Hart Fraeme Gallery
Strategy and Implementation Summary
The primary focus for Hart Fraeme Gallery is to establish and differentiate itself in the marketplace. This can be accomplished through advertising within the community that the company will serve, and by striving to build a positive reputation, particularly with regard to fast project completion time and friendly, creative customer service.
5.1 Competitive Edge
Innovation and advancement is key to any business, including art and framing. Unfortunately, businesses in the art market have been resistant to change and modernization, including the incorporation of computers, accepting changes in décor and design, and using modern equipment to accelerate the process of construction.
The primary advantage of Hart Fraeme Gallery will be the same-day framing and short completion time. In an industry where the standard completion time is three weeks, eleven days is a refreshing change of pace for those who purchase custom framing. Additionally, same-day framing has largely been regarded as either impossible or not worth the effort, since it was assumed that same-day jobs were just impulse shoppers who were more concerned with price than quality. The reality of same-day framing has proven to be quite different; many people who want same day framing have a deadline to meet, such as a birthday, Fathers’ Day, or other event, and are simply unfamiliar with custom framing and its time constraints. Since very few, if any, custom frame shops can offer sane-day framing, it represents a significant opportunity for the business.
The second advantage is technology. The computer has become an essential business tool, accelerating bookkeeping, communication, transactions, etc. Many manufacturers of framing equipment offer computerized machinery, which not only reduces the time needed to build frames, but guarantees consistency and accuracy to a degree unachievable through manual means. This computerized equipment has become a necessity for the modern framer, although it has only recently become widely available.
Additionally, Mr. Fraeme has created a software suite customized to the field, to streamline ordering and design. With adaptation in mind, it has been created it in such a way so as to give the user the ability to make changes as the need arises and to accommodate new possibilities in framing; this feature sets Mr. Fraeme’s program apart from those currently available. Alternative software is available commercially for approximately $1,500, and although this software has not yet been marketed, the possibility remains for the future.
The third advantage is flexibility and openness to change. Given that trends change frequently, the ability to follow them is an absolute necessity in this business. In a business that sells decorative commodities, the merchandise must be stylish and attractive; however, because different people have different styles, this requires a great deal of flexibility and an open mind. Hart Fraeme Gallery is committed to flexibility.
5.2 Marketing Strategy
The marketing strategy for Hart Fraeme Gallery hinges on three main principles:
- Satisfied customers are the most effective form of marketing. When a customer feels they can rely on Hart Fraeme Gallery for creative design, impeccable quality, and fast, friendly service they are eager to share that confidence with friends and family. With 42% of consumers reporting that they are likely to make an art or framing purchase in the upcoming year, word of mouth is an invaluable marketing tool.
- Because repeat customers represent a large portion of art and frame clientele, it is imperative that Hart Fraeme Gallery builds a strong customer base early on. To do this, the company plans to offer sales promotions on custom framing to encourage new customers, advertising such promotions in local newspapers.
- Same-day framing is something that few, if any other frame shops are able to offer. Hart Fraeme Gallery intends to capitalize on this capability by promoting same-day framing in all advertisements as well as with in-store signage.
5.3 Sales Strategy
Pricing for Artwork
Art is priced by a keystone markup. The artist or publisher sets a standard retail price, which is typically twice the wholesale price. Therefore, all galleries will sell the same print at the same price. The exception is artwork that has been sold out at the publisher. Once this happens, prices are set by supply and demand, since these prints must be purchased from one of approximately 3,500 galleries nationwide participating in the listing program. The markup on these prints is not a set percentage, although it is generally between 20-35% above the wholesale cost.
Pricing For Custom Framing
The price for a typical frame is determined from six variables, as chosen by the customer. These are Moulding, Matboards, Glass, Mounting, Fitting, and Extras. Moulding, matboard, and glass prices are all determined by their material cost, whereas fitting, mounting, and extras are all priced according to labor hours. Materials undergo various markups over their wholesale cost, while labor is typically priced out at an industry-standard sixty dollars per hour. However, in order to provide pricing at the time of order, labor time is estimated, based on size and complexity of the project.
Pricing on Materials
‘Moulding’ refers to the wood or metal exterior of the frame. Although vendors only supply moulding in ten-foot lengths, retail customers purchase moulding by the foot. Because of this, the markup on moulding is approximately 300%. Additionally, the unused portion can be used for other projects, although it must be stored safely until it is needed, to avoid damage.
Matboards are the colored sheets under the glass between the image and the moulding. Again, matboards are only available in 32″ x 40″ and 40″ x 60″ sizes, but are sold by the United Inch. Therefore, the markup on a matboard is variable, although pricing is generally adjusted so that the retail price of a 4″ x 6″ image is approximately 150% of the wholesale cost, and the retail price for the whole matboard is roughly 300% of the wholesale; however, due to the way matboards are cut, they leave a center fallout which can be used again. Thus, any given matboard can be used 3-4 times, although like mouldings, matboards must be stored in a certain way.
Glass, like matboard, is sold by the United Inch. Unlike matboard, glass is available in eight standard sizes. This means that there is little waste involved in glass, although glass is fragile by nature, and prone to breaking. The markup on glass is generally 100%, although some specialty glasses, which require special handling and cutting, are subject to a 200%-300% markup. Also, although glass is very fragile and a large quantity of glass must be stored, it can generally be kept in its packaging until it is needed, thus eliminating special storage needs.
Pricing on Labor
‘Fitting’ refers to the labor involved in cutting, joining, and assembling the frame. As mentioned above, fitting is priced at an industry-standard $60/hr. Most frames require one of three types of fitting: standard fitting, fitting with fillet, or shadowbox fitting. These three types vary in complexity and time required, and are priced accordingly. A majority of frames take 45-60 minutes to fit, although they range from as little as ten minutes to as much as two hours.
‘Mounting’ is the cost of labor and materials to mount the picture or item inside the frame. The mounting techniques used are specialized to the type of item being mounted, and range in time from a typical five minutes for most prints to nearly an hour for items such as jerseys. The average price range for mounting, including labor and materials, is between $15-$30.
Framing extras, such as specialty mat cuts, octagonal frames and other non-standard framing requests are priced at the usual $60/hr, plus the price of any additional materials. Many extras are fairly standard, such as nameplates and extra openings, although an important part of offering custom framing is being able to handle unique framing requests.
5.3.1 Sales Forecast
It is estimated that sales of framed and unframed artwork, including special orders will account for 25%-40% of income, varying slightly by season. A very small portion, approximately 2% of these sales, will be Internet sales. The remaining 60%-75% of income is comprised of custom framing. Because roughly half of retail sales will be pre-framed artwork, the estimated replacement cost for the artwork is roughly 30% of retail price, on average. The cost of materials for framing, including the price of the materials used to frame artwork for sale in the store is predicted to be 35% of custom framing income; however, projects which require the same materials can sometimes be completed using the same piece of material, thus at times this cost may be considerably less than predicted.
Additionally, framing requires supplies and maintenance, such as foam board, blade sharpening, glue, nails, mat cutter blades, and others that represent a small but routine expense. Because these supplies are depleted at a rate proportional to the number of frame jobs completed, but are purchased in bulk (i.e. 16 nails per frame job, but bought in quantities of 1,000 nails per box) the cost for these supplies and services is tiered at an estimated rate of $150 per 25 frame jobs. If the average frame job is expected to generate roughly $250-$275 in sales, this means that framing supplies will represent an expense of $150 per $6,500 in custom framing sales, although because these materials are identical for all frame jobs, there is the possibility for some materials to be used for more than one project, which may favorably affect this cost.
Although the art and frame business is not considered to be seasonal, it does experience several high and low points, like most retail businesses. Of particular impact is the lull in June, when most children are done with school, the high point in September when children are returning to school, and the general retail peak around the holiday season. A typical year for art and framing involves strong post-holiday sales, declining slightly until June, where sales drop sharply, remaining somewhat low until September, when sales make marked improvement, improving slightly in October and then substantially in November and December.
Finally, due to the individualized service nature of custom framing, many sales are to repeat customers. Therefore, sales are expected to be markedly (approximately 30%-40%) below average during the first one to two years, until a regular customer base has been established. It has been estimated that it takes the average custom frame shop seven years to fully establish its customer base, during which time sales grow at an accelerated rate. Using advertising as a catalyst for this process, Hart Fraeme Gallery hopes to attract more customers sooner, although it will still require much patience.
|FY 2006||FY 2007||FY 2008|
|Direct Cost of Sales||FY 2006||FY 2007||FY 2008|
|Materials for Framing||$102,600||$123,120||$147,750|
|Framing Supplies and Maintenance||$7,650||$8,100||$9,450|
|Subtotal Direct Cost of Sales||$144,250||$170,220||$202,200|
The following table provides details for many of the important milestones. Many of these milestones hinge on the successful completion of prior milestones. The dates were chosen based on realistic delivery times and necessary construction times, and therefore must be completed within their allotted time frames to ensure the success of contingent milestones.
|Milestone||Start Date||End Date||Budget||Manager||Department|
|Establish Vendor Accounts||6/21/2005||7/14/2005||$0||ABC||Department|
|Advertise Grand Opening||7/1/2005||9/30/2005||$4,000||ABC||Department|
|Purchase Framing Equipment||7/14/2005||8/14/2005||$36,000||ABC||Department|
|Purchase Initial Inventory||7/14/2005||8/7/2005||$16,000||ABC||Department|
|Frame for Initial Inventory||8/7/2005||8/31/2005||$7,500||ABC||Department|
|Hire Two Sales Associates||8/7/2005||8/31/2005||$100||ABC||Department|