Radical Downhill seeks to expand its sales by launching an e-tailing website to offer customers custom-made skis and snowboards, car rack systems and locally made arts & crafts. Marketing Objectives Radical Downhill enjoys current gross sales of $1,700,000 per year. Its business is seasonal and most of the money is made in the six-month period from November through April. Radical Downhill has developed a unique relationship with a local manufacturer of custom-made skis and snowboards. Radical Downhill has exclusive distribution rights for these skis and snowboards for a five-year period and an option or another five years. They have other opportunities to market an innovative car rack system and to act as brokers for local artisans.
Radical Downhill wants to expand its sales through Internet marketing and intends to focus on the extreme alpine sports niche, the same niche that it serves at its store. Its goal is to increase gross sales by 30 percent in the first year and incrementally in subsequent years. Products or Services Although Radical Downhill stocks hundreds of items in its retail store, it intends to focus its e-tail efforts on three new opportunities: custom-made skis and snowboards ND accessories, an innovative new car rack system and local arts and crafts. The custom-made skis and snowboards are high quality, high performance items. They are the Propose or Lampooning of the ski industry. Radical Downhill has contracted with the manufacturer to use the shop name as the brand name.
The car rack system is superior to anything on the market, and, through an innovative manufacturing break-through, retails for half the price of the industry leader. It is made of composite materials, effortlessly mounts to a wide variety of cars, vans, and trucks, and makes changing configurations a breeze. Finally, by virtue of its location in an artistic mountain community, Radical Downhill has entered into consignment agreements Witt local artisans to sell e r arts & carats via the Internet. Some to most popular items are the trinkets, necklaces, and Jewelry made of silver and turquoise. A local artist designed Radical Downhill's brand symbol, a snowboard featuring a Mohawk haircut and prominent piercing studs.
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Resources Needed Radical Downhill is seeking a capital infusion of $200,000 in order to develop, implement, and promote an online website in order to sell these items to the national and international marketplace. This $200,000 loan will be paid back in five years including interest. The company has the management expertise to accomplish the plan but will need to hire outside consultants to develop, debug and post the website. To offload much of the start-up expenses, Radical Downhill plans to completely outsource the development, hosting, and operation of its website. Projected Outcomes We expect to increase our gross sales by $510,000 in the first year. In the second year and beyond, we expect to increase gross sales by between 25 and 30 percent per year. The payback schedule for the $200,000 is five years.
In addition to specific uncial objectives, we intend to become the premier extreme alpine sports website in North America and the world. Our online e-tail site will also serve to increase traffic to our retail store. By building brand awareness, name, and equity, Radical Downhill desires to become a destination store - one to which its clientele enjoys traveling. Company Description Radical Downhill was started in 1991 by expounders Robert and Julie Gonzales to cater exclusively to extreme mountain sports enthusiasts. Radical Downhill sells a wide range of skis, boots, bindings, snowboards, clothing, mountain bikes, climbing equipment and accessories. Radical Downhill is a successful specialty shop.
Its strengths include its location, its personnel, and its products, and service offerings. In addition, Radical Downhill is profitable and generates a positive cash flow annually. Radical Downhill owns the building (4,000 sq. Ft. Of retail space) and property for its retail site and has a small outstanding mortgage. Robert and Julie Gonzales believe that an opportunity exists to expand their trade area through the use of online sales. They want to increase their sales by 30 percent within the next year and incrementally thereafter. They intend to do this by offering custom-made extreme skis, snowboards, car racks and locally made artwork to a global niche market.
Strategic Focus and Plan This section covers three aspects of corporate strategy that influence the marketing plan:
- the mission/vision,
- core competence/sustainable competitive advantage of Radical Downhill.
The mission and vision of Radical Downhill is to market high-quality mountain sports equipment at competitive prices and to provide exceptional support services to the growing niche of extreme sports enthusiasts while providing challenging and attesting career opportunities for employees and an above average return on investment for the owners.
For the coming years, Radical Downhill seeks to achieve the following goals:
- To retain and defend its position as the premier extreme mountain sports retail specialty shop in the western U. S. A.
- To leverage its reputation and image on a national and international basis through tottering its products online through a supplemental Internet marketing effort.
- To remain on the leading edge of mountain sports technology and customer support services.
- To become the rimier website for extreme sports enthusiasts throughout the world.
- To increase gross sales by 30 percent per year over the next three to five years.
- To maximize shareholder equity for the owners.
In terms of core competency, Radical Downhill seeks to achieve a unique ability
- to serve the needs of the growing niche market of extreme mountain sports enthusiasts
- to provide customers with unparalleled levels of quality-oriented, value- added, customer service.
To translate these core competencies into a sustainable competitive advantage, Radical Downhill will work closely with suppliers and employees to ensure that customers receive the highest quality goods and services available in the industry. Situation Analysis Radical Downhill seeks to realistically match its internal strengths with market opportunities that it has identified, while simultaneously minimizing its weaknesses and controlling threats from the external environment.
Internal Factors Strengths:
Radical Downhill's location is key to its success. It has married its success to the explosive growth in extreme skiing and snowboarding - particularly at Big Basin. It serves two groups of customers:
1) the local extreme skiers and snowboarders and refashions,
2) vacation skiers and snowboarders.
The local extreme enthusiasts are the smaller of the two markets. They generally demand a higher quality of product and service. They are "shop loyal" customers, many of which have purchased their equipment and clothing from Radical Downhill for the past 10 seasons. The vacation skiers are "drop-in" customers who need ski rentals, emergency service or clothing and accessories to make their trip to the mountain more enjoyable. Many of the vacationing skiers are remarkably loyal to the small store. Radical Downhill is a family owned business. The owners are former ski instructors who began the shop to service the equipment and clothing needs of their friends. Mr..
Gonzales has an MBA degree and Mrs.. Gonzales has a law degree. A majority of the employees have worked at Radical Downhill for eight years or more. Many are ski instructors or on the ski patrol in addition to working at Radical Downhill. Most are college graduates. The low employee turnover is an asset as it is a plus for customers returning every season to see familiar faces. In addition, because of their length of employment, the employees have in depth product knowledge and experience. Radical Downhill offers high quality ski and snowboard equipment and clothing as well as mid-level and lower-level equipment and apparel for its more price conscious customers.
Since it offers high performance equipment, and employs ski instructors and ski patrolled, Radical Downhill has developed a reputation as THE shop for professional skiers, snowboarders, extreme skiers, and those that strive to become either. The owners of Radical Downhill left their high paying corporate Jobs in San Francisco to pusses a higher quality of life in this mountain "arts" community. Since resettling in the area a decade ago, they nave become fixtures in the local arts and crafts community. Their interaction with the local craftspeople and artisans has blossomed into a business opportunity. They were approached by a local custom ski and snowboard maker and asked to distribute custom-made extreme skis and snowboards to the national and international market. Radical Downhill can make a good margin selling these custom-made items.
They have signed a five year contract to be the exclusive distributors of these skis and snowboards, and an option to extend the agreement for an additional five years. Another local manufacturer has made a technological breakthrough in the engineering and manufacturing of an automobile rack system. These racks retail for half the price of the industry leader, are twice as durable, utilize a more efficient method of changing the racks setup (can easily change from carrying skis to carrying bikes), and attach to any type of automobile without requiring drilling or customization. Finally, the owners of Radical Downhill have agreed to sell locally made arts & crafts for area artists. These items are for sale on consignment, meaning that when they sell, Radical Downhill receives a regenerate of the sales price.
Although Radical Downhill is open for business all year, it is a seasonal business with sales peaking in January and declining rapidly beginning in March. Most of the sales are generated in the six-month period of November to April. Summer sales are mostly to local customers or to seasonal skiers who come to the mountain in the summer to hike or mountain bike. The shop barely breaks even during the off months, and the staffing is reduced to reflect the level of business. Radical Downhill is expanding its selection of mountain bikes to capitalize on the growing demand for ekes and service in the summer months. Even though the business is profitable on an annual basis, its cash flow fluctuates. Each season, the shop relies on credit from its suppliers to replenish stock.
Each fall after sales pick up, Radical Downhill pays the summer bills and hires back the seasonal employees. Cash flow is a problem, especially if suppliers refuse to grant credit. In addition, cash flow and profits are reliant on an uncontrollable factor: snow. Even if there is snow at the mountain, many customers don't think of skiing until they see snow in their backyards. In a good season, the mountain has between 100 and 150 ski days. In a bad season, this can go as low as 70 to 80 days. No snow equals no business. A third weakness is the general decline in the number of skiers. In the industrial growth cycle, the ski industry is in maturity or decline. This is mostly because of the high cost of skiing.
With lift tickets at $50 or more per day and average ski costs exceeding $400 per pair, middle class families can no longer afford to ski. The cost of a ski weekend for a family of five averages about $1 ,OHO when you include lift tickets, lodging, and food (not including remonstration costs). Getting new equipment and clothing for that same family costs anywhere from $2,000 to over $5,000 depending on quality. External Factors Current Opportunities Radical Downhill has an opportunity to be one of the first ski shops to sell custom- made extreme equipment, clothing, and accessories online. Its focus is on the upper income segment of the market. There are currently six competitors offering equipment online.
None of the sites offer much product depth - each has only one or two skis tort sale in limited sizes. An opportunity exists to become the thirst site to otter unique (numbered) series of skis and snowboards to extreme sports enthusiasts internationally. The local craftsman that makes the custom skis and snowboards has agreed to charge Radical Downhill a flat fee for everything produced. Radical Downhill has the freedom to set the retail price. The company that produces the car racks has a Manufacturer's Suggested Retail Price, but the technology is so advanced and the price so low (50 percent of the industry leader's price) that it will be easy to sell. The local artisans are offering their artwork through Radical Downhill via consignment.
Potential Future Opportunities Given the number of ski shop bankruptcies per season and the resultant liquidation sales, a second opportunity exists for Radical Downhill to enter the discount market and to become the first ski discounter online. If Radical Downhill can acquire sufficient inventory, it could launch a new website to sell discount equipment, clothing and accessories. This low-price focus fits well with consumers' expectations of web-based shopping. Radical Downhill must guard against its own brand erosion if it pursues this opportunity. The discount site will be different from the store's main tit and no references to Radical Downhill will be made on the discount ski page.
If the e-tail site proves successful, Radical Downhill will have an opportunity to offer arts and crafts from new artists on its site. Vendors will also be approached to explore the possibility of forming a strategic e-marketing alliance where the vendor provides advertising and sales promotion support for its products being sold on the site. The biggest threat facing Radical Downhill is the trend of global warming and shifting snowfall patterns globally. The number of snow days and the amount of seasonal snowfall is decreasing across North America. Snow drives the industry. Consumers don't think of skiing until they see snow in their back yard. The financial environment also has an impact on industry sales.
The shrinking purchasing power of the middle class and the increased costs of lift tickets and equipment have combined to decrease the total number of skiers. Less than five percent of the U. S. Population participates in skiing or snowboarding. Its image as an elitist sport remains intact. Consumer/Social There are three main geographic regions of the country in which skiers reside. They are the northeast (Pennsylvania and north), the mid-west (Ohio, Michigan, Indiana, Illinois, Wisconsin, and Minnesota), and the northwest (Utah, Colorado, Idaho, Oregon, Washington, and Northern California). Most skiers are suburbanites and have the demographic characteristics presented above.
Trends impacting the industry are the reduced numbers of skiers and the reduced number of days skied by each. Innovations in ski design have made skiing easier for recreational skiers (parabolic skis), but have failed to re-invigorate the sport. Snowboarding is the fastest growing segment of the snowstorm industry and appeals to a younger, more adventurous clientele than does alpine skiing. The reduced number of skiers and of days skied is attributable to the raising cost of skiing, including rapidly raising lift ticket prices. Competitive At the macro-level, there are more ski shops going out to business each year than there are new entrants into the marketplace.
The number one reason for ski shop bankruptcies is the inability to pay suppliers for goods shipped on credit. At the micro-level, Radical Downhill has four competitors within a ten-mile radius of their tore location. One of the competitors is experiencing financial difficulties. The others are surviving. Although there are many ski shops in North America, few are looking to the Internet with an eye for increasing sales. Most are too busy trying to survive season to season. Time, costs, and expertise seem to be the prevalent barriers to entry. And with manufacturers publishing their Manufacturer's Suggested Retail Price (MSP) plus threatening retaliation for deviation from the MSP, there is little to no price competition in the ski industry.
Over time, as the competition becomes more genealogically astute and as web page development and maintenance becomes easier, more competitors will enter the online retail market. However, Radical Downhill will have an established web presence by then along with a dedicated customer base. Technological Ski and snowboard design and manufacturing technology is undergoing dramatic changes. Newly engineered and designed skis are making it easier for recreational skiers to ski proficiently. On the online retailing side, as website development and maintenance software becomes more user friendly, more competitors are expected to enter the online ski retail market. The technology needed to launch the website is minimal.
The computers, a computer network complete with a dedicated server and a DSL high-speed Internet connection are the main components. Our computers will be obsolete within the next three years and will need to be replaced. This is not something that is unique to us. It may make more sense for us to lease our computers and have an upgrade agreement. Using this strategy, we are never more than one or two innovations away from the state of the art in computer systems. While no one on our staff has experience developing, posting, and maintaining ibises, Radical Downhill plans to either train ourselves to do this or hire a consultant to provide these services for us.
If we hire a consultant, he or she will need to train others to maintain the system after development and deployment. Economic Current economic conditions exacerbate declining industry revenues by reducing the number of middle-income skiers and snowboarders. The affluent aren't as impacted by the economic downturn, although they are becoming increasingly selective about where they spend their vacation time and money. All signs point to an early economic covers, but uncertainty regarding the rapidity at which the economy will change abounds. Legal/Regulatory There are no foreseeable changes in the legal and regulatory environment and its impact on the snowstorm industry.
Legal and regulatory influences, however, are deemed to be the culprits in driving lift ticket prices out of reach for the average person. Ski areas are torched to charge higher rates every year to cover increasing insurance costs. Litigation against ski areas and ski shops is one of the major causes of bankruptcy in the industry. The burden of skier safety has shifted from the skier to he resort and to the shop responsible for outfitting the skier. Industry Analysis/ Trends The ski/snowstorm industry is in the maturity stage of market development and is possibly heading into decline. According to the National Sporting Goods Association, there were 7. 4 million skiers and 3. 3 million snowboarders in the U. S. In 1999.
These numbers are down from the previous year, a trend that has been consistent for the past three years. In terms of dollar volume, the alpine ski industry had $793 million in sales in 1999 and the snowboard industry had $184 million in sales for the same period. No single ski shop has more than one percent of the total market share. With gross sales of $900,000 per year, Radical Downhill is a minor player in the ski industry. However, with ski shop bankruptcies at an all time high, Radical Downhill is a profitable exception in its industry. To gather more information about the ski industry as a whole and the characteristics of ski and snowboard customers, the National Sporting Goods Association's website at http://www. Nags. Org was searched.
While much of the information is available for free, access to the in-depth reports requires a membership. Macro-level information such as the total number of skiers and snowboarders in the U. S. Age seven and older (10. 7 million) and the total industry sales for skis and snowboards ($976. 5 million) is available for free. Core Competency Comparison Competitor Analysis There are four competitors within ten miles of Radical Downhill, one of which is the area shop (the ski shop in the ski lodge at the base of the mountain). The total number of skiers coming to the ski area each year is declining and the amount of time that they stay at the area is declining as well.
The exception to this trend is the addict ski and snowboard segments, both of which are experiencing growth. Of the four competitors, three are financially stable and one is in trouble with its suppliers. The total size of the local market for ski and snowboard equipment, clothing, and accessories is estimated to be about $3 to $5 million per year. Radical Downhill is the second largest shop in terms of gross sales. It is positioned to gain local market share should one of its competitors goes out of business. In addition, it may be able to gain some inventory for a bargain if its competitor goes out of business. Local growth for Radical Downhill therefore depends on the demise of its competition rather than an expansion of demand.
However, Radical Downhill plans to expand its market by becoming the worldwide distributor of custom-made skis and snowboards and automobile racks. To provide management with a concise comparison of its retail competition, the following table was developed. The husband and wife team that expounded Radical Downhill in 1991 has 40+ years of experience between them in the ski industry, mostly however as ski instructors. Both are highly educated professionals and nave played key roles in the management of Radical Downhill. They are being advised by an advisory board consisting of upper level managers (former colleagues) who remained in industry. Currently Radical Downhill competes in the mountain sports industry on a local basis.
It is the number one performing specialty shop in its market and seeks expand its reach too national and international audience. The company uses existing distribution channels to supply its store and has an opportunity to partner with the local custom production market to develop "mass-customized" products for the extreme mountain sports market. Customer Analysis Consumers of ski and snowboard equipment, clothing, and accessories tend to be upscale and outdoor oriented. They purchase equipment infrequently and therefore seek durability in addition to performance. Many of these consumers are brand loyal, with parents, friends, and role models being the main influences on brand preference. On average, consumers spend seven days or less skiing per season.
Many schedule their family ski holiday to coincide with the week between Christmas and New Years. Skis and snowboard equipment, clothing, and accessories are specialty goods and the suppliers use either selective or exclusive distribution. This means that shops in close proximity may not offer the same products or mix of products depending on the supplier's distribution strategy. Radical Downhill's customers tend to be at the upper end of either the financial continuum or of the dedication-to-skiing continuum. That is, they are either financially well off or highly dedicated skiers. They are able and willing to pay for the best in quality and service. Radicals customers are unique because of their commitment to leading edge technologies.
Every season, they have to have the best products available. They stay informed by reading ski and snowboard-oriented consumer magazines and by liking to "experts" such as ski instructors. In addition, they are thrill-seekers who enjoy pushing their limits and capabilities on the mountain. The extreme ski and snowboard crowd has a unique sense of Joe-De-vive. Their motto is "live for the moment. " Demographics In terms of demographics, skiers and snowboarders tend to be between the ages of 25 to 34 (35. 6 percent), male (70. 8 percent), have household income in excess of $50,000 per year (51. 6 percent), and are college graduates (43. 4 percent).
These characteristics (professional male college graduates) mirror the characteristics of happily Internet users. Extreme skiers and snowboarders tend to be between the ages of 16 and 28. Most are male (75 percent) and live in households with income in excess of $50,000 per year. Ego-demographics demographic characteristics presented above. Chirography's Skiers and snowboarders tend to share a love of outdoor activities and seek the adrenaline rush of conquering the mountain. Extreme skiers and snowboarders enjoy pushing the envelope more than do recreational skiers. They live hard, play hard, and party hard. They are hedonistic and live for the moment. Extreme skiers
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