Retail Clothing

BUSINESS PLAN

CLOTHES AS ART INC.

49567 Main St.
Los Angeles, CA 55550

April 1, 1993

Clothes As Art offers a creative alternative in the retail clothing industry: customers create and then produce their own designs on garments. Faced with strong competition, this plan outlines several marketing strategies and provides insight into factors like location and demography when planning a clothing venture.

• executive summary
• description of the business
• market
• competition
• marketing strategy
• location
• management
• personnel
• financial section

EXECUTIVE SUMMARY

Clothes As Art Inc. will be a wearable art retail store. Clothes As Art Inc. enables people, male or female, young or old, to design their own clothing whether they have any artistic abilities or not. It will be fashion art that's unique and original. Most of all they will be entertained while creating their own fashion art.

Clothes As Art will begin conservatively by offering T-shirts and sweatshirts as in-store inventory from which the customer can choose. In addition to blanks for the customers to design, Clothes As Art Inc. will have a moderate inventory (30% of projected sales) of pre-painted shirts and sweatshirts. This will tap into the market of those who like the clothing but are more spontaneous buyers. Any customer will be allowed to bring in pieces from their own wardrobe to paint. In addition, at the end of the day the spin drum is coated with a strip of the paint around the edge. This dries over night and becomes a durable, pliable material. This can be fashioned into belts, cut into earrings and other jewelry that will match all clothing produced by the artist. These will be offered as accessories at Clothes As Art.

Clothes As Art's products have two target markets. The first being female, 21 to 35 years of age, with household income of $35,000 per year or higher. The second target market is 50% male, 50% female, 5 to 16 years of age, with household income of $35,000 per year or higher. The only location that would be conducive to the sale of these products is in a small or similar location with very high walk-by traffic. Therefore, the location requirements are a high traffic, indoormall.

Clothes As Art will have no true direct competition by another store in the area. Clothes As Art's edge will be its price. Of the existing indirect competition, there are few companies that will be able to compete with Clothes As Art's price.

Clothes As Art's financial statements have been compiled with the greatest degree of conservatism. Clothes As Art will require a loan of $179,077. The loan will comprise 31% up-front expenses and 69% working capital needs. Close analysis will show that Clothes As Art's gross profit margin is 77% before tax, return on investment is 20%, and time interest earned is 2.0 for the first year. According to Robert Morris and Associates' most recent studies, these ratios are at or above average for this type of company.

Please feel free to contact me if you have any questions.

Name of the Business

Clothes As Art Inc.

This is not the legal name as of yet. I wish to incorporate and trademark, which will give rise to legal costs.

Ownership

Owner: Cathy Wood

Form of Ownership to Be: Corporation

DESCRIPTION OF THE BUSINESS

(Pictures are available for a more visual demonstration of the product.)

Clothes as Art will be a wearable art and accessory retail store. Whether you consider the 1990's as the "me" generation or the "I" generation, consumers today want to do their own thing. Clothes As Art enables people, male or female, young or old, to design their own clothing whether they have any artistic abilities or not. It's fun, it's exciting, and it will be inexpensive for them. It will be fashion art that is unique and original. The consumer will be able to design any number of pieces to go with any other articles of clothing they own. Most of all they will be entertained while creating their own fashion art. In addition, accessories will be fabricated from the by-product of the artwork. Therefore, the accessories will complement any article sold in the store.

The service procedure of the store is quite simple. The customer enters the store and picks out an article of clothing they wish to paint on or they may bring in a piece of their own wardrobe (I will use "shirt" to identify the clothing article). The customer then takes a number to await a free work table at which they will paint. The customer then chooses 4 colors that they will paint with. The paints are applied with squeeze bottles full of bright colors. While they are choosing their colors their shirt will be clipped and stretched on a cardboard board the same size as the shirt. This prepares the shirt to be a canvas for the artist. The attendant will then give the customer brief instructions on how and where to paint on the shirt. The customer then paints on the shirt in any way they believe will look good when it is spun. When the customer is done he/she hands the shirt to the attendant who spins it. This is where the excitement begins. Spinning at about 450 RPM, the paint that was applied to the shirt quickly evolves into original art right before the eyes of the customer. (Pictures are available for a more visual demonstration of the product.) The centrifugal force caused by the spinning causes the paint to be drawn from the center of the shirt to the edges resulting in a star-burst (spin art) look to the design. The colors swirl together but don't blend into new colors. The original colors remain separate colors, while this is happening crowds gather to watch the artist and they quickly form a line to do their own thing. The shirt is then sent through a large belt drier that adheres the paint permanently to the shirt, when the shirt is done drying, the customer's number is called at the cash register and another happy artist is born. The finished product is a self-made piece of artwork that can be machine washed and dried for years along with the customer's regular clothing. The entire services process takes an average of only 20 minutes, so the turnover is great. This includes average time to paint 5 minutes, to spin 30 seconds, and to dry 15 minutes. There will be several tables at which to work. The drier can dry up to six shirts on a continuously moving conveyor belt.

Clothes As Art will begin conservatively by offering T-shirts and sweatshirts as in-store inventory. In addition to blanks for the customers to design, Clothes as Art will have moderate inventory (30% of projected sales) of pre-painted shirts and sweats. This will tap into the markets who like the clothing but are more spontaneous buyers. Any customer will be allowed to bring in pieces from their own wardrobe to paint. A caution will be given that the shop won't guarantee the results and no flammable materials will be allowed. When in-house inventory expansion is warranted, Clothes As Art will expand into jeans, jackets, women's casual suit coats, jean jackets, leggings, leather jackets, collared shirts, canvasses, placemats, more jewelry, sweatpants, ties, belts, and shoes. With respect to canvasses, Clothes As Art will have blank canvasses on which the customer can paint. Many people decorate their homes with certain color schemes. This will give the decorator the ability to create their own piece of artwork that the end of the day the spin drum is coated with a strip of the paint around the edge. This dries overnight and becomes durable rubber type material. This can be fashioned into the accessories such as belts, cut into earrings and other jewelry type articles that will match all clothing produced by the artist.

MARKET

Target Market

In accordance with the manufacturer and my own experience, Clothes As Art will be tapping primarily in to two separate markets.

❑Target Market A:

Sex: Female
Type: Working woman who is fashion Conscious
Age: 21-35
Education: Some College or Degree Holders
Household Income: $35,000+

❑Target Market B:

Sex: 50% male, 50% female
Age: 5-16
Education: Grade School
Household Income: $35,000+

As you will see in my biography (available upon request) I will have previously worked for a retail store of this nature. It has been my experience that this product's market is both sexless as well as ageless (age 5 to 50). I have also spoken with another shop owner who agrees that the product has this type of wide appeal. For analysis I will deal with these two target markets. My choice for location is the Shelby Corners Mall, which offers no traffic studies for their mall. According to their "Primary Trade Market, Neighborhood/Lifestyle Composition"Target Market A fits into those categories called Blue Blood Estates, Money and Brains, Urban Gold Coast and Young Influentials. This accounts for 81.8% of the 1.1 million in this mall trade market. Target Market B fits into the category called Furs and Station Wagons. This accounts for 2% of the 1.1 million in the trade market of the mall. With respect to Target Market B showing such a low market share of the trade area, please keep in mind that the mall offers no traffic studies. If you visit the mall you will see quite a few more children and teenagers than the mall market study shows. Therefore, the overall market with respect to children is very healthy.

Total Market

According to the Standard Industrial Classification Manual, Clothes As Art's Industry Group Number is 565 and the Industry Number is 5699, under which "Tee Shirts, Custom Printed - Retail" is listed.

According to the 1991 U.S. Industrial Outlook published by the U.S. Department of Commerce, the forecast for total retail sales increase is 6.5% in 1990. This is an increase of .8% over 1989's increase of 5.7%. According to most recent information (1989) apparel and accessory stores showed the largest gains of 7.1%.

In addition, Standard and Poor's Industry Surveys (1991) suggest that specialty retailing is the way to go. Their research indicates the general merchandiser is suffering by trying to meet everyone's needs at the same time. This publication states that by meeting the more specialized needs of people, a retailer will be in a better position to grow. Given Clothes As Art's ability to customize to any person's needs, it fits with this analysis very well.

COMPETITION

Direct Competition

According to Spin and Dry Inc., the manufacturers of the spinning and drying equipment, there is no other equipment-based store of this kind in the metropolitan area. Therefore, Clothes As Art would have no direct competition in the Los Angeles area.

Clothes As Art's toughest competition is Artwear, Custom Designs, and Clothes Etc. This is due mainly to the fact that their capital strength is greater than Clothes As Art, their prices will be competitive, and their lines will be more full.

Clothes As Art's main drawback will be a lack of capital necessary to compete with these stores. Clothes As Art can handle this drawback in one of two ways: either avoid them altogether or have a location that has a large enough market to handle all of the shops. The only way to avoid them is to choose another location; this would greatly affect our chances for success. Clothes As Art's location in the mall will have a large enough market for all of the shops. Currently the mall houses only two of our competitors. The expansion has added mainly high-end, high priced shops to the roster. Clothes As Art's main marketing device will be the low price of the goods; therefore, the new expansion has had little effect on the competition but it has increased the number of potential customers. Clothes As Art will bring a product to the market that each of these shops either do not carry or carry in small quantities. Most, with the exception of Clothes Etc., have prices that are quite a bit higher than Clothes As Art. We may not have the capital strength, but we also don't have the expenses that the other stores have to cover. We will be highly competitive with our prices.

Indirect Competition

The remaining T-shirt retailers are men's and women's sportswear stores and little shops that sell small proportions of T-shirts. Clothes As Art will be competing with them by giving the customer something that they don't offer. We will meet a market niche that is not being filled by the current stores.

Other T-shirt retailers are generally custom silk screeners. Clothes As Art is not going to directly compete with them by doing silk screening per se. We will be competing with them in that a proportion of Clothes As Art's sales will be to fraternities, sororities, church groups, etc. to supply their baseball jerseys, event T-shirts, etc.

MARKETING STRATEGY

Based on experience in this market, with respect to T-shirts, price sells. This will be the same case with Clothes As Art's sweats. The cost of a finished T-shirt at our store will be $14 and a sweatshirt will be $17.50. This will be the store's major selling point. Even with this low price the goal of profit and positive cash flow can be achieved. This price may even be able to be raised given the superiority of the location and relative price flexibility of the patrons of that mall.

In addition to my own advertising the mall does quite a bit of advertising itself and will be augmenting other advertising.

The greater proportion of Clothes As Art's advertising will be in give-a-ways to local groups such as high schools, fraternities, and church groups. This will be the best way to build local support in both target markets given that the product is relatively difficult to describe on the radio. In addition, this is a community-oriented advertising device that will help the respect of the store. In contacting local fund raising organizations, such as fraternities and church groups, they will be very apt to be return customers when their next fund raising drive comes around.

Another shop owner has commented that birthday parties are a very effective means of advertising. By bringing in a group of children (Target Market B) to paint, they will either return themselves or show others our product. This is achieved by advertising in small local newspapers and church leaflets.

Another marketing avenue we will explore is contacting the local art clubs at high schools and colleges. The object of an art club promotion will be to teach people how to use the process efficiently. That would in turn help to make repeat customers out of them. Once they have mastered the techniques they would now be in a position to create wearable art gifts or garments for themselves. They will also bring in their friends which they will attempt to teach. In addition, this would be a great method of getting artistically done pre-painted inventory for Clothes As Art for their work. This would be done with the understanding that all designs must be pre-approved. This could also give rise to a special "gallery" section of the store for local artist's work thus adding to the stature of Clothes As Art.

Clothes As Art will be advertising toward local schools. The store will bring in local art classes and charge a nominal fee if they bring their own shirts. The object will be to derive repeat customers out of the class and new customers out of the school. This is another avenue to exploit target market B.

Logo identification will be another advertising method. Garments can be manufactured for the local bowling groups, fraternities, restaurants, and companies. The logo can be screen printed and brought in for establishment or hand painted with the Clothes As Art system. Clothes As Art will attempt to exploit the local professional sports team's logos. The need for licensing agreements will be explored. It is my impression that as long Clothes As Art is not doing the initial screen printing, Clothes As Art will not have to incur the large costs of acquiring a licensing agreement. Clothes As Art can create shirts for special events such as Valentine's Day, Mother's Day, and Father's Day.

LOCATION

Clothes As Art will require very little space. The space needed is only 850 square feet so the rent will be lower than a regular retail store. T-shirts and sweatshirts can be stored in stacked cubicles which take up very little space while storing large amounts of inventory. The pre-painted inventory will constitute 30% of sales and will therefore require a small amount of space also. In using cubicles there will be a very little space needed in a storeroom to store other inventory.

Through my experience with this product, Clothes As Art must be located in a very high walk-by traffic mall with high visibility through a glass store front. A large selling point of this product is entertainment. Therefore, in addition to the above-mentioned marketing techniques, it is sold by one person watching another spin their shirt and then wanting to paint one themselves.

The mall affords the greatest visibility for Clothes As Art product. As mentioned earlier, the mall has no traffic studies but it is known as the most successful mall in the metro area. It also affords the greatest means of reaching Clothes As Art's two targetmarkets. A simple trip through the mall shows overwhelming evidence that Clothes As Art's two target markets will be very effectively reached.

The costs associated with the mall are quite steep. The track record of the mall owners who own several plazas in the area of deli vering a fruitful market to their renters has been shown conclusively by the longevity of and need for expansion of both the malls and plazas.

Clothes As Art's first choice would be a pre-built space where another was operating and is in a good location.

This would lower the store construction costs. The preconstructed space would have to be in a good location. It is the experience of the owners of the mall, that the shops that fail were in the worst positions; therefore, the chance of Clothes As Art finding an adequate, preconstructed space is very remote. To be as conservative as possible, financial statements are based on a few, not yet built, store site in the expanded section of the mall. The average cost per square foot is $25.

Analysis of the completion indicates that the Shelby Corners Mall is the best location to access our target markets, while avoiding locations that house direct competition.

MANAGEMENT

Owner: Cathy Wood earned a Master of Business Administration from St. Louis University in May of 1991. She completed her Bachelor of Science in Business Administration/Finance at St. Louis University in December of 1990.

Throughout her life she has been very involved in entrepreneurship. She has owned her own house cleaning business since she was in grade eight. During the summer of 1988 she completed and entrepreneurial internship in North Carolina with a retail store specializing in Clothes As Art's product. There she learned many aspects of the business from inventory control to cash management.

In addition, during the summer of 1989 she was an original partner in a car part retailing business register in the State of California as Core Enterprises. She has done work for the Small Business Institute as a small business counselor for Bellni Baby and Children's Furniture in Glenwood, California. She was also commissioned by South County Landscaping and Construction Company in Sacramento, California as a small business counselor. During her last year of her undergraduate work she was the founding Vice President of the Association of Collegiate Entrepreneurs (ACE). The Association was begun on campus to help students who aspire to become entrepreneurs get needed information and meet the necessary people. In this association she was responsible for promotion and scheduling of speakers and events.

This plan received an Honorable Mention from the Kennesaw State business plan competition. This competition is international in nature and highly competitive.

Currently Ms. Wood is employed as a business planner for Fox Associates. Fox Associates is an entertainment business in Los Angeles, which owns and operates the Bijou Theater (a local landmark) as one of its lines of business.

Manager

Clothes As Art will not have a manager in the first year of operation. The owner will perform the duties of a manager. When the time comes for the company to acquire a manager he or she will have to have two outstanding abilities. She or he will have to perform all the normal managerial duties such as scheduling, employee guidance and sales computing, and she or he will have to have adequate artistic abilities to lend in the sales process by giving advice to prospective customers.

Directors

The directors will include the owner Cathy Wood. Other directors will include people currently involved in local small business, the local artist community and the local financial community.

PERSONNEL

General Hiring Philosophy: Each employee of Clothes As Art will have to possess enough artistic ability to aid and advise the customers. We already know that Clothes As Art requires almost no artistic abilities to produce a shirt. Therefore, with respect to customer aid the employee's ability to give advice will need to be the strongest. They will have to be pleasant and sales-oriented. They will have to be able to emphasize the ease of the painting process and therefore sell the product effectively. In addition, to their duties to the customer, they will have to be able to design shirts for the pre-painted in-store inventory. With respect to pre-painted inventory their artistic abilities will need to be strong. They must be able to excel in design beyond the average customer.

FINANCIAL SECTION

Analyses and financial statements for projections and information concerning competition and location have been prepared and are available upon request.

The loan will be collateralized with inventory, equipment, and leasehold improvement. Clothes As Art will always have 8 weeks worth of inventory in the shop at all times. T-shirts and sweatshirts are a staple item for screen printers and will therefore have a high resale value in the event of default. In addition, the dryer is commonly used by screen printers; therefore, it is not considered specialized equipment like the spinner and has a high resale price. I will attempt to persuade the mall to take a subordinated position on the leasehold improvements as another form of collateral. It is my intention to use all available net cash flow to pay down the outstanding long term liabilities of Clothes As Art. In addition, the unused portion of the loan will be held in short-term certificates of deposit at the loaning bank.

Financial statements for year 1, as well as supporting documents have been prepared. Financial statements for years 2-5 consist of monthly income statements and year end balance sheet.

I have assumed a 20% growth in sales for years 2 and 3. This is due to the time it takes the product to take hold of its market. The sales then level off at a 15% growth rate for years 4 and 5. This is due to the fact that the store will be becoming an established business in the mall. I have assumed a 5% increase in the cost of my inventory. This is closely tied with the national inflation rate.