Island Shades.
Terry Allen has an idea for a new business. She would like start a retail operation that
would provide high-quality eyewear to discriminating consumers. The business, Islalnd
Shades, would use a focused differentiation strategy, catering to middle and upperincome individuals ranging in age from 16 to 50 years. These customers would range
from avid outdoors people to birdwatchers to Sunday drivers. She envisions carrying
high-end sunglasses (Gucci, prada, Oakley, Ry Ban, Costal Del Mar, etc.) and customprescription sunglasses. She will stock a wide assortment of styles and a variety of colors.
Although Terry will stock some affordable options in each product category, the bulk of
her inventory will be priced at $100 or greater. She estimates that she will need to invest
$75,000 to 5,000 in inventory to begin her business and ensure she has the variety and
quality her discerning customers will expect. She estimates that her monthly sales will
start at $15,000 and fluctuate depending on the seasonal peaks and valleys. For instance,
the first, second and fourth quarters of the year will be much more lucrative than the third
quarter due to ski season, summer activities and the holiday season. Terry expect to
average $35,000 per month in sales over this time period. Currently she is also planning
to pay a consultant to develop an interactive website enabling customers to purchase
merchandise online. The initial quote for the up-front cost for development is $4,000,
with and ongoing annual fee of $300.
Terry believes that the perfect location for this retail sore is the Palacio, an upscale
and trendy shopping village just off a major interstate highway in a mid-sized city with
da population of 295,000 ( The population for the greater metropolitan statistical area is
500,000) Palacio is centrally located within the city and easily accessible from several
high-end neighborhoods. One key factor in choosing this location is that other upscale
retail shops and restaurants currently operate at Palacio, which attracts the desired target
market. Terry believes that she will need around 2,000 to 2,500 square feet. Terry
recently checked with a local leasing agents and found out the following information:
A 2,400- square foot corner unit is open.
The rent is $3,300 per month. ( Taxes and insurance charges are included).
The build out cost is $16.00 per square foot.
The lease term is 3 to 5 years with several different renewal options.
Terry wants a comfortable, friendly atmosphere that is alluring without being stuffy.
The quote she received for build out cost would enable her to accomplish this objective .
it includes displays, but furniture and accessories would be additional. Terry estimates
that these features would run an additional $5,500. space is available now and going
quickly. Even though it is August, she would like to get started and sign a lease
agreement.
Terry is quite aware that she will be working long hours at the beginning. She plans
to be open Monday through Saturday from 10:00am to 7:00 pm. These hours will allow
her to operate when potential customers are eating lunch and dinner and browsing at
Coldwater Creek, Anne Taylor, Adventure Outdoors, and so one. Based on these hours of
operation, Terry believes she needs two to three part-time employers who would rotate
shifts. She is planning on tapping the local high schools and universities to recruit quality
part-time employees. Based on the data she has gathered, she expects to pay between $8
and $10 and hour. Since she is relying on part-time employees, there would be no need to
pay benefits such as medical and dental .
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