1. Summary of the project
The aim of the project is to open an island-format store for retail sales of jewelry and accessories and profit. The outlet will occupy an area of 6 square meters. meters and located in a large shopping center with a population of more than 1 million people. The store will be targeted at middle-aged visitors.
The volume of starting investments - 560 thousand rubles. Source of funds - personal monetary savings. The planned payback period of the store is 14 months. The start of sales is September 2016.
Key financial indicators of the project | |
Discount rate, % | 17 |
Net present value (NPV), rub. | 652, 692 |
Project net profit, rub. | 43, 000 - 65, 000 |
Return on sales, % | 7.5 |
Payback period (PP), months | 14 |
Discount payback period (DPP), months | 15 |
Profitability Index (PI)% | 1.17 |
2. Description of the industry and company
Jewelry refers to jewelry that is made from inexpensive base metals and stones. Outwardly, jewelry resembles jewelry, but its cost is significantly lower. Jewelry is an integral part of fashion retail, the volume of which is estimated at about 57 billion dollars. The jewelry market is about 2.5 billion dollars, that is, about 4% of the entire fashion retail market.
Currently, the domestic market is dominated by imported jewelry of the mid-price segment, a smaller part falls on Russian-made products. According to the calculations of DISCOVERY Research Group, the Russian jewelry production in 2013 amounted to more than 700 million rubles, which was 30% more than in the same period. Mostly, jewelry is produced in the Northwestern and Central Federal Districts. The largest jewelry manufacturer is Zhenavi CJSC.
The aim of this project is to open an island-format store for retail sales of jewelry and accessories and profit. The outlet will occupy an area of 6 square meters. meters and located in a large shopping center with a population of more than 1 million people. The store will be targeted at middle-income visitors. The store’s assortment will be based on multi-brand women's jewelry made of non-precious materials from 8 product groups (bracelets, brooches, beads, clips, necklaces, rings, pendants, earrings). The short-term objective of the project is to reach the payback point and ensure stable operation. In the long run, lies the opening of a chain of jewelry stores. The store’s mission is to provide modern girls and women with high-quality original inexpensive jewelry that can emphasize the individuality of the image and character of the hostess.
The form of business organization will be IP. Taxation system - UTII. OKVED code group for this direction - 52.4 Other retail sale in specialized stores. The management of the store is carried out by an individual entrepreneur, he is also involved in the trading process. The company’s staff will initially include 1 sales consultant.
3.Description of goods
The main products sold by the jewelry store (more than 60%) of the product line will be female jewelry made of base materials. These are bracelets, brooches, beads, clips, necklaces, rings, pendants and earrings. Less than 40% of the assortment will fall on all kinds of accessories and related products: hair jewelry, watches, leather goods. The project price segment is medium. The mark-up level is established traditionally from the cost of production and costs of implementation (rent, salary to sellers, etc.). Markup level - 200%. The price range for products sold is given in Table. one.
Table 1. The price range of goods
No. | Name | Description | Cost, rub. | |
one | Bracelets | Frame bracelets, elastic bracelets, chains | 359-2299 | |
2 | Brooches | Throw a lawsuit. pearls, silver, gold, bronze, enamel, plastic, etc. | 299-2569 | |
3 | Beads and necklaces | Beads, necklace 30-90 cm. Under gold, under silver, under bronze, suit. pearls, plastic, enamel, and so on. | 459-2689 | |
four | Clips | The clips are long, medium, small. Under gold, under silver, under bronze, suit. pearls, plastic, enamel and so on. | 319-989 | |
five | Rings | Rings made of plastic, metal, suit. pearls, rings in gold, silver, enamel, mother of pearl, silver plating, etc. | 299-2099 | |
6 | Pendants | Pendants in gold, silver, suit. pearls, beads, plastic, mother of pearl, steel, etc. | 359-2899 | |
7 | Earrings | Long, small, hanging. Beads, suit. pearls, earrings with silver plating, gold, silver, bronze, mother of pearl, steel and so on. | 299-2379 | |
eight | Jewelry sets | Jewelry sets | 639-4379 | |
9 | Accessories | Hair ornaments, hair clips, garters, headbands, hairpins, watches, etc. | 109-6599 | |
ten | Leather goods | Bags, cases, wallets, gloves and so on. | 349-6999 | |
The main competitive advantage of the store will be the uniqueness of the range. Customers will be provided with products from several brands of manufacturers from Europe and Asia. Organization of supplies will not be limited to one or two companies. To form the initial assortment, the experience of competitor jewelry stores will be analyzed and used, the positions most in demand will be highlighted. This stage is the key to success / failure of the store. In addition to the correlation of categories, it is important to correctly comply with the proportions for the best-selling materials, themes and color scheme of products. In fig. Figures 1-3 show the ratios according to these parameters, calculated on the basis of the offer of successful online jewelry stores in a similar price category.
Figure 1. Materials in the costume jewelry. Percentage in assortment
Figure 2. Topical jewelry items in greatest demand
Fig. 3. Popular colors in demand among jewelry buyers
Retail licenses for jewelry and accessories will not require any licenses. Products are also not subject to mandatory certification, and transportation does not require the creation of special conditions.
4. Sales and marketing
Until recently, the jewelry market in Russia showed steady growth, adding 30-40% annually. A positive trend was also predicted by analysts for 2014-2016, however, the economic situation in the country made adjustments. Due to the devaluation of the ruble and a decrease in the purchasing power of Russians, the demand for jewelry fell. After a surge in sales in December 2014, when the population rushed to spend rapidly depreciating rubles, a recession followed. Most tangible of the crisis, jewelry sellers felt in the fall of 2015, when instead of the expected seasonal growth, a drop in sales or "stomping" on the spot was recorded. Retail has faced rising costs. Due to the fact that most of the jewelry is imported, purchase prices have increased. In such circumstances, entrepreneurs had to look for ways to reduce costs, optimize the range and keep prices. Despite the unfavorable market conditions, the jewelry market feels relatively well compared to many other industries. Thanks to the revision of the level of margins on products and an increase in the volume of purchases, many entrepreneurs were able to adapt to new realities. According to the expectations of industry experts, the main positive changes can be expected as early as 2017.
The main buyers of the jewelry store are women aged 18 to 45 years. Unlike buyers of the late 90s and early 2000s, modern customers have higher requirements for jewelry. Buyer requests vary by age. If it is important for girls to look stylish, conform to fashion and buy well-known brands of jewelry and bright colors, then older clients have a more conservative taste, prefer a classic style, choose materials that do not cause allergies, etc. According to surveys, the vast majority of women buy jewelry every few months or less, preferring to buy jewelry once a month no more than 10-15%.
Since jewelry purchases are often made impulsively, rather than purposefully, the chosen format of work in the form of an island-type department seems to be the most successful. The outlet will be viewed from all sides, while the store will not need to go to consider the thing you like. Due to the fact that the store will be located in a large shopping center with a large flow of visitors, there is no need for large advertising costs. At the preparation stage, the advertising design of the outlet with a colorful sign and a name that will attract customers will be developed, branded price tags will be developed. In the process of activity, if necessary, the methods of distributing print advertising will be applied. To increase revenue, the store management will use techniques to expand the thematic assortment on holidays, provide seasonal discounts. The traditional decline in demand for jewelry occurs from May to the end of August. With the beginning of autumn, there is an increase in demand. Bursts of sales occur in December on the eve of the New Year holidays, as well as in February-March (Valentine's Day, March 8).
5. Production plan
The jewelry store will be located in a large shopping and entertainment center, in a residential area with a population of more than 280 thousand people. The selected shopping center is the largest in the region and covers an area of more than 45 thousand square meters. meters, 35 thousand of which are suitable for rent. The potential audience is expanding to surrounding areas. Half an hour the majority of the city’s population lives (about 800-820 thousand people). The peculiarity of the chosen shopping center is that it is not the center of the day off: the flow of customers is high on weekdays due to the proximity of sleeping quarters. The mall has 4 floors, parking for 600 cars, a cinema, several anchor tenants (a grocery supermarket, a furniture store, an electronics store). The mall has a favorable location, located at the crossroads of transport routes and on the way to the central and eastern part of the city. The flow of customers of the mall varies from 12-17 thousand people on weekdays and from 17-19 thousand on Friday, weekends and holidays. About 66% of visitors to the shopping center are female, while 77% are between 20 and 45 years old, which is the target audience of the jewelry store.
The outlet will be located on the second floor of the shopping center on an area of 6 square meters. meters. When choosing a location, an entrepreneur proceeds from the following factors: the proximity of anchor tenants, the proximity of stores of a similar assortment (clothing stores, jewelry, etc.), the cost of rent, the level of patency (for the second floor is 80% of the total). The rental price will be 12 thousand rubles. per sq. meter, which is a good indicator, because in the other shopping centers under consideration, the price level reaches 16-20 thousand rubles. per sq. m
To trade jewelry, a ready-made island module of 6 square meters will be purchased. 5 mm glass and laminated chipboard with shockproof edge. The module kit will also include backlighting, shockproof film for glasses and decorative elements. The cost of the module will be 115 thousand rubles. In addition, you will need to purchase jewelry coasters, a cash register, a cashless payment terminal, which will require another 45 thousand rubles. Total for equipment points will need 160 thousand rubles. About 30-40 thousand more will be spent on the visual design of the point.
The schedule of the jewelry store will coincide with the opening hours of the mall. The point will be open daily from 10:00 to 22:00. For the daily operation of the store at the initial stage, it will be necessary to hire at least one sales assistant (later the staff can be expanded). The entrepreneur himself will also participate in sales. When hiring sales staff, the key role will be played not by the level of education and experience, but by the person’s personal qualities: active life position, competent speech, sociability, desire to work with people, responsibility and accuracy. A sense of style, good knowledge of products and brands will not be superfluous. The seller’s staffing table is presented in Table. 2.
Table 2. Staffing and payroll
No. | Position | Number of people | PHOT, RUB |
one | Shop assistant | one | 17, 000 |
Total: | 17, 000 | ||
Deductions: | 5 100 | ||
Total deductions: | 22 100 | ||
The main permanent expense points in the store will be rent and payment of salaries. The variable part will include the cost of purchasing jewelry. In addition, you should take into account the cost of electricity, spending on printed-advertising products and consumables (price tags, booklets, packaging, etc.).
In the process of activity, three development scenarios are possible: pessimistic, realistic and close to reality. In the worst case scenario, sales will amount to 3.5 thousand rubles. on weekdays (Mon-Thu) and about 6 thousand rubles. on friday, weekends and holidays. With these indicators, the store will balance on the verge of profitability. With the most optimistic option, revenue on weekdays will reach 7 thousand rubles., On other days - up to 12 thousand rubles. In this case, net profit can reach up to 100 thousand rubles. at a turnover of 280 thousand rubles. The most likely development of events seems to be that in which on weekdays income will amount to 4-6 thousand rubles, and on Friday, weekends and holidays - 7-10 thousand rubles. With this level of sales, the net profit of the outlet will be about 40-45 thousand rubles at a turnover of 200 thousand rubles. per month. Opening a point of sale in the beginning of autumn, during the period of sales growth when it is possible to form a clientele for the New Year holidays, will be strategically correct. Calculations for all key financial indicators based on this scenario are given in Appendix 1.
6. Organizational plan
The management of a jewelry store will be carried out by an individual entrepreneur. His responsibilities will include all legal issues, strategic planning, and the purchase of jewelry. Under the supervision of the entrepreneur will be sales consultants. The sales assistant consults buyers and sells jewelry, participates in the acceptance of goods, conducting inventories, and promotions. As a motivation for sales staff, a reward system is used (a bonus based on the results of work, bonuses), as well as discounts on products sold.
7.Financial plan
Starting investments in the opening of the point will amount to 560 thousand rubles. The source of funds will be personal savings. In Tab. 3 presents the main investment costs. Indicators of planned revenue, net profit, costs are shown in Appendix 1. When calculating the seasonality factor was taken into account (sales growth on holidays, decrease from May to early autumn).
Table 3. Investment costs
No. | Cost item | Amount, rub. |
Room equipment | ||
one | Equipment purchase | 160, 000 |
Intangible assets | ||
2 | Design of the outlet, promotional products | 50, 000 |
Current assets | ||
3 | Working capital as an airbag | 50, 000 |
four | Purchasing a starting batch of goods | 300, 000 |
Total: | 560, 000 | |
8. Evaluation of project effectiveness
The project to open a jewelry store is commercially effective, as indicated by key performance indicators calculated over a three-year period (see Table 4).
Table 4. Project performance indicators
No. | Indicator | Value |
one | Discount rate, % | 17 |
2 | Net present value (NPV), rub. | 652, 692 |
3 | Project net profit, rub. | 43, 000 - 65, 000 |
four | Return on sales, % | 7.5 |
five | Payback period (PP), months | 14 |
6 | Discount payback period (DPP), months | 15 |
7 | Profitability Index (PI)% | 1.17 |
9. Risks and warranties
The project to open a jewelry store has a low level of risk. A business requires a small start-up investment. The location of a point of sale in a large shopping center gives a guaranteed daily flow of customers, however, there is a risk of becoming unprofitable due to high rental rates. In addition, it should be borne in mind that jewelry does not belong to essential goods, which means that certain risks arise with a decrease in the purchasing power of the population. The main risks of a jewelry store are in Table. five.
Table 5. Assessment of project risks and measures to prevent their occurrence or their consequences
No. | Risk | Probability of occurrence | Severity of consequences | Prevention measures |
one | Decrease in the purchasing power of the population due to the situation in the country's economy | average | average | Cost reduction, search for leverage to reduce margins without loss of product quality, improving the assortment that best meets the needs |
2 | Exchange rate growth / increase in purchase prices, customs duties | average | average | Review of contracts with manufacturers and suppliers, purchases in large quantities to reduce wholesale prices, |
3 | Increased competition | average | low | Unique assortment offer, favorable location, price review, cost reduction, assortment optimization |
four | Cost increase / rent increase | average | average | Conclusion of a long-term lease agreement, early discussion of the conditions of price changes, cost reduction |
10. Applications
ANNEX 1
Three-year production plan and key financial indicators of the project
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