Home Decoration Fabrics Business Plan

The store has been well received since its opening on December 16, 1996. Marketing, combined with an optimal product offering, is critical to its continued success and future profitability. The store offers the most extensive selection of in-stock decorator fabrics, but the volume sales of special order fabric is the fastest growing area of the store. 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.

We possess valuable 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.

4.1 Market Segmentation

The general profile of the Interior Views customer consists of the following geographic, demographic, psychographic, and behavioral factors, with additional comments regarding the Web attributes of this customer base. It is important to understand the attributes of the current retail customer, as we develop the Web customer base. We believe that the overall characteristics of our established local clientele can be extrapolated to a national level, and can be reached via the Internet and our eBay store.

Geographics

• Our immediate geographic market is the Pleasantville area, with a population of 175,500.
• A 100-mile geographic area is in need of our products and services.
• The total targeted area population is estimated at 573,300.

Demographics

• Female
• Married
• Have children, but not necessarily at home
• Have attended college
• A combined annual income in excess of $75,000
• Age range of 35 to 55 years, with a median age of 42
• Own their homes, townhouses and/or condominiums valued at over $225,000.
• 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.
• Pleasantville Country Club.
• Junior League of Pleasantville.
• American Business Women’s Association.

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

• 67% have lived in Pleasantville 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
• Elle Decor
• If she does seek out television as an informational source for home decorating that is most likely to be “Martha Stewart” and, on a lesser basis, “Interior Motives.”

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.
• Comparison positioning and stature within social groups are made on an ongoing basis, but rarely discussed.

Web Attributes

We used to be concerned that this particular segment was not know to Web-savvy. Unfortunately, the age group of thise women was one of the smallest groups that looks to the Internet for information and spends time there for research. This is not good for website sales in our niche industry.

However, as time has passed and the cost of computers and Internet access has plummeted, and the ease of Internet use in general, and consumer e-commerce has increased, our earlier fears have been assuaged.

We will pursue an eBay store website positioned to take advantage of the current and future potential of Internet retail. This group has become increasingly comfortable with the Web, and the “Professional Youngsters” are already using this as a resource.

4.2 Target Market Segment Strategy

Our marketing strategy is based on becoming the resource of choice for people looking for decorator fabrics. The “do-it-yourselfers” and “buy-it-yourselfers” need a resource to create a look in their home. Our marketing strategy is based on superior performance in the following areas:

• Product selection.
• Product quality.
• Customer service.

The target markets are separated into four segments; “Country Club Women,” “Boomers in Transition,” “Professional Youngsters” and “Home Builders.” The primary marketing opportunity is selling to these well defined and accessible target market segments that focuses on investing discretionary income in these areas:

Country Club Women — The most dominant segment of the four is comprised of women in the age range of 35 to 50. They are married, have a combined income of greater than $80,000, own at least one home or condominium, and are socially active. They are members of the Pleasantville Country Club, the Downtown Athletic Club, the Junior League of Pleasantville, AAUW, and/or the Doctor Wives Auxiliary. They have discretionary income, and their home is a priority. The appearance of where they live communicates who they are and what is important to them. This group represents the largest collection of “Martha Stewart Wanna Be’s,” with their profile echoing readers of Martha Stewart Living magazine, based on the current demographics described in the Martha Stewart Living Media Kit.

Boomers in Transition — This group, typically ranging in age from 50 to 65, is going through a positive and planned life transition. They are changing homes (either building or moving) or remodeling due to empty nest syndrome, retirement plans, general downsizing desires, or to just get closer to the golf course. Their surprisingly high level of discretionary income is first spent on travel, with decorating their home a close second. The woman of the couple is the decision maker, and often does not always include the husband in the selection or purchase process.

Professional Youngsters — Couples between the ages of 25 and 35 establishing their first “adult” household fall into this group. They both work, earn in excess of $50,000 annually, and now want to invest in their home. They seek to enjoy their home and communicate a “successful” image and message to their contemporaries. They buy big when they have received a promotion, a bonus, or an inheritance.

Home Builders — People in the building process, typically ranging in age from 40 to 55, are prime candidates.

4.2.1 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 – Buyers 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.

4.2.2 Market Trends

The home textile market, including 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 and $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.

Regardless of this data, the following trends and issues impact the success and challenges 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 Pleasantville 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.

4.2.3 Market Growth

American Demographics projects that the number of U.S. households will grow by 16% to 115 million by the year 2010. Almost half of the households comprised of people from 35 to 44 years old are married couples with children under the age of 18. Based on this research, households in the 45 to 65 age range will grow to 45 million in 2010 as baby boomers add to this peak-earning and spending age group. These families will either build new homes or move into existing dwellings. With approximately 46.2% of the nation’s 93.3 million dwellings built before 1960, many of these homeowners are also expected to update.

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 of spending 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 subsegment of the target market.

These factors contribute to an increased need for home decorator fabrics, such as window treatments, upholstery, pillows, bedding, and other fabric accessory needs. This demand is expected to be complemented by the growth in the Pleasantville market. The majority of homeowners spend a large percentage of their disposable income on home goods within two years of buying a new house. Therefore, positive trends in new housing activity represents growth and opportunity for home textiles.

Recent slow downs in the local economy have resulted in falling sales projections and these factors will affect market growth. Adding revenues through the website will likely benefit the revenue stream.

4.3 Industry Analysis

The industry continues to be competitive with a “commodity” concern from both manufacturers/fabricators and retail players–the fabric is looking more alike all the time. Based on Porter’s Five Forces Model, the industry has these attributes:

• Potential Competitors – There are many, both on the Web and through other channels including retail and catalog sales. Loyalty on the Web does not exist and the barriers to entry are very low. Percent of business failures are high–estimated to be over 70% in the first three years of operation.
• Power of Suppliers – Moderately high in that there are recognized leaders in the industry, including Waverly, Fabricut, P/Kaufmann, Robert Allen, and Covington.
• Power of Buyers – Very low as buyers work with the financial terms and product availability offered through the suppliers that specify the terms and conditions.
• Substitute Products – High in the area of window treatment as hardcovering solutions have become available and increasingly affordable. This includes blinds, shutters, and other “manufactured” treatments. Substitute products are not as prevalent for other uses, such as bedding and upholstery.
• Rivalry – Moderately low with the “territorial” structure that the industry experiences and moderately low exit barriers. People get out when it is not working.

With the slow, but steady, growth of the past few years, the industry is now experiencing a “cautious optimism” regarding the future. Growth and expansion activities for most areas of the home and textiles industry appear to be carefully considered as marketing continues to decide what to do as the economy experiences a slowdown and increased uncertainty from the more economically confident 90’s.

Our eBay store will initially focus on these Categories:

• Collectibles – Linens, Fabrics, Textiles
• Crafts – Fabric, Upholstery Fabric
• Home and Garden – Home Decor, Door Accessories, Floral Decor, Screens and Room Dividers, Slipcovers, Wall Decor
• Window Treaments

4.3.1 Industry Participants

Industry participants in the area of decorator fabric come from five general categories: traditional fabric retail stores, catalog and Web-based sales, click and mortar discounters, interior designers, and the individually owned and operated stores. Most of these players have some type of an online presence. The following provides an overview of the type of participants that are most active and most successful in this arena.

Traditional Fabric Retail Stores
The traditional retail stores are corporate stores (not franchises) that have multiple locations in select metropolitan markets. Example of these stores include:

• JoAnn’s www.joanns.com – 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. JoAnn’s purchased the House of Fabric chain and has a link set up from the previous URL www.houseoffabrics.com.
• Calico Corners www.calicocorners.com – This national chain was a franchise through the 1980s (no longer selling licenses) and has been purchasing those stores throughout the country. Calico Corners stores number approximately 90 and are in most larger cities, with a concentration in the Northeast.

Catalog and Web-based Competitors
Virtually every catalog and major retail store in the industry now has a website. The most aggressive and direct catalog competitor is Calico Corners (www.calicocorners.com) which complements their 80+ retail store network. An increasing level of competition is anticipated from these catalog and Web-based sales. Recent trends, such as those demonstrated in the well established, but still evolving, catalog Pottery Barn (www.potterybarn.com) and Ballard Design (www.ballarddesigns.com) indicates increased interest in offering decorator fabric for window design and upholstery 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. In general, fabric sales over the Web have increased substantially in the past two years and present a source of competition for the future.

Click and Mortar Discounters
Channels of distribution continue to shift in favor of discounters, who account for a significant portion of the growth in the industry and who have been extremely active on the Web. 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 (www.homebase.com). 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 Pleasantville Home Base store sells basic curtain rod hardware and other hard cover window treatment, there are no known plans at this time for the Pleasantville Home Base store to implement this in the foreseeable future. Bed, Bath & Beyond (www.bedbathandbeyond.com) has an even larger assortment of hardware with a selection of pre-made solutions for window treatments, bedding and pillows. Both of these retailers have stores in our market and with selection activity on the Web, this will be important to monitor for competitive purposes.

Interior Designers
This large group makes up a substantial quantity of higher end fabric purchases. For example, there are 37 interior designers listed in the Pleasantville Yellow Pages (Year 2001-2002 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 cost to the customer is often two to four times higher than the price per yard from Interior Views. It is unusual to find an independent Interior Designer with a website.

Individually Owned Stores
Some form of locally owned stores exist in virtually every market with a population of over 50,000. Typically, the low end begins with those that carry a limited selection of decorator fabric, often with a focus on clothing fabric and crafts. At a slightly more sophisticated level, stores may offer low-cost products with a wide selection of discontinued fabrics and only a limited number of “current” fabrics; this may be a warehouse concept offering a wide variety of products, including car and boat fabrics and materials. “Full service” individually owned stores, like Interior Views, are less prevalent. An increasing number of these stores at all level do have websites, including this local competitors’ example, Econo Sales (www.econosales.com).

4.3.2 Distribution Patterns

Our primary method of distribution continues to be the traditional retail store. The greatest opportunity for growth lies in the proposed website strategy. The concept behind this is to reach these key groups listed in order of importance based on their expected use and purchases from the site.

• Professional Youngsters – Expected to be the most likely of the targeted segments to use this resource because of their relatively high Internet use compared to the other segments. This group should offer the greatest online revenue opportunity.
• Outsiders – Comprised of people outside the area with Internet access that have come in contact with the physical store or learned of it though a referral or promotion. This group, most commonly located in rural areas of the Western U.S. and Hawaii, are expected to be a small but faithful sector of buyers.
• Online Fabric Shoppers – Most often find the site through search engines and these online decorator fabric shoppers are browsing multiple sites for a best buy or access to discontinued and hard-to-find fabric. They hold potential, but are typically the most work for the lowest return.
• Internet Learners – Represents all of the targeted segments that are just beginning to become familiar with the site and will increase their use of the Internet over time. Revenue expectations from this group are low at this point and it is viewed as an investment in the future.

4.3.3 Competition and Buying Patterns

Competition in the area of decorator fabric comes from three general categories, traditional fabric retail stores, catalog sales, and discounters. Customers make decisions on the basis of quality, price, and uniqueness. Durability and wear apply to upholstered fabric. Additional detail on all competitors will be provided.

Internet Presence

Competitors in our industry have discovered the Internet, but appear to be seeking to discover what works and what doesn’t. Interior Views’ content site and eBay store will seek to complement the store’s presence and expand that reach to other potential customers outside the area. It will have direct click-through links to our eBay store. Our eBay store will also have links taking viewers back to our content site.

Interior Views features a selection of the most popular fabrics from these fabricators on the store site:

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

Complementary product offerings will include smaller fabric mounting hardware, decorative accent pieces, and other non-fabric items from our main store merchandise.

Because of size, weight, shipping and custom measurement constraints we will not initially offer our “Oval Office Iron Works” drapery hardware. It will only be available in our Pleasantville store. It might be added to the eBay store later.

4.3.4 Main Competitors

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 Pleasantville Yellow Pages (Year 2000-2001 issue) that offer fabric as a part of their services. Interior designers make a profit off the mark up of fabric in addition to their hourly service 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. 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 Pleasantville Home Base store sells basic curtain rod hardware and other hard cover window treatment, there are no known plans at this time for the Pleasantville Home Base store to implement this in the foreseeable future. This will be an important issue to monitor for competitive purposes.