The Freshmen business plan

THE FRESHMEN MENSWEAR ONLINE STORE AND BLOG

LIFE’S TOO SHORT TO WEAR BORING CLOTHES WWW.THEFRESHMEN.CO.UK

JACKY YEUNG T H E F R E SH M EN BU SIN E S S P LA N

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F Contents

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Summary of business plan

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02

Basic information

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Market strategies

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Product/service

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Market segmentation

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Product range

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Suppliers/stock management

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PEST analysis

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Promotion

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Risk analysis

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Why online store

07 08

Target customers

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Finance - pricing

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Target customers

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Start up cost

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Market summary and needs

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Sales forecast

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Appendix 1

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Appendix 2

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Appendix 3

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SWOT analysis

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Competitors’ analysis

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Summary of business plan The Freshmen was founded in March 2014 and it will be based in Hong Kong. Initially both a menswear independent online store and a fashion blog, it was created to work with new menswear brands and designers, to offer more innovative products to our fashion savvy consumers who love exploring new brands rather than well-known brands.

In the future, The Freshmen aiming to become a market leader, well known for bringing different brands to the customers and providing quality and unique products. The Freshmen also wishing to support local new designers by hosting new designers award with other association or sponsoring designers to launch their collection.

To get on The Freshmen, designers will need to pay a services fee and the company will take commission off the retail price for all sales made through the platform. The products would be directly shipped from the brands to the customers.

The primary market for The Freshmen is men aged from 25 to 34, which are the most frequent buyers and driving growth in the menswear market according to the marketing research by Mintel. The secondary market is young men aged 16 to 24 and still likely to keep up with the latest trend.

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F Basic information The Freshmen is a sole proprietorship business. It will run by a small team, the staffs will keep the blog updated everyday and looking for more designers to sell on the store.

Objectives: The objectives for The Freshmen are: • Provide high quality products and services to the customers.

• Generate retail sales of over £20,000 in a month.

• To achieve 5000 likes on Facebook in the first year.

• Focus marketing on men aged 25 to 34 to maintain the growth in sales in the following years.

Keys to success: • The Freshmen is a specific menswear online store.

• It offers quality products by new designers and these products are only available at The Freshmen.

• The Freshmen will collaborate with fashion bloggers to generate awareness of the products and store.

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Product/Service The Freshmen offers quality menswear from new designers mainly based in Asia and Europe. If the brand would like to be stocked on the store, they would need to pay a yearly services fee and The Freshmen will take commission on each purchase.

The company will then promote their brands to the target customers.

Each designer The Freshmen selects has their strengths and different from most menswear brands in Hong Kong. They are more creativity such as using different materials and shape on their designs and those elements could attract our target customers. Their products could generate a lot of sales and giving our customers with more interesting clothing.

The store will start with five desginers from different countries.

They are Janine Grosche, Adrien Sauvage, Sasha Kanevski, Nicomed Talavera and Fillip Roth.

• Janine is based in Beijing, China. She studied at ESMOD Berlin and graduated in 2007. Her label PATH started in 2011.

• A.Sauvage established in early 2010. He has acquired a reputation for its understated luxury and nonsense approach to contemporary tailoring.

• Oleksandr is based in Ukraine, Sasha Kanevski founded the brand in 2010. In the same year he started showing his collection at Mercedes-Benz Kiev Fashion Days, the international Kiev fashion week and quickly gaining a cult following among the local fashion crowds.

• Nicomed Talavera studied menswear and fashion degrees at Central Saint Martins. SS14 was his first collection.

Best on using graphic, texture and contrasts on his designs.

• Filip is based in Cracow Poland. His collections are produced in Poland.

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F Product range Product range: According to a Mintel’s research shows that men are more likely to buy classic styles that will last beyond the seasons than to buy latest fashion.

The freshmen product range is wide, offering clothing, accessories to shoes. There are basic items like white shirts, but also some sweater with large colourful graphic prints. There is something for every customer in the target market.

• Clothing - There will be more choices on shirts, blazers and trousers as the target customers are aged 25-34. These products can last longer and suitable for them as they might able to wear them to work. The younger shoppers also invest in a more tailored look, which it can attract the secondary market as well.

• Accessories are mainly bags such as backpacks and messenger bags. They are more classic items and keep in the trend. Unlike totes or pouches, not every man would like to carry them.

• Shoes – It is the part that The Freshmen is going to expand in the future. Not many new brands have footwear but the company is looking to bring quality handmade footwear brands like Fracap to the customers.

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A.SAUVAGE

F Why online store The Freshmen choose to start up as an online store because internet is a powerful platform, it provides a broad awareness of e-commerce websites. There are 937,200 people aged 25 – 34 use the Internet and that’s 98.2% of the total age group population in Hong Kong. (Appendix 1) According to a Hong Kong monthly digest of statistics, the number of people in the city who shop online keep growing, due to the increasing number of consumers who use tablets and smartphones.

Clothing, accessories and shoes are the second major type of products and services purchased online. It grows from 119,500 people in 2009 to 403,000 in 2012. (Appendix 2,3) Also online store has a lower set up and running costs than a physical store. The business could save on rent, staff, wages and other expenses such as electricity. The rent in Hong Kong makes business tough to start up and survive. The money that has saved can be used to develop a better website, provide better services and expand the product range.

Furthermore, Hong Kong is a small place with lots of people, there are billion of tourists. Online stores can avoid our customers to get jostled in the crowds, there are also no queues and no shopping bags that make you keep carrying on the street.

Customers can also try on in the comfort of home instead of changing room and tons of people waiting outside. The benefits of online stores could bring our men a better shopping experience and increase the consumer sentiment.

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F Target customer A significant trend in Hong Kong is that people are more interested in styling themselves. This “Metrosexual” trend came from Korean, people not only wear designer clothing or driving expensive cars to make an impression, men in particular have been putting more effort into looking good.

The primary target market is men aged 25-34. This age group is the most frequent buyers and driving growth in the menswear market.

The secondary target market is the young men aged 18-24 that is more likely to keep up with the latest trend. Their financial situation might not able to afford them to buy expensive products but some entry-level like T-shirts.

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Breaking down these groups of people can let The Freshmen better understand how to reach the potential customers.

• Geographic: The company targets those who live in Hong Kong and China, as China is one of the fastest market growths in the menswear industry and they have a bigger spending power.

• Demographic: People with higher education and have some oversea study experiences. Those who still studying oversea or back to the country after graduated, they should have a better household income. If they still living with parents, they have less financial pressures as they have no mortgage to pay and have more money leftover to spend on fashion.

• Psychographic: They are fashion savvy, excited about some amazing menswear design and buying new brands. They want to be stylish and keep looking good.

• Behaviors: They browse fashion magazines, blogs keep themselves up to trend and they are comfortable on online shopping.

F Market Summary The menswear market is expected to keep growing globally.

It is expected to exceed £240 billion in 2014, according to research from MarketLine. (Menswear: World Market Overview 2012) The leading segment within the menswear industry is comprised of clothing and footwear specialists, which represents close to 60% of the overall market in terms of value.

Also a report from retail market group Verdict Retail shows UK clothing and footwear are going to grow 16.5% over the next five years. Menswear will be the highest growing market, with sales expected to grow 22% as men are becoming increasingly more interested in fashion.

Furthermore China is forecast to record the fastest market growth in the menswear industry among the five leading developing nations of South Africa, Mexico, India, Brazil and China. China’s menswear industry is expected to generate sales of close to £46,000 million in 2014 according to MaketLine.

(Menswear – Top 5 emerging industries market overview) However the economic environment might not be stable, the market growth might likely to be a slow process. Therefore companies need to have a good product differentiation and maintain consumer loyalty to survive in the market.

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Market needs The Freshmen is looking to provide its customers with a wide selection of quality menswear brands. The company seeks to fulfill the following benefits that are important to their customers.

• Choices: Customers demand a wider selection. There are lack of menswear brand in Hong Kong has the braveness to be different and to create fashion.

• Quality: There are many online stores selling menswear in a cheap price, directly buying from China. Having high quality products is important because customers are more likely to buy quality products that will last.

• Services: Consumers are more likely to purchase from companies that have good services as priority. The Freshmen will answer customers enquiry within 24 hours and offer free next day deliver to any orders.

N.TALAVERA

F SWOT analysis The following SWOT analysis captures the key strengths and weaknesses within the company and describes the opportunities and threats facing The Freshmen.

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There isn’t a good quality menswear online store like okini in Hong Kong, also there are not many independent menswear brands due to the market size and usually womenswear are making more profit.

The Freshmen are the best platform that aiming to give some talented menswear designers an opportunity to sell their products and let everyone on the Internet know about their brand. The company selects the fashion designer brands in an extremely careful way.

Those brands have their own styles and characteristics that the customers would love.

Furthermore, The Freshmen has strong relationships with the courier that provides secure and high quality deliveries, make sure customers in Hong Kong will get their purchase next day.

The lack of brand awareness due to The Freshmen is just started up and it is selling fashion designers brands that are quite new and selling niche fashion designs. Also The Freshmen does not have a physical store, only on Internet.

It needs a lot of marketing and promotion to build up the store traffic and it could take a long time because The Freshmen run by a small team and has a limited budget. Therefore during that time the sales could be much lower than expected and the company needs to find a way to survive.

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O The Freshmen could collaborate with other brands, sponsoring the university graduate fashion show. Seeking for some new graduate design student interested in starting up their own brand and wishing to sell their graduate designs. It could increase the brand awareness, especially people who attend to the fashion show are more likely to be the potential customers.

Furthermore, the menswear market was forecasted to keep growing in the next 5 years.

With an efficient business model, The Freshmen could get more brands selling in the store and become the most successful menswear online store in Hong Kong.

T Everyone could set up an online store easily, there will be more competitors entering the market. The competition could be aggressive. It gets harder for the store to be stand out from the crowd, as other competitors could follow what the company doing and even make it better.

The services that The Freshmen providing need to keep getting better and the products offering need to fit the customer needs. If the sales keep lower than expect, the business could face some financial problem as holding too many dead stock and not enough capital ready for the new season.

SASHA KANEVSKI

F Competitors’ analysis There are several competitors in the local market; here are the two strongest with physical stores: • I.T – largest retailer for fashion lovers in Hong Kong with distinct multi brand stores and single-brand shops. Started in 1988.

• Lane Crawford – Hong Kong leading specialty store, offering the largest assortment of designers brand in Asia. Founded in 1850.

These two competitors also has a long history and renowned for the unique edit of the newest and best designers from around the world in fashion.

I.T has a simple idea: to cater the young individuals with a distinct sense of style. It was started with a small shop featuring brands that were not readily available elsewhere in Hong Kong.

It was similar idea that started up The Freshmen.

Their strengths are offering a large product range targeting variety of customers with multi-brand stores and single-brand shops. They not only bring the brands to the market by licensing also developed house brands such as 5cm, Chocolate that targeting menswear market.

Furthermore their stores are located in every main shopping areas and shopping malls. They have attracted many tourists, as Hong Kong well known as the “Shopping Paradise”. People come to shop and especially tourists from China, they are usually big spender that driving the I.T sales growth.

On the other hand, they have too many stores and lack of employees to maintain the quality of their services and the store environment. During some holiday such as Christmas and Chinese New Year with the most tourists coming to Hong Kong, their stores are usually full of customers especially when they are on sales. Customers will find shoeboxes are everywhere, clothes not hanging up and a long queue for the fitting room.

Sales are too busy to serve every customers and don’t expect they will serve you kindly. The whole shopping experience are bad, it stops people getting in to the stores although it is on sale.

Lane Crawford is not only a fashion retailer, they evolved from a department store to a fashion and lifestyle specialist. Best for its unique edit of the newest and best designers from around the world in all part of fashion, cosmetics and even home and lifestyle. They provide their customers with a luxury shopping experience like personal shoppers.

Within the menswear market, Lane Crawford has more than 100 brands in-store and they are luxury brands like Givenchy, Lanvin and Jil Sander. The products they offer are from formal wear to casual wear, customers could get what they want in their store.

Because of their success in the market and some brands that only available in Lane Crawford. Some of their products are pricing too high. There is no VAT in Hong Kong but the price they charge on a product is more expensive than a customer buy it oversea. For example buying on Selfridges and delivery to Hong Kong, the UK VAT will be removed and some oversea online store even offers free delivery to Hong Kong. Although it takes longer for the customer to get the products, it will be cheaper than buying in Lane Crawford.

From those two competitors analysis, it could help The Freshmen better communicate with the customers about how to serve them. Customer services and pricing are the key factor that will affect customers to choose where they buy.

The Freshmen will always put their customers at first, offering the best services like live chat answering customer enquiry and welcoming any feedback on our page to keep the services improving.

F IL IP ROTH

F Market strategies The Freshmen’s marketing strategies are crucial to the success of the business. It needs to get awareness of the products to our target customers, as the brands that we stock are not well known yet.

Market segmentation The two age groups of people who would buy from The Freshmen should have a better household income and higher education that allow them to afford quality menswear in a more luxury prices.

Based on these segments, The Freshmen set its sale forecast at about 1% of the total potential market.

There are 374,700 male employees aged 25-34 in Hong Kong and 102,400 aged 15-24.

The average hourly wage of 25-34 age group is $59.7hkd and at age 15-24 is $41.5hkd. The highest hourly wage of 15-24 is $54.8hkd, which is still lower than the average of 25-34.

The highest hourly wage of employees by educational attainment is tertiary education. There are 500,200 male and they have average of $94hkd and the highest could get up to $155.6hkd.

Furthermore occupations like managers, administrators, professionals and associate professionals have a similar hourly wage as tertiary education employees.

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Demographic segmentation: Age Gender Family size Stage of family Income Occupation Education Religion Race Nationality

25-34 Male Small, they have less expenses and more to spend on fashion.

Not married or married couple without children.

More than $20,000 HKD a month.

Managers, adminstrators, professionals, celebrities University graduated Any Any Chinese

Purchasing behaviour segmentation: User occasion Benefits wanted Loyalty level

Causal, formal Image-enhancement, luxury, high quality Regular purchasers annually

Geographic segmentation: Country Location Climate

Hong Kong, China, Taiwan Online Warm, Hot

Psychographic segmentation: Social class Lifestyles Spending attitude

Higher spending power, education, income.

Following fashion.

Regular spenders

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F Suppliers/stock management The Freshmen will be running as a platform like Farfetch. They are e-commerce fashion company and work with different boutiques and brands from different countries.

The store partners with influential and talented designers. We want to provide different menswear brands to shop from within our store. There are high risks if the store buys all the products and it needs a huge amount of money to buy and store the stocks. Therefore the store will not own the products and hold any stock. When customers make a purchase from The Freshmen, the brand will directly ship the product to them.

According to a research from Yale (Adding small differences can increase similarity and choice), if two similar products are priced the same, consumers are much less likely to buy one than if their prices are even slightly different. Therefore The Freshmen will source the products in various ways in order to give customers more choices to compare and choose.

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PEST analysis Below are the macro environmental factors that could affect The Freshmen.

Political and Legal factors:

The Freshmen needs to hire few employees to run it, for example a web designer. Wages could be a big expense; especially the company was started from nothing. It needs to have employees with more experience that could work individually and handle more workloads.

From 1st of May 2013, the minimum wage rate had increased from $28hkd to $30hkd per hour and the government is still discussing to increase to $35hkd per hour. It could put The Freshmen to a difficult situation when the company needs a bigger team to handle the workload, but the wages has gone up again.

Economic:

There were a worrying signs of Hong Kong being at the centre of the next financial crisis. Last year, a record of 54 million tourists, most of them are from China, thronged through increasingly jammed shopping malls, while millionaires and billionaires bought up luxury properties. People keep blaming them for pushing up home prices and forcing them out of central districts.

The relationship between China and Hong Kong is getting more nervous because of Hong Kong-mainland conflict and people are not getting along.

Some Chinese stop going to Hong Kong.

In this year Chinese golden week from 1st May to 3rd May, there were about 388,000 tourists from China. Comparing to last year, it drops 1.6% and it’s the first time recorded a drop since 2003.

Social:

Hong Kong is a city with a surging number of millionaires and home of some Asia’s richest people, finds a fifth of the population living in poverty. According to a Citibank millionaire research, there were about 732,000 millionaires in Hong Kong last year, which means there were one in ten people. On the other hand, about 1.3 million people were below the poverty line last year, according to a report by Chief Executive Leung Chun Ying released on Sept.

28 2013.

The government address growing inequality between the rich and the poor has been exacerbated by the increasing home price. People are looking for better housing.

If the home price still increasing in the future, people still couldn’t afford to have a better house. People are saving money and spending less. It will decrease the demand of fashion products.

Technology:

It seems like everyone in Hong Kong owns a smartphone. The smartphone penetration in Hong Kong was about 63%. The city has the highest mobile Internet usage rate in the Asia Pacific region with 96% of smartphone owners going online everyday, according to Google’s Our Mobile Planet data. People are spending more time on mobile devices than computers. It makes people to shop anywhere and anytime.

The shopping experience on the mobile devices will get more important. The screen size is much smaller than computer, The Freshmen needs to have a different layout perfectly fit for mobile devices. Stability and speed are also the key of an online store to be successful, as the online traffic will be huge and customers are not willing to wait for a long time to get to the page.

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F Promotion Being able to market and sell the products cost-effectively is one of the most important aspects of running a business. Promoting the business tells potential customers that we exist and entices them to buy.

Personalised shopping experience:

People of the same age can have entirely different purchasing habits and fashion styles. The Freshmen would use cookies on the store to gathers information about the customers. It is a data sent by a web server to a browser and then sent back by the browser every time it accesses. Therefore the store could use these cookies to measure and analyse how customers use the website, what type of fashion they like. This allows The Freshmen to improve the shopping experience and promote the right products for the customers. This information could also help to decide where and how to promote the products.

Social media:

The Freshmen will target advertising to a broad range of social media, such as Facebook, Instagram, Pinterest and Viss a local fashion instagram.

Social networks connect with a world of potential customers that can visit the store, which could increase overseas orders. It also allows The Freshmen to get in touch with customers on a more personal level.

The Freshmen will ask customers to provide email addresses for registration or like the store Facebook page. Therefore the customers could get email newsletters when the store has new products.

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Celebrities endorsement: Celebrity influence is wide. The increasing social importance and visibility of celebrities has resulted in their dress style and fashion sense being keenly watched and analysed by public.

The Freshmen could sponsor clothing for the celebrities when they going to some public events or give away some branded gifts.

People will get interested about what brands are those celebrities wearing and where could they get that. Therefore the store could gain more awareness.

Adwords: Adwords is a Google promotion tool, it allows company to be seen by customers at the moment that they are searching on Google for the things The Freshmen offers. The company only needs to pay when customers click to visit the store. It is good for new company as it can starts with low budget and no contract.

The company can buy more search terms such as menswear that will make the ad show in the Google results. It allows the store to have more visitors and grow the sales.

Risk analysis Starting up an online fashion store has a certain amount of business risk. • Trend assessment: Trends in the fashion industry are fickle. A successful store needs to capitalize on the latest trends and recognizes when the trends are on the decline. There is a risk if The Freshmen fail to identity the trend and bought some products that could not sell because the store does not have an experienced buyer. It could lead the customers to have a bad impression on the store. For example, if a customer visits the store about two or three weeks after his first purchase, the products selling are still the same. The customer will be less interested to come back again. • Brand awareness: The Freshmen is a new name in the market, also the brands that selling in the store are not available elsewhere in Hong Kong and they are quite new to the customers.

People come to the store because they already know the brands are less likely to happen.

When people buy, they would consider the quality, design and brand. Customers might choose to buy from the brands they already know rather than new brands if the products are similar. Therefore The Freshmen also need to sell the story behind the brand and products in order to engage the customers with the brands. • Inventory management: Some of the brands or products might sell more than others. When customers visit the store looking for that product, they expect the product will have their sizes. Failure to get enough inventory could disgruntled customers and lost sales. On the other hand, if the business gets too much inventory, it needs more spaces to store and it costs more to have storage.

In order to avoid this, The Freshmen could use the purchase record of each customer, knowing what sizes and brand have the biggest demand to get a more accurate amount of inventory.

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F Finance - pricing of service For brands that want to sell on The Freshmen, there’s a yearly fee for services rendered. This fee is dependent on the brand product category. Products such as accessories and hats, the yearly fee will be £2,000 and clothing will be £4,000. The reason of charging two different prices is to attract brands that only selling accessories, they might have a smaller product range and profit margin. If some brands have products on both categories, The Freshmen will only charge £2000.

To encourage the brands to keep having new products and sell on the store, The Freshmen will conditionally return 50% of the annual fee depends on the annual sales requirements of £10,000 for accessories and £20,000 for clothing.

Also on each transaction, the store will charge 20% commission fee.

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Start up cost Web store:

The Freshmen store was set up on Big Cartel. Currently it costs £6 per month and has a 25 products limit. If there are more brands and products selling on the store, it needs to be upgraded. It will cost £18 a month and allow 300 products limit.

Domain:

The freshmen.co.uk domain was purchased on iwantmyname – a domain provider and it costs £9 per year.

Staffs:

The company will hire two staffs to maintain a high quality services to our customers and to promote our stores. First will be a customer services and social media officer. The main job role is to keep the blogs, Facebook etc. updated and answering customers’ enquiry. The Freshmen will offer a salary of £1,000/month. This salary is based on a similar job role hiring at an aesthetic medical body-contouring center.

The Freshmen also needs a web programmer to develop, troubleshoot and maintain the website is perfect for customers to shop. The salary would be £1,200/month, slightly lower than our competitor I.T offering for the same post.

Office and equipment:

The company will rent a furnished office about 690ft, that’s enough space for few staffs to work in and set up a small studio to take some products shot, estimated about £2000. The rent of the office is £640/ month, management fee is £100/month and government rate £140/ quarter. Also the company needs 3 iMacs in the office and some other equipment such as printer, as an estimated it costs about £5000. Furthermore a business uses Internet costs about £30/month.

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F Sale forecast for the first three years The estimated yearly cost of running The Freshmen was £47,625, which is about £3,970 a month.

I need to have about £1,500 profit a month to cover my own living cost. Which means The Freshmen needs to make £5,470 a month from the yearly service fee and the commission, therefore the store needs to aim its sales to £19,020 a month.

For the first half year, The Freshmen not expecting that it is possible to reach £19,020 sales a month. We aiming that the company could reach that amount after two year. Also we expect the sales would grow during some festivals such as Christmas, Chinese New Year and Valentines Day. The Freshmen could attract female customers to buy gifts for their boyfriend or husband.

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2014 2015

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2016

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

Appendix 1

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F Appendix 2

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Appendix 3

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F Reference - Tim Jackson (2009). Mastering Fashion Marketing . London: Palgrave Macmillan. p76-79.

- Tony Hines and Margaret Bruce (2007). Fashion Marketing. 2nd ed. Oxford: Elsevier. p74-77.

- Paul Grefen (2010). Mastering e-business. New York: Routledge. p67-98.

- Jonathan Bacon. (2013). Men’s fashion: Online suits you sir. Available: http://www.marketingweek. co.uk/trends/mens-fashion-online-suits-you-sir/4006265.article. Last accessed 2nd June 2014.

- Tamara Sender. (2014). Men’s Fashion: 3 key issues retailers need to know about the menswear market in the UK. Available: http://www.mintel.com/blog/mens-fashion-3-key-issues-retailers-need-toknow-about-the-menswear-market-in-the-uk. Last accessed 2nd June 2014.

- Cherise Luter. (2014). Why menswear may finally get respect in the fashion industry. Available: http:// www.bustle.com/articles/15167-why-menswear-may-finally-get-respect-in-the-fashion-industry. Last accessed 2nd June 2014.

- Brenda goh. (2014). Suited and booted, London chases global menswear crown. Available: http:// uk.reuters.com/article/2014/01/06/uk-britain-fashion-idUKBREA050RK20140106. Last accessed 2nd June 2014.

- Jessica Fioriti. (2014). Retailers must take advantage of fastest growing clothing sector: menswear.

Available: http://www.verdictretail.com/retailers-must-take-advantage-of-fastest-growing-clothing-sector-menswear/. Last accessed 2nd June 2014.

- Kyle Chayka. (2014). How to Sell Clothes to Men. Available: http://www.psmag.com/navigation/business-economics/how-to-sell-clothes-to-men-menswear-mr-porter-63626/. Last accessed 2nd June 2014.

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