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					The Closet: Business Plan




       Lisa Shell-Schnitzer
      514.919.5914 ext. 240
  www.shoptrends.thecloset.com
Be a Recessionista                      The Closet




EXECUTIVE SUMMARY                                2

PROJECT DESCRIPTION                              3

MARKET ANALYSIS                                  4

TARGET MARKET: CONSUMER DEMOGRAPHICS            4
RISK                                            5
COMPETITIVE ANALYSIS                            5
MARKETING                                       6
PROJECTED SALES                                 6

MARKETING STRATEGY                               8

MARKETING CAMPAIGN                              8
SLOGAN/BRANDING                                 8
VIRAL ADS                                       9
SOCIAL SITES                                    9

OPERATIONAL&PRODUCTION                          10

BUSINESS LOCATION                              10
MODE OF OPERATIONS                             10
OUTSOURCING                                    10
MANAGEMENT                                     11
NETWORKING                                     11
WEBSITE                                        11

FINANCIAL ANALYSIS, PRICING & SALES             12

FINANCIAL ANALYSIS                             12
PRICES & SALES                                 13

BIBLIOGRAPHY                                    14




                                                 1
Be a Recessionista                                                               The Closet




Executive Summary

        The Closet is a new online company that will provide haute couture on a rental
basis, using the Internet as a marketing vehicle to the world at large. The Closet would
cater to women of every size, style, type and wallet. Based on our demographic
segmentation, our clients, the mature socialite (47.5%), the stylish teen (20%) as well as
the successful businesswoman (32.5%), would be able to rent an outfit or piece of
clothing for a selected period of time. Annually, haute couture companies generate over 5
billion dollars combined. Once distribution and financing are in place, marketing such a
business via the Internet opens up a world of opportunity for sales. Instantly, The Closet
finds itself with an untapped market and an avenue full of potential.

        The objective of this company is not only to cater to women of different social
status’s, its goal is to provide a luxury good, while taking into account the current global
recession. The economic recession is intended to spearhead our angle on the premise that
renting couture clothing is more economically friendly, as well as reflective of evolving
customers spending trends. Women remain committed to following all the latest trends
and don’t want to spend a fortune; welcome to the future of shopping, with the pressing
of the send button, the cost-conscious fashionista can have the closet she’s always
wanted.




                                                                                           2
Be a Recessionista                                                             The Closet



Project Description

        The Closet welcomes you to an economically friendly, stylish and chic era of
shopping. The company’s service is simple but creative. Essentially, The Closet is an
online company that allows woman to rent designer clothing on a weekly or monthly
basis, paying 15% of the products retail value. Designers are varied and clothing items
are abundant. As a rental based system using the Internet as a marketing vehicle, this
company fits nicely into our emerging technological world. As the online shopping
industry continues to climb its way up the consumer ladder, The Closet feels that we are
being introduced to the market at a crucial time when women still want to be stylish, but
not at any price.

        We are confident that this company will succeed because of its specific target
market as well as our economically in tune perspective. In addition to this, businesses
exists that have a similar service, however, these businesses rent designer handbags and
accessories. The Closet has realized that these businesses have been successful and the
next step in expanding the rental-based market is introducing rental designer clothing to
the industry. We have jumped on this opportunity and look forward to our beginning.




                                                                                            3
Be a Recessionista                                                              The Closet



Market Analysis

Industry Description / Analysis

        The online clothing business is an established market that took off in the mid
nineties. Since its advent, the sales and growth figures have been increasing
exponentially. According to a study conducted by Forrester Research, Inc. of 170
retailers, Americans last year spent more online on clothing than they did on computers.
The report found the online apparel, accessories and footwear category reached $18.3
billion in 2006 and rose to $22.1 billion in 2007. Studies examining the potential sales
growth have concluded that the increase in online sales has been aggressive to date and is
predicted to continue. Statistics demonstrate that over 39% of Canadian households are
connected online, but only 9% are shopping via the Internet; the opportunity for
additional growth in online sales is tremendous. With this being said, The Closet, an
haute couture rental based company, is being introduced to the market at a prime time,
when the Internet is a haven for all, and the figures of online shopping are increasing at a
speed faster than ever before.


Target Market: Consumer Demographics

        The unique nature of this business is two fold; it is responsive to the current
economic times and caters to a specific market. Based on the Canadian population at
present, it is appropriate to separate the targeted demographic of The Closet’s consumers
into three categories, namely the ―mature socialite‖ with a projected market share of
47.5%, the ―young businesswoman‖ with 32.5%, and, the ―stylish student‖ with 20%.

        The mature socialite, based on Canadian studies, is defined by women aged 35 –
65, 70% of whom are married and 65% of whom are independent and employed. With a
projected 47.5% market share intended for mature socialite, The Closet’s mission is to
cater to woman of all styles and incomes. The mature socialite would be inclined to
respond to The Closet’s product - designer labels at reasonable prices for evening and
office attire. With 65% of Canada’s mature socialite employed and independent, it is
reasonable to predict a high sales growth from this segment.

        The demographic of the ―young businesswoman‖ include women aged 21-45,
52% of whom are single and 48% married or coupled. This sector would respond to The
Closet’s mission because of the benefits sought; designer labels at reasonable prices,
providing high-end office wear with classic designer styles. The successful
businesswoman would benefit from the opportunity to wear different styles weekly and
set themselves apart from peers, appearing stylish and elegant in the work environment.
Furthermore, the young businesswoman is obliged to be stylish in and out of the
boardroom, entertaining and hosting special occasions; personal events, work, meetings,
company-hosted events, family events, dinner parties etc. Taking this into account, it



                                                                                           4
Be a Recessionista                                                              The Closet


becomes clear that this demographic would generate tremendous sales for The Closet as
online purchasing not only caters to their busy lives but suits their budget as well.

        Lastly, while the mature socialite and the successful businesswoman are predicted
to account for most of the potential sales, the ―stylish teen,‖ the third and last
demographic, is seen as a contributing market factor. This group, aged 17-23 would
benefit from trendy clothing at a student’s budget and the ability to constantly change
styles and outfits.


Risk

        With the potential demographics identified, like any new business, risks must
always be taken into account. The greatest risk The Closet faces is the overwhelming
economic downturn and the consumer’s reluctance to buy luxury items. The Table below
identifies how the spending habits of Canadian consumers in 2008 have changed.




      The Closet’s mission to provide designer clothing at reasonable prices for rent
specifically addresses this economic setback, by indulging the consumer’s desire for
fashion with modest capital output. Its motto is; don’t buy, rent. This ideology addresses
the female’s consumer delight in wardrobe choice as well as their more discriminatory
spending trends.


Competitive Analysis

        Notwithstanding The Closet’s unique business idea, it is imperative to identify
where the price point stands and understand the competition analysis. Several companies
currently rent out designer items. Frombagstoriches.com has an inventory for loan of


                                                                                             5
Be a Recessionista                                                               The Closet


more than 2,000 handbags, from sequined evening clutches to oversized totes, from 35
designer labels including Louis Vuitton, Coach, Prada and Chanel. Bags must be rented
for no less than a week and no more than a month. All rental fees paid in advance by
major credit card companies include return shipping. The Closet would run in a similar
fashion focusing on designer clothing. The cost of a 7-day rental would be 15% of an
item's retail value—a Carolina Herrara red-and-cream strapless dress, for example, is
$320 a week. This cost would include a dry-cleaning charge while an international
shipping fee of $9.95 would be an additional charge. Any order over $500 would not be
charged a shipping fee. This pricing system is based on the businesses,
frombagstoriches.com and bagborrowsteal.com, both of which are existing designer
handbag and jewelry rental sites.


Marketing

      Without marketing and advertising, there would be no sales and thus no business,
which is why The Closet has put so much thought into its marketing strategy. Firstly, as a
market icebreaker, The Closet would introduce a ―VIP Closet Card.‖ For the price of
$100 and an initial minimum rental of $300, the cardholder would receive an additional
week free with every rental for a 12-month period. With this incentive in mind, The
Closet would use the Internet at its main marketing vehicle. Ads would be posted on
www.google.com, allowing the company to advertise to a specific customer base paying
a minimal amount (20 cents per time that someone clicks on the add.) Furthermore, The
Closet would target the three demographics by making alliances with the two principal
rental handbag and jewelry sites mentioned above. In addition to posting adds on google,
targeting would also be done through network channels such as Facebook, Friendster,
Myspace, and Twitter. Lastly, The Closet’s website, www.shoptrends.thecloset.com will
be used as a market vehicle, constantly being updated and re-designed.


Projected Sales

         The Closet will debut in Montreal, Canada and spend the first two years mainly
shipping across Canada. It is projected that by our third year, we will have enough
disposable income to cater internationally. Given The Closet’s demographic breakdown
into its three categories along with figures based on this industry and a little logic, The
Closet has forecasted its sales growth over the next three years. As the mature socialite
accounts for 47.5% of sales, we have allocated more sales on the pieces of clothing that
suit this demographics lifestyle and engagements, i.e., social and business events. The
same line of logic was applied to the successful businesswoman with 32.5% and the
stylish teen with 20%. As seen in the graph below, the sales are projected to
steadily increase.




                                                                                              6
Be a Recessionista                                                    The Closet



                                                 $ Year
                           $ Year 1   $ Year 2   3
                           (Canada)   (Canada)   (Globe)    Total $
                Pants        40,000     55,000     70,000   165,000
                Sweaters      30000      50000      75000    155000
                Blouses       25000      38000      65000    128000
                Jackets       30000      55000      75000    160000
                Jeans         23000      30000      48000    101000
                Dresses       40000      60000    100000     200000
                Skirts        17000      25000      45000     87000
                Total
                (Annual)   205,000    313,000    478,000    996,000




                                                                               7
Be a Recessionista                                                            The Closet



Marketing Strategy


Marketing Campaign

         Marketing is a crucial component when launching a business. The Closet is going
to heavily rely on the Internet for marketing channels. More specifically, our marketing
campaign will include, slogans/branding, social sites, and viral adds. As The Closet is a
small start-up company, out marketing budget will be limited, however, most of our
overhead money will be allocated to marketing and advertising. While we do aspire to
launch commercials and promote our idea through talk shows, initially, we will focus on
marketing through the Internet and manipulating it to work to our advantage. In addition
to this, The Closet will have its own website, professionally designed by our team. This
website will be used as a marketing tool as well as for information.



Slogan/Branding

        Brand image is an important aspect of marketing. The Closet’s brand Image
would include the following: stylish, classy, ―wardrobe-saving‖, accessible, easy-to-use,
economically friendly etc. As seen below, our logo is an armoire with The Closet written
on it. Our idea when creating this logo was that a simple logo would fit nicely on our
receipts and boxes when shipping to customers, always keeping marketing and
advertising in mind.

Slogan: Be a Recessionista




                                                                                        8
Be a Recessionista                                                                The Closet




Viral Ads

Idea:

        Initially there will be consecutive clips of a woman in her mid forties in different
haute couture pieces, capturing different scenarios; in the office, at a social event, family
event etc. Following these images, the camera will focus in on this woman and she will
being talking to the camera.

Woman: ― I lead a busy life; business meetings one day, social events the other and
family events the next. I’m always changing my outfits and it comes as no surprise that
price is a factor.‖

As she completes her sentence, The Closet’s logo will appear on the screen. The video
will return to the woman and she will say:

Woman: ― I can’t afford all the pieces you saw in the clip before! I shop at The Closet
where I can browse online and rent an haute couture pieces for up to one month! The
selection is always updated and stylish, allowing me to stay classy and trendy while
saving money!‖

Once the woman’s line is completed, the screen will turn black and the following
sentence will appear in hot pink on the screen; ―welcome to the future of shopping,
rentals have never been so chic…”

*This video will be submitted to YouTube, Facebook, Twitter, Google Video, etc.


Social Sites

        The Closet’s marketing team has realized that as social sites are becoming
increasingly popular and are continuing to target our demographics, marketing through
these social sites is imperative. Sites such as Facebook, Twitter, Friendster, Myspace
would aid the Closet in promoting and marketing by using their different applications. On
Facebook for example, our team would be able to create events that include promotions,
make groups where people can easily find us, and ensure that our name is all over
Facebook. Through Twitter, we can track promotions, sales and stock updates and
concentrate on pre-season and post-season inventory. In addition to these sites, google is
a haven for advertising and marketing. Ads would be posted on www.google.com,
allowing the company to advertise to a specific customer base paying a minimal amount
(20 cents per time that someone clicks on the add.)




                                                                                                9
Be a Recessionista                                                               The Closet


Operational&Production


Business Location

      The Closet is an online business with a base administrative office located in
Montreal, Canada. All sales and inventory can be found on our site,
www.shoptrends.thecloset.com .

At The Closet, we make it simple for the consumer to rent authentic designer clothing;
this is how it works.


Mode of Operations


It’s this simple:            1 rent, 2 enjoy, 3 return
1. Choose to become a Closet Member (for the annual cost of $160) or rent as a Guest.
    (Members enjoy our lowest rental rates plus, other privileges outlined in the above
    section entitled Market Analysis.)
2. Browse our exciting collections and click the borrow button on the items you'd like to
        rent.
3. Rent by the week, the month or for as long as you'd like - there's never a late fee.
4. Borrow more than one item at a time! Please note: limits apply for "couture" items,
        which have a retail value over $1199. Guests and Members who joined within the
        last 3 months may only borrow one couture item at a time. However, members
        who have joined for more than 3 months can borrow up to 3 couture items at one
        time.
5. Delivery time is 2 business days from borrow to order anywhere in mainland United
        States, Canada and Mexico.
6. When the consumer is ready for something new, just return the item in the box it was
        sent in (delivery costs prepaid) and continue browsing.

        As for billing, when the consumer joins as a member (or a guest) the consumer
will be required to provide The Closet with accurate, complete and current credit card
information with respect to a valid credit card that she is authorized to use. By signing up
with The Closet, you authorize the company, or its agent, to bill the applicable
membership fees, per-item borrowed, shipping charges, all applicable taxes or other
charges to the credit card, in Canadian currency.

Outsourcing
       The Closet has established relationships with high-end designers around the


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Be a Recessionista                                                              The Closet


world, such as, Chanel, Dior, Prada, Versace, Diana Von Furstenberg. With these
relationships, we will be able to have early access to seasonal lines and to purchase their
pieces with significant volume discounts. We will also establish a relationship with
Federal Express to ship our products to the clients. This cost is included in the borrowing
fee.

Management

        The Closet will function as a lean team. Its senior management will include a
chief financial officer, an executive shopper and a sales officer. Supporting this
management team will be the web-maker and a bookkeeper to monitor the phones. All
these people will work out of the Montreal head office. Once the company has proven the
concept and is profitable, additional personnel will be brought on board to help further
improve marketing and sales strategies.

Networking

       The Closet will direct its marketing by targeting channels such as Facebook,
Friendster, Myspace and Twitter. As well, it will use viral ads to advertise videos, posting
them on YouTube, Facebook and Google Video. In addition, The Closet will develop
contact with television hosts and promote itself through their shows, ie, The View.


Website
www.shoptrends.thecloset.com

        This website, designed by our web-master, will allow clients to rent clothing from
anywhere in Canada (at the beginning). The website will be a funky, vibrant and
organized site where borrowing is made easy and enjoyable. The clothing will be
separated by designer, on the left hand of the page. When the designer name is clicked,
the available pieces for rental will appear with a short description of the product, their
retail value and their rental prices below. Once the piece is selected, the client will then
proceed to checkout and pay with credit card.




                                                                                         11
Be a Recessionista                                                             The Closet



Financial Analysis, Pricing & Sales

Financial Analysis

       The Closet has estimated that around 300 pieces of designer clothing will be
needed to start up the company. This ensures that enough of each type of clothing is
available for rent. On average, based from an haute couture department store,
www.saksfifthavenue.com, each product would cost around $1000. With this being said,
our company is looking at $300,000 in initial clothing purchases alone.

        Our general and administration costs include, salaries, webpage, rental of office
and storage space, insurance, utilities, initial start up of legal and accounting fees and
marketing and advertising costs. The table below roughly indicates the amount of money
that will be allocated to each overhead cost. We are estimating that $500,000 will be
needed to cover these costs. A percentage is estimated under the cost column.

                      Fixed Costs                         Percentage Allocated
Heat, Electricity and Air Conditioning                   1% ($5000 of 500,000)
Insurance                                                1% (5000 of 500,000)
Telecommunications (telephones, high-speed internet,     2% (25000 of 500,000
cell phones for employees, hosting for website)
Gross Rent                                               %6 (30,000 of 500,000)
                                                         (1500 sq.ft located in the
                                                         outskirts of Montreal)
Warehousing                                              1.5% (7500 of 500,000)
Auditor/Accounting                                       1% (5000 of 500,000)
Legal Fees                                               1% (5000 of 500,000)

               Variable Costs                 Percentage Allocated
               Salaries (5 employees)         50% (250,000 of 500,000)
               Marketing and advertising      20% (100,000 of 500,000)



*When starting a business, there are miscellaneous costs that occur that are unplanned.
With this being said, The Closet has set aside $75,000 of the general and administration
costs for discretionary and miscellaneous funds.




                                                                                        12
Be a Recessionista                                                              The Closet


Prices & Sales

        While The Closet is a unique business in the sense that it rents designer clothing,
frombagstoriches.com and bagborrowsteal.com are both existing businesses that rent
designer handbags, jewelry and accessories. After much deliberation, The Closet’s
financial team has decided to base our prices on both the above companies. Consider the
table below, based from www.bagborrowsteal.com for prices.

          www.bagborrowsteal.com                                  The Closet
Product            Retail Rental Price             Product          Retail Rental Price
                   Price    (15% of retail                          Price    (15% of retail
                            and includes                                     and includes
                            dry-cleaning)                                    dry-cleaning)
Bcbgmaxazria       $498     $74.00/                Diane von        $345     $52.00/ week
Femme Fatale                week                   Furstenberg
Leather Satchel                                    Strapless
Handbag                                            Satin Dress


*In short, 15% will be charged per item borrowed a week.




                                                                                         13
Be a Recessionista                                                          The Closet




                             Bibliography

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<http://www.nytimes.com/2009/03/10/us/10reset.html?_r=2>.

Emerging Textiles. 17 February 2009. 29 September 2009
<http://www.emergingtextiles.com/?q=art&s=090408-eu-clothing-retail-sales&r=free>.

Government of Ontario. Ontario. 15 July 2009. 29 September 2009
<http://www.fin.gov.on.ca/english/economy/ecaccts/>.

Kavilanz, Parija B. CNN Money. 27 January 2009. 30 September 2009
<http://money.cnn.com/2009/01/27/news/economy/nrf_2009forecast/index.htm?postversi
on=2009012703>.

National Retail Federation. National Retail Federation. 14 May 2007. 31 January 2009
<http://www.nrf.com/modules.php?name=news&op=viewlive&sp_id=292>.

Sarras, Nesreen. Canada Zone. February 2000. 30 September 2009
<http://www.canadaone.com/ezine/feb00/internet_retail.html>.

Statistics Canada. Statistics Canada. 22 January 2008. 28 September 2009
<http://www40.statcan.gc.ca/l01/cst01/famil16c-eng.htm>.




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