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The Bend/Redmond area is growing faster than any other Oregon metropolitan area. This growth is fueled by the purchase of 2nd homes, from home-buyers nationwide and retirees, or those searching for an idyllic America. In addition, many people in Western Oregon make the two to three-hour drive from Portland, Oregon's largest city, or Eugene, site of the University and Oregon's and the state's second largest city, to escape the Spring, Fall, and Winter cloud cover and rainfall. We count all tourists and locals as potential customers, since we offer coffee and ice cream, as well as climbing gear and events.

Many locals in Redmond believe that growth, for the sake of growth, is a political disease. They are right. We must make sure our physical and sociological impact is kept to a minimum, and that locals maintain the quality way of life they deserve.

Our local competition is not as fierce as our direct mail and Web competition. They currently do very little marketing and very few company-sponsored events. We won't rule out the possibility that they may do so in the future as a response to our projected success in such marketing. The competition for coffee is an issue, yet we aren't directly competing with the downtown Starbucks(tm), since we don't cater to the urbane culture, but rather the natural explorers, those who would rather go to a state park than city shops.

Market Summary

In a 1997 state-generated report, consumer expenditures for espresso beverages and rock climbing equipment combined rose to $4,000,000 in Central Oregon. We expect sales to increase steadily as Oregon's population grows and the rock climbing industry becomes increasingly popular.

The proximity of several large cities in Western Oregon helps fuel our business, as does the status of Smith Rock as an international destination for rock climbing enthusiasts. Individuals from as far away as Japan, Europe, South America, and Australia travel to Smith Rock to 'recreate'.

  • Direct Mail and Web Market

Our direct sales are fueled by our current list of customers and Web co-marketing. To date, we have allocated minimal funds to marketing over the Web. We have relied on word of mouth, free banner exchange programs, our printed catalogs, and Web reviews to drive revenues to the site. We count worldwide readers of such publications as Rock & Ice magazine and Outdoor Adventure among our target direct audience.

  • Retail Market

Our three main target markets are weekend warriors, hard core climbers, and the curious. We predict that the number of hard core climbers will grow faster than the number of weekend warriors. Climbing is becoming more and more technical, an "insider's sport", and we believe this will fuel the growth of dedicated, highly sophisticated climbers. At the same time, amateur growth is leveling off.

This market analysis is conservative when compared with Oregon's predicted population growth of 2% per year and Bend's 5% average gains over the last five years.

Market Demographics

Direct Mail and Web Market

Geography:   80% U.S. customers. 
15% European customers. 
5% Other countries
Age: 18-34
Sex: 75% male
25% female

Retail Market

Geography: 90% U.S. customers
9% European customers
1% Other countries
Age: 15-45
Sex: 62% male
28% female

Males buy gear through catalogs and the Web more often than women. This skews the direct sales toward male customers. In-store customers tend to be younger than catalog shoppers, and a larger % of them are locals or native to the United States.

Market Analysis

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Market Analysis
  20012002200320042005 
Potential CustomersGrowth     CAGR
Weekend warriors25%40,00050,00062,50078,12597,65625.00%
The curious25%30,00037,50046,87558,59473,24325.00%
Hardcore climbers30%15,00019,50025,35032,95542,84230.00%
Total25.93%85,000107,000134,725169,674213,74125.93%

Market Needs

There are two important underlying needs, and the combination of gear and coffee serves both. The Boulder Stop's function is similar to that of the ski lodge at the bottom of the slopes; selling important gear while providing a place for snacks, beverages, and talk. We're the rock climber's version of the ski lodge.

  1. There is a real need for a highly professional provider of climbing gear near the Smith Rock location. People forget to pack exactly what they need, and things break.
  2. There is a practical need for coffee, a meeting place, and conversation. This is part of the activity focus of the location.
  3. There is a need for 'one-stop' shopping. Climbers, and recreationalists don't want to have to buy their gear at one store, and drive miles to enjoy good coffee and conversation at another. The Boulder Stop fulfills this need.

Trends are in our favor. We have three major trends that help us:

  • The sport of rock climbing is enjoying growth. The success of rock climbing gyms in the Silicon Valley, Seattle, Eugene, and other locations offer clear evidence of this growth.
  • Central Oregon is booming as a vacation destination and recreation spot. Oregon in general is enjoying the growth of interest from Californians, Washingtonians, and former urban dwellers searching for small, friendly communities.
  • Gourmet coffee demand is very strong throughout the Northwest. Growing numbers look to their expensive espresso drink as a way to enjoy a moment, and as a natural part of an outing or activity.

Market Growth

  • According to [the latest available studies], spending on vacations in Oregon will grow at better than 25% per year.
  • Spending on climbing has grown faster than skiing or mountain biking, although from a much smaller base, according to [the latest available studies]. They estimate 30% growth in climbing-related sales for the next three years.
  • Spending on coffee is up 15% this year, according to the [omitted] annual report. We expect coffee and espresso beverage sales to level out in 1999-2000.

SWOT Analysis

The Boulder Stop recognizes the following strengths, weaknesses, opportunities, and threats (SWOT):

Strengths:

  • Community commitment
  • Experience in the sport of rock climbing.
  • Nationwide marketing experience.

Weaknesses:

  • Limited cash.
  • Limited experience dealing with contractors/builders.
  • Little experience with local politics.

Opportunities:

  • No well-focused, well-marketed competition.
  • The cost of Internet and other direct marketing opportunities have decreased in recent years.
  • Climbers and hikers are not as price-sensitive as other outdoor enthusiasts.

Threats:

  • Locals are very sensitive to land use.
  • La Nina weather.

Strengths

Our most significant strength lies in our management team's skills in both rock climbing and running a small business. After years of working the pro circuit, Bill Walsh has gained insight into the history, ethics, and progressive nature of traditional wall and sport climbing. Pan Silverton has worked a number of years with small business clients looking for direction and strategic cohesion. His insight has led to multi-million dollar finance deals that helped put some $100K-500K a year businesses on the map. The combination of experience and proven business acumen represent a strength for The Boulder Stop.

With a nationwide direct marketing business that includes Internet and catalog sales of more than $50,000 per year, The Boulder Stop is in a natural position to expand into retail. Gateway Computer started as a small start-up direct assembly business in North Dakota and is now opening "Gateway Country" stores across America. Although The Boulder Stop is taking a more conservative approach, the company also enjoys strong brand recognition. The natural 'next-step' is to expand into retail, into Redmond, OR.

During it's 10 years of operation in Eugene, The Boulder Stop has contributed over $13,000 toward community events and involvement. We have hosted "Boulder Green" for three years. A state wide bowling tournament, "Boulder Green" is about giving bowling balls and free bowling passes to the less fortunate in our community. We view this as one more win in the fight against badminton We are comfortable that our community involvement will only strengthen our business in Redmond, as it has in Eugene.

Weaknesses

The Boulder Stop has access to a limited amount of cash. Initial financing will not be difficult due to solid credit and the low inventory depreciation rate, but ongoing financing will be more difficult to obtain. It's not the receivable days that will wreak havoc on the cash plan, since sales are 100% cash, it is the operating and marketing expenses.

Nobody at the Boulder Stop has experience in negotiating with contractors. This is a liability due to the difficulty in managing and maintaining the timeliness and budget for a contractor. We will compensate for this weakness by retaining an expert contractual lawyer, Frank Nussheim, to negotiate our side of the construction contract. Our lawyer will handle all building commitments and authorize the disbursement of funds for such activities.

Although management at The Boulder Stop understands many of the concerns of local citizens in Redmond, we have few opportunities to express our vision through a useful venue. Eastern Oregon can be very 'status quo' and any new player threatens the old order and puts the locals on the defensive. Instead of proclaiming our innocence and placing the blame on a few radicals, we will pull the community together through free barbecues that include children's' games such as gunny sack races. We're also sponsoring the "Run For Their Lives" event which will raise money for children from broken and violent homes, donating medical care and clothing.

Opportunities

The market for rock climbing and hiking gear, good coffee, and ice cream in Redmond is far below saturation level. Our two local competitors do very little in the way of marketing, be it advertising or community involvement PR. This gives us the opportunity to develop the market and brand ourselves as the market 'original'.

The cost of selling via e-commerce and through mail-order has decreased tremendously in recent years. Internet domain names (www.yourname.com) cost $35 a year, and e-commerce servers may be set up for only $30 a month. Certain high-circulation catalogs will develop custom catalogs for vendors and mail them for a fixed fee. This is incredibly cost effective for companies that don't have costly relationships with printers, graphic artists, and the like. Both direct mail and Internet sales are a growing segment of our business.

Weekend warriors and hard core climbers will pay anything to get into the latest gear. The average climber carries around $1,200 of equipment. Since climbers place their lives on the line when they use their equipment, the majority of them buy only name brand gear at a price premium. Climbers associate high price with premium quality. Hikers are similar, but to a lesser degree. Hikers look for gear that looks great and feels comfortable. Our typical curious customer is lodging in Sunriver (20 miles), hiking at Smith Rock, Newberry Crater, and lakeside trails in the mountains. They own a new VW, SUV, or 4WD station wagon, are married, have a stable job, and are responsibly putting enough in savings to retire early. In other words, they don't care what they pay for hiking gear, as long as it's not insulting. We categorize insulting as 110% or more above REI (Recreational Equipment Incorporated) prices.

Rock climbing service companies offer us a unique opportunity. We can team up with these services to promote our events and store, and in return we will give them 'shelf-space'. This gives service companies cost-effective market exposure. We will partner with companies such as First Ascent LLC and other American Mountain Guides Association (AMGA) accreditees.

Threats

Locals are sensitive to the manner in which we develop our land for commercial use. The land is state owned. Oregon will lease one, 1/4 acre parcel to The Boulder Stop. Since it is public land, the public can revoke our lease without offering just cause.

The last three years have been 'La Nina' years, pummeling Oregon with rain and cold weather. Last year, the rock climbing season began in May. When the season begins as late as May, it means we have two to three fewer months of revenue with which to pay for our leased land and equipment (fixed costs). Although we can hope for an Indian summer, this doesn't happen very often in Oregon. By early October, the vacation season is over, kids are back in school, and there are few people around to buy our coffee, gear, etc.

Competition

Direct Mail and Web Sales:

  • REI (REI.com) and L.L. Bean (L.L. Bean.com) sell climbing gear to our target market. They are large corporate entities, each with powerful online and retail presence. Fortunately, they have not opened any retail stores in the Bend/Redmond area, so we count them solely as direct mail and Web competitors. We hope to achieve .5-1% of their gross yearly direct sales.

Retail Sales:

  • [UnNamed#1] will be our toughest competitor, for they have already established themselves in the rock climbing community. They have a very experienced and knowledgeable staff of expert climbers, and they are located on the highway that leads directly to Smith Rock. They carry 75-80% of the same gear that we sell.
  • [UnNamed#2] sells limited gear (clothes), they do not promote, and they do not market their products extensively. On the other hand, they sell ice cream and carry more GenX apparel than The Boulder Stop. Their biggest weakness is small store size.

Growth and Share Analysis

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Growth and Share
    
CompetitorPriceGrowth RateMarket Share
UnNamed#1$5010%45%
UnNamed#2$353%15%
REI$30015%35%
Other$00%0%
Competitor$00%0%
Other$00%0%
    
Average$64.174.67%15.83%
Total$385.0028.00%95.00%

Product Offering

Espresso is the big money maker for The Boulder Stop, with coffee peripherals coming in a close second. Straight espresso bean re buys arrive on Mondays and Thursdays, ensuring the freshest beans possible. Modified re buys begin on the first of each month. Bill Walsh will oversee all purchases, shipments, and deliveries.

The Boulder Stop sells high-quality rock climbing gear to serious climbers. Rock climbing gear is a long-term sales project that will rely on future catalog and "word-of-mouth" sales. The gear is checked by knowledgeable employees who use and recommend equipment to customers and management. The gear is purchased from well-known manufacturers like Metolius Mountain Products, Black Diamond, Boreal, and Petzl. Management will rely on employees and customers to shorten the feedback loop in product and service offerings. Climbing gear is delivered every Thursday via UPS.

Keys to Success

To succeed in this business we must:

  • Sell products that are of the highest reliability and quality. We must offer as many or more high-end products than REI offers online and through their Eugene and Portland stores. This means we must carry all high-end brands of harnesses, active protection, passive protection, helmets, ice climbing gear, camping gear and mountaineering gear.
  • We will offer loss leaders and other promotions that bring customers into the store, to buy goods and to generate awareness of promotional events.
  • Provide for the satisfaction of 100% of our customers. Our customers are very valuable to us, and we will design a customer care plan to manage complaints, implement employee and customer feedback, manage supplier accounts, and predict future conflicts.
  • To partner with the appropriate service companies in order to supply our customers with all the climbing products and services they need.
  • Establish long-term relationships with great distributors such as Trago, Petzl, Black Diamond, Beal, Metolius Mountain Products, and others.

Critical Issues

As we expand into retail, our success will depend on whether we will be able to maintain our existing direct business. The retail model offers a more mature market than the direct model and exposes us to fewer outside threats. In our direct business sales, we compete against big players such as REI and LL Bean, among others. Our retail model competes against two small, under-marketed gear stores that don't offer great espresso or a convenient locale.

The integration of retail and direct sales strategies will help The Boulder Stop build business sales in both categories. It's critical that we view the 'big picture' when allocating resources to marketing tactics. For instance, we will both gain allies and increase sales by discounting Eastern Oregon vacations to our existing and potential direct customers. Our allies will offer co-marketing discounts, and we will use their venues to advertise our rock climbing classes, gear selection, and espresso beverages.

The most important issue is this: We must stay the course and build the business conservatively and spend accordingly. Projects must be kept on budget and on time, marketing programs must be cost efficient and backed by solid data gathering and a high potential for success, measured or otherwise.

Historical Results

Our marketing strategies have always revolved around direct Internet and mail sales. We have done little tele-sales, as that does not fit into our business practices model. To date, our direct sales model has been successful in (1) keeping costs down, (2) giving us great ROI, (3) building a business from nothing to $150,000 a year, and (4) restraining our growth to match our level of financing.

As we expand into a new market and grow with a new business model, we will need to put our direct mail sales experience to work. We will need to be just as aggressive about getting our message out to the locals. Our direct mail sales experience will help us determine which direct market tactics and programs work, and which ones don't. From flyers to magazine and newspaper ads, we will use our connections and resources gathered through national direct sales to focus our retail marketing on one region.

In addition, our Website and Website sales will be of much use to us. We will synch Website sales orders with in-house ordering systems, to ensure that customers may buy over the Web and pick up merchandise in the store if they wish, free of shipping charges. By adopting this marketing program, we will gain from historical experience, while adapting to our retail direct business model.

Things have changed tremendously in the direct catalog (mail) and especially the Internet sales category. Major players such as REI and L.L. Bean now rely on Web sales to boost catalog sales. Both companies put out the same number of catalogs, but use the Web for product real-time pricing, order tracking, and customer feedback. Since 1995, Web business has grown by 3,000%. Direct market growth, and our sales stability in the direct market, give us the power to leverage our direct sales to build non-Internet retail sales.

Historical Data

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Historical Data
     
Variable 199819992000
Industry Revenue $2,000,000$2,000,000$2,000,000
Company Market Share 2%4%8%
Company Revenue $40,000$80,000$150,000
Industry Variable Costs $6$6$6
Company Variable Costs $4$4$3
Industry Gross Contribution Margin  $1,999,994$1,999,994$1,999,995
Company Gross Contribution Margin $39,997$79,997$149,997
Marketing Expenses $1,000$1,200$2,000
Company Net Contribution Margin $38,997$78,797$147,997

Macroenvironment

Rock climbing

The rock climbing industry is growing faster than ever. Although the gear is expensive, people buy it because it provides them with long-term fun.

Coffee and Espresso

High profit margins on coffee sales and low overhead costs lead to high profit margins in the espresso industry. Expansion of coffee and espresso retail outlets has increased exponentially in the last five years as large companies such as Starbucks[tm] have increased their reach to the East Coast in cities such as Boston, New York, and Washington D.C.

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