Feasibily report to start a boutique ( Strategic Marketing of textile business).

8/14/2019 Feasibily report to start a boutique ( Strategic Marketing of textile business).

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Pre-Feasibility Study

BOUTIQUE

(Women Designer Wear)

Small and Medium Enterprise Development Authority

Government of Pakistan

www.smeda.org.pk

HEAD OFFICE

Waheed Trade Complex, 1stFloor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA LahoreTel: (042) 111-111-456, Fax: (042) 5896619, 5899756

[email protected]

REGIONAL OFFICEPUNJAB

REGIONAL OFFICESINDH

REGIONAL OFFICENWFP

REGIONAL OFFICEBALOCHISTAN

Waheed Trade Complex,

1stFloor, 36-Commercial Zone,

Phase III, Sector XX,

Khayaban-e-Iqbal, DHA Lahore.

Tel: (042) 111-111-456Fax: (042) 5896619, 5899756

[email protected]

5THFloor, Bahria

Complex II, M.T. Khan Road,

Karachi.Tel: (021) 111-111-456

Fax: (021) [email protected]

Ground Floor

State Life Building

The Mall, Peshawar.Tel: (091) 9213046-47


Bungalow No. 15-A

Chaman Housing Scheme

Airport Road, Quetta.Tel: (081) 831623, 831702


July, 2002


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Pre-Feasibility Study Boutique (Women Designer Wear)

PREF-57/July, 2002/ Rev 01

2

DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject

matter and provide a general idea and information on the said area. All the material

included in this document is based on data/information gathered from various

sources and is based on certain assumptions. Although, due care and diligence has

been taken to compile this document, the contained information may vary due to any

change in any of the concerned factors, and the actual results may differ substantially

from the presented information. SMEDA does not assume any liability for any

financial or other loss resulting from this memorandum in consequence of

undertaking this activity. Therefore, the content of this memorandum should not be

relied upon for making any decision, investment or otherwise. The prospective user

of this memorandum is encouraged to carry out his/her own due diligence and gather

any information he/she considers necessary for making an informed decision.

The content of the information memorandum does not bind SMEDA in any legal or

other form.

DOCUMENT CONTROL

Document No. PREF-57

Revision 1

Prepared by SMEDA-Punjab

Approved by GM Punjab

Issue Date July 31, 2002

Issued by Library Officer


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11 IINNTTRROODDUUCCTTIIOONN11..11PPrroojjeeccttBBrriieeffThe pre-feasibility study focuses on the establishment of women designer wearBoutique including the operations of apparel designing, manufacturing, selling andmarketing. The study has been designed to capture the dynamics of the Boutique

industry, with its many components and possible strategic opportunities.

11..22OOppppoorrttuunniittyyRRaattiioonnaalleeClothing is a beautiful visual demonstration of the social and emotional needs ofpeople wearing it. It also portrays in a clearly understood visual manner, what people

of different cultures and styles want socially. Fashion, through times, has gone

through so many rapid changes and bizarre extremes that it has examples of nearly

every kind of clothing function.However, in a boutique business, the specifications and descriptions of the designs

and clothes are so general that they can fit more than one costume, which actually

are quite different in nature from each other and this is solely dependent on the tasteof the people.

The range of Pakistani dresses is remarkably wide, according to the vast cultures,

geographical differences, purchasing capacities, influence of the western culture, and

bewildering diversities of the ethnic groups. One has, therefore, to sift and isolate,and then relate and bring together, the ideas for creating various designs, which can

fit in the context of the fashion in vogue and the culture in practice.

In reference to Pakistan, the Boutique business is quite in vogue but has yet to beformalized. The market of this enterprise is quite scattered and unorganized. Thereare a few major players in Boutique business and these entrepreneurs have also taken

an initiative based on their caprice and experience in the field of fashion design.

However, there is a massive potential in this field, if one has the ability to design andmarket his/her products through introducing innovative designs both in stitching as

well as the fabric sector.

Furthermore, there is massive export potential in this sector, as the demand of

Pakistani dresses, especially in countries like UAE, USA, and UK, is massive due toa high number of Pakistani expatriates who have settled in these countries. The

Boutique business can also be expanded into a more profitable venture by providing

stitching facilities to other boutiques, which do not own a stitching unit or arelacking this facility.

11..33PPrrooppoosseeddCCaappaacciittyyThe Boutique business capacity is greatly dependent on the market size and the

number of potential clientele one can attract. Furthermore, the women fashion wear


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garments will be designed through a contracted designer and then stitched through

in-house stitching unit. On average, a designer can supply forty designs per month

from which nearly twenty designs are selected on average. Approximately, totalcapacity of the defined unit with 5 stitching machines (basis on 8-10 hours shift) will

be about 5001dresses. The breakup of the total number of dresses will be as follows:

Total designs selected by designer 20Number of dresses in each design 5

Number of dresses in each size 5

Total Number of dresses 500

This production and sales capacity is estimated to be economically viable and

justifies the capital as well as operational costs of the project.

11..44TToottaallPPrroojjeeccttCCoossttThe Boutique shop needs a total investment of about Rs. 1.45 million. This includes

a capital investment of Rs.881,920 and a sum of Rs.569,600 as working capital.

22 CCUURRRREENNTTIINNDDUUSSTTRRYYSSTTRRUUCCTTUURREECurrently, the boutique industry is relatively unorganized and is scattered in andaround the posh areas of the metropolitan cities of Pakistan i.e. Lahore, Islamabad,

Karachi, Peshawar, and Quetta. The boutiques in Peshawar and Quetta, mostly sell

the traditional dresses having indigenous/local designs, whereas the ones in Lahore,Islamabad, and Karachi deal in fashion wear greatly influenced by the west and the

local trends in vogue. As such, there is no exact detail available of the number of

boutiques, especially in women wear, because there is no association or link between

these enterprises. The reason being the business rivalries and the competitivestructure of this industry. However, one can name a few major players in the

business such as Indifference, Generation, Parahan, Nee Punhal, Bossini, KapreWaghera, Maria B, Ninas, and some individual designer players like Beegees,Nilofar Shahid, Nadia Mistri, Amir Adnan, Shayan Malik, and Sahar Saigol.

33 MMAARRKKEETTIINNGGThe marketing of boutique follows the conventional marketing pattern which is

dependent on selection of venue of the outlet/s and the product mix (designs and

sizes), as well as the promotional strategy. Furthermore, the boutique owner has tomarketing techniques like:

Usage of print media i.e. printing of posters and pamphlets as well as displayingit and distributing it at proper places

Advertisement in print media i.e. newspapers and fashion magazines, etc.

1 This production also includes additional suits that will be prepared on orders/outsourcing/CMT

(Cutting, Manufacturing and Trimming) per month in order to utilize the maximum capacity of the

stitching unit.


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Usage of electronic media i.e. projection of the boutique in fashion programs,advertisement on television, and provision of dresses to various television plays

and films.

Event arrangement like fashion shows and photo-shoots. Usage of e-commerce i.e. launching of website and advertising on web.Moreover, in order to keep abreast with the emerging trends and client tastes,surveys regarding customer satisfaction/needs should be a regular feature of this

project.

As this project of Boutique deals in designer women wear, therefore the product mixwill comprise of different styles of the female dresses in different sizes. Whereas, the

styles will be Shalwar Kameez, Q-lots, Pajama Kameez, Frocks, Kurta, Peeshwaz,

Party dresses, Casual Dresses and other prevalent dresses based on the markettrends. The average sale price per dress is assumed to be Rs.2,100.

Apart from this, there is a vast export potential in this industry, which is evident

from the export figures of 1998-99 (available from the data of Federal Bureau of

Statistics-FBS).SITC

2Code Product Classification 2000 2001

Value (Rs. 000)

8422102 Suit women cotton not knitted 1,415,124

8422103 Suit women synthetic not knitted 501,917

8422104 Suit women (other textile material not knitted) 46,861

8422202 Ensembles women cotton not knitted 2,107

8424002 Dresses women not knitted 463,346

8424003 Dresses women man made fiber not knitted 63,438

8424004 Dress women other textile not knitted 17,723

8424006 Shisha embroided dresses of cotton 286

8427006 Baluchi Kameez of Silk 27

Total 2,510,826Source: Federal Bureau of Statistics

Even these figures represent the formal export patterns of women dresses from

Pakistan and are not representative of the export of these dresses taking place on

informal level. Most of the women dresses prepared in Pakistan are exported toUSA, UK, Germany, UAE, Saudi Arabia, France, Belgium, Netherlands, and South

Africa.

The end users of these dresses in foreign countries are mostly Pakistani and Indian

women who have immigrated to these countries.

2Standard International Trade Classification


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44 RRAAWWMMAATTEERRIIAALL44..11RRaawwMMaatteerriiaallThe raw-material required for such sort of projects, would be as follows: Fabric:The fabric, which is the basic raw material requirement for a boutique

and a major component of the cost, can be obtained from wholesale markets orfrom markets specializing in designer cloth at Faisalabad, Karachi, and Lahore.

Accessories: Accessories such as buttons, laces, zippers, elastics, threads,needles, embroidery threads, glasses, etc. will be procured from the local market

at competitive rates.

Labels, tags and packaging:Labels and tags can be obtained on order, as theseserve as an identity for the boutique and are useful for promotion.

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55..11PPrroodduuccttiioonnPPrroocceessssFFlloowwThe process for converting fabric in designer wear garments follows the below

mentioned sequence:

Design: The initial process starts from the designing phase. Various patterns ofclothing and the fashions in vogue, which also relate to the tastes of the

concerned clientele, are designed. This is done by the contracted designer as

he/she will provide the basic designs of which the fabric will be converted intothe designer wear garment. On average, a designer is supposed to provide 40

designs per month or 100-120 designs per season i.e. three months. From thesedesigns, approximately 50% of the designs are selected for further developmentof clothes.

Pattern Making/Cutting: Based on the designs selected, patterns for cutting aredeveloped and based on these patterns, fabric is cut, embroided, block printed,

and processed accordingly3.

Stitching: The cutting is then followed by stitching, which can either be done bythe in-house stitching unit or by outsourcing it

4. Labels are also attached to the

apparels in this process.

Finishing: The final phase is that of finishing, in which the garment will bechecked for quality control and will cleaned (if required) for final presentation at

the outlet. The garments will also be tagged for identification of sizes, prices,addresses, handling instructions, etc.

3After cutting, the fabric is embroided and this is normally outsourced to any locally available

commercial embroidery unit.4In case of over-lock stitching, it will be done in-house. The stitching of buttonholes as well as elastic

embedding will be outsourced. This will cost approximately @Rs.5 per dress.


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Presentation/Market: Once the designer wear garment is ready after goingthrough the above-mentioned process, it is presented at the outlet/shop for sale to

the clientele.

Designing

Pattern

Making/CuttingStitching

FinishingPresentationMarket/Clientele

66 HHUUMMAANNRREESSOOUURRCCEERREEQQUUIIRREEMMEENNTTSSThe project of Boutique requires the following Human Resources/Staff:

Positions Required Salary per

Month

Salary per

Annum

Chief Executive/Owner 1 30,000 360,000

Designer 1 15,000 180,000

Sales Girls 2 5,000 120,000

Production Supervisor/Cutting Master 1 8,000 96,000

Stitchers/Tailors5 5 6,000 360,000

Press/Iron Man/Finishing man 1 3,000 36,000

Office Boy 1 2,000 24,000

Total 12 1,176,000

77 MMAACCHHIINNEERRYY//EEQQUUIIPPMMEENNTTDDEETTAAIILLSSThe boutique will require a small in-house stitching unit. The cost of the stitching

machinery will be as follows:

Stitching Machinery6 No. Rs/Unit Rs

Single needle lock-stitch machine (Juki China) 4 20,000 80,000

Over-lock stitch machine (Juki China) 1 50,000 50,000

Accessories (Scissors, Cutting Board, Table,

stools, carpet, etc.)

50,000 50,000

Total 180,000

5

6Though the prices here are given of the new machines but second hand machines are also widely

available which can function properly and can reduce the project cost too.


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Furthermore, the following will also be required to setup a Boutique:

Other Equipment No. Rs/Unit Rs

Air-conditioner 1 30,000 30,000

Stereo System 1 23,000 23,000

Computer and Printer 1 35,000 35,000Telephone & Fax 1 10,000 10,000

Credit Card Machine7 1

Total 98,000

88 PPRREEMMIISSEESSFFOORRSSHHOOPPAANNDDSSTTIITTCCHHIINNGGUUNNIITT88..11RReeccoommmmeennddeeddmmooddeeffoorrrreennttiinnggaaSShhooppIt is recommended that the proposed location for the said enterprise be a posh area,

where people have the buying capacity for women fashion wear. The size of the

shop should be at least 800 Sq.ft i.e. 20 feet front and 40 feet depth. Furthermore, asmall building will be required to establishing the stitching unit. One viable option is

to rent a small house for this purpose.

The shop will be obtained on rental basis, and the rent estimation for such a shop isRs 30,000/month. According to the prevailing practice, six months rent as advance

and three months rent as security would be required for renting the shop. It is

assumed that security is a one-time expenditure, whereas pre-paid rent will only begiven at the beginning, while establishing the boutique. After first six months, rent

will be paid on monthly basis.

The cost estimates for setting up the Boutique are as follows:

Rs

Security for renting shop/outlet (Rent @ Rs.30,000per month. 3 months rent as security)

90,000

Interior decoration (installing lighting, mannequins,

hanging racks, mirrors, glass panes, cash counter, andother dcor, etc.)

300,000

Security for renting a house for installing the stitching

unit (Rent @ Rs.6,000 per month)

9,000

7Credit card machines are installed free of cost by the Bank on fulfilling the Bank requirements like

having a Bank account, copy of registry or lease agreement of shop, etc. However, these requirements

may vary from Bank to Bank.


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88..22IInnffrraassttrruuccttuurreerreeqquuiirreemmeennttssThe project will have the following infrastructure components:

Infrastructure Requirements Sq.ft

Main shop 600Try Room 36

Small Store 100

Kitchen 64

Building for Stitching Unit 10 Marla House


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99 PPRROOJJEECCTTEECCOONNOOMMIICCSS99..11PPrroojjeeccttCCoossttDescription Cost (Rs.)Machinery & equipment 278,000

Furniture & Fixture (Interior Decoration) 300,000

Security Deposits for Premises8 108,000

Pre-operating expenses

Salaries9 98,000

Promotional Expenses 97,920

Total Capital Cost 881,920

Working Capital

Raw material (Fabric & Accessories) 28,800

Accounts Receivable 108,800

Prepaid Rent (Boutique and Stitching Unit) 432,000

Total Working capital 569,600

Project Cost 1,451,520

99..22PPrroojjeeccttRReettuurrnnssInternal Rate of Return (IRR) 40.18%

Payback Period (Years) 3.87

Net Present Value (NPV) 2,267,714

99..33FFiinnaanncciinnggPPllaannFinancing Rs.

Equity 50% 725,760

Debt 50% 725,760

8 Security Deposit for Boutique Rs.90,000 (@Rs.30,000 per month for three months), and for

Stitching Unit Rs.18,000 (@Rs.6,000 per month for three months).9One month salary of staff


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1100KKEEYYSSUUCCCCEESSSSFFAACCTTOORRSSThere are a number of factors, which contribute towards the success of a project. In

case of the project of Boutique, some of the Key Success Factors are as follows:

Proper care while producing dresses should be adopted Proper Inventory management i.e. keeping minimum inventory as per past sales

trends.

The dress designs should be according to the emerging trends and fashions. Designing of dresses according to the consumer tastes/preferences gathered

through consumer surveys.

The location of the outlet should be properly selected and attractively decoratedso as to target the clientele effectively.

The customer satisfaction should be given due importance, because it is thecustomer satisfaction, which can increase the sales. Hence, excellent customer

service should be provided.

1111TTHHRREEAATTSSFFOORRTTHHEEBBUUSSIINNEESSSS Competitive Structure of the marketThe market of the boutiques is highly competitive, therefore if the entrepreneur isnot well responsive to the tastes and response of the clientele as well as the fashions

in vogue he/she may not be able to capitalize the opportunity properly.

Pilferage in the designsThe designs which a designer produce can be sold by the staff even before that

design is launched and that can pose serious threat to the business because in the

fashion industry it is the uniqueness of the design which matters.

Selection of the wrong venueSelection of the wrong venue can be a major hurdle in achieving the desired businessobjectives.

Selection of the wrong designIf the designs are not selected according to the tastes of the clientele then it can bedetrimental for the business, so the clientele taste should be properly tracked.

TaxImproper documentation of the sales receipt record may lead to problems with Tax

department.


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1133KKEEYYAASSSSUUMMPPTTIIOONNSS1133..11 PPrroodduuccttiioonnAAssssuummppttiioonnss

Number of Stitching Machines 5Production Capacity (No. of dresses per month) 500

Capacity Utilization for the first year (No. of dresses per month) 200

Self Production (% of total production) 60%

Dresses manufactured on CMT basis (% of total production) 40%

Monthly self production (Year 1) 120

Monthly Dresses manufactured on CMT basis (Year 1) 80

1133..22 CCoossttAAssssuummppttiioonnssInitial (Year 1) Average cost per dress (Rs.)Material & Fabrics 400

Accessories 25

Embroidery Cost 100

Direct Labor Cost 280

Direct Electricity Cost 20

Machine Maintenance Cost 4

Admin & Rent expenses & promotional expenses 446

Fixed electricity 30

Average unit cost per dress (Rs.) 1,305

1133..33 SSaalleessAAssssuummppttiioonnssNo. of dresses sold per month(Year 1) 120

Average unit price per dress (Rs.) 2,100

Average Monthly Sales through retail outlet (Rs.) 252,000

No. of dresses sold on CMT basis per month(Year 1) 80

Average unit price per dress on CMT basis (Rs.) 250

Average Monthly Sales through outsourcing(Rs.) 20,000

Total Average Monthly Sales (Year 1) (Rs.) 272,000

Sale growth rate (Units) 10%Sale growth rate (price) 3%


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1133..44 OOppeerraattiinnggAAssssuummppttiioonnssHours operational per day 8

Days operational per month (Production) 25

Days operational per month (Boutique) 25

1133..55 CCaasshhfflloowwAAssssuummppttiioonnssAccount Payable Cycle (Days) 10

Account Receivable Cycle (Days) 10

Raw Material Inventory (Days) 15

1133..66 EExxppeennsseeAAssssuummppttiioonnssInitial Promotional Expenses (Year 1) (%age of expected sales) 3%

Promotion Expenses after Year 1 (% of expected sales) 1.5%Machine Maintenance per annum Rs.10,000

Direct Electricity per month (Year 1) 4,000

Fixed Electricity per month (Year 1) 6,000

Telephone and Internet charges (Year 1) 3,000

Raw Material Price Growth rate 1%

Payroll growth rate 7%

Machine Maintenance growth rate 2%

Direct electricity growth rate 10%

Fixed electricity growth rate 10%

Rent growth rate 5%

Telephone and Internet charges growth rate 5%

Depreciation Method Straight Line

1133..77 FFiinnaanncciiaallAAssssuummppttiioonnssProject Life 10 Years

Debt: Equity 50:50

Interest Rate on Long Term Debt 18%

Interest Rate on Short Term Debt 18%

Debt Tenure 5 YearsDebt Payment per year 1

Discount Rate 18%

Feasibily report to start a boutique ( Strategic Marketing of textile business).

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Transcript of Feasibily report to start a boutique ( Strategic Marketing of textile business).