Executive Summary
Nature's Candy is an e-commerce company designed to become the market leader in Web based sales of naturalistic and homeopathic nutritional supplements. The company is located in Portland, OR. Although many Internet companies have recently failed, the Internet is still poised to support e-commerce retailers. Most of the dot-coms failed because of too easy access to capital and unproven business models with no true revenue streams. Nature's Candy will overcome these problems with an easy-to-use website and an efficient distribution system.
In the next three years Nature's Candy intends to create an icon e-commerce brand through laser-focused marketing and will grow to $319,000 in revenue.
1.1 Objectives
Nature's Candy's objectives for the first three years are:
- To make Nature's Candy an icon brand.
- To develop an effective, well placed e-commerce site for sales of homeopathic and naturopathic products.
- To launch a laser-focused marketing campaign in a controllable and measurable market that will drive customer's toward the company's website.
- To create an infrastructure for the fulfillment of Web-based sales.
1.2 Mission
Nature's Candy's mission is to provide the finest in natural supplements using the Internet to lower the consumer's cost. We exist to attract and maintain customers. When we adhere to this maxim, everything else will fall into place. Our services will exceed the expectations of our customers.
1.3 Keys to Success
Nature's Candy's keys to success are:
- Marketing.
- Web design.
- Product quality.
- Service.
Company Summary
Nature's Candy's goal is to become the e-commerce market leader in sales and marketing of naturopathic and homeopathic dietary supplements.
2.1 Start-up Summary
Nature's Candy will incur the following start-up costs:
- Legal fees for the business formation.
- Office supplies.
- Web development.
- Telephone line installation.
- Desk, chair, filing cabinets.
- Shelving units for inventory storage.
- Computer system with Microsoft Office, QuickBooks Pro, CD-RW, printer, and a broadband Internet connection.
Start-up Requirements
Start-up Expenses
Legal $1,000
Stationery etc. $200
Web Development $10,000
Total Start-up Expenses $11,200
Start-up Assets
Cash Required $65,600O
other Current Assets $0
Long-term Assets $3,200
| TOTAL ASSETS | $68,800 |
| Total Requirements | $80,000 |
| Start-up Expenses to Fund | $11,200 |
| Start-up Assets to Fund | $68,800 |
| TOTAL FUNDING REQUIRED | $80,000 |
| Non-cash Assets from Start-up | $3,200 |
| Cash Requirements from Start-up | $65,600 |
| Additional Cash Raised | $0 |
| Cash Balance on Starting Date | $65,600 |
| TOTAL ASSETS | $68,800 |
Liabilities
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| TOTAL LIABILITIES | $0 |
Planned Investment
| Quack | $45,000 |
| Stewart | $35,000 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| TOTAL PLANNED INVESTMENT | $80,000 |
| Loss at Start-up (Start-up Expenses) | ($11,200) |
| TOTAL CAPITAL | $68,800 |
| TOTAL CAPITAL AND LIABILITIES | $68,800 |
| Total Funding | $80,000 |
2.2 Company Ownership
Nature's Candy is a privately held Oregon corporation. Quack Vendor will be the majority owner. The company intends to recruit a sophisticated team of owner board members. The board members will be granted shares of stock to provide an incentive for their performance on the board.
Products
Nature's Candy will market and sell private label (manufactured by a company that places the retailer's name on the packaging) naturopathic homeopathic dietary supplements to individual consumers via the Internet. These products will include ginseng, ginkoba, and various antioxidants. After year one additional products will be offered.
Market Analysis Summary
The market for vitamins and nutritional supplements has grown to over $6.5 billion annually. Herbal sales alone are growing by 20% per year. This market is lead by the aging Baby Boomer who is concerned with his/her mortality. Also, there has been a paradigm shift of perception of nutritional supplements. Homeopathic and naturopathic products are seen as normal. In addition, positive medical results from major studies have further legitimized these products.
4.1 Market Segmentation
A significant trend in America, and abroad, is that people are taking a more proactive interest in their health. This is exemplified by the increase of health clubs and health club memberships. People are looking to avoid invasive surgery and powerful pharmaceuticals. People are taking an active role in the maintenance of their health and practicing preventive medicine. Naturopathic medicine promotes the diagnosis, treatment, and prevention of human disorders through the use of non-invasive, non-pharmaceutical products and practices. In 1993, the United Stated government recognized this trend when it established the Office of Alternative Medicine.
Besides the general development of naturopathic medicine, the aging of the American population is a significant trend driving the use of naturopathic and homeopathic health supplements. The Baby Boomers are now reaching middle age and mortality is becoming a focus. This demographic segment, which is comprised of 80 million people, represents over 50% of our county's discretionary income. It is reasonable to believe that this wealthy market segment will continue to grow the sales of naturopathic products.
Another global trend is the emergence and popularity of e-commerce. Brand-focused Web retailers that can provide quality products, customer service, information, and the intangible, emotional buy-in by the customer are becoming hugely successful. E-commerce retailers have an advantage in that "Unlike traditional retailers, Web-based sellers are not slowed by the friction of store growth and local marketing" (J.W. Gurley, Fortune, 1/11/98). In addition, e-commerce companies do not have the excessive overhead of a traditional brick and mortar retailer. As seen by the recent success of Amazon.com and Gap.com, consumers are comfortable buying online and will pay for convenience. Experts predict Web sales to grow to $12 billion by 2003.
This enthusiasm about the Internet is not irrational but grounded in reality in light of the recent market crash of Internet retailers. The recent Internet crash was based on too-easy access to capital invested into retailers and other dot-coms without reasonable business plans or revenue models. Regardless of the recent fallout, the Internet is a very efficient marketing and distribution model that if done right, significantly decreases costs of serving the consumer. Nature's Candy will harness these efficiencies and will grow intelligently unlike other .dot-coms that became dot-bombs.
4.2 Industry Analysis
The nutritional supplement market is a semi-mature market characterized by high-growth rates, medium barriers to entry, and a few large competitors. Despite the competition in the market, many companies have reported annual growth levels of 30%. The market leaders are as follows:
- GNC (General Nutritional Companies, Inc.): This company is a nationwide specialty retailer of vitamins, minerals, and sports nutrition supplements. With over 3,000 stores, GNC generated $1.19 billion in 2000.
- Nature's Sunshine Products, Inc.: Nature's manufactures and markets a variety of health supplements. This multi-level marketing company had 2000 revenues of approximately $370 million.
- Rexall Sundown, Inc.: Rexall develops, manufactures, markets and sells vitamins, nutritional supplements, and consumer health products through retailers, independent distributors, and mail order. Rexall had 2000 revenues of approximately $370 million.
- International Vitamin Company, Inc.: IVC manufactures, packages, sells, and distributes private label vitamins and nutritional supplements to drug stores, supermarkets and health food stores. IVC had revenues of $107 million in 2000.
The primary channels of distribution in this market are:
- Mass market retailers (Fred Meyer, Rite Aide).
- Direct Sales organizations.
- Health Food Stores (GNC).
- Mail order catalogs and the Internet.
4.2.1 Competition and Buying Patterns
Within the mass market retailer channel, the three main primary vitamin and supplement product categories are national brands, broad-line brands, and private label brands. The national and broad line brands consist of 60% of the domestic market, which the private label brands account for the remaining 40% of the market.
National BrandsExamples: Centrum, One-A-Day.
Generally do not provide a full line of vitamins or other supplements.
The product formulas are conservative and generic in nature.
Generally do not provide a full line of vitamins or other supplements.
The product formulas are conservative and generic in nature.
Broad-line Brands
Examples: Rexall Sundown, GNC's Nature's Fingerprint, Country Life.
Full lines of produce under one brand.
Manufactured by company.
This is the market segment where most of the product development and innovation occurs.
Stronger potencies and cutting edge ingredients.
Highest price.
Examples: Rexall Sundown, GNC's Nature's Fingerprint, Country Life.
Full lines of produce under one brand.
Manufactured by company.
This is the market segment where most of the product development and innovation occurs.
Stronger potencies and cutting edge ingredients.
Highest price.
Private Label Products
Examples: NatureMed.
Under retailer's name.
Smaller line of products than broad-line brands.
Manufactured by a third party.
More conservative potencies than broad line.
Tend to be the cheapest.
Examples: NatureMed.
Under retailer's name.
Smaller line of products than broad-line brands.
Manufactured by a third party.
More conservative potencies than broad line.
Tend to be the cheapest.
Strategy and Implementation Summary
Nature's Candy's strategy is based on capturing a small percentage of the growing homeopathic and naturopathic supplement market share through Web sales.
Also, Nature's Candy intends to create a premier brand, so that they can eventually capture market share across broad geographic lines.
5.1 Competitive Edge
Nature's Candy's competitive edge will be their easy-to-use website and superior customer service. The website design will be a competitive advantage because research indicates that an easy-to-use website significantly increases sales. The design of Nature's site will encourage purchases because it is so easy and quick to make the purchase. Too often sales are lost because of complex websites that are far from intuitive.
Nature's Candy's other competitive edge is superior customer service. The mantra of the customer service department is to serve the customer in any way required. Customers that call in with problem/issues will be amazed at the amount of personal attention they receive and how quickly issues are not only resolved, but significantly improved. This will be a powerful asset.
5.2 Marketing Strategy
Nature's Candy is focused on the merging/redefined Internet marketplace. The users will be Baby Boomers, which represent approximately 50% of the discretionary income currently in the United States. They are looking for proactive, non-invasive, and non-pharmaceutical ways to stay healthy as they age. Nature's Candy can bring these people cutting-edge products coupled with convenience and service.
The long range goal of Nature's Candy is not only to dominate the naturopathic and homeopathic supplement market, but to create an icon brand. Initially the company will:
- Engage in Web-based marketing for the next year to generate awareness of the company and product information. Because Internet based advertising has declined in recent quarters, the prices for advertising have consequently significantly dropped making the expenditure more cost effective.
- Engage in outdoor advertising providing general awareness to the public at large and direct individuals to the company's website.
5.3 Sales Strategy
Nature's Candy will process 90% of it's sales online through a secure socket layer (SSL), an secure Internet connection. All orders will be charged to Visa, Mastercard, or American Express.
By ensuring that the website is easy to navigate as well as simple to order from, Nature's Candy will be ensuring that people who make it to the website will end up purchasing something. This last point is key. Research indicates that too many sites that are not easy or intuitive lose customers who migrate through the site, often putting products in their basket, yet leave without purchasing anything.
5.3.1 Sales Forecast
The first month and a half will be used to develop and ready the site. There will be no sales. From month two on, Nature's Candy expects a gradual rise in sales.
5.4 Milestones
Nature's Candy will have several milestones early on:
- Business plan completion. This will be done as a roadmap for the organization. This will be an indispensable tool for the ongoing performance and improvement of the company.
- Office set up.
- Website completed.
- Complete hiring of the initial company personnel.
Web Plan Summary
Nature's Candy will use their website as their catalog and ordering device. The website will be a complete product offering as well as to provide company information.
The website will be designed with simplicity in mind. It is imperative that customers are able to navigate throughout the site intuitively with no problems. Nature's Candy will be benchmarking websites such as Amazon's to develop a best practices for the different elements of the site.
A phone number will be offered on the website to remedy and problems that customers encounter.
6.1 Website Marketing Strategy
The website will be marketed through search engines such as Yahoo and Google. In addition to advertisements on search engines, Nature's Candy will advertise with websites that have similar customer demographics like REI.com, an outdoor retailer. The cost of Internet advertising has dropped significantly with the collapse of so many dot-coms that it has become quite cost effective.
6.2 Development Requirements
Stew Wachit will be responsible for site development. Stew will be hiring a programmer to assist him starting month one.
Management Summary
Quack Vendor, president and founder. Quack worked for Arthur Andersen until qualifying for his CPA credential. He left Arthur Andersen to become operations manager at Nautilus Footwear, a niche footwear start-up. His duties included general office management, finance manager, and jack-of-all-trades. Quack has gained useful insight into the supplemental industry through in-depth conversations with his father, a naturopathic physician. He received his BS from the University of Oregon.
Stewart Wachit, technology officer. Stew worked at Imagina for two years where he specialized in C++ and HTML/XML programming. Stewart left Imagina to become a Web database developer at Systems Management Incorporated, specializing in ColdFusion and JSP. He received his BS from the University of Pittsburgh.
There are important gaps as follows:
- Customer service representative/manager.
- Distribution/warehouse manager.
- Advisory board.
7.1 Personnel Plan
Quack and Stewart will be on the payroll starting month one and a customer service agent and distribution agent will be hired for month two.
One programmer in addition to Stew will be hired in month one.
8. Break-even Analysis
The Break-even Analysis indicates that $24,248 will be needed in monthly revenue to reach the break-even point.
8.1 Projected Profit and Loss
The following table will indicate projected profit and loss.
8.4 Projected Cash Flow
The following chart and table will indicate projected cash flow.
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