Business Plan - Fad Ladies Version 2.0

Business Plan

Fad Ladies™ Enterprises

Diana Yu Jeong Seo

Business Plan 2013

2 Diana Yu Jeong Seo, Author

EXECUTIVE SUMMARY The sleeping giant of the world, China, has awakened. After centuries of maintaining a hermit-like existence, the country has now opened its arms to the steamrolling pace of progress. Today’s China is far from the agricultural mammoth it once was; it is now the world’s largest consumer economy and has been opened to the New Age. The new China is no different from the rest of the developed world. It’s population is growing old, and is suffering from the very low birth rate (1.6%, lower than the 2.1% international standard). Its citizenry is ageing. The business proposition of Fad Ladies™ Enterprises puts focus on this population trend. Its flagship product, aiming to provide clothing devices to elderly Chinese women reflects the visionary spirit of its founder, Diana Yu Jeong Seo. The company is set to sail in the early months of 2014. Data provided in this business plan are management assumptions; reliant on available information online from companies offering similar products, existing market and environmental conditions, and risks. Projections are guided by the standards set by the United States – Small Business Administration for business with capital of US$ 100,000.00 and below.

Diana Yu Jeong Seo

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BUSINESS DESCRIPTION AND MISSION

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CHAPTER 1

BUSINESS DESCRIPTION AND MISSION

Business Description

Fad Ladies™ Enterprises is a sole proprietorship enterprise (SPE) duly

registered and organized under the Sole Proprietorship Enterprise Law of the

People’s Republic of China. The company was registered and acquired its

juridical personality on June 21, 2013, with the intent to engage in the business

of garments design, manufacturing, and sales. Its main place of business is

located at No. 19 Kexiang Road, Luo Gang District, Guangzhou, People’s

Republic of China.

Fad Ladies™ Enterprises was organized by Diana Seo, a resident of

Guangzhou City, with a paid up capital of RMB 300,000.00 (equivalent to

approximately US$ 50,000.00). The business has no other investors and

shareholders.

The business is in the process of developing a website cum blog that features

design for the elderly Chinese females aged 60 and above that hybrid the design

principles of the East and the functionality and comfort of the West. The designs

shall come from Ms. Seo, and from contributions of her friends and website

followers. The business also plans to expand its operations and reach by

including provisions for the establishment of boutiques and shops across China.

China is known globally as the leader in manufacturing, known for the quality of

its output and the speed to which it is produced. The business shall capitalize on

this ability in providing its target customers with clothing that are made at top

quality, superb aesthetics, and functionality that fits the remands of advanced

age.

Inspired by the increasing technology attunement of the ageing population as

well as the country’s increasingly ageing population, Fad Ladies™ Enterprises

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came to being to become the leader in designing, manufacturing, and selling

clothes for Chinese Women 60 and above.

Business Mission and Vision

FAD LADIES™ ENTERPRISES

Mission Statement

Fad Ladies™ Enterprises is a sole proprietorship enterprise organized in 2013

to provide the elderly Chinese women with clothing devices that combines

comfort, function, and elegance meant to exude the dignity and the novel

requirements of women in advanced age as they tread the best years of their

lives.

Vision Statement

Fad Ladies™ Enterprises envisions itself to be China’s leading designer,

manufacturer, and distributor of clothing devices and accessories for elderly

females with boutiques in the cities of Shanghai, Beijing, Hong Kong, Macau, and

in China Town districts of major cities around the world by 2019.

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MARKET DEFINITION

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CHAPTER 2

MARKET DEFINITION

Market Outlook

The following articles describe the business outlook for the fashion industry and

women’s clothing and apparel in China:

TITLE: THE FASHION INDUSTRY AND CHINA AUTHOR: Oriana Luquetta, The World of Chinese DATE: March 21, 2013 With China Fashion Week 2013 and MODE Shanghai 2013, the leading

international fashion trade show in Shanghai, as well as the 2013 BIFT Fashion

Week all taking place this month, we decided to take a closer look at the fashion

industry in China. The fashion industry has undergone tremendous change within

the past decade and is continuing to expand at an exponential rate.

What it Used to Be

If you walked down the street in China a couple of decades ago, you would more

than likely see both men and women wearing the Zhongshan suit

(中山裝, zhōngshān zhuāng), the Chinese version of a Western business suit

also known as the Mao suit. The suit was originally named after Sun Zhongshan

(Dr. Sun Yat-sen) after he advocated the wearing of functional clothes.

As China underwent its modernization period, women began to experiment with

fashion. Many more flowery dresses were beginning to be seen, as well as

leggings with straps on the foot, hoses that reached up to the ankle, and

hairstyles other than just braids. Because China was slowly picking itself up,

fashion developed at a very slow pace. Migrant workers began to wear white

shirts and black dress pants to work, even if their jobs consisted of manual labor.

Today’s Fashion Boom

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China is expected to become the largest fashion market within the next

five years. “China’s luxury market is forecast by McKinsey & Co. to soar

to US$27 billion by 2015 — one fifth of the world’s total — up from US$10

billion in 2009,” said Emma Charlton in “China’s passion for fashion on

show in Paris.” According to fashionista.com, Didier Grumback, head of

France’s fashion federation, also claimed China “is a country that is

passionate about fashion, like all emerging nations where appearance is

of the utmost importance.

Fashion Weeks

In 1997, China Fashion Week was established in Beijing. According to

this article, today it has become world-renowned as not only a “top-rated

platform for fashion design, ready-to-wear- accessories, styling and other

designs and new technologies,” but also as a “platform for promoting

brands, displaying originality, and broadcasting fashion trends” to the

world. It has over 320 designers, more than 350 fashion brands, and

holds over 768 fashion shows, attracting hundreds of media from all of

the world. It is held twice a year during March and October. China’s

fashion week has proved to the world that it is not only ready to embrace

the fashion industry, but that it is becoming pivotal in the innovation of

fresh new trends.

In March 2010, the leading international fashion trade show in

Shanghai, MODE Shanghai, was established. It is said to be designed to

“cater to the needs of global department stores looking to enter the Asian

fashion retail business, and to be an optimized business platform for

retailers and fashion brands,” according to its website. It further argues

that MODE SHANGHAI is more than a trade show, it is “a gateway of a

tremendous market for fashion brands and designers, as the future’s axe

of the global fashion business.” In just three years, the fashion trade show

has flourished exponentially. This year, it was held March 12th-14th.

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There are many more fashion shows seeking to crack the Chinese market,

including Dior’s S/S 2013 couture show, taking place in Shanghai on March 30

and organized by Bureau Betak.

The Chinese Consumer

Many Chinese women will spend a larger percentage of their income on fashion

magazines than Western women, according to this article in The New York

Times. In the article, Duncan Edwards, president and chief executive of Hearst

Magazines International, stated, “We’re going through this wonderful period

where huge numbers of women are coming out of poverty into the middle class

and beyond. Many of these women are choosing to spend on luxury goods.”

With much more recent exposure to Western media, the Chinese consumer is

now much more aware of global fashion trends. Furthermore, according to a

2011 study conducted by Bain & Company, as stated in The New York Times,

mainland China ranked sixth in the world for spending on luxury goods ranked by

country, and in 2010, it was a US$17.7 billion market where Louis Vuitton,

Chanel and Gucci remain the most desired luxury brands.

International Designers

Because of such a freshly booming fashion industry, world renowned designers

are turning their attention to China. After husband David Beckham was unveiled

as China’s first ever global football ambassador, Victoria Beckham will be making

a series of high-profile appearances in China in an attempt to crack its market

with her fashion line. Luxury fashion label Marc Jacobs is also said to be going

after China with plans to add six stores a year to its existing 25 in Mainland China

and 5 stores to its stores in Hong Kong.

“I think Chinese consumers can learn very fast. Three or four years ago, they

may have been merely chasing logos. Now they seek more than that. The chase

now is more about lifestyle, social status and how the brand can fit them. It’s not

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just about a logo any more,” said Stalla-Bourdillon, Marc Jacob’s chief executive,

to the South China Morning Post.

Companies such as H&M, Zara, Topshop, and Karen Millen are opening

stores at an alarming rate, as China continues to become the fastest

growing market with store numbers.

Chinese Students in the Fashion Industry

Chinese students are seeking to gain more exposure and experience in the

fashion industry. The applications to Pratt Institute’s fashion program in New

York have more than tripled in the past three years. The younger generation is

interested more than ever in fashion and in creating a stronger presence in the

industry. This month, the Beijing Institute of Fashion Technology hosted its four-

day 2013 Fashion Week. According to former vice president of SCAD Hong

Kong,

“One only has to walk down the street in Shanghai and Beijing today

and see the importance of fashion and street style, and how that’s

grown and changed in the last 20 years and definitely even in the last five years,”

reported China Daily.

TITLE: APPAREL IN CHINA AUTHOR: EUROMONITOR INTERNATIONAL DATE: May 2013 Decelerating economic growth adversely affects apparel growth

The country’s economy suffered a decline in growth over the review period with

2012 GDP growth declining to 7.8% from 9.2% in 2011. Under the sluggish

macroeconomic conditions, consumers became more conservative when

purchasing apparel. In this context, apparel in China experienced a decline in

growth over the review period in both retail volume and value. However, in an

attempt to secure share growth many players and retailers launched marketing

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campaigns to attract consumers such as discount sales. However, this was not

successful.

Unit price continues to grow

Despite the discount promotions widely seen in 2012, the average unit price of

apparel continued to increase over the review period with rising raw material,

labour, other production and distribution-related costs. As a result of the increase

in average unit price, apparel saw stronger retail value growth in 2012 than retail

volume. With the sluggish global economic conditions, retail volume sales of

apparel were impacted by the price increases hence slower growth in 2012

compared to 2011.

International apparel players support expansion in China

Due to the on-going financial crisis in developed markets in 2012, many

international players switched their focus to the Chinese market which remained

lucrative. Over the review period, leading international fast fashion apparel

players such as H&M, Gap, Uniqlo and Zara all opened new outlets in the

country, not only in first tier cities like Shanghai and Beijing, but also further

penetrated into lower tier cities across the country. In addition, international

sports brands represented by Nike and adidas all increased the distribution

coverage across China in attempt to boost the penetration in lower tier cities and

town level markets.

Internet retailing sees strong growth

Under the sluggish domestic economic conditions in 2012, consumers became

more price-sensitive when purchasing apparel. A number of consumers therefore

tended to shop via the internet which provides higher discount rates than store-

based outlets. In addition, a large number of players collectively opened online

outlets and strengthened their online forces in 2012; internet retailing provided

wider choices to consumers than before. For instance, Zara, one of the most

famous fast fashion brands in China, debuted in Chinese internet retailing in

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September 2012. In this context, apparel retail sales via internet retailing

increased to RMB126 billion by the end of 2012 from RMB52 billion in 2011.

Steady growth projected over the forecast period

Over the forecast period, apparel is expected to register on-going healthy growth,

both in retail volume and value sales. This will be driven by the country’s

continuing economic development, rising disposable income levels and a desire

for a higher standard of living amongst consumers. Increasing choice through

various channels, as well as the wide availability of international fast fashion and

sportswear brands, will likewise contribute to Chinese consumers spending more

on apparel over the forecast period.

TITLE: CHINA’S APPAREL MARKET 2012

AUTHOR: LI & FUNG RESEARCH CENTRE

DATE: December 2012

(An Excerpt from the Market Overview)

1. Apparel sales grew by 24.2% yoy in 2011, reaching RMB 795.5 B

a. According to the National Bureau of Statistics of China (NBS), the total

retail sales of clothing, shoes, hats and textiles* by enterprises above

designated size in 2011 rose nominally by 24.2% year-on-year (yoy) to

reach 795.5 billion yuan.

b. The growth in 1-3Q11 was 17.8% yoy, reaching 666.5 billion yuan.

2. Urban and rural households on average spent 11% and 7.2% of their

annual expenditure on clothing respectively

a. The annual per capita disposable income of urban households grew by

8.4% yoy to 21,810 yuan in real terms in 2011. The annual per capita net

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income of rural residents reached 6,977 yuan in 2011, posting double

digit yoy growth of 11.4%.

b. Urban households on average spent 1,674.7 yuan on clothing, accounting

for 11% of their total annual expenditure in 2011; while rural households

spent 341.1 yuan, which was 7.2% of the total annual expenditure on

clothing in the same year.

3. Many Chinese consumers purchase new clothing for need-based

reasons

a. Chinese consumers register a noticeable level of self-control in their

apparel purchase habits. The Hong Kong Trade Development Council

(HKTDC)’s survey results suggest that 90% of the surveyed respondents*

purchased new clothing for practical reasons such as replacement or

seasonal change; 50% of the respondents attributed their apparel

shopping to promotions or discounts.

4. High-end department stores saw weak sales growth in 2011

a. Consumers are generally cautious with spending. According to the China

National Commercial Information Centre (CNCIC), sales growth of

apparel category in high-end retailing locations such as department

stores and shopping malls was 10% yoy, below the national average of

21.5% yoy in 2011.

5. Climbing costs pose challenges to apparel enterprises

a. Rising costs of raw materials, labor and rental are posing increasing

challenges to apparel enterprises.

Ø China’s cotton price indices were in a downward trend during late

March to early July of 2012, yet the indices rebounded in mid-July of

2012 and have ridden on an ascending trend since then.

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Ø During 1-3Q12, the minimum wage increase was around 13% for

most cities, including Shenzhen, Sichuan, Guangdong and Shanghai.

Currently, the minimum wage level is the highest in Shenzhen,

subsequently followed by Shanghai.

b. According to the NBS, the clothing price index has declined for four

consecutive years since 2007. Yet it increased by 2.1% in 2011 and 3.4%

in 1-3Q12 (Exhibit 6). While some branded apparel companies are able to

raise their price tags, many smaller companies continue to face

squeezing margins.

Critical Needs of the Perceived/Existing Market

Based on the prevailing market trends, the following were identified to be the

perceived market’s needs:

1. Mid-Priced, High Quality Clothing – the perceived market needs

clothing devices that are priced at mid-ranged but produced using high

quality raw materials at high-quality production facilities – all these without

being necessarily a luxury item.

As many Chinese consumers purchase clothing due to necessity, this

gives them the challenge of finding brands and items that offers a “bang

for the buck”. Necessity-oriented purchases drive customer to find

providers, or channels, which may give them a better value for their

money.

2. Niche-Oriented Sales Channels – the perceived market currently deals

with two fundamental divisions in clothing choice: standard choice and

luxury. To date, there has been no influx of specialty clothing stores in

many parts of the country. Most of those classified as “luxury items” are

goods that originate from the West.

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Niche marketing in China is more oriented to address psychographic

distribution than demographic distribution of the market. A need to create

hyper specific sales channels that address one specific spectrum of the

demographic is an unstated need of the modern Chinese consumer.

3. Proudly Chinese, World-Class – the perceived market yearns for a

Chinese fashion line that will stand head and shoulders with brands from

the West. In light of the recent developments highlighting the proud

heritage of this great nation, the modern China is in need of a brand that

can stand toe to toe with international brands.

Market Analysis and Assumptions:

The current conditions of the target market are as follows:

1. The Target Market of Fad Ladies™ are Chinese Women aged 60 and

above – Fad Ladies™ shall be targeting the older segment of the

Chinese population as it shall be designing, creating, and selling clothing

devices suitable to the distinct needs of this segment.

2. China’s Population is Ageing – while much of China’s citizenry at the

moment are young (aged 20-49), the effects of the “One Child Policy” and

other birth control policies initiated in recent decades puts the country in

the verge of housing an aged population. The United Nations Population

Division projected that, by 2050, 31% of China’s population will be above

the age of 60. With this population trend in mind, Fad Ladies’

sustainability as a business serving this very specific segment is

plausible.

3. Online Shopping is a Staple in the Chinese Economy – with more

than 100 million Chinese people shopping online, China is a good place

to do online business. Fad Ladies™ shall initially make its designs

available to its target `market through an online sales channel (website

cum blog). Furthermore, the most purchased item online in China are

clothes, which makes the company’s offering a potentially viable item.

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4. There is Market Outside China – figures indicate that people from the

US, Hong Kong, South Asia, Japan, and Korea also visit China-based e-

commerce sites to purchase goods. This serves as a welcome addition to

the already extensive consumer base within the mainland. Also,

approximately 50 million non-native Chinese speakers residing outside

the mainland serve as a strong tertiary target market for Fad Ladies.

Demographic Profile of the Target Market

Fad Ladies perceives its market to be, primarily, Mainland China’s elderly

women, aged 60 and above, either actively employed or retired, with access to

the internet, and with an average monthly income of RMB 3,000.00

(approximately US$ 500.00).

Psychographics (Using the VALS 2 Model)

VALS 2 (Values, Attitudes, and Lifestyles), developed by Stanford Research

Institue (SRI), attempts to profile customers by grouping them into three

orientation categories: principle oriented, status oriented, and action oriented;

and splitting these categories again according to the resources people have at

their disposal. For example, in the following figure, the segments on top have

abundant resources, and as you move down from actualizers to strugglers, the

resources progressively diminish (Mishra, 2012).

Based on the demographic profile of the target market, it has been established

that the target market is old, mostly female, and have mid- to high-level

income derived from mid- to high-income professions, as they are

presumed to be mostly retired. Plotting these on the VALS 2 framework

provides Fad Ladies™ with three (3) target customer groups, namely: the

Innovators/Actualizers, the Believers/Fulfilled, and the Achievers.

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1. Innovators/Actualizers – are image-conscious consumers. This group consists

of active consumers who are always on the market for new and innovative

products and solutions. They are usually mid-aged professionals, senior officials

of the government, or successful C-Suites company officials who have a

preference for high-end and luxury items.

2. Thinkers/Fulfilled – are value-conscious consumers. This group consists of

active consumers who purchase items that provide order and induces a new skill

or value to them. They are well-educated consumers and employ a thorough

thought process before making a purchase. They are respectful of norms but are

open to new ideas and offerings. They primarily look for value and functionality in

items they buy.

3. Achievers – are time-oriented consumers. This group consists of successful

professionals who look for work-life balance. They are structured and very family

oriented. Their fast-changing needs reflect their constant presence in the market.

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PRODUCT DESCRIPTION

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CHAPTER 3

Product Description

Products & Services

Fad Ladies™ Website

Fad Ladies™ Enterprise owns and operates the Fad Ladies™ Website

(http://www.fadladies.com.cn). The website sells clothes for elderly Chinese

women, aged 60 and above. It is under the categories of CLOTHES &

ACCESSORIES, on the basis of its offering, and is an E-COMMERCE

BUSINESS, on the basis of its sales/distribution channel.

Designs & Development

Fad Ladies’ clothing line has two (2) categories based on the physical condition

and demands of the elderly target market. The categories are: (a) Standard

Women’s Clothing; and (b) Adaptive Women’s Clothing. Each category is

defined as follows:

a. Standard Clothing; and

b. Adaptive Clothing – clothing specially designed for people with physical

disabilities, the elderly, and the infirm who may have difficulty dressing

themselves due to an inability to manipulate closures, such as buttons

and zippers, or due to a lack of a full range of motion required for self

dressing eg. arthritis sufferers, Quadriplegics, and Paraplegics

Clothes designed by Fad Ladies are inspired by the functionality and practicality

brought about by the varied demands of advanced age, which is combined with

the need to continue to feel young, fresh, and beautiful. It shall also incorporate

the design aesthetics of the east to give its items a more Asian feel.

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The generation of designs to be lined up for production shall be done in three (3)

ways.

First, the company’s in-house design team shall be generating designs which

themes and other considerations shall be determined by the company. This shall

constitute 80% of the stock designs.

Second, the company, through the website’s blog, shall be generating designs

from its audience, who can send their own designs for either standard or

adaptive clothing, which may be lined up for production. This shall constitute 10%

of the stock designs.

The remaining 10% shall be reserved for premium or limited edition designs,

either derived from in-house design stock, design contributions of the audience,

or designs commissioned by the company to an external paid designer.

Manufacturing

All the designs of Fad Ladies™ shall be manufactured in China. The company

shall, at first, outsource the production of the designs until its liquidity allows for

the establishment of its own manufacturing plant. Production quality shall be co-

managed by Fad Ladies and the selected supplier.

Sales & Distribution

For the first three (3) years of the business, all designs of Fad Ladies shall be

sold online solely through its website. Eventually, its designs may be sold by

other websites and through brick-and-mortar stores across China.

Unique Selling Proposition:

The Unique Selling Proposition of Fad Ladies is its utmost focus on its target

market. While China’s biggest online buy has always been clothing, Fad Ladies

is the only brand that caters exclusively to the elderly female market of China. It

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is also the only company in China that maintains a consistent 80-10-10 ratio

diversifying its design offerings (80 in-house, 10 from audience/customers, 10

special edition), which is a testament to its concern for its target market. Lastly,

Fad Ladies is the only website that offers adaptive clothing for seniors based in

Mainland China.

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ORGANIZATION AND MANAGEMENT

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CHAPTER 4

Organization and Management

Juridical Personality

The Fad Ladies Website is owned and operated by Fad Ladies™ Enterprises, a

duly organized sole proprietorship enterprise (SPE) under Law No. 8672,

otherwise known as “The Sole Proprietorship Enterprise Law of China”,

passed in 2008. Its place of domicile is Guangzhou, People’s Republic of China.

A ‘Sole Proprietorship Enterprise’ as defined in Article 2 of the abovementioned

law is “a business entity established within China with its capital

contributed by one individual and its assets owned personally by the sole

proprietor, who assumes unlimited liability to the extent of his personal

assets.” (Emphasis Supplied)

Under the same law, a Sole Proprietorship Enterprise needs to meet the

following requirements (Article 8):

1. The sole proprietor is a natural person;

2. There is a lawful enterprise name;

3. There is capital contribution declared by the sole proprietor;

4. There is a permanent place and the necessary conditions for production

and operation;

5. There are necessary personnel.

Business Registration

To legally operate a business in Guangzhou City, a 13-step procedure must be

complied with. A summary of the procedure is outlined by the International

Finance Corporation (A member of the World Bank Group). The procedure is as

follows:

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No. Procedure Time to Complete Associated Costs

1 Obtain notice of Pre-Approval of the Company Name

1 day No cost

2

Open a preliminary bank account, deposit funds in the account and obtain the certificate of deposit

1 day RMB 20.00

3

Obtain capital verification report from an auditing firm

5 days RMB 800.00

4

Obtain registration certification "Business License of Enterprise Legal Person" from local Administration of Industry and Commerce (AIC)

7 days RMB 219.07 (Registration fee: 0.08% of registered capital; copy of Business License: RMB10)

5 Make a company seal

2 days RMB 400.00

6

Obtain the Organization Code Certificate issued by the Quality and Technology Supervision Bureau

5 days RMB 148.00

7 Register for national tax

1 day RMB 10.00

8 Register for local tax

1 day RMB 10.00

9

Open a bank account for the company and transfer registered capital to the account

1 day No cost

10

Apply for the authorization to print or purchase financial invoices

3 days No cost

11 Purchase invoices

1 day RMB 40.00 (RMB0.7-1.1 per set of invoices)

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* 12

File for recruitment registration with local Career Service Center

1 day (simultaneous with procedure 10)

No cost

* 13

Register with Social Welfare Insurance Center

1 day (simultaneous with procedure 10)

No cost

Organizational Chart

The organizational chart of Fad Ladies™ Enterprises shall be as follows:

Roles:

1. Owner/Manager – owns the business and, in his/her capacity as

Manager, runs the daily operations of the business;

2. Web Administrator – is in charge of developing and maintaining the Fad

Ladies™ Website. This includes the daily updates, server management

and administration, and online user experience.

3. Designer/Designs Coordinator – is in charge of generating designs for

the clothes to be put on sale. He/She shall be in charge of developing

Owner/Manager

Web Administrator

Designer/Designs

Coordinator

Sales and MarkeIng Officer

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themes and designs, and selecting designs contributed by website users

to be submitted to the manager for approval.

4. Sales and Marketing Officer – is in charge of setting sales goals for the

company, and developing strategies and action plans to achieve the

same. He/She shall also be in charge of conducting various activities to

market and promote the business to the general public.

Business Flowchart (Customer)

The business flowchart with customer orientation:

• Customer enters the Fad Ladies website

Customer Entry

• Customer navigates through the website. • Customer chooses items to purchase • Customer buys the item.

Customer Engagement • Customer agrees to Terms

and CondiIons • Customer provides payment and shipping details. • Customer exits the site.

Customer Exit

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Business Flowchart (Operations)

Designer compiles designs for the month

or season.

Manager approves designs and sends to

the plant for producIon.

MarkeIng and Sales Officer conducts promoIon and

markeIng efforts pre-‐launch.

Products are launched and displayed on the website for sale.

MarkeIng and Sales Officer conducts the

inventory and adherence to sales goals, and develops

strategies based on the result.

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Business Flowchart (Financial)

Planning

• Designer/Design Coordinator compiles designs for the next month or season together with materials specificaIons and submits to owner/manager for review. • Owner/Manager calculates cost to produce the designs at quanIIes set for sale and sends to the producIon plant to begin producIon. • MarkeIng and Sales Officer calculates suggested retail price of all items based on target revenues, markeIng and promoIon costs, and operaIng and capital expenses.

OperaIons

• MarkeIng and Sales Officer calculates revenues from sale at the end of each week and month, and submit to Owner/Manager for review. • Owner/Manager creates a Profit & Loss Statement, classifying all costs related to producIon and administraIon of the business which includes site maintenance, salaries and wages, cost of producIon, capital pay up, and other expenses .

RecapitalizaIon

• Should there be a surplus aZer the Profit & Loss Analysis, owner/manager may select to keep surplus or roll it over to serve as addiIonal capital for the business.

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Salaries & Wages

Salaries and wages consist of 60% of all expenses. The timely disbursement of

salaries and wages must not withstand the establishment’s performance to

prevent any disputes and legal action.

In determining salaries and wages, a sole proprietorship business considers the

current and future business climates, salary regulations in the city and country

where the business is situated, hiring and training costs, and experience of the

employee.

Considering the distinct nature of a sole proprietorship enterprise where the

owner and the business share the same business identity under the law, all

profits of the business technically belong to the business owner. However, Fad

Ladies Enterprises Owner/Manager Diana Seo will receive a separate monthly

salary. The salary for Designer/Designs Coordinator has been pegged close to

the Sales and Marketing Officer as no data is available, but their work is similar in

nature and scope.

Salaries provided in the table have been based on the report entitled “Guide to

China” published by J.M. Gemini Personnel Ltd in 2013.M

POSITION SELECTION QTY. EMPLOYMENT STATUS

MONTHLY SALARY

Manager N/A 1 Full-Time RMB 13,000.00

Web Administrator Hiring 1 Full-Time RMB 9,000.00

Designer/Designs Coordinator Hiring 1 Full-Time RMB

8,000.00 Sales and Marketing Officer Hiring 1 Full-Time RMB

8,000.00

Projected Monthly Cost of Salaries RMB 38,000.00

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MARKETING AND SALES STRATEGIES

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CHAPTER 5

Marketing and Sales Strategies

Market Description

Fad Ladies’ market is comprised of individuals, aged 60 and above, mostly

female who are retired and possibly living alone or in the care of relatives or

other guardians, with a capability to spend at least Three Thousand Chinese

Yuan Renminbi every month for the purchase of clothes and other accessories.

Fad Ladies serves the elderly women market almost exclusively, being the

pioneer provider of clothing products and devices designed for women of

standard and special needs lifestyles. With a projected increase of the ageing

population in the coming decades, Fad Ladies posits itself to be China’s leader in

the design and sale of adaptive clothing for women of advanced age, that

address their situation’s specific requirements for style and comfort.

While adaptive clothing has come as part of the mainstream clothing industry in

the Western World, mainly due to the reality that most people aged 60 and above

are residing in assisted-living facilities, Fad Ladies has decided to pioneer this

niche product in China to give elderly Chinese, and Asian, women an opportunity

to continue to be fashionable despite the grueling remands of old age. As our

mission plainly states - to provide clothes for elderly women that combines the

design aesthetics of the East and the functionality of the West.

Distribution Channel

Fad Ladies’ distribution channel is its website, http://www.fadladies.com.cn,

which shall be launched online in 2014. The website shall be at the public

domain and shall be accessible to all users, regardless of their location.

The distribution channel shall have the following features:

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1. An online catalogue that shall contain all designs currently in stock, and

those designs available for pre-order;

2. An online shopping with integrated payments system that allows

customers and users to pay for their items online using various payment

methods (credit and debit cards, bank checking accounts, and online

money transfer services like Alipay, TenPay, 99Bill, and ChinaPNR) and

indicate place of delivery.

3. A blog where the company’s team’s and other writers’ works may be

published, with articles mostly related to the elderly clothing industry; and

4. A Live Support Ticketing System that allows users and customers to

have their real-time use and purchase issues sent and resolved (e.g.

ZenDesk and FreshDesk).

The 7C’s Marketing Mix: Fad Ladies – Consumer Centered Orientation

MIX/COMPONENT DESCRIPTION

C1 - Company

Competitors – online competitors include Buck & Buck (www.buckandbuck.com), IZ Adaptive Clothing (www.izadaptive.com), and Silvert’s Adaptive Clothing and Footwear (www.silverts.com). Currently, there are no brick-and-mortar stores offering adaptive clothing in China. Organization – Fad Ladies Enterprises is a sole proprietorship enterprise owned by Diana Seo, with the goal of pioneering the adaptive clothing device in China. Stakeholders – the industry’s stakeholders include the elderly community/market, clothing items manufacturers and distributors, the government, and other fashion designers based in China

C2 - Commodity Fad Ladies offers standard and adaptive clothing devices for elderly Chinese women. Adaptive clothing devices include:

o Senior Clothing o Wheelchair-Ridden Clothing o Arthritic Clothing o Adaptive Sports Wear for Senior Women

C3 - Cost Capitalization – Fad Ladies’ total capitalization amount is at THREE HUNDRED THOUSAND CHINESE YUAN RENMINBI (RMB 300,000.00 = appx. US$ 50,000.00).

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Capital shall be raised through equity from the owner and loan facilities to be secured from various financial institutions in China. Price Positioning – Fad Ladies’ price positioning is pegged at range of THREE HUNDRED FIFTY to FIVE HUNDRED CHINESE YUAN RENMINBI (RMB 350.00 – 500.00 = appx. US$ 60.00 – 80.00). Cost to Change Providers – there is no cost associated with the customer’s choice to change to another provider as most adaptive clothing stores are online and requires no subscription fees to access.

C4 - Channel Fad Ladies, as a products provider, sells the items directly to its customers online. All clothes are ready-to-wear (RTW) and currently has no provision for made to order clothing. There is also currently no physical store where the product is sold in China.

C5 - Communication

Fad Ladies positions its communication strategy on the need for provide elderly Chinese women with fashionable and functional clothing at a mid-range cost.

C6 - Consumer

Compass Model Analysis: Needs – the target market needs clothing devices that is both fashionable and functional; one that addresses the special demands of old age. Wants – the target market wants clothes that will identify them as the new face of active ageing in China; wearing clothes that fit the fashion of their generation and allows them to continue normal tasks and activities with ease. Security – the security requirement of the market concerns payments made online, as the products are exclusively sold online. Any person engaged in online purchase is subject to potential deeds of fraud. Education – the target market possess a high school, vocational, and college education.

C7 - Circumstances Compass Model Analysis: National/International Circumstances – the consumer’s spending power is not directly affected by national and international circumstances. Weather – China enjoys the four seasons and clothing choices may be affected by seasonal demands. Social/Cultural Circumstances – over the recent years, China has adopted the taste of the West in clothing and

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fashion, with numerous Western brands entering China’s stores. This gives China’s booming fashion professionals with opportunities to introduce their new age designs to a more open market. Economic Circumstances – the macroeconomic downturn in China does not significantly affect the purchasing decisions of the market as most of them are not part of the active workforce anymore.

Sales Strategy

Fad Ladies’ sales strategy is anchored on its mission of providing elderly

Chinese women with fashionable and functional clothing. In this line, the

following initial sales strategies shall be adopted to penetrate the target market

and generate revenue:

1. Seasonal Promotions – based on the climate conditions in mainland

China, there will be clothing designs set for each season (summer,

autumn, winter, and spring collection) which will give the target market a

variety of options.

Strategy Frequency: Seasonal

Decision Maker: Designer/Design Coordinator

Sales and Marketing Officer

2. Sale – based on the flow of new designs and availability of old ones, Fad

Ladies may impose discounts on excess stock items.

Strategy Frequency: Seasonal

Decision Maker: Sales and Marketing Officer

Owner/Manager

3. Annual Fashion Show – in promoting the line of clothing to the greater

Chinese market, Fad Ladies™ shall be participating in major fashion

events across China and shall be holding its fashion shows and

exhibitions across major cities in China.

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Strategy Frequency: Annual

Decision Maker: Sales and Marketing Officer

Owner/Manager

Expansion Plans

Fad Ladies’ clothing line will initially be available sole on the Fad Ladies

Enterprises website. The website shall house a catalogue of all the items sold

and the means of payment. However, as indicate in the company’s vision

statement, “to be China’s leading designer, manufacturer, and distributor of

clothing devices and accessories for elderly females with boutiques in the cities

of Shanghai, Beijing, Hong Kong, Macau, and in China Town districts of major

cities around the world by 2019.”

Relative to the performance of the business, Fad Ladies has identified this

expansion and development glide path:

Year No. of Years from Startup Expansion Goal

2015 1

Offer Fad Ladies™ through other China-serving shopping websites and online shops such as TMall™ (www.tmall.com) and Zipia™ (www.zipia.net) through the company’s in-house sales team and by accredited sellers.

2017 3 Offer Fad Ladies™ to the world market by placing inventory and catalogue through online shops of countries with significant Chinese populations.

2018 4 Open the first Fad Ladies™ Clothing Store in the YueXiu District of Guangzhou, China to cater to the city’s elderly market.

2019 5 Open the second Fad Ladies™ Clothing Store in the HuaiHai Road district of Shanghai, China to cater to the city’s elderly market.

2019 5 Offer an expanded product line including clothing for active paraplegic and quadplegic mid-aged women, that shall be available online and at its stores.

2020 6 Open the third and fourth branch of Fad Ladies™ Clothing Store in Beijing and Hong Kong to cater to the city’s elderly market.

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FINANCIAL MANAGEMENT

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CHAPTER 6

Financial Management

Capitalization

Fad Ladies Enterprises has pooled a total capital of THREE HUNDRED

THOUSAND CHINESE YUAN RENMINBI (RMB 300,000.00). Such amount

shall be utilized for the start up expenses.

Startup Cost (Projection Phase)

Startup Expense Projected Amount Description of Expense

Permits, Licenses, and Franchises RMB 1,647.07

Permits to be used to file the documents related to establishing the business in Guangzhu City, PROC

Website Expense RMB 62,000.00 Expense related to the design, development, encoding, and launch of the website

Employee Salaries Costs RMB 114,000.00

Projected cost of salaries and wages of all employees of the establishment pooled for three (3) months

Marketing and Advertising Costs RMB 30,000.00 Projected cost for marketing, advertising,

and branding the establishment.

Inventory RMB 100,000.00 Projected cost of inventory for the company equivalent to three (3) months.

TOTAL RMB 307,647.07

Monthly Expense Statement Projection

EXPENSE STATEMENT Fad Ladies Enterprises

FAD LADIES WEBSITE (www.fadladies.com.cn)

Expense

Code Expense Type Remarks Amount

EX-001 Salaries and Wages

Cost Associated with the Payment of Salaries and wages for employees directly working for Barcode and outsourced personnel.

RMB 38,000.00

EX-002 Website Administration

Cost Associated with the maintenance and RMB 3,000.00

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management of the website which includes bandwidth payment, domain payment, and the like

EX-003 Inventory Replenishment

Cost Projected for Monthly Replenishment of Clothing Items Produced

RMB 50,000.00

EX-004 Capital Recovery Cost Cost Associated with the Recovery of All Capital

RMB 12,800.00

EX-005 Miscellaneous Expenses

Cost Allocation for Unanticipated Expenses RMB 3,000.00

TOTAL RMB 106,800.00 Pricing Principle

Fad Ladies shall price its items pursuant to the recommendation of Elizabeth

Wasserman’s six (6) factors of pricing, namely:

1. Actual product costs, including labor and cost of marketing/sales;

2. Operating expenses to own and operate the business;

3. Cost of borrowing money (debt service expense);

4. Salaries and wages;

5. Recovery of Capital; and

6. Capital for future expansion and replacement of fixed assets.

Another pricing consideration that must be taken into account is taxes. The

company must ensure that their prices reflect current taxes and fees assessed by

their city, state, and national governments.

In managing price changes, Fad Ladies shall comply with the recommendation of

Wasserman, which are the five (5) considerations, namely:

1. Market’s willing amount to pay; 2. Market’s perception of the company and the product; 3. Competitors’ Pricing; 4. Visibility of the product and volatility to comparison; and 5. Estimated volume of products to sell.

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APPENDIX

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APPENDIX 1 POPULATION PYRAMID – PEOPLE’S REPUBLIC OF CHINA

Source: The United Nations Population Division

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APPENDIX 2 OVERVIEW OF INTERNET USERS – PEOPLE’S REPUBLIC OF CHINA

Source: Go-Globe Dubai

Number Of Internet Users In China 591 Million Penetration rate 42.1% Internet growth rate 9.9% Mobile internet users 460 million

Mode of Internet Access Desktop computers 70.6% Notebooks 45.9% Mobile devices 74.5%

Internet Users By Gender Gender % Men 55.8 Women 44.2

Internet Users By Age Age % Less than 19 years old 25.7 20-29 years old 30.4 30-39 years old 25.3 40-49 years old 12.4 Older than 50 years 6.2

Users By Area

Users in urban areas 72.4% 408 million Users in rural areas 27.6% 156 million

Users By Access Point

Home 91.7% Internet café 22.4% Office 32.4% School / University 15.7% Public facilities 13.3%

Users by Activities

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Activity # of users % of users Instant messaging 468 million 82.9% Search 451 million 80.0% Music 436 million 77.3% Blogging 373 million 66.1% Video 372 million 65.9% Gaming 336 million 59.5% Micro-blogging 309 million 54.7% Social Networks 275 million 48.8% E-mail 251 million 44.5% Online shopping 242 million 42.9% Reading books 233 million 41.4% E-banking 221 million 39.3% Online payment 220 million 39.1% Forums/BBS 149 million 26.5% Travel booking 112 million 19.8% Group shopping 83 million 14.8% Online stock investment 34 million 6.1%

Top Websites in China

Website Monthly Visits tmall.com 432,456,034 jd.com 311,917,568 51buy.com 130,461,270 yihaodian.com 104,629,174 amazon.cn 78,556,254 1mall.com 73,101,821 suning.com 70,096,761 dangdang.com 54,498,868 jumei.com 48,519,033 vancl.com 36,070,466

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APPENDIX 3

ONLINE SHOPPING TRENDS – PEOPLE’S REPUBLIC OF CHINA

Source: PayVision™

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APPENDIX 4

THE VALS 2 MODEL – VALUES, ATTITUDES, AND LIFESTYLES MODEL

Source: Standard Research Institute

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1. Innovators/Actualizers - Innovators are successful, sophisticated, take-

charge people with high self-esteem. Because they have such abundant

resources, they exhibit all three primary motivations in varying degrees.

They are change leaders and are the most receptive to new ideas and

technologies. Innovators are very active consumers, and their purchases

reflect cultivated tastes for upscale, niche products and services.

Image is important to Innovators, not as evidence of status or power but

as an expression of their taste, independence, and personality.

Innovators are among the established and emerging leaders in business

and government, yet they continue to seek challenges. Their lives are

characterized by variety. Their possessions and recreation reflect a

cultivated taste for the finer things in life.

2. Thinkers/Fulfilled - Thinkers are motivated by ideals. They are mature,

satisfied, comfortable, and reflective people who value order, knowledge,

and responsibility. They tend to be well educated and actively seek out

information in the decision-making process. They are well-informed about

world and national events and are alert to opportunities to broaden their

knowledge.

Thinkers have a moderate respect for institutions of authority and social

decorum but are open to consider new ideas. Although their incomes

allow them many choices, Thinkers are conservative, practical

consumers; they look for durability, functionality, and value in the

products that they buy.

3. Achievers - Motivated by the desire for achievement, Achievers have

goal-oriented lifestyles and a deep commitment to career and family.

Their social lives reflect this focus and are structured around family, their

place of worship, and work. Achievers live conventional lives, are

politically conservative, and respect authority and the status quo. They

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value consensus, predictability, and stability over risk, intimacy, and self-

discovery.

Documents

Business Plan - Fad Ladies Version 2.0