable relationships with their customers, as opposed to the old retail practice of “stack ‘em high and sell ‘em cheap”. The THS experience will have three main components:

• Store: With over 7,500 historical products, THS will be a retail store with the widest selection of historical merchandise under one roof, including: history books (non-fiction, historical novels, biographies, etc.), videos/DVD’s (documentaries, movies, biographies), magazines, maps, globes, prints, famous documents, artifacts and toys/models. THS’ products will be purchased for a variety of reasons, including: edutainment, home/office decorating, teacher aides, and as gifts.

• Museum: THS will display a variety of authentic artifacts in glass cases throughout the store to educate customers and differentiate the store from competition. These items will either be owned by THS or loaned to THS as part of partnerships with local museums, historical associations and antique shops.

• Community: THS will create a vibrant community with its customers through a membership program, interaction with knowledgeable employees, author book signings, historian lectures and other special events.

2 Lifestyle Market Analyst 2002 3 Simmons Database 4 The Greater Boston Convention and Visitors Bureau, September 2002

…Analysis indicates that there are over 175,000 people

interested in history in the

Boston area alone, and Boston

attracts over 12 million tourists

per year…

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1.5 Store Concept

The store itself will be the primary means of delivering THS’ strategy in terms of layout, product selection, and merchandising. THS’ competitive advantage provides customers with the ambience of a bookstore, the depth and perspective of a regional museum, and the emotive quality of an historic site. To bring to life this sense of history to each store visitor, we have placed unique thematic areas throughout the THS floor plan that will emphasis popular historic themes and eras. For instance, rather than having customers locate videos in one section of the store and books in another, THS will place all books, videos, and other historical merchandise related to the Civil War in the same thematic section. This will add significant value to the customer shopping experience while also promoting impulse purchase of products in other merchandise categories. Spot lighting (focused lighting creating the museum-quality sense of drama) highlights authentic historical items either purchased for permanent effect or on loan through relationships with local collectors and historical societies. Actual historic items will be protected in a glass display case or frame as appropriate. Book shelving arrangements will separate theme areas, while merchandise bins/tables contain larger items unsuitable for shelving. Exhibit 1.5A details the preliminary store layout.

Exhibit 1.5A: The History Shoppe Layout

Theme Area

(e.g., Civil War)

= 5 square feet

3,000 total square feet

60 feet

50 feet

Back Room/

Office

Magazines

Counter

2 Window Displays

52 Bookshelf- 6-8 shelves

7 Artifact Display Cases

1 Promo Display

10 Merchandise Bins/Tables

Chair

Couch

Table

Fireplace

Key:

Spot Lighting

THS Theme Areas

Classical (Roman and Greek) American Revolution Civil War World Wars European Maritime

General Interest

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1.6 Location- Lexington, Massachusetts

Knowing that location is one the most important elements in any brick and mortar store, THS has chosen Lexington as its flagship location. Lexington, Massachusetts, where the American Revolution began, is where it will all begin for THS. Lexington was chosen as the location for the flagship store due to its high density of our target population, the existence of high foot traffic, and its proximity to historical destinations. Target Population

Lexington’s population grew 5% in the 1990s, reaching a high population density of 1,741 thousands per square mile in 20005. As was mentioned in the Customer Information section, the primary THS customer is a higher income, well-educated, 35 – 55 year old male. The average age of the 30,355 Lexington residents is 40.3 years old, with nearly 35% of these residents in the 35 – 55 year old age bracket, 12% over the Massachusetts average. A comparison of the other major demographic categories, based on the 2000 census, is below6: Exhibit 1.7A: Demographic Statistics for Lexington

Lexington Mass U.S.

Income $67,380 $50,502 $41,994

Degree (college or greater) 60.9% 33.2% 24.4%

Male 47.0% 48.2% 49.1%

As the exhibit above indicates, the Lexington resident strongly matches the income criteria (98th percentile nationally) and the education level of THS’ target customer7. We also found similarly positive demographics in Lexington’s neighboring towns, including Concord, Winchester, Belmont, and Arlington. The total population of these towns exceeds 500,000 residents. In addition, our primary research indicates that customers are willing to drive up to 30 minutes away for a store such as THS. Based on this information, THS estimates its trade area to include over 1.5 million people.

1.8 Growth Plan

The Company believes that The History Shoppe has nationwide appeal and that the store’s concept could be replicated in a variety of cities throughout the U.S. However, the Company plans its focus on opening and operating one successful store initially, and as a result, this business plan focuses solely on THS as a one-store operation. Once the concept has been established financially and operationally, the Company plans to embark upon a realistic store expansion plan in additional markets across the country. The History Shoppe will look to expand into other large metropolitan areas on the East Coast that have similar demographic characteristics to THS’ target customers and also

5 LexisNexis Statistical Information 6 U.S. Census 2000 7 www.hunneman.com

Lexington, Massachusetts, where

the American Revolution began,

is where it will all begin for THS.

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have access to a sizable historic tourist population. Areas that THS has preliminarily targeted include Philadelphia, Washington D.C., Baltimore, New York and Atlanta. THS also intends to grow in-market sales through the development of retail kiosks in higher end malls in the area. These kiosks would only carry a limited assortment of the Company’s fastest moving products, and would primarily target the gift-buying consumer. In addition to providing the Company with incremental sales and profits, these kiosks will also be valuable promotional vehicles introducing the THS concept to a broader base of customers and driving foot traffic to the stores. Another significant growth opportunity will be the Internet, as a comprehensive website will enable THS to reach consumers across the country. This will especially be valuable for the store’s tourist customers who will be introduced to the store on their visit and then be able to make repeat purchases when they return home over the Internet. 1.9 Financial Highlights

A summary of THS’ projected financial performance for the first five years of operation is contained below in Exhibit 1.6A. The financial information presented is based on the Company operating only one store for the entire five-year period. Exhibit 1.9A

The History Shoppe

Summary Financial Information

2003 1

2004 2005 2006 2007

Revenues 258,367 730,290 881,032 974,896 1,084,910

Gross Profit 109,487 313,683 382,245 426,115 480,535

% of Revenues 42.4% 43.0% 43.4% 43.7% 44.3%

Operating Income (17,894) 8,601 35,869 64,223 97,484

% of Revenues -6.9% 1.2% 4.1% 6.6% 9.0%

Net Income (34,894) 8,601 32,038 38,534 58,490

% of Revenues -13.5% 1.2% 3.6% 4.0% 5.4%

1 Assumes store is opened for 5 months in '03; represents annualized sales of $567k

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The Company’s expects to have the following distribution of revenues across its product categories: Exhibit 1.9B: Revenue Distribution by Product Category

Videos/DVD

12%

Prints/

Photos/Maps

14%

Books

58%

Artifacts /

Reproductions

7%

Toys

3%

Documents

2%Magazines

1%

Globes

3%

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2.0 Capital Needs

The Company estimates it will require an initial investment of $250,000 to open the flagship store in Lexington. The majority of this investment will be used for leasehold improvements, fixtures, equipment and the initial purchase of inventory. Of the initial capital required to open the first store, $200,000 will be raised from outside investors.

2.1 Team

The founders of The History Shoppe have extensive experience in finance, marketing, and operations in both the consumer product and retail industries. While the cumulative experience of this team has been leveraged in development of the THS plan, Matthew Feczko will serve as President and Store Manager. Working for Procter & Gamble and as a consultant to the retail industry, Matt has close to six years of retail, financial, and management experience. Matt received an undergraduate degree from the University of Notre Dame and is currently pursuing his MBA at the F.W. Olin Graduate School of Business at Babson College. The Company plans to leverage the skills and experience of a quality group of advisors. Advisors will be selected to complement management’s experience in the areas of retailing, history, and entrepreneurship. Relationships have been established with the following, and a formal advisory board will be established prior to launch.

Name Position Company

Marhsall Smith Founder Paperback Booksmith, Viedeosmith, Learningsmith

Dana Brigham Co-Owner Brookline Booksmith, Wellesly Booksmith

Bill Fowler Director Massachusetts Historical Society

Steve Kenney Director Commonwealth Museum

Bob Brodbeck Owner Brodbeck Enterpsies/Dick's Supermarkets