Step One: The Market

Traditional retail store sales are built on serving the demographics of

the local store location. They must carry a wide range of products and

constantly promote price to compete with similar stores nearby. Their

key measurements of success are sales per square foot and gross

profit from volume.

Successful online stores are built on serving a specific customer

worldwide. They carry a targeted range of products with a specific

customer base. Their key measurements of success are gross profit

per item and frequency of return customer visit.

Retail sales target the neighborhood,

Online sales target the whole world…

The Market: Demography

Retail stores are built on communicating their sales proposition to the

general public and hoping that a segment of that audience is ready to

buy the item(s) that are in the promotion. This overkill is required

because they attract shoppers and then turn them into buyers.

Online stores are visited because the customer is searching for a

specific product. This product-based customer is looking for value and

quality they do not need conversion to become a buyer; they need to

find exactly what they want at a reasonable price.

Retail stores attract their customer

through advertising,

Online stores attract their customers

through product…

A retail apparel store must forecast its inventory well in advance. If the store

sells golf shirts it must also multiply the product by colors and sizes offered.

This requirement to predict the customer needs in advance creates a massive

supply to promote. Often price markdown is the only way to entice the

consumer to shop and then buy.

An online store using “Purchase Activated Manufacturing” (PAM) does not

forecast inventory. The unlimited selection of product range and the online

display of product choice from the virtual inventory are the keys to online

merchandising. Protecting the transaction margin is the overriding

mission of online marketing.

Retail Store: Supply and Demand

Online Store: Demand and Supply

Linking a Zero Inventory Production (ZIP) supply chain to a PAM selling

strategy creates the opportunity to produce a huge variety of products and

selling conditions. Since in the ZIP/PAM system product choice does not

create inventory risk, the proliferation of type, color, prints, features, fabric and

theme can be overwhelming. Enriching the online consumer experience and

providing an easy, organized selection process with a logical product offering

is critical.

The following Matrix tool is an excellent planning device to focus the product

offering.

Product selection should offer variety and

depth in every product category, while

protecting value and transaction

margin.

First: Choose the Styles

Second: Choose the White Fabric

Third: Choose the Theme, Print and Color

This Matrix has 1215 possible products… once the Matrix is

established, every block should be prioritized and preparation

started.

Product Matrix: Blanket

Projected Price & Costs

Retail Price COG Shipping GP License/Royalty Retail Site

Mini-Factory

Income Margin %

Retail Mfg. $32.00 $10.50 $3.00 $18.50 $1.92 $16.58 51.81%

Distribution Mfg. $32.00 $10.50 $3.00 $18.50 $1.92 $8.00 $8.58 26.81%

Product Matrix: Scarves

Retail Price COG Shipping GPLicense/Roya

ltyRetail Site

Mini-Factory

IncomeMargin %

Retail Mfg $42.00 $13.00 $3.00 $26.00 $2.52 $23.48 55.90%

Distribution Mfg $42.00 $13.00 $3.00 $26.00 $2.52 $10.50 $12.98 30.90%

Projected Price & Costs

Product Matrix: Sarong/Parea

Retail Price COG Shipping GP

License/Royalt

y Retail Site

Mini-Factory

Income Margin %

Retail Mfg $45.00 $13.00 $3.00 $29.00 $2.70 $26.30 58.44%

Distribution Mfg $45.00 $13.00 $3.00 $29.00 $2.70 $11.25 $15.05 33.44%

Projected Price & Costs

Product Matrix: Performance Jersey

Retail Price COG Shipping GPLicense/Royalt

yRetail Site

Mini-Factory

IncomeMargin %

Retail Mfg $45.00 $11.00 $3.00 $31.00 $2.70 $28.30 62.89%

Distribution Mfg $45.00 $11.00 $3.00 $31.00 $2.70 $11.25 $17.05 37.89%

Projected Price & Costs

Product Matrix: Designer Leggings

Retail Price COG Shipping GPLicense/Royalt

yRetail Site

Mini-Factory

IncomeMargin %

Retail Mfg $35.50 $9.50 $3.00 $23.00 $2.13 $20.87 58.79%

Distribution Mfg $35.50 $9.50 $3.00 $23.00 $2.13 $8.88 $12.00 33.79%

Projected Price & Costs

Product Matrix: Rash Guard

Projected Price & Costs

Retail Price COG Shipping GP License/Royalty Retail SiteMini-Factory

IncomeMargin %

Retail Mfg $60.00 $20.00 $3.00 $2.40 $1.20 $33.40 55.67%

Distribution Mfg $60.00 $20.00 $3.00 $2.40 $1.20 $12.00 $21.40 35.67%

Est. Mini-Factory Annual Income

Average Daily

Sale/Output in

Units

100 150 200 250 300 350 400 450 500

Leggings ($1,219,000) ($828,500) ($438,000) ($47,500) $343,000 $733,500 $1,124,000 $1,514,500 $1,905,000

Raglan Top ($1,010,000) ($515,000) ($20,000) $475,000 $970,000 $1,465,000 $1,960,000 $2,455,000 $2,950,000

Scarf ($1,076,000) ($614,000) ($152,000) $310,000 $772,000 $1,234,000 $1,696,000 $2,158,000 $2,620,000

Sarong/Cover-up ($1,010,000) ($515,000) ($20,000) $475,000 $970,000 $1,465,000 $1,960,000 $2,455,000 $2,950,000

Blanket ($1,296,000) ($944,000) ($592,000) ($240,000) $112,000 $464,000 $816,000 $1,168,000 $1,520,000

Rash Guard ($680,000) ($20,000) $640,000 $1,300,000 $1,960,000 $2,620,000 $3,280,000 $3,940,000 $4,600,000

Average Daily

Sale/Output in

Units

100 150 200 250 300 350 400 450 500

Leggings ($219,000) $171,500 $562,000 $952,500 $1,343,000 $1,733,500 $2,124,000 $2,514,500 $2,905,000

Raglan Top ($10,000) $485,000 $980,000 $1,475,000 $1,970,000 $2,465,000 $2,960,000 $3,455,000 $3,950,000

Scarf ($76,000) $386,000 $848,000 $1,310,000 $1,772,000 $2,234,000 $2,696,000 $3,158,000 $3,620,000

Sarong/Cover-up ($10,000) $485,000 $980,000 $1,475,000 $1,970,000 $2,465,000 $2,960,000 $3,455,000 $3,950,000

Blanket ($296,000) $56,000 $408,000 $760,000 $1,112,000 $1,464,000 $1,816,000 $2,168,000 $2,520,000

Rash Guard $320,000 $980,000 $1,640,000 $2,300,000 $2,960,000 $3,620,000 $4,280,000 $4,940,000 $5,600,000

Retail Net Pre Tax Income 1st Year

Including: Direct Cost of Goods, $1 Mil Cost of Factory, $1 Mil G&A Expense

Retail Net Pre Tax Income 2nd Year Including: COG, $1 Mil G&A Expense

Based on 220 days of Sales/Output