Sports Equipment Cafe Business Plan

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Market Analysis Summary

Consumer expenditures for sport climbing equipment rose to $4,000,000 in Central Oregon in 1997. We expect sales to increase steadily as Oregon's population grows and the rock-climbing industry becomes increasingly popular.

The Western Oregon presence of several large universities helps fuel our business, as does the status of Smith Rock as an international destination spot for sport climbing enthusiasts. Individuals from as far away as Japan, Europe, South America, and Australia seek out Smith Rock as a beautiful and challenging sport and sport climbing destination. We count worldwide readers of such publications as Rock & Ice magazine and Outdoor Adventure among our target audience.

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.

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

4.1 Market Segmentation

  • The weekend warriors purchase during weekends. When these climbers are on a rock wall, they want to look COOL. They want to hang out at with their friends at Smith Rock and enjoy a nice pre-climb or post-climb espresso drink or ice cream cone. Weekend warriors pack special events with family members and friends. This market is our target for special events and climbing services such as tours and fun climbs.
  • Hard-core climbers are very fickle about the gear they use. This segment is very brand loyal and provides the company with powerful word-of-mouth marketing. They are highly sophisticated climbers who know the jargon and want to let everyone know they are serious about the sport and its image.
  • The Curious want to stop in for a gander on their way to their campsites or hotel rooms. They may be into hiking Smith Rock State Park, or just taking a driving tour, it doesn't matter. They may be travelers or locals, depending upon the season and the event.
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Weekend Warriors 2% 40,000 40,800 41,616 42,448 43,297 2.00%
Hard-core Climbers 2% 2,300 2,346 2,393 2,441 2,490 2.00%
The Curious 2% 30,000 30,600 31,212 31,836 32,473 2.00%
Total 2.00% 72,300 73,746 75,221 76,725 78,260 2.00%

4.2 Target Market Segment Strategy

We will focus on the highly discriminating Hard-core climber segment first, because these are the opinion leaders. Both the weekend warrior and The Curious will follow the Hard-core climbers. If we can attract and keep the Hard-core climbers, then they will attract others. To attract Hard-core climbers, we will carry all the best high-tech gear, know the jargon, use the latest technology, and become a "Futurist" product and services company.

We want to clearly differentiate the Weekend warriors from the Hard-core climbers. Less competitive, or at least at a different competitive level, these climbers are usually at Smith Rock to hike or explore. They respect the Hard-core climbers, but don't want to be classified as having "Rock on the brain." 20-30% of these climbers will respond to family events by bringing their families, the other 70-80% climb with friends and occasionally try to outdo each other. This market is highly susceptible to getting stuck in a coffee shop with friends, they will talk about their latest romance, conflicts with other friends, the future, or the fine espresso at The Boulder Stop. We will market the weekend warriors with a combination of amateur climbing events and family fun climbs.

Trends are in our favor. There are three major trends at work in our market:

  • Outdoor sports in general and rock climbing in particular are gaining exposure. The rock climbing gyms in the Silicon Valley, Seattle, Eugene, and other locations are clear evidence of this trend.
  • Central Oregon is becoming a major vacation destination and recreation spot.
  • The gourmet coffee trend started in the Northwest, and is spreading throughout the nation. A growing number of people look to their high-end coffee drinks as a way to enjoy a moment, and as an integral part of any outing or activity.

4.2.2 Market Growth

  • According to [the latest available studies], vacation spending in Oregon is growing more than 25 percent per year.
  • Over the last five years, spending on climbing has been grown faster than spending on skiing or mountain biking, although from a much smaller base. According to [omitted], the industry will experience 130 percent growth over the next three years.
  • Coffee spending is up 15 percent this year, according to the [omitted] annual report.

4.2.3 Market Needs

There are two important underlying needs, and the combination of gear and coffee serves both. In many ways the Boulder Stop mimics the positioning of a ski lodge; selling crucial gear while providing a place for coffee, snacks, and talk.

  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 also a practical need for coffee, a meeting place, and conversation. This is the activity focus of the location.

4.3 Industry Analysis

The rock-climbing industry is expanding faster than ever. Although climbing gear is priced at a premium, people buy it because it provides them with adventurous and, naturally, safer climbs.

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 [omitted] have increased their reach to the East Coast in cities such as Boston, New York, and Washington D.C.

4.3.1 Competition and Buying Patterns

Climbers demand knowledgeable employees in a convenient location.

  • Comparison: [Omitted] has placed its stores in urban industrial areas. [Omitted], a wholesaler, implements a similar strategy that draws the suburban dweller out of the house. This strategy keeps these customers isolated from the competition.
  • Products and services are the most important factors when selling sport climbing gear. Brand name products sell well in stores that maintain a good selection, good location, and knowledgeable, friendly employees.
  • Espresso shops need to be fast, efficient, and friendly. Fortunately, there are no espresso shops in close proximity to The Boulder Stop.

4.3.2 Main Competitors

Our nearest competitor is [Omitted]. Our next closest competitor is [Omitted], located in Redmond, 7 miles from our store. Neither of these retailers offer espresso to their customers.

  • [Omitted] sells limited gear (clothes), they do not promote, or otherwise market their products extensively. They sell ice cream and carry more GenX apparel than The Boulder Stop. In fact, their biggest strength may be that they may potentially become our ally. We see their products as complementary to ours; Ice Cream<>Espresso. Their biggest weakness is limited store space.
  • [Omitted] will be our toughest competitor, for they have already established themselves in the sport climbing community. They have a very experienced and knowledgeable staff of expert climbers, and are located on highway 97, 2 miles from Smith Rock. They carry 75-80% of the same gear that we do.

4.3.3 Industry Participants

The sport climbing gear industry is still fairly young. Climbing stores are generally small in size and community oriented. These stores seek to attract the most knowledgeable $6-8/hour employees. There are some bigger players, such as [omitted] that serve a larger, less targeted community with rock gear and gear for dozens of other outdoor sports. These national participants are consistent about their message and carry an impressive array of gear, but only the largest stores combine an espresso shop with the "Yuppie" shopping experience.

Participants in the espresso market are big name retailers such as [omitted] and [omitted] . These retailers focus on the standardized model. Under this model, a buyer will get the same service and same beverage in New York as the one they will get in downtown Bend. This leads to a backlash of sorts, as local consumers move to industry participants that differentiate their companies from the national standardized model. The product becomes localized and the buyer recognizes the value of supporting a business that keeps its profits in the community that created the profit.

4.3.4 Distribution Patterns

Traditional distribution channels are followed. The products are bought from wholesalers who have little say in how products are marketed, beyond the occasional sales promotion display provided via the manufacturer. This is beneficial in keeping the marketing and product costs low, while maintaining high profit margins.

Customers are very brand oriented and affect the distribution patterns (rebuys) on the retail end. As consumers become increasingly aware of the internet's potential, they will begin to buy product directly from the manufacturer. This will not hurt our business because a) we have a website, direct distribution model of our own and b) our location and convenience create and advantage for us. We will create in-store kiosks linked to our website. For now we will build on the strengths of location. If distribution patterns shift to a direct model, we build our business under the direct model.