Regali Luxuri

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Gift Shop Business Plan

Market Analysis Summary

Many skeptics wouldn't think in these economic times that a small business would be capable of successfully launching their business. However, the following research findings will prove that small businesses in the gift industry have a distinct advantage. While the U.S. economy has been in a recession since 2000, consumers have continuously been focused on enhancing their homes with the purchase of home accent pieces. Total sales in the gift and decorative accessories industry for 2002 were $54.3 billion, resulting in just a drop of 1 % from $54.6 billion in 2001.

"When it comes to dealing with change, small firms are at a distinct advantage. Not having the large corporate hierarchy, they can be flexible, react quickly, and readily respond. When you make a change in a big company, it's like turning an aircraft carrier. In a small company, you're turning a jet ski."
--Source: The Kenmarc Company, Common Sense Management, Thriving in a Recession 2002

"Although cost cutting is inevitable, marketing and product promotion are absolutely essential. The question is, How can you effectively promote your products on a smaller budget?"

"The answer is the Internet. It is an extremely powerful, yet cost-effective, communication tool that effectively utilized can stimulate significant sales growth, even in a recession."
--Source: The Kenmarc Company, Common Sense Management, Thriving in a Recession 2002

4.1 Market Segmentation

Regali Luxuri target markets will consist of the following groups:

BABY BOOM GENERATION (age 35-59) is married with children; college educated; homeowner; tend to stay in their home rather than multi-family properties; household income $50,000-$75,000; and seeks spacious living.

AFFLUENT (age 30-45) are married; college educated; household income $100,000+; growing at a much faster rate than the total number of U.S. households; and currently represents more women and minorities than ever before.

GENERATION X (age 24-37) well educated; married and raising children; buying our first homes; climbing up the corporate or entrepreneurial ladder.

GENERATION Y (age 10-24, born 1977-1995) is more ethnically diverse and is experiencing tremendous growth in spending power. "They will have careers and enough disposable income to afford luxuries for themselves and our homes."
--Source: Home Accents report 2002, The Consumer Counts: Generation Y.

Market Segmentation Demographics

Regali Luxuri's retail boutique is located in the community of Treschicburg. It encompasses a wide area of 28.7 square miles and experienced a population growth rate of 6.0% through 2005. The following demographic information will concentrate primarily within a five mile radius of our retail location.

The population (age 0-59) contained within a 5 mile radius of Regali Luxuri target market segments totals 214,675 in 2000.

Women are the primary consumers of Regali Luxuri products representing 60%. The growth rate of 6.0% is expencted to continue.

By market segments, Regali Luxuri's customer base is represented by the following:

  • 33% Baby Boomers
  • 26% Affluent
  • 24% Generation X
  • 17% Generation Y

By race, Regali Luxuri's market segments is represented by the following:

  • 45% White
  • 30% African American
  • 10% Hispanic
  • 5% Asian
  • 10% Other

The total number of households from 2000 through 2005 was projected to increase at a 7.5% growth rate for our area.

--Source: CACI Marketing Systems for 2000 Information Systems, Ourstate University

Who is Regali Luxuri's customer?

  • Primarily Female
  • Educated
  • Homeowner
  • Middle-to-upper class
  • 25-59 years of age
  • Favorites splurges are traveling and redecorating
  • Enjoys spending time with family and friends
  • Finds "word-of-mouth" and referrals from friends and colleagues extremely significant when making decisions
  • Influenced by a brand and reputation of the product and its seller
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Baby Boomers 3% 70,842 73,180 75,595 78,090 80,667 3.30%
Affluent 3% 55,816 57,267 58,756 60,284 61,851 2.60%
Generation X 2% 51,522 52,759 54,025 55,322 56,650 2.40%
Generation Y 2% 36,495 37,115 37,746 38,388 39,041 1.70%
Total 2.63% 214,675 220,321 226,122 232,084 238,209 2.63%

4.2 Service Business Analysis

The "Gift Industry" is primarily engaged in the retail sale of combined lines of gifts and novelty merchandise, souvenirs, greeting cards, holiday decorations, and miscellaneous small arts goods. These establishments are characterized by small, single unit specialty shops, each retailing a narrow line of full-priced, high-quality merchandise. The gift industry's five product categories along with its total sales and market share are represented by the following:

Product Category

Total Sales (billions)

Market Share

1. Home Decorative Accents

$16.89

31.0%

2. Stationery & Paper Products

$14.07

26.0%

3. General Gifts

$13.51

25.0%

4. Collectibles

$6.40

12.0%

5. Seasonal Decorations

$3.66

7.0%


--Source: 2004 Market Share Reporter (Research Alert, Dec. 6, 2002, p.5 from Unity Marketing)

The market for gifts and decorations hit $54.6 billion in 2001, only a 1% drop of $55.2 billion for 2000. In the Home Decorative Accents segment, Candles commanded the largest sales of $2 billion, while Baby and Children gifts were the top sellers in the General Gifts category with $1.8 billion.

Snap Shots of the Industry

"While the traditional furniture industry is struggling with the new fashion focus in home, the gifts industry is benefiting greatly from this trend. In the past two years, consumers spent more money on home furnishings than on clothes."

"With this new emphasis on home decorating, consumers are not just striving to make our homes more 'beautiful,' rather they are seeking decorative items that can positively impact the mood and emotional climate of our home."

"Products which have a personal, emotional link to the consumer, such as collectibles or gifts based upon licensed properties or which appeal to multiple senses, including sight, sound, scent, are in demand as consumers seek to make our homes more comfortable and comforting."

"The future of the gifts and home accents market is positive for the next several years. A significant consumer trend that will play out in the gifts and home decorative market, as well as many other consumer product categories, will be a reaction against our increasingly technology-driven culture."

"As our lives become more 'virtual' and dependent upon computers and technology, consumers will seek out gifts and decorative accents which will help ground them in the 'real' world."
--Source: Unity Marketing, The Gifts and Decorative Accents Report 2002: The Market, The Competitors, The Trends

4.2.1 Competition and Buying Patterns

Main Competitors

Specialty gift retailers have the ability to distinguish themselves merely by the types of products and/or services that they offer and Regali Luxuri is no exception. We have identified and conducted an in-depth analysis of three of our competitors located within a 5 mile radius. To aide in a more effective analysis, one of the owners visited all three retail stores to observe pricing structures, company image, traffic-flow, location and range of service. The analysis proved to be valuable to Regali Luxuri in identifying our competitive edge, areas of uniqueness, and marketing "niche."

BELLA AZUL
Bella Azul is an ultra chic, cutting-edge, funky fashion and lifestyle boutique that recently opened its doors in February 2003. A large percentage of their merchandise is designer fashion followed by a distinctive but narrow line of home accessories, candles, bath/body accents and jewelry. They have a personal shopping staff available to repeat customers who are interested in this service. Their target market is primarily affluent women and prices range from $20 - $1600. While walking through the store, customers become captivated by the lofty space, eclectic ambiance and hand-painted floors. Since Bella Azul is located just blocks away from Regali Luxuri, they too are experiencing slow traffic-flow due to the developing residential/commercial area. The boutique occasionally hosts special events like Wine Tasting and Fashion Shows. Hours of operation are Tuesday through Friday 11 a.m. — 7 p.m., Saturday 10 a.m. — 6 p.m. and Sunday/Monday by appointment only. Their first-year estimated annual sales were approximately $200,000.

SWOOZIES
Swoozies is a more established gift shop located in the metro Treschicburg area with four retail locations. The shop closest to Regali Luxuri is located in a shopping center so there is a substantial amount of traffic-flow. The two owners of this establishment have at least 25 years of retail experience between them. They too target affluent women with an eclectic wide range of products and services. Products range from dinnerware, picture frames and journals to doll collections, pet products and custom printing. The store environment is very festive, engaging, bright and celebratory which have been effective in establishing the store's name and image. The products are creatively displayed and showcased throughout the store to distinguish who the gifts are for, e.g. "a girl" section and "a boy" section. Swoozies is looking to expand nationally to the southeast cities like Raleigh, Huntsville, and Memphis. Their estimated annual sales for 2003 were $8 million. Hours of operation are Monday through Friday 10 a.m. — 7 p.m., Saturday 10 a.m. — 6 a.m. and Sunday 12 p.m. — 6 p.m.

BROOKSTONE, INC.
And lastly Brookstone, Inc., the most recognized company of the three local competitors is a nationwide specialty retailer whose strategy is to develop unique, proprietary branded products. Their merchandise is offered to customers through several distribution channels including 240 retail stores, catalogs and the Internet. Brookstone's closest retail store is located in the very popular and frequented Rhomboid Square mall. Customers are encouraged to try out products for true, hands-on shopping. Their product range is vast in comparison to the other competitors. Their "brand identity" is well established and customers identify their products as personifying exceptional quality and high-value. There is of course a "corporate gifts program" available where personalized services like silk-screening, engraving, stitching or embossing are offered. Brookstone products range from $5 - $3,000 and estimated annual sales were over $325 million. Their target market is women who purchase for their husbands, fiances, boyfriends, etc.