Project 2 - Final Deck

Date: November 15th, 2015

To: Lori MarcheseTom Marchese Luke McElfreshTammy Rapp

From: Philip Croft

Natalie Clark Jessi CrosbyGregory Couch

Subject: Project 2: Environmental Analysis, Business Concept, Competition, Operations, Human Resources,

Marketing, Advertising, Information Systems Strategy, Demand Forecasts, and Financials The attached report, requested by the Copeland Associates Management Team dated October 13th, was written to determine the best business concept with the greatest growth potential in a desired location. We feel that you will find this report beneficial in evaluating future projects with the research methods and calculations that we generated. This study was designed to examine the following criteria:The external environment of the overall specialty retail industryThe external environment of the athletic apparel industryPlanning, organization, and strategies for the following business areas

Business ConceptTarget MarketLocal Competition

OperationsHuman ResourcesMarketingInformation SystemsRevenue GenerationSales ProjectionsFor the immediate first year of sales For four additional years of operationsFinancial Results Our team thanks you for the opportunity to conduct this research through various methods. We would be happy to discuss any questions and concerns regarding our thought processes and conclusions. It would be our pleasure to conduct any further research for any additional projects.

Memo of Transmittal

Prepared for:Senior Partners

Copeland & AssociatesCollege of Business

Prepared by:Team 2 – Philip Croft, Natalie Clark, Jessi Crosby, and Gregory Couch

Mid Cohort 107College of Business

Ohio University

The city of Chapel Hill would greatly benefit from the development of a new athletic apparel store, especially for the busy lifestyle that many working women face. Altai is a retail store that provides a large amount of reliable products that are fashionable and functional for everyday tasks, including yoga in the morning, grocery shopping in the afternoon, and cocktails in the evening.

Copeland Associates utilized various research methods for analyzing the current state of the macro-environment of the specialty retail industry. Through this, the growth potential for athletic apparel stores was very prevalent, resulting in the further research of the micro-environment of the athletic apparel industry. This research gave Copeland Associates the inspiration to create a business plan for Altai, which is located in Chapel Hill, North Carolina. The creation would create several benefits for the Chapel Hill area, and this company would result in the satisfaction of many potential customers within the area.

Altai is the premier destination for athletic apparel for women and their busy schedules, which is why the store is equipped with some of the best equipment to maximize efficiency while minimizing shopping stress with long lines. Altai’s business plan includes the following:

• A clear and direct business mission and objective as well as a very strong target market• A location with a large amount of foot traffic and college-student populations• A small amount of similar stores in the area, but not direct competitors• A highly organized business operations plan as well as a very simplistic shopping/returns process• A small, but dedicated group of employees, who can monitor their progress with advanced

technology systems• A strong product mix of reliable products• A strategic and diversified marketing plan, including the following platforms

• Free classes taught by local instructors to attract customers into the store• Social Media Platforms specified to customers in the target market• Special events at the neighboring college campuses

• A highly sophisticated and efficient shopping experience through RFID technology that is compatible with all of Altai’s shopping technology

• Accurate sales projections using primary and secondary data based on forecasted demand• Strong financials that will result in:

• A start-up capital requirement of $210,000• A positive Net Present Value and strong Internal Rate of Return• Growing financial ratios after Year 2

Based on these findings, Altai would be a very successful business in the foreseeable future and would be very beneficial for the Chapel Hill community overall. This business would revolutionize the way that customers shop, almost completely eliminating lines. This process will also innovate the way that companies utilize inventory control, making employees happier and more capable of focusing on the customer experience instead of tracking items.

Executive Summary

Table of ContentsIntroduction 1

Specialty Retail Apparel Industry: 2

Industry Overview and Drivers 2

Millennial Consumers Will Drive the Industry 2

Passage of the Trans-Atlantic Partnership Will Lower Clothes Prices 2

Athletic Apparel Segment: 3

Imported Products are a Threat to Domestic Manufacturers 3

Buyer Power Outweighs Supplier Power 3

Competitive Landscape 3

Business Concept: 4

Who Altai Is 4

Name and Logo 4

Value 4

Altai’s Market: 5

Target Market 5

Chapel Hill Demographics 5

Location 5

Local Competition: 6

Operations: 7

Inventory Control and Supply Chain 7

Human Resources 7

Marketing: 8

Marketing to Millennials 8

What Altai Means to Customers 8

Customer Reviews as a Form of Marketing 8

Inventory Bought and Pricing 9

Products and Services 9

Place 10

Promotion 10

Marketing in the ‘Research Triangle’ 10

Table of ContentsAdvertising: 11

Billboard 11

Facebook 11

Twitter 11

Instagram 11

Loyalty Program 11

Information Systems Strategy: 12

Using Information Systems to Add Customer Value 12

Inventory Management with RFID Technology 12

Managing the Stock Room with RFID Technology 13

POS Transaction Processing 13

Reaching Customers Cross-Platform 14

Disaster Recovery and Security 14

Demand Forecast #1: 15

Potential Sales Based on Number of Customers per Day and Average Ticket Price 15

Step 1: Expected Potential Customers per Day 15

Step 2: Average Ticket Price 15

Demand Forecast #2: 16

Potential Sales Based on Market Size 16

Step 1: Forecasting Obtainable Millennials 16

Step 2: Average Ticket Price 16

Financials: 17

Weighting of Demand Forecasts 17

Fiscally-Impacting Risks 17

Revenue Generation Plan 17

Pro Forma Statement Overview 18

Sales Growth, Profit Margin, ROE, and ROA 18

Free Cash Flows 18

Details on Key Ratios 18

Conclusion 19

Table of Contents

References 20

Appendices: 27

Appendix A: Financials 27

Appendix B: Depreciation Schedule 33

Appendix C: Amortization Schedule 40

Appendix D: Cash Flow for Year 1 41

Appendix E: Inventory Mix and Average Ticket Price 43

Appendix F: Technology Equipment 44

Appendix G: PESTLE Analysis 46

Appendix H: Porter’s Five Forces 48

Appendix I: Facebook Page 50

Appendix J: Twitter Page 51

Appendix K: Instagram Page 52

Appendix L: Billboard, T-Shirt, and Flyer 53

Appendix M: Desktop Website Mockup 54

Appendix N: Perceptual Map 55

Appendix O: Positioning Pyramid 56

Appendix P: Aaker Model 57

Appendix Q: Customer Order and Inventory Processing 58

Appendix R: Processing New Inventory and Returns 59

Appendix S: System Security and Inventory Management 60

Appendix T: Dashboards 62

Appendix U: Interviews 64

Appendix V: Financial Calculations 70

Appendix W: Store Front 71

List of FiguresFigure 1: Demand Forecast 1

Figure 2: Financial Predictions 1

Figure 3: U.S. Population Growth by Age 2

Figure 4: Industry Drivers 2

Figure 5: Supplier/Buyer Weighing 3

Figure 6: Favorite Brands for Women’s Sportswear 3

Figure 7: Nile Running Look 4

Figure 8: Store Blueprints 5

Figure 9: Local Competition Chart 6

Figure 10: Manager and Employee Qualities 7

Figure 11: Employee Logistics 7

Figure 12: Brand Mix 8

Figure 13: Products Mix 9

Figure 14: Map of ‘Research Triangle’ 10

Figure 15: Females in ‘Research Triangle’ 10

Figure 16: Membership Card 11

Figure 17: On-Shelf Availability 12

Figure 18: RFID vs Barcode 12

Figure 19: RFID Tag 13

Figure 20: Inventory Tagging & Management 13

Figure 21: POS Software Comparison 13

Figure 22: Cost of Web Development 14

Figure 23: Causes of Data Loss 14

Figure 24: Customer Expectancy 15

Figure 25: Customer per Day Forecast 15

Figure 26: Sales Forecast 15

Figure 27: Percent of Market Size in Locations 16

Figure 28: Breakdown of Potential First Year Sales 16

Figure 29: Weighing of Demand Forecast 17

List of FiguresFigure 30: Sales Growth 18

Figure 31: Profit Margin 18

Figure 32: ROE & ROA 18

Figure 33: Free Cash Flows 18

Figure 34: Projected Net Income 19

Introduction

1

In this business plan, we explore the different aspects that would follow the creation of the specialty apparel store, Altai, that specializes in athleisure clothing. The first topic that is focused on is the specialty retail apparel industry as a whole, then the sports apparel industry and local competitors within Altai’s market to illustrate the current and future growth. The business itself has a target market of millennial females in and around Chapel Hill, North Carolina. Compared to other businesses within the area, Altai would be one of few with this specific target market. The surrounding area proves valuable as well, due to that fact that Duke University and North Carolina State University are both within 25 miles of the University of North Carolina, which is located in Chapel Hill. The largest segment of the target market will come from these college students. In order to reach these students and other female millennials within the community, our marketing efforts will primarily revolve around being visible on each campus and in the town. Advertising will consist of a billboard located between Chapel Hill and Durham, 300 flyers spread throughout each campus, 600 free t-shirts, a Facebook ad, and Twitter sponsored tweets.

Altai differentiates itself from its competitors through its superior customer experience that deviates from its advanced technology, and in-store yoga and Pilates sessions . The store will implement RFID tags for each product, so that customers can just walk through a terminal and the prices automatically be added up for them instead of having to wait in long lines. Touch screen displays above each unit provide the customers with information on how much is in stock, and if it has a specific size in the back. Once an item is sold, an extra replica from the back will be brought up so customers shouldn’t have to spend time trying to find a particular size. In terms of the yoga and Pilates sessions, there will be various ones throughout the day during the slow hours of the store. This will create a sense of serenity within the store, and incentivize more customers to enter. Since customers are the top priority, an option to provide feedback and customer reviews for others to see are located almost anywhere in correlation to the store. Based on the facts further provided within this business plan and projected net present value, internal rate of return, and payback period, Altai would be a positive venture to pursue and capitalize on.

Net Present Value

Internal Rate of Return

Payback Period

$25,62226.62%

(WACC = 25.73%)

4.22

Figure 1: Demand Forecast

Demand Forecast #1

Demand Forecast #2

Forecast: $930,355.52 $722,848.45

Weighing: 10% 90%

Estimated Total Cost of

Start-Up:$210,000

Figure 2: Financial Predictions

Analysis of Specialty Retail Apparel Industry

2

Industry Overview and Drivers

The specialty retail apparel industry is composed of the manufacturing, or distribution, of clothing, accessories, and footwear for consumers that focuses on a specific range or type of product. This excludes department stores that sell non-apparel items as well (i.e. Target, Walmart, etc.).

Passage of the Trans-Atlantic Partnership Will Lower Clothing Prices

The Trans-Pacific Partnership is a negotiation between the United States and 11 other countries which will create a free trade zone to nearly 40% of all the world's gross domestic products (Ellis, 2015). With tariffs on clothing reaching up to 32%, the U.S. Government collected $13.5 billion in tariffs on imported clothing and shoes in 2014 (Lamar, 2015). These tariffs must be compensated when pricing clothing, raising the retail value. With 97% of all US clothing imported (Michael, 2015), the passage of the Trans-Pacific Partnership will help make clothing more affordable to individuals with lower disposable income without affecting the manufacturer’s income.

Millennial Consumers Will Drive the Industry

Millennials are defined as, “those born in 1982 and approximately the 20 years after” (Bump, 2014). This age group’s purchasing power is estimated to be nearly $170 billion per year and growing (Honigman, 2013). However, millennials are cautious with their spending, often turning to others’ reviews and advice for further information before purchasing a product. For example, more than 50% use a smart phone to research products while shopping (Honigman, 2013). Also, 51% claim customer reviews have a greater impact on their purchase decision than direct recommendations from family and friends. In order to attract this powerful segment, it is important for companies to have easily accessible product information that reflects positively on the company.

<25 25-34 35-44 45-54 55-64 65+

-10%

-5%

0%

5%

10%

15%

20%

U.S Population Growth by Age

2015 - 2020 2020 - 2025

Consumer Confidence

0.9% forecasted compound growth (IBISWorld, 2015)

Per Capita Disposable Income2.5% forecasted compound growth (IBISWorld, 2015)

Average Household Income2.6% of income is spent on apparel (Bureau of Labor

Statistics, 2015)

Industry Drivers

Figure 3: U.S. Population Growth by Age

Figure 4: Industry Drivers

Analysis of the Athletic Apparel Segment

3

Buyer Power Outweighs Supplier Power

What gives purchaser’s power strength is the high level of choices they have; with a plethora of styles, brands and even colors buyer’s can freely chose between them with little consequence (Mintel, 2015). Furthermore, due to relaters’ position at the end of the supply chain, companies are forced to follow customer demand. Buyer strength is further purchased due to shortfalls in supplier power.

Due to the relative fragmentation of retailers, supplier power is weakened due to the retailer’s ability to buy inventory from multiple sources. Intense competition from low-wage, foreign manufacturers create large incentives for retailers to import clothing, further weakening a supplier’s power.

Imported Products Are A Threat to Domestic Manufacturers

Competitive Landscape

The athletic apparel segment is highly competitive, both internationally and locally. Nike is currently the largest athletic retailer in the US with a 21% market share, followed by VF Corp with 6% and Adidas America with 5% (Passport, 2015). These large companies compete amongst themselves and with large department stores who have begun to diversify their product mix into athletic apparel.

Threat of New Entry is high due to the relatively low capital investment required to make market entry. However, imported apparel prove the highest threat; foreign child labor and low working conditions allow for cheaper products. With the passage of the Trans-Atlantic Partnership, these products will continue to lower in price. While this seems cost effective, a company’s reputation for using such manufacturing practices can greatly impact its sales, causing companies to avoid this method.

NikeAdidas

Rebok

Under Arm

our

Danskin

ChampionHanes

0%

10%

20%

30%

40%

50%

60%

Favorite Brands for Women’s Sportswear

Statista, 2015

Figure 6: Favorite Brands for Women’s Sportswear

Small, independent operators compete on the local level, usually targeting niche markets to obtain a market share (IBISWorld 2015). Due to improving economic conditions, the number of these retailers is expected to increase, further creating competition. In order to compete, the ability to create a strong brand awareness is crucial to separating a retailer from its competitors, causing many companies to invest heavily in marketing and public relations.

Supplier Buyer

High Level of Choice

Lead Demand

Inventory’s multiple

sources at low prices

Figure 5: Supplier/Buyer Weighing

Business Concept

4

“Altai’s vision is to be the premier destination for women who want a balance between fitness and fashion.” - Company Vision Statement

Value

Altai’s products are for more than just exercise. Using simple, practical patterns and designs, its clothing easily match with almost any outfit, allowing for complete seasonality and long-term use.

The company believes that customer experience is the key to a successful retailer, which is why it incorporates radio-frequency identification technology (RFID) to solve common customer complaints such as lack of product information and long check out lines. This in turn leads to a more positive shopping experience, increasing the likelihood for repeat shopping. However, the benefits of RFID aren’t limited to the customers.

Using modern inventory practices, RFID allows for detailed inventory tracking and data collection. Not only does this allow for more accurate inventory replacement, but it provides critical information on popular product lines, sizes, and seasons. This simplifies company planning and procedures, freeing management and employees to handle other tasks.

Figure 7: Nike Running Look

Who Altai Is

Altai sells fashionable, practical athleisure wear to progressive women who want the convenience of a whole day's wear from a single outfit. The company values simplicity, functionality and personality, which is reflected through its extensive selection of clothing and superior customer experience. To foster its family of customers, the company offers in-store programs such as yoga and Pilates in order to make each individual feel like part of the Altai community.

Name and Logo

Altai’s name stems from the mountain range in Central Asia. The point where Russia, China, Mongolia, and Kazakhstan come together, the company wanted a name that aligned with its vision as the intersection of fitness and fashion.

The colors of Altai’s logo reflect a sense of peace and balance. The stretching woman in its design creates an image of activity but tranquility. The combination of color and design express the balance and functionality of its products.

Altai’s Market

5

Altai’s store is located on 109 East Franklin Street in the heart of downtown Chapel Hill, North Carolina. Just a few minutes walk from the University of North Carolina's campus, it rents an ADA compliant, 2,380 sq. ft. retail space with a glass storefront and exposed brick walls. Refer to Appendix W for a picture of the store.

Location

Chapel Hill Demographics

Chapel Hill has a total population of 60,138, including the 29,153 students at the University of North Carolina. Of this population, 53.4% are female and 24% are females between the ages of 18-34. Furthermore, with an average household income of $106,337 (SimplyMap, 2015) Chapel Hill is about 26% higher than the U.S average.

Retail sales from women’s clothing stores in Chapel Hill totaled $4,425,050 in 2014. Sportswear accounted for $728,200 of this, or roughly 16% of total sales. This is more than 2.5 times higher than the portion sportswear accounted for in the US total (IBISWorld, 2015). With a larger demographic within the target market that has a high spending on sportswear, Chapel Hill is the perfect location for Altai.

Target Market

Altai's primary customers are women between the ages of 18-34. Women's apparel is the largest segment in global apparel with 49.4% market share or a $121 billion value (MarketLine). This is expected to increase 14% to $139 billion by 2019 (Mintel, 2015). Within this segment, 20-30 year olds represent a key demographic (IBISWorld, 2015). The millennial age group is projected to reach 75.3 million in number by the end of 2015 (Fry, 2015), with 50% of millennial females shopping more than twice a month compared to 36% of older females (Honigman, 2013). With the female population between the ages of 25-34 expected to increase, targeting this growing and spending segment will prove a successful market.

Figure 8: Store Blueprints

Local Competition

6

Local Competition

Company Miles from Altai Target Market Strengths Weaknesses

Dragonwing GirlGear:

- - - Young females

High quality, affordable products at a niche, targeted market.

Young market leaves out large potential from older customers.

Chapel Hill Sportswear: 0.5 University of North Carolina

students and fans

Large selection of UNC apparel.

Only UNC apparel targets very small market.

Great Outdoor Provision: 2.5 Casual outdoorsman

High quality, name brand products lines.

Focuses on functionality rather than fashion.

Fleet Feet Sports:

0.9 Runners

Well respected, recognizable name in running market with high quality products and services.

Niche targeting creates niche brand association with runners.

Durham/Raleigh stores: 11-28 Women

Established brands with large customer bases.

Distance from Chapel Hill customers.

Chapel Hill has four major competitors: Dragonwing Girlgear, Chapel Hill Sportswear, Great Outdoor Provision, and Fleet Feet Sports. While all of these companies provide competition to Altai, Altai has a major advantage over these companies: Altai is the only women’s sportswear store to target millennial women in the Chapel Hill area. While there are multiple vendors of women’s sportswear, none of these companies market themselves as women’s clothing wear. For example, while Fleet Feet Sports carries many similar products to Altai, it has a strong brand association with runners rather than the broader female market. By actively marketing as a women’s sportswear, Altai will be the only store in Chapel Hill associated with women’s sportswear.

The most immediate competition within Altai’s target market is from the nearby cities of Raleigh and Durham. Large, well established companies such as Dick’s Sporting Goods, Omega Sports, Athleta, and Lululemon draw customers out of Chapel Hill to these stores mainly due to their strong brand recognition. However, Altai has a large factor in its favor over these competitors: location. Altai is a more convenient location for Chapel Hill residents, translating to a large portion of them coming to Altai rather than traveling to a neighboring city. Furthermore, these large retailers are about equal distance from Durham as Chapel Hill is. By actively marketing in Durham, women will be more likely to visit Altai before these other competitors.

Figure 9: Local Competition Chart

Operations

7

Inventory Control and Supply Chain

In order to guarantee acquisition of top trending products, Atlai places its orders 6 months in advance of season (fall wear ordered in February-March, spring wear in September-October, etc). Altai will hold 2-3 months worth of inventory and re-purchase as necessary. The company offers to purchase inventory from distributors at a 55% discount with payment due 90 days from purchase.

As products arrive to the store, they are moved into the stock room for processing. Using Seagull RFID tagging software, tags for individual items in the shipment are printed in-house. The apparel is then unpacked and tagged before being placed onto pre-determined racks and shelves. As inventory is purchased from the floor, the Point of Sales (POS) System sends a notification to the stock room. A message showing the item to be restocked and its locations in the stock room is displayed on a monitor located near the shelving units. The stock room attendant then locates the item and brings it to the floor. An antenna above the door between the floor and stock room senses the article of clothing leaving the stock room, notifying the system that the item has been restocked and clears it from the stock room display.

Customers place their items in a shopping bag as they go through the store. When a customer has finished their shopping, they move to the back of the store where two RFID equipped POS terminal are located. The items are read within seconds and totaled. A store clerk will be waiting on the other side of the scanner in order to collect payment. Once payment is complete, the POS system updates the central database that inventory has been sold and numbers are reduced. If the database detects low inventory for an item, an alert is sent to the store manager with the option to automatically reorder. Management will make the final decision to place the order.

Human Resources

Altai believes that having a positive customer experience is not only composed of its advanced technological equipment, but also with the employees that are on the floor and in the stockroom.

The store has one manager during each shift and three part-time employees. These employees are held to the standard of being the most customer-centric in the industry. This includes product knowledge and customer interaction. Altai’s highly efficient inventory control system through RFID allows employees to avoid the monotonous scanning of products, freeing the sales associates to improve customer experiences. Using the business dashboards in Appendix T, employees will be able to track their own progress.

Position: # of Employees: Salary: Total

Expense:

Manager 2 $42,000 $92,000

Sales associate:

11 $11/hour $110,352

Instructor: New one each week

$100 per session

$5,200

ManagersHiring, firing, and leading of sales

associates

Purchasing and tracking of inventory

Collection and counting of end-day

cash

Employees

Customer greeting

Organizing and arranging of store

Product information and suggestions

Completing retail transactions

Figure 10: Manager and Employee Qualities

Figure 11: Employee Logistics

Marketing

8

Marketing to Millennials

Marketing to millennials is different from traditional strategies. This is mainly due to their daily use of technology and its integration within their lifestyles. For example, because of their close online interactions, millennials want to be the first to receive updates and coupons (Newman, 2015). 85% of ages 15 to 35 own a smartphone, making optimization for mobile marketing and usage a must. (Kaplan, 2015). Finally, millennials expect to be rewarded for their loyalty and want to be included in a brand’s communication efforts (Newman, 2015). In order to reach the entire target market of millennial women, the store must connect with the consumers primarily through social media, loyalty programs, an effective website, and promotional materials.

Customer Reviews as a Form of Marketing

64% of millennials feel that companies should offer more ways to share their opinions online (Honigman, 2013). In order to maximize customer’s ability to share product information, Altai incorporates the ability to share and read product reviews both online and in-store. Online review platforms include the company website and app. These reviews collect both customer input as well as social media posts regarding the products. For example, Instagram pictures where products are used can be viewed so customers can see real applications of products.

For customers who do not want to use their smartphone to access reviews, in-store kiosks can be used; scanning the barcode of the product, product reviews and information will immediately be displayed. Not only will this help keep the consumer more involved and interactive, but it will also provide valuable insight to those looking to purchase a product. This is important because 51% of millennials say consumer opinions found on a company’s website have a greater impact on purchase decisions than recommendations from acquaintances (Honigman, 2013).

What Altai Means to Customers

When customers think of Altai, it should be associated with its superior customer experience and quality line of products . These products that are fashionable, functional, practical, comfortable, and most importantly, versatile. These come from trusted, quality brands, making Altai’s product mix very reliable. Selection of brands was based on favorite clothing brands for women’s sportswear (Figure 6, page 3). For more information on the brand mix, refer to Figure 10 below. Through the classes that Altai provides to its customers, it is also recognized as a community-involving through athletics and healthier lifestyles.

Brand % of Inventory MixNike 30%

Adidas 20%

Under Armour 20%

Reebok 15%

North Face 15%

Figure 12: Brand Mix

Marketing

9

Products

Clothing Type Spring/Summer Fall/Winter

T-Shirts 15% 15%

Tank 20% 5%

Sports Bra 15% 5%

Hoodie 5% 20%

Shorts 20% 5%

Leggings 15% 20%

Sweat Pants 5% 10%

Jacket 5% 20%

Altai’s product mix represents what percent of the inventory is a certain type of clothing, such as t-shirts, leggings, and jackets. Figure 13 is a table showing a breakdown of the product mix.

These products will come from specific brands, such as Nike, Adidas, Under Armour, Reebok, and North Face. These brands make up the inventory at 30%, 20%, 20%, 15%, and 15% respectively.

Inventory Bought and Pricing

Figure 13: Product Mix

In order to compete with the increasing competition of online sales, Altai provides in-store fitness sessions. Offered once a week, these sessions bring customers in to the store for half-hour long group classes. These will be primarily scheduled around the slow times of the store in order to maximize store efficiency. For those who have signed up to be Altai members, they can find short clips of the daily sessions online. These videos allow new customers to see a session before deciding if they want to participate and for novice’s to practice in case they would feel uncomfortable coming to a class without having done the activity before. In order to incentivize customers to attend sessions, frequent attendance rewards are distributed; if a customer comes to ten sessions, they will receive 10% off their next purchase. These sessions not only provide Altai with more customers, but also offer two major benefits.

First, research has found that sitting down in a store can cause a customer to spend about 40% more (Byron, 2015). These in-store sessions surround participants with products in a casual environment, increasing their likelihood to make a purchase without feeling pressured or overwhelmed.

Second, these sessions build a sense of belonging. Altai creates a peaceful, supportive environment for its customers to participate in, creating a sense of community rather than an feeling like an individual. This feeling of place is key to maintaining loyal customers and separating ourselves from competitors .

Altai will purchase inventory from a wholesale distributor at a 55% discount with three months payable. Inventory will then be marked up by 45%. After year 3, inventory will be purchased at a 50% discount with immediate payment. It will then be marked up 50%, increasing gross margin. Product prices range from $25 to $100 due to the variety of brands and styles. For more information on pricing, please refer to Appendix E.

Services

Marketing

10

Marketing in the ‘Research Triangle’

Promotion

Place

Altai is located within the ‘Research Triangle’, or the region within North Carolina between the three major colleges: University of North Carolina (UNC) in Chapel Hill, Duke University in Durham, and North Carolina State (NC State) in Raleigh. Colleges. With UNC only a five minute walk, Duke 15 miles away, and NC State only 20 miles away, many of the potential female consumers will come from these schools . Businesses in the area who sell athleisure clothing only target one of these schools, usually through selling affiliated apparel. By marketing to all three, Altai has a competitive advantage over these companies .

Promotional items will include free t-shirts and flyers at each of the three colleges to help incentivize consumers to stop in. There will also be advertising on the social media sites, which include Facebook, Twitter, and Instagram, and a digital billboard between Chapel Hill and Durham will be used as well. More information on advertising will be discussed on page 11.

The first method of campus advertisement is through on-campus flyers. 300 informational flyers will be distributed and posted in and around major campus locations, such as sororities and libraries. To highlight this potential, this method reaches 1,809 potential customers from sororities at UNC alone.

Before its grand-opening, Altai will also set up a tent on the campus in order to help promote the store. This includes the distribution of 200 t-shirts with Altai’s logo and holding a free outdoor yoga sessions to raise brand awareness. At the tent students can see samples of products offered and learn more about session offerings. This method will also be implemented at Duke and North Carolina State University.

Figure 13 below represents the total undergraduate female population at all three colleges, as well as the number of sororities and approximate number of females within them. This represents the fewest number of potential views from the flyers being posted amongst the sororities. This number also does not include graduate females, so that is something to take into consideration as well.

UNC Duke NC State

Female Population 10,643 3,313 10,768

Females in Sororities 1,809 1,325 1,077

Number of Sororities 23 18 15

Figure 15: Females in ‘Research Triangle’

Google Maps, 2015Figure 14: Map of ‘Research Triangle’

Advertising

11

Billboard

Instagram

Twitter

Facebook

Located between Chapel Hill and Durham off US – 15 and 501, an ad for Altai will be on a 10” by 40” billboard that is facing the Chapel Hill area. This will reach approximately 138,700 potential consumers within a four week span, and will remain up for the next five years. This will be beneficial to the business because most people travel the same road on a daily basis and will easily memorize what the ad is about (Wombrose,2015).

Altai’s Facebook page will primarily focus on informing the consumers of when sales will begin and end, as well as the Pilates and yoga schedule. There will also be pictures of items posted with a direct link to the item on the website. According to Teen Vogue's "Seeing Social" survey, which consisted of 1,074 millennial women, 85% purchased a product after viewing it on a social media network (Cohen, 2014). Altai will also budget for the use of Facebook ads to help draw in customers in the area.

The purpose of Altai’s Instagram will be to post pictures of actual consumers wearing the clothes bought at Altai. The account will be linked with Facebook, so the pictures will be posted on both sites. Many consumers are now heavily impacted by customer reviews, so the option to post a comment with the submitted picture will be provided as well. By physically seeing how the product fits on “real” people and creating additional outfit options, Altai hopes to connect with the visual consumers.

With the 140-character limit, there isn’t much that can be said on Twitter. However, it provides an excellence source of direct communication. Altai’s Twitter account would be primarily used for giving “shout-outs” to consumers. If a customer would direct message the account, or simply type ‘Altai’ in her tweet, Altai would be able to see it and comment back. This would be a positive interaction with the consumers, and help create a positive brand image for the store. The use of sponsored tweets will also be implemented in the hopes of consumers retweeting it to further spread the message of the store.

Figure 16: Membership Card

Loyalty Program

Name

Membership Card

3765 5342 8268 7253

In order to help the customers feel more connected with Altai, there will be a membership card (see Figure 14, below) available. When signing up, the customer will receive 15% off her next purchase, and will accumulate points per how much is spent. Another included feature will be that members can use their card number on the website to access yoga videos in case they aren’t able to make it to the instore session. The purpose of the card is to incentivize customers to buy more in order to receive discounts and extra exclusives.

Information Systems Strategy

12

Using Information Systems to Add Customer Value

Information systems provide insight into some of the most important aspects of the business process through in-depth analytics of data collected from everyday business activities. By implementing strong inventory management, Customer Relationship Management (CRM), a powerful website, and innovative technology in store, Altai aims to provide a customer experience like no other. Online sales and a modern website with up to date product information enhances customer interaction with Altai. Through a comprehensive information systems strategy, Altai seeks to keep its costs low, its consumers informed, and provide a level of service greater than any other stores in the area.

Inventory Management with RFID TechnologyMismanagement of inventory is one of the leading causes of failure in a retail business (Roggio, 2014). In order to accurately track in store inventory, Altai uses the industry changing technology of Radio Frequency Identification (RFID) tracking to manage its stock. RFID technology allows unparalelled accuracy when inventorying store merchandise, and its ease of use enables frequent inventory counting. Unlike barcodes, RFID tags can never be scanned twice by accident while counting inventory. Rather than counting inventory twice a year with barcodes and limited accuracy, RFID technology allows large retailers like Macy’s to inventory its shelves up to 24 times a year (O’Connor, 2014).

IMPINJ, 2012Figure 17: On-Shelf Availability

Figure 18: RFID vs Barcode

Radio Frequency Identification (RFID)

Barcode

Inventory Accuracy

95%+ 65%

Price Per Tag

20¢ 3¢

Throughput > 100 Tags Can Be Read at Once

User Dependent

Line of Sight None Needed Direct (Optical)

Read Distance

Up to 35 Feet Inches

Source: Jovix 2015, inLogic 2014, IMPINJ 2012

Another benefit of RFID technology is that no direct line of sight is needed to read RFID tags. An employee equipped with a hand-held RFID gun can scan an entire rack of clothes in seconds without having to physically locate each item’s price tag. Since a direct line of sight is not needed, a customer does not need to remove their items from their shopping bag when checking out. A single stationary reader can register the contents of the shopping bag in seconds and allow the cashier to complete the transaction quickly. The cost per RFID tag is slightly higher than a barcode system, but provides more benefits which justify this cost. Speed in all aspects of the inventory handling process is increased with the use of RFID technology, which benefits both Altai and its customers.

Clark, Natalie

Can we make this a chart? Something highlighting the benefits of RFID inventory management opposed to the standard method?

Criteria WASP QuickStore

Microsoft RMS

QuickBooks POS v12

Automatic Product Reorders

No No Yes

Employee Timekeeping

Yes Requires Microsoft Dynamics

Yes

Gift Card Processing

Yes Yes Yes

Rewards Program Tracking

Yes No Yes

Electronic & Online Payment Processing

Yes Requires Third Party Software

Yes

Automatic Inventory Tracking

No Yes Yes

Price $2,065.50 $2,070.00 $1,999.95


13

Managing The Stock Room With RFID Technology

Inventory is

Delivered

RFID Tags Printed

Tagged Inventory is Shelved

Customer Purchases

Item

System Alerts Stock Room for Replacement

Inventory accuracy and management is one of the main factors that will drive Altai’s success. Customers can be assured that items shown on the website can be found that same day in store and in the size they need. As new inventory is delivered, it is moved to the back of the store for processing. Seagull BT-3 software prints labels similar to that of Figure 19 for all items in the shipment, which are then affixed to the clothing.

Figure 19: RFID Tag

Figure 20: Inventory Tagging & Management

Figure 21: POS Software Comparison

Completing The Transaction: Point of Sale (POS) Transaction Processing

Altai employs Point of Sale (POS) Software in store to provide inventory tracking, sales management, and transaction processing. Various POS software solutions were vetted to find the best balance of features and functionality. All of the solutions shown in Figure 21 provide for integration with QuickBooks accounting software, which Altai uses to process transactions and generate financial reports . iPad based solutions were not considered due to their inability to interface with the store’s RFID antennas.

QuickBooks POS Software is the best fit for Altai, as it meets all the critical criteria outlined in Figure 21. Its ability to seamlessly integrate with QuickBooks for Business and process online transactions placed it above and beyond the competition. QuickBooks Accounting software generates accounting and inventory reports in conjunction with QuickBooks POS Software. A detailed breakdown of the customer checkout process with QuickBooks POS can be found in Appendix Q, while total system costs are outlined in Appendix F.

Once it is shelved in the stock room, it remains there until a customer purchases the same item from the store floor. An employee is alerted by the POS system to replace the item on the floor. Immediate replacement ensures the customer can always find the exact item, in the size they need, at all times on the store floor. A detailed breakdown of this process can be found in Appendix R.


14

Disaster Recovery and Security

Altai relies heavily on data produced by its POS terminals and its inventory management system in its day-to-day business. As such, precautions have been taken to minimize the risk to consumer data and the systems they are stored on. According to Figure 23, hardware failure accounts for 40% of all business data loss. To minimize this risk, Altai’s server is cloned twice daily to protect against hardware failure in a disaster proof hard drive enclosure. APC battery backup protects the entire store’s IT system, providing 30 min of uptime in the event of power loss. More information on Altai’s data security can be found in Appendix S.

Hardware Failure

40%

Human Error29%

Software Corruption13%

Computer Viruses6%

Theft9%

Hardware Distruction3%

Causes of Data Loss

Figure 23: Causes of Data Loss Source: Smith 2003

Reaching Customers Cross-Platform

A modern website and mobile browser design add to the premium look and feel that Altai strives to achieve. Online, customers can browse everything Altai has to offer in store. Thanks to the RFID tagging of inventory, customers can know exactly what sizes and items are in stock. They have the option to order online, reserve to try on in store, or order for in store pickup. Though Altai does not plan to allow online orders upon opening, the functionality of an online storefront it calculated into the development costs below in Figure 22. Visitors of Altai’s site can preview upcoming classes held on a weekly basis and connect with the company via social media integration.

Desktop Site

Mobile Site

iOS App

Android App

$- $20,000 $40,000 $60,000

Cost of Web Devel-opment

A fully functional mobile site compliments the desktop site, with added functionality for in store use. Customers can use this mobile site to scan QR codes on items in store, which directs them to product information such as sizes in stock, price, and photos of the item. Developing a mobile site over a fully functional app will save Altai money in its infancy. Fully developing a mobile app for Android and iOS alongside a mobile site and desktop site would cost nearly double that of just developing the two browser-based sites. The estimated cost of development was $89,100 (Otreva, 2015). As the business grows, Altai plans to develop its own apps to further enhance the customer experience. Website mockups can be found in Appendix M.

Figure 22: Cost of Web Development

Demand Forecast #1

15

Potential Sales Based on Number of Customers Per Day and Average Ticket Price

The potential sales per year will be calculated by finding the expected number of customers per day and multiplying that by the average ticket price for purchases from Altai. This number will then be multiplied by the number of days the store is open to find the yearly sales potential.

Step 1: Expected Potential Customers Per Day

Store Name:

Location: Number of Visitors Per Day:

Purchasing Customers:

Great Outdoor Provision

Chapel Hill

160 80

Omega Sports

Durham, NC

75 55

Athleta Durham, NC

120 65

Average Total:

= 118 per day

= 67 Customers

In order to determine the number of customers to expect per day, primary research was gathered from sportswear and sporting goods stores in Chapel Hill and nearby cities. Averaging the number of customers from similar stores, the expected number of customers per day is roughly 67.

Figure 24: Customer Expectancy

Figure 26: Sales Forecast

46 customers per day

$66.53 ticket price

$3,060.38 sales per day

Open 304 days a year

$930,355.52 first year sales

The average price for apparel from Altai was calculated by finding the average price per type of apparel (t-shirts, shorts, jackets, etc.) for each brand Altai carries. The average price for each type of apparel per brand was then totaled and averaged to find the average price per type of apparel. All types of apparel were then averaged to find the average item price for Altai. For a breakdown of average pricing, refer to Appendix E.

Step 2: Average Ticket Price

However, this is an expected potential after multiple years of establishment. Assuming an average yearly growth rate of 15%, or the rate at which a company would need to grow to double its size within 5 years (Nagel, 2013), this 67 customers can be scaled back to approximately 45 customers for the first year.

Year 1 Year 2 Year 3 Year 4 Year 5

46 51 56 61 67Figure 25: Customers Per Day Forecast

Demand Forecast #2

16

Potential Sales Based on the Market Size

Step 1: Forecasting Obtainable Millennials

The potential sales per year will be calculated by finding the potential number of female customers within Chapel Hill and multiplying it by the average price per item for Altai.

In order to determine the portion of the company’s target market who will purchase clothing from Altai, the national percent for women within this age range who purchased women’s sports clothing within the past 12 months is taken, or 19.5% (MRI+).

Next, this percentage is multiplied by the female population in Chapel Hill, Durham, Clay and Raleigh (the areas of advertisement and nearby cities) to determine the number of potential customers from each location. Adjustments were estimated based external factors such as number of competitors in the area and distance from Altai. For example, Durham has a similar women’s athletic apparel market to Chapel Hill, but due to the fact that it’s almost 30 miles away, this number was adjusted to fit the number that the company believes would shop at Altai compared to other competitors.

Location: Target Market Size:

% Adjustment:

Total Market Potential:

Chapel Hill:

2,818 95% 2,677

Durham: 8,325 80% 6,660

Clay 3,011 30% 903

Raleigh: 12,501 5% 625

Total: 10,865

Step 2: Average Ticket Price

The average price for apparel from Altai was calculated by finding the average price per type of apparel (t-shirts, shorts, jackets, etc.) for each brand Altai carries. The average price for each type of apparel per brand was then totaled and averaged to find the average price per type of apparel. All types of apparel were then averaged to find the average item price for Altai. For a breakdown of average pricing, refer to Appendix E.

10,865 potential

customers per year

$66.53 average item price

$722,848.45 potential first

year salesFigure 27: Percent of Market Size in Locations Figure 28: Breakdown of Potential First Year Sales

17

Weighing of Demand Forecasts

Based on the demand forecasts, Altai has decided to use an initial customer base of 36 customers per day, or 12,464 customers per year. This weighing was made based on Chapel Hill’s demographics: high average income and above average spending on sportswear. However, Altai believes first year sales of over $900,000 are unrealistic. Using financial formulas, one of the lowest numbers of customers per day while still growing at 15% per year rate and maintaining a positive net present value was 36. This yields first year sales of $727,995, which aligns closer with Demand Forecast #2. However, Altai believes Demand Forecast #1 depicts future sales potential, granting it a 10% weighing.

Fiscally-Impacting Risks

A Highly Competitive IndustryThis risk could affect the company and its sales based on a possibly lower penetration rate than projected. However, with the location that the store is in, it is predicted to attract a heavy amount of foot traffic and campus students. The free fitness classes will also heavily involve the community and give a personalized shopping environment.

A Highly Cyclical IndustryThis risk can definitely impact sales and the major parts of business operations. Entering the market during a time of expected growth in the economy will allow the company to establish personal connections with customers.

Dependence on Quality of Wholesaler’s ProductsBased on other companies’ issues with manufacturing errors, the company is very vulnerable to these problems as well. To combat this possibility for error, the company chooses very reputable brands that create high-quality, pairing with customer experience.

Heavy Technology InvolvementHigh involvement in technology poses for large investments and can have large amounts of difficulties. Personal dedication to technology has been tested by various major companies and has shown large amounts of return on investment.

Revenue Generation Plan

Altai’s majority of revenue will come from the selling of various athletic apparel through the brick-and-mortar store in Chapel Hill, North Carolina. Coupons and free fitness classes for customers are offer to come try new items in the store . Altai offers an excellent customer shopping experience, which increases customer retention rates.

Altai estimates that for the first year, it will average 36 customers per day with a $66.53 average ticket price. By year 5, it is estimated that Altai will have 63 customers per day, which is similar to the pre-calculated average for established companies.

Financials

Figure 27: Projected Customers Per Day

Demand Forecast

#1

Demand Forecast

#2

Estimated Total

Start-Up Cost:

10% 90% $210,000

Figure 29: Demand Forecast Weighing

18

Pro Forma Statement Overview

Altai’s business operations and various projections give it a good position fiscally. Altai plans to take a start-up loan for $63,000, with a financing plan of 8% interest for 7 years and issuing $147,000 worth of common stock . Altai projects that even with its initial investment in technology, that it will be compensated for these costs by the fourth year, provided that the revenue growth model is followed or exceeded. To begin this business venture, Altai’s Net Present Value (NPV) is a positive $25,622 and its Internal Rate of Return is 26.62%, 1.53% greater than the Weighted Average Cost of Capital. With its financial standings and various investment decisions, Altai will be able to finance its debt and keep investors happy, creating an overall healthy business.Sales Growth Details on Key Ratios

Using Altai’s estimated expenses and sales forecasts, various quantitative ratios support the initiation of the project. WACC was generated through the terms of the loan and the cost of equity. The equity’s cost of capital for was calculated through the Capital Assets Pricing Model (CAPM). Using Economist Peter Bernstein’s analysis that the stock market provides a 10% annual return for the Market return (Investing Answers) and 2.14% for the risk-free rate (Bloomberg, L.P.), the risk premium for this investment is 7.86%. A beta of 4 was used due to Altai’s very cyclical industry and startup risks. Figure 31 illustrates the free cash flows and the horizon value of $1,022,970 was omitted. For additional information, please see Appendix A. Additional calculation details can be found in Appendix V. Investors can predict to see a return on investments within Year 2, where sales growth, profit margin, return on equity (ROE), and return on assets (ROA) are positive.

Financials

Profit Margin

ROE & ROA

Free Cash Flows

Year 1 Year 2 Year 3 Year 4 Year 510%12%14%16%18%20%

14%

17%

13%15%

Year 1 Year 2 Year 3 Year 4 Year 5-50%

-35%

-20%

-5%

10%

25%

40%

5%

39% 35% 34%

-12%

1%

12%16%

25%

ROE ROA

Year 1 Year 2 Year 3 Year 4 Year 5-0.1

-0.05

0

0.05

0.1

0.15

-0.07

0.01

0.07 0.080.1

Figure 30: Sales Growth

Figure 31: Profit Margin

Figure 32: ROE & ROA Figure 33: Free Cash Flows

Year

0

Year

1

Year

2

Year

3

Year

4

Year

5

$(500,000.00)

$(300,000.00)

$(100,000.00)

$100,000.00

Conclusion

19

By following this business plan, Altai will reach its financial goals and become a successful specialty retail business. Analyzing industry drivers, Chapel Hill, North Carolina has above average statistics, making it the perfect location to open our store . With the inclusion of the ‘Research Triangle’, Altai will have a large pool of potential customers who will help the company grow an average of 15% per year, doubling our size within 5 years.

Through consistent, targeted marketing to millennial females across a range of social media and physical channels, these potential customers are expected to translate to 63 customers per day by year five. Our superior customer experience, implementation of cutting-edge technology, and addition of yoga and Pilates sessions offer more to the customer than the average retailer. Through these incentives we believe the company will develop a strong, loyal customer base.

Based upon the data produced from demand forecasts and financial projectionssuch as a positive NPV , a 1.53% larger Internal Rate of Return than the Weighted Average Cost of Capital, and a manageable payback period, Copeland Associates would accept this project and would recommend to move forward with the creation of this business. The company is in a very favorable position and with its commitment to incorporating technology into its customers’ shopping experience, it will be able to counteract the various risks that companies in this industry face with the changing economy.

As seen in Figure 32, Altai is poised to succeed in the specialty apparel industry .


$(100,000)

$(50,000)

$-

$50,000

$100,000

$150,000

Projected Net Income

Figure 34: Projected Net Income

20

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27

Appendix A: Financials

Altai Pro Forma Statements of Financial Position

Start-Up Year 1 Year 2 Year 3 Year 4 Year 5

Cash $210,000 $137,189 $200,191 $213,308 $217,204 $180,816 Accounts Receivables Inventory $300,000 300,000 350,000 350,000 350,000 360,000

RFID Labels $445 Thermal Print Paper $75 Total current assets $510,519 437,189 550,191 563,308 567,204 540,816

Property and equipment, net (a) $145,645 (8,791) (14,065) (8,439) (5,063) (5,063)Intangible assets, net $- - - - - - Total assets $656,165 $428,398 $536,126 $554,869 $562,141 $535,753

Accounts payable Accrued expenses $446,165 268,671 377,569 339,800 265,898 115,284 Current portion of long-term debt $7,008 $7,586 $8,211 $8,888 $9,621

Total current liabilities $446,165 275,679 385,155 348,011 274,786 124,905 Long-term debt $63,000 55,992 48,984 40,772 31,884 22,264

Total liabilities $509,165 331,671 434,139 388,784 306,670 147,168 Paid-in equity capital $147,000 147,000 147,000 147,000 147,000 147,000 Retained earnings (b) (50,273) (45,012) 19,085 108,470 241,584

Total equity $147,000 96,727 101,988 166,085 255,470 388,584 Total liabilities and equity $656,165 $428,398 $536,126 $554,869 $562,141 $535,753


28

Altai Pro Forma Statements of Financial Position(a) Property and equipment, net:

Leasehold improvements Fixtures and equipment 13,000 Computer hardware and software RFID Hardware

4 Port Fixed RFID Terminal $2,929.80 RFID Antenna $524.40 Large RFID Antenna $2,315.20 RFID Gun $2,846.00 RFID Capable Printer $4,613.00

Total RFID Hardware $13,228.40 Networking

APC UPS Battery Backup $239.99 Cisco 8 Port Gigabit Network Switch $59.96 Cisco Modem $70.00 Cisco Small Business Router $65.28

Total Networking Equipment $435.23 Intercom System

PylePro 8 Ohm 300 Watt Amplifier $170.00 3.5 mm to RCA Cable $10.00 Wired through speaker selector $2,120.00 Coper L/R Channel Speaker Wire CL 3 14 Guage $179.99 Stereo 4 Channel Splitter $232.00

Total Intercom System $2,711.99 IT Equipment

Seagull ET-Pro Label Printing Software $495.00 Panasonic Link2Cell KX-TG9581B Cordless Phone $149.95 Screens for Back Office $389.30 Inventory & POS LED Backlit LCD $185.15 VERSA Mount $13.50 Verifone M132-409-01-R Payment Terminal $1,158.20 Quickbooks Pro V12 POS Software $2,000.00 ThinkCentre M73 Small Form Factor Desktop $1,197.60 POS Keyboard $239.60 Quickbooks Accounting $199.95 ThinkServer Server with Windows Server 2012 $2,827.80 ioSafe 1515+ Waterproof & Fireproof NAS Storage $1,899.99 WD Enterprise 6TB 7200 RPM Drives $1,744.00 Software Development Fee $89,100.00 Thermal Reciept Printer $509.98

Total IT Equipment $102,110.02 Cabling

CAT 6e Patch Cable $486.54 CAT 6e Crimp Connectors $78.90 CAT Crimpers $10.72

Total Cabling $576.16 Total Computer Hardware and Software $119,061.80 Furniture

Back Room Shelves (48 x 18 x 72) $2,239.65 Back Room Table $406.00 Clothing Bins $400.00 Office Desk $439.00 Custom Checkout Counter $450.00 Alta Large Display Table $1,625.00 Alta Medium Display Table $555.00 Alta Small Display Table $185.00 Alta Island $2,634.00 Alta Wall Module $1,890.00 Alta 4 Way Tree $1,710.00 Custom Wall Mount Racks $400.00 Window & In-Store Displays $500.00 Desk Chair $149.99

Total Furniture $13,583.64

Less: Accumulated depr and amort 8,791 14,065 8,439 5,063 5,063 Property and equipment, net $145,645.44 $(8,791) $(14,065) $(8,439) $(5,063) $(5,063)

(b) Retained earnings:

Balance, beginning of year $- $- $(50,273) $(45,012) $19,085 $108,470 Net income - (50,273) 5,260 64,098 89,385 133,114

Balance, end of year $- $(50,273) $(45,012) $19,085 $108,470 $241,584


29

Altai Pro Forma Statements of Operations

Income Tax Expense for Year 7% 22% 46% 46% 46%


Sales (a) $727,995 $829,105 $970,660 $1,112,214 $1,273,991 Cost of goods sold and occupany costs (b) 476,175 531,785 561,107 631,885 712,773

Gross profit 251,820 297,320 409,552 480,330 561,218 Direct store expenses (c) 209,291 190,252 190,252 218,539 218,539 General and administrative expenses* 92,000 92,000 92,000 92,000 92,000 Pre-opening expenses

Operating income (49,471) 15,068 127,301 169,791 250,679 Interest expense $4,833.22 4,256 3,630 2,953 2,221

Income before income taxes (54,304) 6,781 119,639 166,837 248,458 Provision for income taxes (4,032) 1,521 55,541.11 77,453 115,344

Net income $(50,273) $5,260 $64,098 $89,385 $133,114

(a) Sales:Number of customers per day 36 41 48.00 55 63.00

x Average transaction value 66.52 66.52 66.52 66.52 66.52 Sales per day 2,395 2,727 3,193 3,659 4,191

x Number of days open per year 304 304 304 304 304 Sales $727,995 $829,105 $970,660 $1,112,214 $1,273,991

(b) Cost of goods sold and occupancy costs:Cost of goods sold $400,397 $456,008 $485,330 $556,107 $636,996 Rent 72,000 72,000 72,000 72,000 72,000 Utilities 3,777 3,777 3,777 3,777 3,777

Cost of goods sold and occupancy costs $476,175 $531,785 $561,107 $631,885 $712,773

(c) Direct store expenses:Store payroll, payroll taxes, and benefits

Store Payroll $101,006 $101,006 $101,006 $135,616 $135,616 Payroll Taxes $11,580 $11,580 $11,580 $13,657 $13,657

Store suppliesTWC Internet $1,188.00 1,188 1,188 1,188 1,188 TWC Phone $300.00 300 300 300 300 Quickbooks Payroll $301.00 301 301 301 301 RFID Labels $444.80 Printer Paper $75 Shopping Software $229.00 229 229 229 229 Adobe Creative Suite for Business $11,088.00 11,088 11,088 11,088 11,088 Webhosting $1,440.00 1,440 1,440 1,440 1,440

Advertising $81,640.00 63,120 63,120 54,720 54,720 Direct store expenses $209,291 $190,252 $190,252 $218,539 $218,539

*General and Administrative Expenses include Manager Salaries


30

Altai Pro Forma Statements of Operations

Income Tax Expense for Quarter 7%

Q1 Q2 Q3 Q4

Sales (a) $196,899 $179,604 $184,393 $181,999 Cost of goods sold and occupany costs (b) 127,239 117,727 120,361 119,044

Gross profit 69,660 61,877 64,033 62,955 Direct store expenses (c) 55,995 51,915 55,475 51,915 General and administrative expenses 23,000 23,000 23,000 23,000 Pre-opening expenses -

Operating income (9,334) (13,038) (14,442) (11,960)Interest expense $1,260.00 1,226 1,191 1,156

Income before income taxes (10,594) (14,264) (15,634) (13,116)Provision for income taxes (787) (1,059) (1,161) (974)

Net income $(9,808) $(13,205) $(14,473) $(12,142)

(a) Sales:Number of customers per day 37 36 36 38

x Average transaction value 66.52 66.52 66.52 66.52 Sales per day 2,461 2,395 2,395 2,528

x Number of days open per year 80 75 77 72 Sales $196,899 $179,604 $184,393 $181,999

(b) Cost of goods sold and occupancy costs:Cost of goods sold 108,294.6 98,782.2 101,416.4 100,099.3 Rent 18,000.0 18,000.0 18,000.0 18,000.0 Utilities 944 944 944 944

Cost of goods sold and occupancy costs $127,239 $117,727 $120,361 $119,044

(c) Direct store expenses:Store payroll, payroll taxes, and benefits

Store Payroll $25,251.40 $25,251.40 $25,251.40 $25,251.40 Payroll Taxes $2,895.08 $2,895.08 $2,895.08 $2,895.08

Store suppliesTWC Internet $297.00 $297.00 $297.00 $297.00 TWC Phone $75.00 $75.00 $75.00 $75.00 Quickbooks Payroll $75.25 $75.25 $75.25 $75.25 RFID Labels $444.80 Printer Paper $74.69 Shopping Software $57.25 $57.25 $57.25 $57.25 Adobe Creative Suite for Business $2,772.00 $2,772.00 $2,772.00 $2,772.00 Webhosting $360.00 $360.00 $360.00 $360.00

Depreciation and amortization $1,502.23 $1,502.00 $1,502.00 $1,502.00 Advertising* $22,190.00 $18,630.00 $22,190.00 $18,630.00

Direct store expenses $55,995 $51,915 $55,475 $51,915

*Advertising Expense Includes:• Billboard• Facebook• Twitter• T-Shirts (Year 1)• Flyers (Year 1)


31

Altai Capital Budgeting Analysis

Project Cash Flows

0 1 2 3 4 5

EBIT $ (49,471) $ 15,068 $ 127,301 $ 169,791 $ 250,679 x (1 - tax rate) 93% 78% 54% 54% 54%

Operating profit after tax (45,798) 11,689 68,203 90,967 134,304

+ Depreciation and amortization 8,791 14,065 8,439 5,063 5,063

Operating cash flow $ - $ (37,008) $ 25,754 $ 76,641 $ 96,030 $ 139,367

- Change in net working capital 300,000

- Capital spending 119,062

Free cash flow $ (419,062) $ (37,008) $ 25,754 $ 76,641 $ 96,030 $ 139,367

+ Horizon value (end of year 5) 1,022,970

Project cash flow $ (419,062) $ (37,008) $ 25,754 $ 76,641 $ 96,030 $ 1,162,337

EBITDA (year 5) $ 255,742

x Market multiple 4.0

Horizon value (end of year 5) $ 1,022,970

Required Rate of Return

Weighted average cost of capital (WACC):

Capital x Cost of x After-Tax = WACCStructure Capital Adjustment

Debt 30% x 8% x 66% = 1.59%

Equity 70% x 33.58% = 23.51%+

25.09%

CAPM

Ra= Rf + Beta(Rm-Rf) Rf Beta Rm-Rf Ra

2.14% 4 7.86% 0.3358

Decision-Making Criteria

Net present value = 25,622

Internal rate of return = 26.62%

Payback period = 4.22

Project Cash Flows:

Year 0 $(419,062)Year 1 $(37,008)Year 2 $25,754 Year 3 $76,641 Year 4 $96,030

Year 5 $1,162,337


32

Year One Cash Flows

Q1 Q2 Q3 Q4

Tax Rate: 0.07

EBIT (10,033) (13,736) (15,141) (12,659)x (1 - tax rate) 93% 93% 93% 93%

Operating profit after tax (9,331) (12,775) (14,081) (11,773)

+Depreciation and amortization 2,201 2,201 2,201 2,201 Operating cash flow $ (7,130) $ (10,574) $ (11,880) $ (9,572)

- Change in Net Working Capital- Capital Spending

Free cash flow $ (7,130) $ (10,574) $ (11,880) $ (9,572)

Appendix B : Depreciation Schedule

33

Audio Equipment and NetworkingPylePro 8 Ohm 300 Watt AmplifierYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $170.00 $34.00 $136.00 Year 2 32.00% $136.00 $54.40 $81.60 Year 3 19.20% $81.60 $32.64 $48.96 Year 4 11.52% $48.96 $19.58 $29.38 Year 5 11.52% $29.38 $19.58 $9.79 Year 6 5.76% $9.79 $9.79 $-

3.5 mm to RCA CableYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $10.00 $2.00 $8.00 Year 2 32.00% $8.00 $3.20 $4.80 Year 3 19.20% $4.80 $1.92 $2.88 Year 4 11.52% $2.88 $1.15 $1.73 Year 5 11.52% $1.73 $1.15 $0.58 Year 6 5.76% $0.58 $0.58 $-

JBL Control HST Speakers (wired through speaker selector)Year % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $2,120.00 $424.00 $1,696.00 Year 2 32.00% $1,696.00 $678.40 $1,017.60 Year 3 19.20% $1,017.60 $407.04 $610.56 Year 4 11.52% $610.56 $244.22 $366.34 Year 5 11.52% $366.34 $244.22 $122.11 Year 6 5.76% $122.11 $122.11 $-

Copper L/R Channel Speaker Wire CL 3 14 GuageYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $179.99 $36.00 $143.99 Year 2 32.00% $143.99 $57.60 $86.40 Year 3 19.20% $86.40 $34.56 $51.84 Year 4 11.52% $51.84 $20.73 $31.10 Year 5 11.52% $31.10 $20.73 $10.37 Year 6 5.76% $10.37 $10.37 $0.00

Stereo 4 Channel SplitterYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $232.00 $46.40 $185.60 Year 2 32.00% $185.60 $74.24 $111.36 Year 3 19.20% $111.36 $44.54 $66.82 Year 4 11.52% $66.82 $26.73 $40.09 Year 5 11.52% $40.09 $26.73 $13.36 Year 6 5.76% $13.36 $13.36 $-

APC UPS Battery Backup Year % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $239.99 $48.00 $191.99 Year 2 32.00% $191.99 $76.80 $115.20 Year 3 19.20% $115.20 $46.08 $69.12 Year 4 11.52% $69.12 $27.65 $41.47 Year 5 11.52% $41.47 $27.65 $13.82 Year 6 5.76% $13.82 $13.82 $0.00

Cisco 8 Port Gigabit Network SwitchYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $59.96 $11.99 $47.97 Year 2 32.00% $47.97 $19.19 $28.78 Year 3 19.20% $28.78 $11.51 $17.27 Year 4 11.52% $17.27 $6.91 $10.36 Year 5 11.52% $10.36 $6.91 $3.45 Year 6 5.76% $3.45 $3.45 $0.00

Cisco ModemYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $70.00 $14.00 $56.00 Year 2 32.00% $56.00 $22.40 $33.60 Year 3 19.20% $33.60 $13.44 $20.16 Year 4 11.52% $20.16 $8.06 $12.10 Year 5 11.52% $12.10 $8.06 $4.03 Year 6 5.76% $4.03 $4.03 $-

Cisco Small Business RouterYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $65.28 $13.06 $52.22 Year 2 32.00% $52.22 $20.89 $31.33 Year 3 19.20% $31.33 $12.53 $18.80 Year 4 11.52% $18.80 $7.52 $11.28 Year 5 11.52% $11.28 $7.52 $3.76 Year 6 5.76% $3.76 $3.76 $-

Appendix B: Depreciation Schedule

34

RFID and Cabling4 Port Fixed RFID TerminalYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $2,929.80 $585.96 $2,343.84 Year 2 32.00% $2,343.84 $937.54 $1,406.30 Year 3 19.20% $1,406.30 $562.52 $843.78 Year 4 11.52% $843.78 $337.51 $506.27 Year 5 11.52% $506.27 $337.51 $168.76 Year 6 5.76% $168.76 $168.76 $-

RFID AntennaYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $524.40 $104.88 $419.52 Year 2 32.00% $419.52 $167.81 $251.71 Year 3 19.20% $251.71 $100.68 $151.03 Year 4 11.52% $151.03 $60.41 $90.62 Year 5 11.52% $90.62 $60.41 $30.21 Year 6 5.76% $30.21 $30.21 $-

Large RFID AntennaYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $2,315.20 $463.04 $1,852.16 Year 2 32.00% $1,852.16 $740.86 $1,111.30 Year 3 19.20% $1,111.30 $444.52 $666.78 Year 4 11.52% $666.78 $266.71 $400.07 Year 5 11.52% $400.07 $266.71 $133.36 Year 6 5.76% $133.36 $133.36 $-

RFID GunYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $2,846.00 $569.20 $2,276.80 Year 2 32.00% $2,276.80 $910.72 $1,366.08 Year 3 19.20% $1,366.08 $546.43 $819.65 Year 4 11.52% $819.65 $327.86 $491.79 Year 5 11.52% $491.79 $327.86 $163.93 Year 6 5.76% $163.93 $163.93 $-

RFID Capable PrinterYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $4,613.00 $922.60 $3,690.40 Year 2 32.00% $3,690.40 $1,476.16 $2,214.24 Year 3 19.20% $2,214.24 $885.70 $1,328.54 Year 4 11.52% $1,328.54 $531.42 $797.13 Year 5 11.52% $797.13 $531.42 $265.71 Year 6 5.76% $265.71 $265.71 $-

CAT 6e Patch CableYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $243.27 $48.65 $194.62 Year 2 32.00% $194.62 $77.85 $116.77 Year 3 19.20% $116.77 $46.71 $70.06 Year 4 11.52% $70.06 $28.02 $42.04 Year 5 11.52% $42.04 $28.02 $14.01 Year 6 5.76% $14.01 $14.01 $-

CAT 6e Crimp ConnectorsYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $39.45 $7.89 $31.56 Year 2 32.00% $31.56 $12.62 $18.94 Year 3 19.20% $18.94 $7.57 $11.36 Year 4 11.52% $11.36 $4.54 $6.82 Year 5 11.52% $6.82 $4.54 $2.27 Year 6 5.76% $2.27 $2.27 $-

CAT CrimpersYear % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $10.72 $2.14 $8.58 Year 2 32.00% $8.58 $3.43 $5.15 Year 3 19.20% $5.15 $2.06 $3.09 Year 4 11.52% $3.09 $1.23 $1.85 Year 5 11.52% $1.85 $1.23 $0.62 Year 6 5.76% $0.62 $0.62 $-


35

IT EquipmentPanasonic Link2Cell KX-TG9581B Cordless Phone

Year % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $149.95 $29.99 $119.96 Year 2 32.00% $119.96 $47.98 $71.98 Year 3 19.20% $71.98 $28.79 $43.19 Year 4 11.52% $43.19 $17.27 $25.91 Year 5 11.52% $25.91 $17.27 $8.64 Year 6 5.76% $8.64 $8.64 $-

Screens for Back Office

Year % Depreciation Beginning Amount Amount Depreciated Ending Year AmountYear 1 20.00% $389.30 $77.86 $311.44 Year 2 32.00% $311.44 $124.58 $186.86 Year 3 19.20% $186.86 $74.75 $112.12 Year 4 11.52% $112.12 $44.85 $67.27 Year 5 11.52% $67.27 $44.85 $22.42 Year 6 5.76% $22.42 $22.42 $(0.00)

ThinkVision T1714p 17-inch Square LED Backlit LCD (Inventory & POS)


VERSA Mount


Verifone M132-409-01-R Payment Terminal

Year % Depreciation Beginning Amount Amount Depreciated Ending Year Amount

Year 1 20.00% $1,158.20 $231.64 $926.56 Year 2 32.00% $926.56 $370.62 $555.94 Year 3 19.20% $555.94 $222.37 $333.56 Year 4 11.52% $333.56 $133.42 $200.14 Year 5 11.52% $200.14 $133.42 $66.71 Year 6 5.76% $66.71 $66.71 $-

Quickbooks POS V12

Year % Depreciation Beginning Amount Amount Depreciated Ending Year Amount

Year 1 20.00% $2,000.00 $400.00 $1,600.00

Year 2 32.00% $1,600.00 $640.00 $960.00 Year 3 19.20% $960.00 $384.00 $576.00 Year 4 11.52% $576.00 $230.40 $345.60 Year 5 11.52% $345.60 $230.40 $115.20 Year 6 5.76% $115.20 $115.20 $-

Seagull BT-A3 RFID Software



36

IT Equipment

ThinkCentre M73 Small Form Factor Desktop

Year % Depreciation Beginning AmountAmount Depreciated Ending Year Amount

Year 1 20.00% $1,197.60 $239.52 $958.08

Year 2 32.00% $958.08 $383.23 $574.85

Year 3 19.20% $574.85 $229.94 $344.91

Year 4 11.52% $344.91 $137.96 $206.95

Year 5 11.52% $206.95 $137.96 $68.98

Year 6 5.76% $68.98 $68.98 $-

Cherry G86-62401EUADAA POS Keyboard


Year 1 20.00% $239.60 $47.92 $191.68

Year 2 32.00% $191.68 $76.67 $115.01

Year 3 19.20% $115.01 $46.00 $69.00

Year 4 11.52% $69.00 $27.60 $41.40

Year 5 11.52% $41.40 $27.60 $13.80

Year 6 5.76% $13.80 $13.80 $0.00

Thermal Reciept Printer


Year 1 20.00% $509.98 $102.00 $407.98

Year 2 32.00% $407.98 $163.19 $244.79

Year 3 19.20% $244.79 $97.92 $146.87

Year 4 11.52% $146.87 $58.75 $88.12

Year 5 11.52% $88.12 $58.75 $29.37

Year 6 5.76% $29.37 $29.37 $0.00

Security Camera


Year 1 20.00% $389.99 $78.00 $311.99

Year 2 32.00% $311.99 $124.80 $187.20

Year 3 19.20% $187.20 $74.88 $112.32

Year 4 11.52% $112.32 $44.93 $67.39

Year 5 11.52% $67.39 $44.93 $22.46

Year 6 5.76% $22.46 $22.46 $-


37

IT EquipmentQuickbooks Accounting


Year 1 20.00% $199.95 $39.99 $159.96 Year 2 32.00% $159.96 $63.98 $95.98 Year 3 19.20% $95.98 $38.39 $57.59 Year 4 11.52% $57.59 $23.03 $34.55 Year 5 11.52% $34.55 $23.03 $11.52 Year 6 5.76% $11.52 $11.52 $-

ThinkServer TS440 6-Bay Server with Windows Server 2012


Year 1 20.00% $2,827.80 $565.56 $2,262.24 Year 2 32.00% $2,262.24 $904.90 $1,357.34 Year 3 19.20% $1,357.34 $542.94 $814.41 Year 4 11.52% $814.41 $325.76 $488.64 Year 5 11.52% $488.64 $325.76 $162.88 Year 6 5.76% $162.88 $162.88 $-

ioSafe 1515+ Waterproof & Fireproof NAS Storage


Year 1 20.00% $1,899.99 $380.00 $1,519.99 Year 2 32.00% $1,519.99 $608.00 $912.00 Year 3 19.20% $912.00 $364.80 $547.20 Year 4 11.52% $547.20 $218.88 $328.32 Year 5 11.52% $328.32 $218.88 $109.44 Year 6 5.76% $109.44 $109.44 $-

WD Enterprise 6TB 7200 RPM Drives


Year 1 20.00% $1,744.00 $348.80 $1,395.20 Year 2 32.00% $1,395.20 $558.08 $837.12 Year 3 19.20% $837.12 $334.85 $502.27 Year 4 11.52% $502.27 $200.91 $301.36 Year 5 11.52% $301.36 $200.91 $100.45 Year 6 5.76% $100.45 $100.45 $-


38

Furniture

Back Room Shelves (48 x 18 x 72)Custom Wall Mount Racks

Year % Depreciation Beginning Amount Amount Depreciated Ending Year Amount Year% Depreciation

Beginning Amount Amount Depreciated

Ending Year Amount

Year 1 20.00% $2,239.65 $447.93 $1,791.72 Year 1 20.00% $400.00 $80.00 $320.00

Year 2 32.00% 1791.72 $716.69 $1,075.03 Year 2 32.00% 320 $128.00 $192.00

Year 3 19.20% 1075.032 $430.01 $645.02 Year 3 19.20% 192 $76.80 $115.20

Year 4 11.52% 645.0192 $258.01 $387.01 Year 4 11.52% 115.2 $46.08 $69.12

Year 5 11.52% 387.01152 $258.01 $129.00 Year 5 11.52% 69.12 $46.08 $23.04

Year 6 5.76% 129.00384 $129.00 $- Year 6 5.76% 23.04 $23.04 $-

Back Room Table Window & In-Store Displays



Ending Year Amount

Year 1 20.00% $406.00 $81.20 $324.80 Year 1 20.00% $500.00 $100.00 $400.00

Year 2 32.00% 324.8 $129.92 $194.88 Year 2 32.00% 400 $160.00 $240.00

Year 3 19.20% 194.88 $77.95 $116.93 Year 3 19.20% 240 $96.00 $144.00

Year 4 11.52% 116.928 $46.77 $70.16 Year 4 11.52% 144 $57.60 $86.40

Year 5 11.52% 70.1568 $46.77 $23.39 Year 5 11.52% 86.4 $57.60 $28.80

Year 6 5.76% 23.3856 $23.39 $- Year 6 5.76% 28.8 $28.80 $-

Clothing Bins Desk Chair



Ending Year Amount

Year 1 20.00% $400.00 $80.00 $320.00 Year 1 20.00% $149.99 $30.00 $119.99

Year 2 32.00% 320 $128.00 $192.00 Year 2 32.00% 119.992 $48.00 $72.00

Year 3 19.20% 192 $76.80 $115.20 Year 3 19.20% 71.9952 $28.80 $43.20

Year 4 11.52% 115.2 $46.08 $69.12 Year 4 11.52% 43.19712 $17.28 $25.92

Year 5 11.52% 69.12 $46.08 $23.04 Year 5 11.52% 25.918272 $17.28 $8.64

Year 6 5.76% 23.04 $23.04 $- Year 6 5.76% 8.639424 $8.64 $-

Office DeskCustom Checkout Counter



Ending Year Amount

Year 1 20.00% $439.00 $87.80 $351.20 Year 1 20.00% $450.00 $90.00 $360.00

Year 2 32.00% 351.2 $140.48 $210.72 Year 2 32.00% 360 $144.00 $216.00

Year 3 19.20% 210.72 $84.29 $126.43 Year 3 19.20% 216 $86.40 $129.60

Year 4 11.52% 126.432 $50.57 $75.86 Year 4 11.52% 129.6 $51.84 $77.76

Year 5 11.52% 75.8592 $50.57 $25.29 Year 5 11.52% 77.76 $51.84 $25.92

Year 6 5.76% 25.2864 $25.29 $- Year 6 5.76% 25.92 $25.92 $-


39

FurnitureBack Room Shelves (48 x 18 x 72) Custom Wall Mount Racks

Year % Depreciation Beginning Amount Amount Depreciated Ending Year Amount Year % DepreciationBeginning Amount Amount Depreciated Ending Year Amount

Year 1 20.00% $2,239.65 $447.93 $1,791.72 Year 1 20.00% $400.00 $80.00 $320.00 Year 2 32.00% 1791.72 $716.69 $1,075.03 Year 2 32.00% 320 $128.00 $192.00 Year 3 19.20% 1075.032 $430.01 $645.02 Year 3 19.20% 192 $76.80 $115.20 Year 4 11.52% 645.0192 $258.01 $387.01 Year 4 11.52% 115.2 $46.08 $69.12 Year 5 11.52% 387.01152 $258.01 $129.00 Year 5 11.52% 69.12 $46.08 $23.04 Year 6 5.76% 129.00384 $129.00 $- Year 6 5.76% 23.04 $23.04 $-

Back Room Table Window & In-Store Displays


Year 1 20.00% $406.00 $81.20 $324.80 Year 1 20.00% $500.00 $100.00 $400.00 Year 2 32.00% 324.8 $129.92 $194.88 Year 2 32.00% 400 $160.00 $240.00 Year 3 19.20% 194.88 $77.95 $116.93 Year 3 19.20% 240 $96.00 $144.00 Year 4 11.52% 116.928 $46.77 $70.16 Year 4 11.52% 144 $57.60 $86.40 Year 5 11.52% 70.1568 $46.77 $23.39 Year 5 11.52% 86.4 $57.60 $28.80 Year 6 5.76% 23.3856 $23.39 $- Year 6 5.76% 28.8 $28.80 $-

Clothing Bins Desk Chair


Year 1 20.00% $400.00 $80.00 $320.00 Year 1 20.00% $149.99 $30.00 $119.99 Year 2 32.00% 320 $128.00 $192.00 Year 2 32.00% 119.992 $48.00 $72.00 Year 3 19.20% 192 $76.80 $115.20 Year 3 19.20% 71.9952 $28.80 $43.20 Year 4 11.52% 115.2 $46.08 $69.12 Year 4 11.52% 43.19712 $17.28 $25.92 Year 5 11.52% 69.12 $46.08 $23.04 Year 5 11.52% 25.918272 $17.28 $8.64 Year 6 5.76% 23.04 $23.04 $- Year 6 5.76% 8.639424 $8.64 $-

Office Desk Alta Small Display Table


Year 1 20.00% $439.00 $87.80 $351.20 Year 1 20.00% $185.00 $37.00 $148.00 Year 2 32.00% 351.2 $140.48 $210.72 Year 2 32.00% 148 $59.20 $88.80 Year 3 19.20% 210.72 $84.29 $126.43 Year 3 19.20% 88.8 $35.52 $53.28 Year 4 11.52% 126.432 $50.57 $75.86 Year 4 11.52% 53.28 $21.31 $31.97 Year 5 11.52% 75.8592 $50.57 $25.29 Year 5 11.52% 31.968 $21.31 $10.66 Year 6 5.76% 25.2864 $25.29 $- Year 6 5.76% 10.656 $10.66 $-

Custom Checkout Counter Alta Island


Year 1 20.00% $450.00 $90.00 $360.00 Year 1 20.00% $2,634.00 $526.80 $2,107.20 Year 2 32.00% 360 $144.00 $216.00 Year 2 32.00% 2107.2 $842.88 $1,264.32 Year 3 19.20% 216 $86.40 $129.60 Year 3 19.20% 1264.32 $505.73 $758.59 Year 4 11.52% 129.6 $51.84 $77.76 Year 4 11.52% 758.592 $303.44 $455.16 Year 5 11.52% 77.76 $51.84 $25.92 Year 5 11.52% 455.1552 $303.44 $151.72 Year 6 5.76% 25.92 $25.92 $- Year 6 5.76% 151.7184 $151.72 $-

Alta Large Display Table Alta Wall Module


Year 1 20.00% $1,625.00 $325.00 $1,300.00 Year 1 20.00% $1,890.00 $378.00 $1,512.00 Year 2 32.00% 1300 $520.00 $780.00 Year 2 32.00% 1512 $604.80 $907.20 Year 3 19.20% 780 $312.00 $468.00 Year 3 19.20% 907.2 $362.88 $544.32 Year 4 11.52% 468 $187.20 $280.80 Year 4 11.52% 544.32 $217.73 $326.59 Year 5 11.52% 280.8 $187.20 $93.60 Year 5 11.52% 326.592 $217.73 $108.86 Year 6 5.76% 93.6 $93.60 $- Year 6 5.76% 108.864 $108.86 $-

Alta Medium Display Table Alta 4 Way Tree


Year 1 20.00% $555.00 $111.00 $444.00 Year 1 20.00% $1,710.00 $342.00 $1,368.00 Year 2 32.00% 444 $177.60 $266.40 Year 2 32.00% $1,368.00 $547.20 $820.80 Year 3 19.20% 266.4 $106.56 $159.84 Year 3 19.20% $820.80 $328.32 $492.48 Year 4 11.52% 159.84 $63.94 $95.90 Year 4 11.52% $492.48 $196.99 $295.49 Year 5 11.52% 95.904 $63.94 $31.97 Year 5 11.52% $295.49 $196.99 $98.50 Year 6 5.76% 31.968 $31.97 $(0.00) Year 6 5.76% $98.50 $98.50 $-

Appendix C: Amortization Schedule

40

Period Beginning Balance Payment Amount Payment on Principal Payment on Interest Ending Balance1 $63,000.00 $2,960.35 $1,700.35 $1,260.00 $61,299.65 2 $61,299.65 $2,960.35 $1,734.36 $1,225.99 $59,565.29 3 $59,565.29 $2,960.35 $1,769.04 $1,191.31 $57,796.25 4 $57,796.25 $2,960.35 $1,804.42 $1,155.93 $55,991.83 5 $55,991.83 $2,960.35 $1,840.51 $1,119.84 $54,151.31 6 $54,151.31 $2,960.35 $1,877.32 $1,083.03 $52,273.99 7 $52,273.99 $2,960.35 $1,914.87 $1,045.48 $50,359.12 8 $50,359.12 $2,960.35 $1,953.17 $1,007.18 $48,405.95 9 $48,405.95 $2,960.35 $1,992.23 $968.12 $46,413.72

10 $46,413.72 $2,960.35 $2,032.07 $928.27 $44,381.65 11 $44,381.65 $2,960.35 $2,072.72 $887.63 $42,308.93 12 $42,308.93 $2,960.35 $2,114.17 $846.18 $40,194.76 13 $40,194.76 $2,960.35 $2,156.45 $803.90 $38,038.31 14 $38,038.31 $2,960.35 $2,199.58 $760.77 $35,838.73 15 $35,838.73 $2,960.35 $2,243.57 $716.77 $33,595.15 16 $33,595.15 $2,960.35 $2,288.45 $671.90 $31,306.70 17 $31,306.70 $2,960.35 $2,334.22 $626.13 $28,972.49 18 $28,972.49 $2,960.35 $2,380.90 $579.45 $26,591.59 19 $26,591.59 $2,960.35 $2,428.52 $531.83 $24,163.07 20 $24,163.07 $2,960.35 $2,477.09 $483.26 $21,685.98 21 $21,685.98 $2,960.35 $2,526.63 $433.72 $19,159.35 22 $19,159.35 $2,960.35 $2,577.16 $383.19 $16,582.19 23 $16,582.19 $2,960.35 $2,628.71 $331.64 $13,953.49 24 $13,953.49 $2,960.35 $2,681.28 $279.07 $11,272.21 25 $11,272.21 $2,960.35 $2,734.91 $225.44 $8,537.30 26 $8,537.30 $2,960.35 $2,789.60 $170.75 $5,747.70 27 $5,747.70 $2,960.35 $2,845.40 $114.95 $2,902.30 28 $2,902.30 $2,960.35 $2,902.30 $58.05 $0.00

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Appendix D: Cash Flow for Year 1

41

Cash Flow (12 months) AltaiPre-Startup

EST Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16

Cash on Hand (beginning of month) 210,000 52,289 1,325 43,264 83,081 41,182 95,696 CASH RECEIPTS Cash Sales 18,115 13,586 13,586 12,393 16,524 12,393Collections fm CR accounts 0 59,432 44,574 44,574 40,659 54,212 40,659Loan/ other cash inj. TOTAL CASH RECEIPTS 0 77,547 58,160 58,160 53,051 70,735 53,051Total Cash Available (before cash out) 210,000 129,836 59,485 101,424 136,133 111,917 148,747

CASH PAID OUT Purchases (merchandise) 90,000 60,000 Technology/IT/RFID Purchases 32,027 Shelving and Furniture 13,584 Gross wages (exact withdrawal) 8,417 8,417 8,417 8,417 8,417 8,417Payroll expenses (taxes, etc.) 965 965 965 965 965 965Outside services Supplies (office & oper.) Repairs & maintenance Advertising 22,190 18,630 Car, delivery & travel Accounting & legal Rent 6,000 6,000 6,000 6,000 6,000 6,000Telephone and Internet 124 124 124 124 124 124Utilities 315 315 315 315 315 315Insurance Taxes (real estate, etc.) -838 -1,111Interest 1,260 1,226Development License 89,100 Yoga Instructor 500 400 400 500 400 400Manager Salary 23000 Miscellaneous SUBTOTAL 157,711 128,511 16,221 16,643 94,951 16,221 16,336Loan principal payment 1,700 1,734Capital purchase (specify) Other startup costs Reserve and/or Escrow Owners' Withdrawal TOTAL CASH PAID OUT 157,711 128,511 16,221 18,343 94,951 16,221 18,070Cash Position (end of month) 52,289 1,325 43,264 83,081 41,182 95,696 130,677

ESSENTIAL OPERATING DATA (non cash flow information) Sales Volume (dollars) Accounts Receivable Bad Debt (end of month) Inventory on hand (eom) Accounts Payable (eom) Depreciation

Appendix D: Cash Flow for Year 1

42

Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Total Item EST

95,696 130,677 77,554 110,955 156,530 35,459 90,916 52,289

12,393 10,603 16,964 14,844 6,279 16,744 18,837 40,659 34,786 55,657 48,700 20,600 54,934 61,801

53,051 45,388 72,622 63,544 26,879 71,678 80,638 0

148,747 176,065 150,176 174,499 183,409 107,137 171,554 52,289 60,000 90,000

8,417 8,417 8,417 8,417 8,417 8,417 8,417 965 965 965 965 965 965 965

22,190 18,630

6,000 6,000 6,000 6,000 6,000 6,000 6,000 124 124 124 124 124 124 124 315 315 315 315 315 315 315

-1,111 -1,213 -1,026 1,226 1,191 1,156

400 500 400 400 500 400 400

23,000 23000 23,000

16,336 98,511 39,221 16,200 147,951 16,221 39,351 0

1,734 1,769 1,804

18,070 98,511 39,221 17,969 147,951 16,221 41,156 0130,677 77,554 110,955 156,530 35,459 90,916 130,398 52,289

Cash Flow (12 months)

Cash on Hand (beginning of month)

CASH RECEIPTSCash SalesCollections fm CR accountsLoan/ other cash inj.TOTAL CASH RECEIPTS

Total Cash Available (before cash out)

CASH PAID OUTPurchases (merchandise)Technology/IT/RFID PurchasesShelving and FurnitureGross wages (exact withdrawal)Payroll expenses (taxes, etc.)Outside servicesSupplies (office & oper.)Repairs & maintenanceAdvertisingCar, delivery & travelAccounting & legalRentTelephone and InternetUtilitiesInsuranceTaxes (real estate, etc.)InterestDevelopment LicenseYoga Instructor

Manager SalaryMiscellaneousSUBTOTALLoan principal paymentCapital purchase (specify)Other startup costsReserve and/or EscrowOwners' Withdrawal

TOTAL CASH PAID OUTCash Position (end of month)

ESSENTIAL OPERATING DATA (non cash flow information)

Sales Volume (dollars)Accounts ReceivableBad Debt (end of month)Inventory on hand (eom)Accounts Payable (eom)Depreciation

Appendix E: Average Ticket Price

43

Brand: T-ShirtTank Top

Long Sleeve

Sports Bra Hoodie Shorts

Leggings

Sweat Pants Jacket

Average:

Nike: $51.67 $40.00 $56.67 $57.50 $98.33 $35.00 $81.67 $81.67

$362.5

0 $96.11

Adidas: $35.67 $41.67 $38.33 $33.33 $76.67 $37.33 $76.67 $66.67

$150.0

0 $61.81

Under Armour: $30.00 $36.67 $40.00 $36.67

$101.67 $30.00 $56.67 $60.00

$158.3

3 $61.11

New Balance: $56.67 $40.00 $78.33 $38.33 $87.50 $38.33 $71.67 $71.67

$110.0

0 $65.83

Reebok: $31.00 $37.67 $33.33 $45.00 $76.67 $36.67 $57.33 $45.00 $95.00 $50.85

North Face: $34.33 37 $40.00 $37.00 $55.00 $42.33 $98.33 $63.33

$163.0

0 $63.37

Average: $39.89 $38.83 $47.78 $41.31 $82.64 $36.61 $73.72 $64.72

$173.1

4 $66.52

Appendix F: Technology Equipment

44

System System Componenet Qty. Price RFID

Motorola FX7500 (4 Port Fixed RFID Terminal) 1 $976.60 Motorola AN610-SCL71129US (RFID Antenna) 2 $524.40 Motorola AN620-SCL71131US (Large RFID Antenna) 1 $289.40 MC3190-Z RFID READER (RFID Gun) 1 $2,846.00 Zebra 10002052R4 (RFID Labels) 2 $444.80 Zebra 170-801-00000 (RFID Capable Printer) 1 $4,613.00

NetworkingAPC UPS Battery Backup 1 $239.99 Cisco 8 Port Gigabit Network Switch 1 $22.38 Cisco Modem 1 $70.00 Cisco Small Business Router 1 $65.28 TWC Internet Per Month $99.00 TWC Basic Phone Line Per Month $25.00 4 Camera Security System 1 $389.99

CablingCAT 6e Patch Cable (1000 ft) 1 $243.27 CAT 6e Crimp Connectors (100 ct.) 1 $39.45 CAT Crimpers 1 $10.72

IT EquipmentPanasonic Link2Cell KX-TG9581B Cordless Phone 1 $149.95 ThinkVision X24 23.8-inch Ultra-slim FHD LED Backlit LCD Monitor (Screens for Back Office) 2 $389.30 ThinkVision T1714p 17-inch Square LED Backlit LCD (Inventory & POS) 3 $185.15 VERSA Mount 1 $13.50 Thermal Reciept Printer 2 $509.98 Thermal Print Paper (24 Rolls) 1 $74.69 VeriFone M132-409-01-R Payment Terminal 2 $1,158.20 QuickBooks V12 POS Software 1 $2,000.00 Seagull BT-A3 RFID Software 1 $795.00 Quickbooks Accounting 1 $199.95 Quickbooks Payroll (per year) 14 $301.00 ThinkServer TS440 6-Bay Sever with Windows Server 2012 1 $2,827.80 ThinkCentre M73 Small Form Factor Desktop 3 $1,197.60 Cherry G86-62401EUADAA POS Keyboard 2 $239.60 ioSafe 1515+ Waterproof & Fireproof NAS Storage 1 $1,899.99 WD Enterprise 6TB 7200 RPM Drives 4 $1,744.00

Audio EquipmentPylePro 8 Ohm 300 Watt Amplifier 1 $170.00 3.5 mm to RCA Cable 1 $10.00 JBL Control HST Speakers (wired through speaker selector) 8 $2,120.00 Coper L/R Channel Speaker Wire CL 3 14 Guage 500 ft $179.99 Stereo 4 Channel Splitter 2 $232.00

WebsiteWebhosting Per Month $120.00 Secure Net Shop (Online Shopping Software) Per Year $229.00 Adobe Creative Suite for Business Per Month $924.00 Standard and Mobile Website Development 1 $89,100.00

TOTAL $117,735.48 Utilities Cost (Yearly)

Garbage Removal (4 Yard Dumpster) $615.00 Downtown Compactor Fee $280.00 Electric (20,000 kWh Estimated) $2,343.39

Water & Sewer $539.04

TOTAL $3,777.43

Appendix F: Technology Equipment

45

Item Quantity Price

Back Room Shelves (48 x 18 x 72) 27 $2,239.65

Back Room Table 1 $406.00

Clothing Bins 2 $400.00

Office Desk 1 $439.00

Custom Checkout Counter 1 $450.00

Alta Large Display Table 5 $1,625.00

Alta Medium Display Table 3 $555.00

Alta Small Display Table 1 $185.00

Alta Island 6 $2,634.00

Alta Wall Module 10 $1,890.00

Alta 4 Way Tree 6 $1,710.00

Custom Wall Mount Racks $400.00

Window & In-Store Displays $500.00

Desk Chair 1 $149.99

TOTAL $13,583.64

Appendix G: PESTLE Analysis

46

Politics – Like many others, the United States government charges tariffs on products, such as apparel and footwear. According to the American Apparel and Footwear Association, tariffs on clothes can reach up to 32%, and “in 2014, the United States government collected $13.5 billion in tariffs on imported clothes and shoes” (Lamar, 2015). However, Congress is currently debating various methods to help eliminate some of these clothing costs. For example, “Renewing Trade Promotion Authority (TPA) will pave the way for conclusion of pending trade agreements with Europe and the Pacific Rim. These agreements can eliminate duties on goods made by our trading partners. Also, extending trade programs with Haiti, African countries, and other developing countries around the world. These programs have the dual benefit of promoting economic development in some of the most impoverished areas on the planet while eliminating duty costs (hidden taxes) on items made in those regions” (Lamar, 2015). These pending trade measures will hopefully provide some relief on American families while they purchase their clothing.

Economy – Due to digital innovation and an increase in spending for sportswear, sales of apparel and footwear in the United States continues to rise. “With the continued improvement of the US economy, Americans are more willing to spend on discretionary apparel such as swimwear as well as apparel accessories. Consumers remain the ultimate beneficiaries as they continued to bargain hunt and shop around to find the best deals in 2014” (Mintel, 2015). During the economic recession, many stores provided discounts and had promotional sales; however, this has become the new “norm” and retailers are finding it hard to conform to these new customer expectations.

Social – When dealing with customer engagement, many companies have had a difficult time trying to provide the right type of customer experience. The biggest issues many customers have are the long lines and lack of product information. In order to combat some of these concerns, retailers are now trying to engage the customers are various different contact points. “For many fashion apparel players, adopting a multi-channel strategy entails significant investment in order to ensure that online and offline operations work seamlessly in an integrated manner. Many others have innovated to a large extent in order to engage their customers at moments which are highly relevant to them so as to strengthen brand visibility and, thereby, loyalty” (Mintel, 2015).

Appendix G: PESTLE Analysis

47

Technology – “Smartphone Commerce: From mobile-optimized shopping experiences complete with virtual showrooms, real-time customer service and feedback, social media integration, and personalized data-driven advertising, fashion retailers are rushing to develop a mobile experience that meets the demands of today’s shoppers” (Spears, 2014). “Apart from the cost and greater accessibility, there is an overall impact on the clothing technology strengthens the competitiveness of larger companies at the expense of small and medium scale firms. New technologies brought the significant change and enhanced economies of sales in clothing manufacture and organization. Design, cutting and marker making can be handled with the use of the most modern equipment. In case of woolen goods, cutting can be integrated directly into the fabric quality control process. Sewing and related operations are framed into small units known as satellite units wherever the availability and cost of labor are more favorable” (World March of Women 2000, n.d.).

Legal – “Fashion houses and designers now face unique challenges specific to their industry, requiring attorneys who understand the advantages and disadvantages of various types of intellectual property protection, particularly in light of the seasonal nature of the fashion industry. Moreover, the increased availability of counterfeit goods, such as “knock-off” designer handbags and dresses, the risk of threats from so-called “copyright trolls,” and laws relating to the use of "hazardous materials" in consumer goods have created interesting new challenges for the fashion industry and the fashion lawyer in particular. Similarly, the fashion industry deals with unusual international supply chain issues, and very specific employment-law concerns, such as the use of minors for fashion modeling or as labor in overseas factories. Consequently, while fashion law is a fairly new specialty area of practice, it is gaining momentum and sure to a major focus in years to come” (Fashion Law – Guide to Fashion Law, 2015).

Environment – “The two major hotspots in the life-cycle of a garment are raw materials and use phase (washing and drying). Dealing with sustainable raw materials is key and this means working down the entire supply chain. Whilst most big brands understand this, getting to grips with extended global supply chains can be very difficult….Address the issue of raw material production. This area presents a big challenge to the industry because the use of raw materials is at the bottom of the supply chain and is the least visible process. It also includes a range of industries from agriculture (cotton and linen) to oil extraction to refining (polyester and nylon)” (Purt, 2011).

Appendix H: Porter’s Five Forces

48

Women's Clothing:

Threat of new entrants:Threat of new entry is high:1. Due to recent attractiveness of women's clothing, threat of new entrants is strengthened.2. low capital investment required for market entry strengthens threat of new entry. Large corporations (Gap, TJX, etc.) keep entry threat in check by building brands in multiple outlets, creating a pricing competition. The top 4 retailers in the segment control only 21.5% of the total market share, indicating low industry concentration. However, this is not enough to greatly impact the high threat of new entry.3. While child labor and low work conditions give significant price advantage, the reputation damage can in turn significantly hurt a company.4. Low retailer switching costs and low product differentiation strengthen new entrants. Diversification of traditional food stores and super markets into clothing sales has further increased the threat of new entry.

Bargaining power of buyers:Buyer power is moderate:1. Buyers are individual customers rather than bulk buyers. Due to sheer size of buyers, individual voice is weakened.2. High level of choice strengthens buyer power.3. Multiple styles of clothing weakens buyer power.4. Due to retailers’ position at the end of the supply chain, they are forced to follow customer demand, strengthening buyer power.

Appendix H: Porter’s Five Forces

49

Threat of substitute products or services:1. Manufacturer to customer sales through online sales creates high threat of substitution. However, to combat this retailers have developed their own websites to retain customers.2. Online-only retailers have are a high threat as they can avoid the expenses of running a brick-and-mortar facility. This in turn gives them a pricing advantage by being able to sell clothes for cheaper.3. Home-made and second hand clothing offers a low risk of substitution. However, counterfeiting presents a medium level of threat in certain countries.4. Consumer uncertainty in sizing of clothing leads to a desire to try on products in stores before purchasing, lowering risk of substitution from online retailers.

Bargaining power of suppliers:Supplier power is moderately low:1. Key suppliers are manufacturers and wholesalers2. Typically small to medium sized and relatively fragmented, weakening supplier power by allowing retailers to buy from both small and medium sized sources.3. Competition from low-wage foreign manufacturers weakens supplier power as retailers can import from them instead.4. Lack of diversity between suppliers weakens supplier power due to the low switching costs of retailers.

Rivalry among existing companies:Rivalry is high:1. while fragmented, large retailers compose a large percent of the market, creating high rivalry2. narrowing of product lines and specific markets creates raises rivalry

Appendix I: Facebook

dad50 Reviews

dad50 Reviews

dad287 people like this

dad50 Reviews

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dad

dad

dad

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Dad#Altai

Appendix J: Twitter

Appendix K: Instagram

dad

dad

dad

Dad

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Appendix L: Billboard, T-Shirt, Flyers

dad

dad

dad

Dad

T-Shirt Design

Billboard

Flyer

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Appendix M: Desktop Website Mockup

54

Appendix N: Perceptual Map

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High Price

High Quality

Appendix O: Positioning Pyramid

56

Slogan“Same shirt, same day,

different occasion”

PersonalityFriendly, helpful, involved in the athletic community

Emotional BenefitsMore relaxed because waiting in line

kills time, feel good about your purchase with readily available

reviews by other customers

Functional BenefitsGet an entire day’s wear for several occasions while having an excellent shopping experience

CredibilityCreated by millennials who know and love

the trendsIn-Store Attributes

RFID for quick checkout, knowledgeable employees

Product AttributesHigh quality brand names, matches with most other clothing (non-seasonal), price transparency

Essence/Consumer Value Proposition

Fashionable, functional clothing for the busy modern day woman

PositioningTo women looking for fashion and

functionality for their wardrobe. Altai provides products for any daily activity,

while making the shopping process easier.

Competitive ContextPRIMARY: Athleta, Lululemon, Fabletics

Others: Dick’s Sporting Goods, American Eagle, VSX

InsightBusy people don’t have time for

lines or outfit changes throughout the day

TargetWomen looking for a stress-free checkout process for clothing

that is for every occasion

Appendix P: Aaker Model

57

Brand as ProductBrand as OrganizationBrand as Person Brand as Symbol

• Brand name products

• Competitive pricing

• Reviews readily available

• Convenient

• Every shopper is a part of the Altai fitness community

• Helpful, attentive and friendly service

• Fast processes to enhance check-out

• Simple and functional

• Efficient• Innovative

• Yoga• Women as

target gender

Brand PositionTo Millennial Women looking for a comfortable, versatile, outfit Altai offers functional clothing that are made for all kinds of activities, whether it is to the grocery store, the mall, or to the park with an innovative shopping process.

Selling Idea: Convenience and products to accommodate your busy lifestyle

Brand as Asset

• Community, social place for exercise

• Easy check-out• Warm and

inviting• Easily accessible

for community

SAME SHIRT. SAME DAY. DIFFERENT OCCASION.

Consumer Value PropositionThe most efficient shopping experience for the most fashionable,yet comfortable, clothing for life’s everyday activities

Credibility• Created by Millennials• Selling quality, reputable

brands for increased reliability

Competitive Frame of Reference Other “athleisure” retail stores(Athleta, Lululemon, etc.)

Appendix Q: Customer Order & Inventory Processing

58

Appendix R: Processing New Inventory & Returns

59

Appendix S: System Security & Inventory Management

60

The ever increasing presence of technology in the business environment further increases the importance of having a solid backup solution in place should something go wrong. Taking this into consideration, Altai has developed a backup strategy that is both scalable to future business needs and ensure the business can continue to function in the event of a technical malfunction.

All systems, including the Seagull BT-A3 software, QuickBooks POS, and QuickBooks Accounting Software are run from a central Lenovo server located in the back office. This server is integral to conducting business transactions and inventory tracking in store. To protect the critical data stored on this server, a ioSafe hard drive array creates daily clones of the data. By intelligently backing up only data that has changed from day-to-day, the entire server can be cloned in a matter of minutes when the business closes and at mid-day. Should something incapacitate the central server, the individual POS terminals can be run individually to record sales transactions until the central server is repaired.

In the event of a fire or flood, the ioSafe external drive array protects business-critical data. In the event of a power surge or outage, an APC Battery Backup unit protects sensitive server equipment from power surges. If the store were to experience a total loss of power, the unit would provide enough power to the server and other sensitive equipment to safely back up all data from the day’s sales and shut down systems safely.

Theft is also a threat to the security of Altai’s merchandise and profits. To prevent this, Ethernet based cameras are placed in strategic locations throughout the store. Equipped with night vision, they survey the checkout counter, stock room, and front of the store. Should any break-ins or theft occur, a 780p 24hr video of the store is kept for identification purposes. Please refer to Appendix F for complete list of hardware and costs.

Disaster Recovery and Security

Lenovo Server(Hosts Business

Applications)

POS Terminal 1 POS Terminal 2

APC Batter Backup

ioSafe Backup(Critical Data)

61

Seagull BT-A3 printing software is the first piece in Altai’s IT solution. This software interfaces with the QuickBooks POS v12 software, allowing seamless communication between the RFID tag printing and inventory database aspects of the solution via an API. When inventory enters the store, it is brought back to the stock room for processing. Using a specially equipped printer from Zebra Systems, a series of RFID labels are printed which correspond to each item of clothing. This specialized printer encodes the RFID antenna and prints visual information on the tags. Vital information like the cost of the item, its size, and a QR code which can be scanned via camera to see the item on the Altai website are printed and encoded on the tag. The Seagull BT-A3 software generates these tags, which are entered into the inventory database in QuickBooks POS v12. Once all items have been tagged and automatically entered into the inventory database, the items can either be shelved or brought onto the floor. If the item is shelved, it is placed in a specific location within the stock room as per the items tag to be retrieved at a later time. If the item is to be placed on the floor, a fixed antenna above the stock room door senses the item leaving for the floor and records its change in location.

Inventory Management

Appendix S: System Security & Inventory Management

Qui

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or B

usin

ess

Qui

ckBo

oks P

OS

v12

Seag

ull B

TA-A

3 Ba

rcod

e So

ftwar

eEncodes RFID TagsInterfaces with QuickBooks POS v12 via APIZebra RFID Solution Compatable

Processes Transactions, Cash & ElectronicManages In-Store Inventory

Manages Employee Timekeeping & PayrollProduces Financial Statements & Inventory Reports• Profit & Loss• Cash Flows• Balance Sheet• Accounts• Expense Reports

Successful inventory management, being key to providing a favorable customer experience, is a main focus of Altai. To reach this goal, the company’s Point of Sale (POS) System, accounting system, and inventory management system must interface seamlessly. With the goal of accurate inventory counts and fast checkouts in mind, software was selected which fit both budget and operational goals.

Once a customer selects the items they wish to purchase from the floor, they walk to the checkout counter. Two custom built POS terminals running QuickBooks POS v12 allow for a speedy checkout. An antenna located at each terminal reads the tags of the items the customer has selected and sends the item information to the terminal. Because a clear line of sight is not needed between the reader and the RFID tag, the items do not have to be removed from the bag. The customer then completes the payment portion of the transaction, removing the item form the store inventory database. QuickBooks POS v12 software generates an unlimited number of detailed reports for inventory and accounting purposes.

Implemented Software

•Windows Server 2012•Windows 8.1

Professional

Other Software

:

Appendix T: Dashboards

62

Man

ager

Vie

w

Appendix T: Dashboards

63

Ow

ner V

iew

Appendix U: Interviews

64

1. On average, how many customers do you get daily?80 purchase, 160 come in

2. Are there busier days/times for your store?Noon-rush and 5:00 rush, weekends are busier than weekdays. Tuesday Wednesdays are busiest

3. What is your average ticket per customer?Varies from month to month-- $30

4. What types of items are you selling right now? Are there particular items that are not selling?Mainly apparel, men's and women's and children

5. Do you see more males or females purchasing from your store, or is it pretty even?Trying to get younger demographic, but bread and butter are middle-aged women, some saturation.

6. Are there any unexpected costs that your business faces (i.e. insurance, community involvement, other unforeseen costs)? N/A

7. How often do you do sales/promotions? How successful are they?Fair amount of promotions, less sales than average. Loyalty program: e-mail list with discounts

8. If you have inventory that runs out, how long does it take for new/replacement items to arrive since placing your order?Varies. Have 9 stores, privately owned. Stuff goes to main warehouse. Yeti Products are difficult to get.

9. Do you have any "regulars"? Are they within close proximity of the store, such as being within the 5-mile radius or are they further away than that?This town really likes to spend money within their own town. People won't spend out of town, they never leave! Chapel Hill and Carroboro. They won't drive ten minutes, some biking. Some residential development/ putting up 400 unit apartment complex. and complex across the street.

10. Please feel free to add any additional information as well about your business?The only way that we have been able to survive, we are a niche company. We are moving away from that (may be a mistake). We try to carry things that other stores cannot. We carry companies that other people don't and things that other people don't. Company survived 40 years with one owner. Items: Camp Stoves, jetoil (them) MSR (business), not the cheapest or highest markup, but we try to carry the best quality products and customer service.

Great Outdoor Provision


65

1. On average, how many customers do you get daily?50-100 low times = 30-40% purchase busier time 70-80%, specialty, people would seek you out

2. Are there busier days/times for your store?mornings are busiest, lunchtime, 3-6, 8:00.

3. What is your average ticket per customer?N/A

4. What types of items are you selling right now? Are there particular items that are not selling?stay at home moms and working people, 50/50. Women purchase more Shoes

5. Do you see more males or females purchasing from your store, or is it pretty even?N/A


7. How often do you do sales/promotions? How successful are they?Coupons promotions. Radio, E-mail, In-Store, No billboard

8. If you have inventory that runs out, how long does it take for new/replacement items to arrive since placing your order?Look at trends, and buyers determine. 2-3 days

9. Do you have any "regulars"? Are they within close proximity of the store, such as being within the 5-mile radius or are they further away than that?Local company = local culture. 5 mile radius attracting

10. Please feel free to add any additional information as well about your business?N/A

Omega Sports


66

1. On average, how many customers do you get daily?N/A

2. Are there busier days/times for your store?We're in a mall and so just in general the mall is busier on the weekends, quieter during the week


4. What types of items are you selling right now? Are there particular items that are not selling?N/A

5. Do you see more males or females purchasing from your store, or is it pretty even?More women than men, but becoming more equal

6. Are there any unexpected costs that your business faces (i.e. insurance, community involvement, other unforeseen costs)? Waiver to sign

7. How often do you do sales/promotions? How successful are they?As a company, not many sales. More markdowns throughout the store

8. If you have inventory that runs out, how long does it take for new/replacement items to arrive since placing your order?Changing products weekly, there are four seasons.

9. Do you have any "regulars"? Are they within close proximity of the store, such as being within the 5-mile radius or are they further away than that?N/A

10. Please feel free to add any additional information as well about your business?Classes- offer complimentary weekly class (yoga) usually on weekends, done on Sundays because mall doesn’t open until noon, so the class is at 10:30. Sometimes going outside, local yoga teachers

Lululemon


67

1. On average, how many customers do you get daily?low 80-140, purchases 40% 50%

2. Are there busier days/times for your store?During the week 11-3, pop 6-7. Saturday 11-4/5:00. Sunday is hit or miss


4. What types of items are you selling right now? Are there particular items that are not selling?popular right now- sweaters, polar fleece tights, wraps, layering.

5. Do you see more males or females purchasing from your store, or is it pretty even?Females only 36-54 Younger generation is stuck on brand names. Moms are tired of spending that kind of money on their daughters so they are bringing them to Athleta.


7. How often do you do sales/promotions? How successful are they?Sales are rare. Not part of the brand, we stand behind it. We know what she likes, and she's very big on durability

8. If you have inventory that runs out, how long does it take for new/replacement items to arrive since placing your order?Warehouse orders stuff. Ships new stuff within 24-48 hours

9. Do you have any "regulars"? Are they within close proximity of the store, such as being within the 5-mile radius or are they further away than that?Customers from all over, some from South Carolina, but just opened a new store there. North Carolinians shop locally, but when they make that connection with the brand, they will travel to wherever because of a positive customer experience.

10. Please feel free to add any additional information as well about your business?Sunday 10:45-11:45. Partner with different studios, vet them (licensed, insured, credible within the community), sign contract. Free-marketing. Customer can go test it out, then they can get a free pass to test waters. Different classes kickboxing, hip-hop. Community outreach is done through headquarters

Athleta


68

1. On average, how many customers do you get daily?500 75% purchase

2. Are there busier days/times for your store?N/A


4. What types of items are you selling right now? Are there particular items that are not selling?N/A

5. Do you see more males or females purchasing from your store, or is it pretty even?broad spectrum of customers. 50/50 split, apparel more towards women


7. How often do you do sales/promotions? How successful are they?Sales are dictated by corporate office

8. If you have inventory that runs out, how long does it take for new/replacement items to arrive since placing your order?Warehouse-controlled

9. Do you have any "regulars"? Are they within close proximity of the store, such as being within the 5-mile radius or are they further away than that?N/A

10. Please feel free to add any additional information as well about your business?N/A

Sports Authority Sporting Goods; La Mesa, CA


69

1. On average, how many customers do you get daily?Cyclical (No pun intended)- 20-25/day 50%, heavily touristy area

2. Are there busier days/times for your store?During the week, lunchtime is the busiest (11AM-1PM), Weekend 10-11, pick up again at 2-4

3. What is your average ticket per customer?$30-40

4. What types of items are you selling right now? Are there particular items that are not selling?We sell all cycling apparel, jerseys shorts, cool weather jackets, socks. Helmets.

5. Do you see more males or females purchasing from your store, or is it pretty even?Sell bikes to everyone! Early 40s, Women Centric (first women bike shop 5 years ago)


7. How often do you do sales/promotions? How successful are they?Social media FB, Twitter, Insta (big!!), some direct marketing, flyers-- marathon/half booth

8. If you have inventory that runs out, how long does it take for new/replacement items to arrive since placing your order?varies from overnight (warehouse location) a week-10 days (SCOTLAND, but WH in NJ)

9. Do you have any "regulars"? Are they within close proximity of the store, such as being within the 5-mile radius or are they further away than that?Most regular customers (20-25% are from way out of town), 80% of business is local, located downtown. Travel's rest.

10. Please feel free to add any additional information as well about your business?(first women bike shop 5 years ago)

Pedal Chic; Greenville City, NC

Appendix V: Financial Calculations

70

Financial Calculations

Weighted Average Cost of Capital

Capital Structure (%)

Cost of Capital (%)

After-Tax Adjustment (%)

WACC (%)

Debt 30 8 93 2.22

Equity 70 33.58* 23.51

Total WACC 25.73

Rf Beta (Rm-Rf) Ra

2.14% 4 7.86% 33.58%

Equity Cost of Capital


ROE

Net Income/ Shareholder's Equity -52% 5% 39% 35% 34%

ROANet Income/ Total Assets -12% 1% 12% 16% 25%

Equity Multiplier

Total Assets/Total Stockholder's Equity 4.43 5.26 3.34 2.20 1.38

Free Cash FlowsFree Cash Flow Sheet $(419,062) $(37,008) $25,754 $76,641 $96,030 $1,162,337

NPV NPV Calculation 25,622

PaybackPayback Period Calculation 4.22Days

IRR IRR Calculation 27%

Profit MarginNet Income/ Sales -7% 1% 7% 8% 10%

Sales Growth(Sales New-Sales Old)/Sales Old - 14% 17% 13% 15%

Key Ratio Calculations

Appendix W: Store Front

71

Google Maps, 2015

Project 2 - Final Deck

Documents

Transcript of Project 2 - Final Deck