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Interior Views is a retail store heading into its third year of operation. The store has been well received, and marketing is now critical to its continued success and future profitability. The store offers the most extensive selection of in-stock decorator fabrics as well as a resource for special ordered fabrics. The basic market need is to offer a good selection of decorator fabrics at reasonable prices, for the "do-it-yourself" and the "buy-it-yourself" customers, through a personalized retail store that offers excellent service, design assistance, and inspiration for people to redecorate their homes.

Market Summary

We possess good information about our market and know a great deal about the common attributes of our most prized and loyal customers. We will leverage this information to better understand who we serve, their specific needs, and how we can better communicate with them.

Market Demographics

The profile of the Interior Views customer consists of the following geographic, demographic, psychographic, and behavior factors:

Geographics

  • Our immediate geographic market is the Boise area, with a population of 168,300.
  • A 50-mile geographic area is in need of our products and services.
  • The total targeted area population is estimated at 568,800.

Demographics

  • Female.
  • Married.
  • Have children, but not necessarily at home.
  • Have attended college.
  • A combined annual income in excess of $50,000.
  • Age range of 35 to 55 years, with a median age of 42.
  • Owns their home, townhouse and/or condominium valued at over $125,000.
  • If they work out of the home, it's by choice in a professional/business setting.
  • Belong to one or more business, social and/or athletic organizations, which may include:
    • Downtown Athletic Club.
    • Boise Country Club.
    • Junior League of Boise.
    • American Business Women's Association.

We know the following regarding the profile of the typical resident of Boise:

  • 67% have lived in Boise for 7 years or more.
  • 23% are between the ages of 35 and 44.
  • 40% have completed some college.
  • 24% are managers, professionals and/or owners of a business.
  • 53% are married.
  • 65% have no children living at home.
  • 56% own their residence.

Psychographics:

  • The appearance of her home is a priority.
  • Entertaining and showing her home is important.
  • She perceives herself as creative, tasteful and able, but seeks validation and support regarding her decorating ideas and choices.
  • She reads one or more of the following magazines:
    • Martha Stewart Living.
    • Country Living.
    • Home.
    • House Beautiful.
    • Country Home.
    • Metropolitan Home.
    • Traditional Homes.
    • Victoria.
    • Architectural Digest.
    • Elle Decor.

Behaviors

  • She takes pride in having an active role in decorating their home.
  • Her home is a form of communicating "who she is" to others.
  • Comparisons within social groups are made on an ongoing basis, but rarely discussed.

Market Analysis

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Market Analysis
  20012002200320042005 
Potential CustomersGrowth     CAGR
Country Club Women25%73,50091,875114,844143,555179,44425.00%
Boomers in Transition20%28,50034,20041,04049,24859,09820.00%
Professional Youngsters18%23,00027,14032,02537,79044,59218.00%
Total22.68%125,000153,215187,909230,593283,13422.68%

Market Needs

Interior Views is providing its customers the opportunity to create a home environment to express who they are. They have the choice to select their fabric and go whatever direction they choose -- to fabric it themselves or have it done for them. They have the opportunity to actively participate in the design, look, and feel of their home. They desire their home to be personal, unique, and tasteful as well as communicate a message about what is important to them. We seek to fulfill the following benefits that we know are important to our customers.

  • Selection - A wide choice of current and tasteful decorator fabrics.
  • Accessibility - The buyer can walk out of the store with the fabric they need to begin their project.
  • Customer Design Services - Employees have a design background to make them a resource for the customer. This enables customers to benefit from suggestions regarding the selection of their fabric and related products in a manner to complement their design choice.
  • Competitive Pricing - All products will be competitively priced in comparison to stores in the Portland, Oregon market (best price comparison) and other channels of distribution, such as catalog sales.

The home textile market, considered to include sheets, towels, draperies, carpets, blankets, and upholstery, accounts for 37% of all textile output. The trade publication "Home Textiles Today" estimates the size of the U.S. home textiles market at the wholesale level, excluding carpets, to be between $6.5 billion to $7 billion annually. The industry is expected to realize a steady increase over the next few years.

The industry is driven by the number of "household formations" which is expected to continue through the first years of the new millennium. This is primarily due to the solid growth in the number of single-parent and non-family households. This growth also comes from baby boomers needing bigger houses to accommodate growing and extended families and, as people get older, they are buying homes rather than renting to realize tax and equity building benefits. Favorable mortgage rates will also enable others to invest in their existing home.

The "do-it-yourself" (DIY) market continues to grow and closely parallels the professional home-improvement market. DIY market growth is attributed to an increased presence of products, the personal satisfaction experienced, and the cost savings customers realize. A portion of the do-it-yourself market is the "buy-it-yourself" (BIY) market. Consumers are buying the product and arranging for someone else to do the fabrication and/or installation. This is more expensive then the do-it-yourself approach, but less costly than buying finished products from other sources. It also provides similar feelings of creativity, pride, and individuality associated with direct creative involvement. This sense of "participation" in home decorating is an important factor for many of these committed customers.

Market Growth

The publication, American Demographics, projects the number of U.S. households will grow by 16% between 1995 and the year 2010, an increase from 98.5 million to 115 million. Of the households comprised of people from 35 to 44 years old, almost half are married couples with children under the age of 18. Based on research by American Demographics, households in the 45 to 65 age range should grow to 34 million by the year 2000. These households will increase another 32 percent to 45 million in 2010 as baby boomers add to this peak-earning and spending age group. With approximately 46.2% of the nation's 93.3 million dwellings built before 1960, many of these homeowners are also expected to update. These factors contribute to an increased need for home decorator fabrics for window treatment, upholstering, pillows, bedding, and other fabric accessory needs. This demand is expected to be complemented by the growth in the Boise market. The majority of homeowners spend a large percentage of their disposable income on home goods within two years after buying a new house. Therefore, positive trends in new housing activity represents growth and opportunity for home textiles.

One important factor is that married couples in the 35 to 65 age range represent a growth segment and enjoy larger incomes than other family structures. They enjoy the choice to spend their disposable income on life's amenities. They may demonstrate "cocooning" by making their home a more comfortable and attractive haven. They choose to spend resources here rather than on vacations and other discretionary options. This group represents a larger sub-segment of the target market.

SWOT Analysis

The following SWOT analysis captures the key strengths and weaknesses within the company, and describes the opportunities and threats facing Interior Views.

Strengths

  • Strong relationships with suppliers that offer credit arrangements, flexibility, and response to special product requirements.
  • Excellent and stable staff, offering personalized customer service.
  • Great retail space that offers flexibility with a positive and attractive atmosphere.
  • Strong merchandising and product presentation.
  • Good referral relationships with complementary vendors, local realtors, and some designers.
  • In-store complementary products through "The Window Seat" and "Antique Bureau" add interest, stability and revenue.
  • High customer loyalty among repeat and high-dollar purchase customers.

Weaknesses

  • Access to capital.
  • Cash flow continues to be unpredictable.
  • Owners are still climbing the "retail experience curve."
  • Location is not in a heavily traveled, traditional retail area.
  • Challenges of the seasonality of the business.

Opportunities

  • Growing market with a significant percentage of our target market still not knowing we exist.
  • Continuing opportunity through strategic alliances for referrals and marketing activities.
  • Benefiting from high levels of new home construction.
  • Changes in design trends can initiate updating and therefore sales.
  • Increasing sales opportunities beyond our "100-mile" target area.
  • Internet potential for selling products to other markets.

Threats

  • Competition from a national store; or a store with greater financing or product resources could enter the market.
  • Catalog resources, including Calico Corners and Pottery Barn, are aggressively priced with comparable products.
  • Continued price pressure, reducing contribution margins.
  • Dramatic changes in design, including fabric colors and styles, creates obsolete or less profitable inventory.

Competition

Competition in the area of decorator fabric comes from three general categories, traditional fabric retail stores, catalog sales, and discounters.

Retail Stores

Current local competition includes the following:

  • House of Fabrics -- Nationwide recognition and buying power of numerous types of dated fabric with strong product availability. This store has experienced financial difficulty in recent years and has closed several locations throughout the country.
  • Warehouse Fabrics -- Locally owned, offering low-cost products with a wide selection of discontinued fabrics and only a limited number of "current" fabrics. This warehouse concept offers marginal customer service with what many "upper end" customers consider to be an "undesirable" shopping environment.
  • JoAnn's -- Nationwide chain with strong buying power. They have a broad fabric selection for clothing with a limited number of in-store decorator fabrics available. Their primary target markets are the clothing seamstress, with an increasing emphasis on craft items.
  • Interior Designers -- There are 37 interior designers listed in the Boise Yellow Pages (Year 2000-2001 issue) that offer fabric as a part of their services. Interior designers make profit off mark up of fabric in addition to their hourly services charges. Their costs per yard are typically higher since they do not benefit from retail or volume discounts. Therefore, their costs to their customer is often two to four times higher than the price per yard from Interior Views.
  • Website Providers -- Fabric sales over the Web are limited at this time, and this will be a source of competition for the future to watch. Currently, there is no measurable impact on our market through competitive websites.

Catalog Competitors

An increasing level of competition is anticipated from catalog sales. Recent trends, such as those demonstrated in the well established but evolving catalog Pottery Barn, indicates increased interest in offering decorator fabric, window designs, and other home decorating products through this increasingly popular channel of distribution. Catalog sources do not offer customers the option to see, touch, and have the fabric in their homes. Price is the most significant competitive factor this product source presents. The most aggressive catalog competitor is Calico Corners followed by Pottery Barn and other home-accessory-based providers.

Discounters

Channels of distribution continue to shift in favor of discounters, who account for a significant portion of the growth in the industry. As consumers experience lower levels of disposable income, discounters leverage frequent store promotions to entice frugal, value-oriented consumers. One of the biggest criticism of discounters is their failure to offer a quality service experience and their failure to present inviting displays to promote sales. These discounters, along with specialty store chains, present one of the most severe competitive threats for individually-owned specialty stores. This is partially due to extensive promotional efforts, price advantages, and established relationships with their vendors. One example of these discounters is the "home improvement" chains, such as Home Base. This aggressive retailer has adopted a strategy to include complete decorator departments in their metropolitan stores. Currently existing in the Los Angeles market, this strategy is anticipated to be introduced into the Seattle area and other select metropolitan markets within the year. Although the Boise Home Base store sells basic curtain rod hardware and other hard cover window treatment, there are no known plans at this time for the Boise Home Base store to implement this in the foreseeable future. This will be an important issue to monitor for competitive purposes.

Growth and Share Analysis

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Growth and Share
    
CompetitorPriceGrowth RateMarket Share
House of Fabrics$805%18%
Warehouse Fabrics$758%23%
JoAnn's Fabrics$806%16%
Interior Designers - Combined$20512%25%
Interior Views$13525%29%
Other$00%0%
    
Average$95.839.33%18.50%
Total$575.0056.00%111.00%

Product Offering

Our primary points of differentiation offer these qualities:

  • The most extensive access to in-stock, first quality decorator fabrics within 100 miles of our primary geographic market and offered at affordable prices.
  • The largest selection of special-order fabrics, with arrangements to have most of those products shipped to the store within 10 days of placing the order.
  • Personal assistance from a design-oriented staff that is qualified and capable of meeting the needs of discerning customers with high expectations.
  • Complementary product offering, including hard-covering window treatment, hardware, home accessories, made-to-order upholstered furniture, and antiques that are designed, selected, and displayed in a way to emphasize the use of fabric in home design.

Interior Views will qualify for the most attractive retail discount through these suppliers, offering greater profit margins and more competitive pricing for bolt purchases in quantities of 50 to 60 yards, or in half of that yardage with a "cutting fee" that increases cost per yard by an average of 50 cents. The primary product lines will include fabrics from the following textile sources:

  • Robert Allen Fabrics
  • Fabricut
  • Waverly Fabrics
  • Spectrum
  • Art Mark
  • Covington
  • P/Kaufmann

Complementary accessories, including fabric trims, drapery hardware, and hard-covering window treatments, are supplied from the following sources:

  • Hunter Douglas -- Hard-window coverings.
  • Kirsh -- Rods and selected window hardware and accessories.
  • Conso -- Trims and Fabric Accessories.
  • Petersen-Arne -- Trims and Accessories.
  • Graber -- Selected window hardware.
  • Grumman -- Threads.

Keys to Success

  • Maintain gross margins in excess of 45%.
  • Retain customers to generate repeat purchases and referrals.
  • Generate average sales in excess of $1,000 per business day.

Critical Issues

Interior Views is still in the "speculative" stage as a retail store. Its critical issues are:

  • Relatively slow annual sales growth. With admirable results through the first 30 months of operation, the market continues to hold promise, but, as learned through the first two years of operation, it is still smaller that what it should be to support a store of this kind.
  • Continue to take a fiscally-conservative approach; downscale when necessary and modify our business model based on market response.

Historical Results

The following categorizes our marketing activities as "Do It Again" and "Did Not Work." This was determined on the return on investment (ROI) based on trackable sales that resulted from these marketing efforts.

Do It Again

  • Quarterly Newsletter containing three elements, currently to a mailing list of 4,300;
    1. Classes; paid and sponsored.
    2. Sales; eight days in duration.
    3. Events; open house, demonstration, or charity fund raiser.
  • Newspaper ad in the Boise Herald for sales activities.
  • Television advertising-30 second commercials;
    1. Local broadcast of "Martha Stewart."
    2. Local broadcast of "Interior Motives."

Did Not Work

  • Advertising and sponsorship of local ballet and opera performance programs.
  • Advertising in Junior League Newsletter.
  • Advertising in the Athletic Club Newsletter.
  • Local television advertising on talk show formats, news shows, and general audience programs.
  • Hotel "In-room" book advertisements.

Therefore, the three-step quarterly newsletter combined with advertising on "Martha Stewart" and "Interior Motives" with ads in the Boise Herald to promote specific sales events has proven to be the best marketing combination.

Historical Data

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Historical Data
     
Variable 199819992000
Industry Revenue $1,305,000$1,650,000$2,062,500
Company Market Share 11%12%13%
Company Revenue $143,550$198,000$257,813
Industry Variable Costs $717,750$750,000$1,179,750
Company Variable Costs $78,953$90,000$147,505
Industry Gross Contribution Margin  $587,250$900,000$882,750
Company Gross Contribution Margin $64,598$108,000$110,308
Marketing Expenses $1,150$12,560$15,920
Company Net Contribution Margin $63,448$95,440$94,388

Macroenvironment

The following trends and issues impact the success of Interior Views.

  • National economic health -- The store does better when the country experiences "good times" regardless of its direct impact on the local economy. Sales decrease when the stock market falls and when NATO takes military action. An upbeat State of the Union address by the President correlates with an increase in sales.
  • New home construction activity -- More closely related to what is taking place in our local economy, new home construction has a significant impact on sales across all product lines.
  • Shifts in design trends -- Major changes in design trends increase sales. The Boise market lags behind metropolitan design trends by 6 to 12 months. This offers a buying advantage for the store, offering a preview of what is coming and how we should adjust our in-stock inventory.

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