Sample Business Plan On Boutique In Geneva Business Plan
Type of paper: Business Plan
Topic: Business, Wealth, Products, Brand, Boutique, Market, Customers, Population
Physical Address, Geneva
The Swiss luxury goods market is expected to post considerable growth in 2015 through to 2019 to reach more than CHF 6,107 million in annual revenues. The country’s high net worth population, a taste for luxury goods, excellent economic conditions and high consumer confidence have proven to be important drivers of the expanding demand for high-end goods. Specifically, the proportion of high-income and ultra-rich Swiss population has increased by between 4% and 7% while the country’s GDP expanded by more than 2% in 2013. Geneva is also home to hundreds of equally wealthy expatriates.
The proposed boutique hopes to capitalize on the expanding demand for luxury consumer goods, by offering a mono-brand, Italian-style fashion. While this Dolce & Gabbana Geneva would have to struggle against strong competition and competitor concentration in the city, product differentiation and exclusivity are central to eking out a niche. The boutique will require more than CHF 10,804,222 in seed capital and achieve CHF 3 million in revenues during the first year of operations.
Multinational luxury products companies have an excellent presence in the Swiss market, largely because of the absolute luxury products and high premiums. Specialist retailers hold a dominant position in the luxury goods market because they offer a posh ambience, expert advice, have excellent customer service and less crowded, facilitating a relaxed shopping experience. Further, leading luxury goods companies in Switzerland usually sell their products through specialist channels/boutiques to avoid counterfeiting and brand adulteration. The proposed boutique offers high-end, Italian clothing, leather goods, accessories, timepieces, fine jewellery and footwear designed by Dolce & Gabbana. Dolce & Gabbana is an established luxury brand both in Switzerland and the rest of the world, which is why this boutique should easily appeal to the local and tourist populations.
The boutique will offer multiple product categories designed by, and/or distributed by Dolce & Gabbana. These will include luxury accessories, travel bags, designer footwear and apparel, fine wines and spirits, premium personal care and beauty products. Others will include luxury electronic gadgets, timepieces and jewellery (Euromonitor International, 2014; Dolce & Gabbana, 2015).
Market Analysis & Potential
The Swiss luxury goods industry has been expanding largely due to the population’s partiality to branded products, high consumer confidence, high purchasing power and class-consciousness. The luxury goods market is should expand by 2% between 2014 and 2019, with the designer footwear and apparel segments will grow by 2% in constant 2014 terms until 2019, while the luxury jewellery and personal care (beauty) products will grow by 3% and 1% respectively. The success of the proposed boutique may only be limited by the stern competition among the highly concentrated super premium personal care and beauty brands.
Switzerland is easily one of the wealthiest countries in the world with a GDP of $685.4 billion and a GDP per capita of $84,815.41 by the close of 2013. The inflation and unemployment rates are low at -0.2% and 3.2% respectively while less than 8% of the population live under the poverty line. The country has upwards of 8,061,516 people, with 4.976 million being active participants in the labour force. The country’s population expanded by 1% since 2008 due to immigration, with people aged 65 and above increasing by 13% over the same period. The population aged between 15 and 64 expanded by only 4% between 2008 and 2014, but the number of super-rich and high-income Swiss people increased by 4% and 7% respectively, to account for 15% of the total population. The population earning upwards of CHF130,000 rose by 4% since 2008 to account for 6% of the population, and the top 20% of the population’s income is 5000% more than the bottom 20%. With a population of 184,538 people, large tourist and wealthy expatriate population, Geneva is the country’s economic capital that holds immense promise for a luxury boutique and globally renowned brand (World Bank, 2015; Euromonitor International, 2014).
Switzerland is home to large luxury brands with established brands and loyal customers, especially since the country’s population insists on brands that they perceive as being of high quality. Global luxury brands have come to epitomize elite lifestyles. Cartier and Rolex, for example, have specialized in time in making luxury watches while Louis Vuitton is renowned for its jewellery, bags and watches. Cartier International is easily the single largest player in the industry with 2.9% of the market share in 2013, with Louis Vuitton Suisse SA, Guccio Gucci SPA, Rolex and Chopard & Cie SA controlling 2.9%, 2.6%, 2.5%, 2.4% and 2% respectively. Dolce & Gabbana holds a 0.9% share of the Swiss market. The market has about 30 dominant players.
The customers would be targeted by geography, demographics and psychographics. Residents of Geneva and tourists visiting the city, aged above 15 years and household net adjusted disposable incomes of more than CHF 30,000 per year will be targeted (Yip & Hult, 2012; Euromonitor International, 2014). The boutique will also target customers who mainly shop in department stores, highly classy, fashion-sensitive and interested in high fashion. The Swiss are famous for their insistence on branded, luxury products, which means that the proposed business would succeed by laying a great emphasis on offering the best ambience, expert advice and a crowd-free shopping experience.
Target Market & Sales Forecast
The Swiss luxury goods market is expected to expand by 2% on average between 2014 and 2019, reaching CHF6.107.1 million, wilt the luxury electronic gadgets, luxury accessories, jewellery/timepieces and luxury travel products represents the highest growth potential. Dolce & Gabbana has a strong presence in the designer apparel/footwear, jewellery, accessories and beauty products segments. The respective market shares of the different product segments in Switzerland are shown below.
Establishing operations and attracting customers to the boutique is difficult, but should not be impossible given the fact that Dolce & Gabbana already has a presence in the country and elsewhere in the world. The new boutique will benefit from the brand equity and parity established by the existing Dolce & Gabbana boutiques in Geneva, Switzerland and elsewhere in the world. The D&G Boutique in Geneva would look to gain a 0.00052% of the Swiss luxury goods market, which should yield CHF 3,000,000 in the first year of operations. In the subsequent years, it is hoped that the market share will grow marginally, increasing revenues.
The high income and wealthy customer base that the proposed boutique would be catering to have a low price elasticity of demand and income elasticity of demand. Effectively, it is possible to extract premium prices for quality products and services without losing out to the competitors. This is even more so because of the soaring consumer confidence, rising disposable incomes and population, low inflation and unemployment rates. To capitalize on this reality, Dolce & Gabbana Geneva would set prices that would be upwards of 300% of the cost of goods sold.
The intense competition the Swiss luxury goods market means that Dolce & Gabbana would be competing with some of the world’s foremost players in the industry. Effectively, it is critical to invest in marketing and promotion. The boutique has the advantage because there are other Dolce & Gabbana boutiques in the country, and the parent company has a strong brand and advertising budget that indirectly generate sales. Further, promotional investment is required on television and fashion media advertising, social media advertising, outdoor advertising, event sponsorship, product placements and celebrity endorsements.
Dolce & Gabbana offers Italian-style luxury clothing and footwear, high-end beauty/personal care and other products. The unique designs and the brand’s rich history of innovation have allowed its products to be differentiated, in common with other competing products/brands. Product differentiation is such that while all the competitors in the field compete for the same market, customer brand loyalty, tastes and preferences give every player quasi-monopolistic power their products. The brand/product exclusivity allows the boutique to target the ultra-rich and extract premium prices.
While the boutique can depend on the established Dolce & Gabbana boutiques for brand parity and equity, it stands on its own, and in competition with its sister boutiques, with regard to the place. It needs strong selling points to create an ambience of supreme quality in order to attract and justify its high prices. The location of the boutique would be a posh mall or other place frequented by the ultra-rich consumers. In addition, the boutique would be a mono-brand outlet for Dolce & Gabbana products, which is important because it gives the brand greater depth at the retail level and communicates the brand’s strong vision and message about its quality and target customers. The mono-brand specialization would also ensure that Dolce & Gabbana Geneva does not compete directly with the dominant specialist, luxury product retailers that sell multiple luxury brands. A dedicated website for the boutique is also critical in ensuring its visibility and traffic (Euromonitor International, 2014; Rugman & Collinson, 2012). According to Euromonitor International (2014), internet retailing has had a strongly positive effect on absolute luxury brands, largely because of an increasing constituency of youthful consumers.
A professional team of managers and sales persons would be recruited to manage the operations of the boutique, led by the owner. Experience in luxury products retailing and brand management is key to the organization.
The boutique would require CHF 10,804,222 to set up shop. The owner will put up 20% of the capital, while remaining will be borrowed. There are also prospects for selling a stake in the company to Angel investors in order to raise capital as against borrowing, in order to avoid the interest rate risk and also share the risk in the event the business proves unsuccessful.
The boutique is expected to make upwards of CHF 3 million and CHF 70, 2805 in sales and net revenues respectively, during its initial year of operations. In subsequent years, however, the sales are expected to more than double while at once the marketing costs would fall
Profit & Loss
Cash Flow Statement
The successful establishment of Dolce & Gabbana Geneva is dependent on the ability to raise upwards of CHF 8 million (80% of the start-up costs) from banks and other lending institutions. There is a possibility of failing to raise an adequate amount of money to launch successful operations. In addition, debt financing opens the business up to possible fluctuations in interest rates and other lending terms, which will affect the financial stability and profitability of the company. To mitigate this risk, the possibility of selling out a stake of the company to angel investors will be explored.
In order for Dolce & Gabbana boutique to be successful, it must achieve at least 0.00052% of the Swiss luxury goods market. Even most importantly, it needs to capture this proportion of the market, among residents of Geneva and tourists. Given the high competition among luxury boutiques and speciality stores, this is a tough ask and potentially very costly. The failure to capture the target market would mean that the business is unable to finance its year two operations, besides defaulting on the interest rates payments, which will could bring the operations down. To mitigate this risk, a considerable amount of resources would allocated to advertising and branding during the initial years of operations to ensure that the boutique can attract and retain an acceptable number of customers.
Other potential risks include unexpected rise in costs, including possible rise in inflation since the Swiss inflation rate is considerably at the moment
Dolce & Gabbana, 2015. Online Store. [Online] Available at: http://store.dolcegabbana.com/ch?_ga=1.239455811.1924278846.1426635044[Accessed 18 Mar 2015].
Euromonitor International, 2014. Luxury Goods in Switzerland, London: Euromonitor International.
Kotler, P. & Keller, K. L., 2012. Marketing management. Upper Saddle River, N.J: Prentice.
Rugman, A. M. & Collinson, S., 2012. International Business (6th Ed). London: Pearson Education.
World Bank, 2015. Switzerland. [Online] Available at: http://www.worldbank.org/en/country/switzerland[Accessed 11 Mar 2015].
Yip, G. & Hult, T., 2012. Total Global Strategy. New York: Pearson Education..