A summary on a Market Analysis
sarahlin
MarketAnalysis.docx3.0 Market Analysis
Meticulous research of the intended market is imperative when deciding whether to invest resources into a business venture. The following market analysis will detail the market need for our product, intended target market, and market potential This section will also define the industry, market competitors, along with barriers to entry, and regulations associated with our product. In short, the subsequent research will inform you of everything you, the investor, needs to know about the current market environment associated with our product and its potential to thrive.
To begin the market analysis we must first outline the need in the market for hemp based products in the footwear industry. The need for hemp based products is an environmental demand. According to The Shoe Industry, 20 billion pairs of shoes are produced annually and of those shoes about 38% end up in landfills where they will remain for the next 1,000+ years until they have completely biodegraded. (The Shoe Industry. 2013, August. The Environmental Impact. https://theshoeindustry.weebly.com/environmental-impact.html ) The biodegradeable pit falls of conventional shoes are a direct contradiction to that of hemp shoes which are 100% biodegradeable and completely decay within three to six months. (Retrieved from: http://www.sciencefocus.com/qa/how-long-do-biodegradable-bags-take-decompose )
In addition More Than Shipping reports that established shoe brands such as Nike, Adidas, Vans, etc import all of their assembled shoes from countries such China, Vietnam, Brazil, and Indonesia. Manufacturing and transportation of these goods generates millions of tons of CO2 annually. For every pair manufactured, 30 pounds of carbon dioxide is released into our atmosphere. That equates to 30 million tons of CO2 annually. Our hemp will be procured within the Unites States which will aid in the overall reduction of transportation costs and environmental damages. The shoe industry levies a mounting burden on our environment. Our shoe will not only curve the impact production has on the environment but will do so by not compromising the structure of the shoe itself. Rather, it will revolutionize the way shoes are fabricated. Our shoe will compete with these brands and excel in the market by providing a environmentally conscious shoe that is wearable, comfortable, and aesthetically enthralling. For further environmental and sustainable analytics please refer to our extensive research found under the “Sustainability” section of our proposal.
Target Market
The intended target market will be young adults ranging from 15-30 years old. Essentially millennials that are forward thinking, modern, and liberal in nature. Millennials are more apt to changes in trends specifically fashion. Overall outer appearance is fairly important to millennials. Physical appearance is a reflection of yourself and is a mechanism of self expression which asserts the influence style and trends have on purchasing patterns. The truth of the matter is that we as humans make assumptions and perceptions based on the physical appearance of others and by that token, spend an insurmountable amount of time and money on our physical appearance. According to the Huffington Post, millennials have $2.45 trillion in purchasing power annually. (Mak, Phillip. 2016, January 14. Millennials Shopping Habits Are Changing Fashion. http://www.huffingtonpost.ca/2016/01/14/millennial-shopping-habits_n_8980380.html ) Which positions millenials as the most influential group on the market. Further research on millennials also indicates that they support brands that are environmentally conscious, favor brands with an impactful presence on social media outlets, and expect efficiency and convenience when making purchasing decisions.
Channels of Distribution
Online channels are the most fluid and can be reached easily. Millennials see the world through a digital lens and we plan on catering to that behavior by making our product readily available through our website forum. Our physical facility will be located in Orlando, Florida that which will provide a tangible purchasing experience. The Department of Labor reports that millennials spend 33% more on clothing than generation X. (Henderson, Steven. 2016, November 3. Spending Habits by Generation. https://blog.dol.gov/2016/11/03/spending-habits-by-generation .) ComScore conducted a survery which estimates that of their 5,330 respondedents between the ages of 18-34, 54% of their monthly purchases were made online. (Blumenthal, Eli. 2016, June 8. Millennials drive spike in online shopping.
Growth Strategy
Moreover, the Hemp Business Journal affirms that hemp-based products ranging anywhere from skin care products, to pharmaceuticals, to clothing generated $688 million in 2016. The hemp industry is growing exponentially. The market has seen growth of up to 22% in food and body care products alone. Figure 1 is a visual representation of the growth in the market beginning in 2014 and includes a three year projection. The Hemp Business Journal anticipates that the hemp market will reach $2.1 billion by 2020. Figure 2 visually breaks down the segmentation within the market and the total retail value for each category.
Figure 1:
Figure 2:
Our product will fall under “consumer textiles” with a retail value of $99.5 million in annual sales. Our exclusive product is one that is vastly different from the structure of the shoes already in the market. Hemp is revolutionizing the way textiles are produced and is doing so by using sustainable modes of production. Hempsy will bring hemp based shoes to the forefront of the market will do so by implementing efficient and ethical modes of production and distribution.
Our market penetration strategy will be to infiltrate states that have either legalized hemp cultivation or the recreation/medicinal use of marijuana and or states that have decriminalized marijuana altogether. States that fit our intended market criteria are slowly increasing as political officials and the general population shift their attitudes toward the legalization of marijuana. In a recent study done by the Public Industry of California promulgates that nationally 52% of Americans favor the legalization of marijuana. In California, where it is legal to both cultivate and use recreationally, 60% favor decriminalization of marijuana altogether. (Kordus, David. 2016, October 18. Chaninging Attitudes toward Marijuana Legalization. http://www.ppic.org/blog/changing-attitudes-toward-marijuana-legalization/ ) With that in mind there are 30 states that have legalized hemp cultivation which are; Washington, Oregon, California, Nevada, Colorado, Arizona, Nebraska, Wyoming, Montana, Delaware, North Dakota, Michigan, Illinois, Indiana, Kentucky, Tennessee, Alabama, Florida, South Carolina, North Carolina, Virginia, West Virginia, Pennsylvania, Rhode Island, New York, Maryland, Vermont, New Hampshire, Utah and Maine. However, under federal law marijuana is a schedule 1 drug and requires a DEA issued license to cultivate. Florida in particular is the state we are most interested in permeating. Our facility will be located in Orlando, Florida. Orlando has an estimated population of 277,173, a median income of $42,318, with an above average educational attainment percent at 89.5 for high school, graduate, or higher schools (United States Census Bureau, 2016). Florida has a land area of 53,624.76 square miles. By July 2016, it had an estimated population of 20,612,439, with the female population at 51.1 percent. Furthermore, its total retail sales per capita stood at $14,117 in 2016 (United States Census Bureau, 2016). The cumulative median household income in the state is $47,507, with a total employment of 7,777,900 persons. Besides, it has the lowest tax burdens in the U.S. at 6 percent (“Florida taxes,” n.d.) Florida also has the most lenient regulations on hemp cultivation although it is not legal for recreational usage rather only medicinal purposes. The hemp industry has made noteworthy strides in its ability to be cultivated and harvested since its initial acceptance and decriminalization in states that have successfully proposed and passed legislation. States such as California, Florida, and Colorado have acknowledged both its medicinal benefits as well as its environmentally consciousness textile alternative. The hemp industry has flourished since the decriminalization of hemp through the passing of the 2014 Federal Law Bill that allows the cultivation of hemp by farmers in certain states for research through pilot programs.
As for our competitors, our most challenging competition would be the already established brands such as Nike, Adidas, and Vans to name a few. Other competitors in the market would be hemp shoes currently retailed. Hemp shoes retail anywhere from $30-160, ours would be $55-65. Our shoes are positioned on par with the costs of vans and nike shoes. However, our product offers advantages like longevity and cleanliness. Our hemp shoes last twice as long as the conventional shoes on the market and require less upkeep. Brands such as Nike and Adidas are household names and occupy a large share of the market. However, our competitive edge includes our ability to source our materials domestically which stimulates our local economy and generates domestic jobs. Our production medium will attract consumers who like to buy American made goods. Our product will also stimulate job creation by employing locally and would ensure our employees are paid above the minimum wage along with offering benefits such as health insurance, birth control, and even the option of opening a 401K with us. We are committed on reflecting our consciousness through our product and in our corporation structure. Our values are directly reflected in the design and structure of our shoes. By developing our workforce domestically we would evade allegations of exploiting children in third world countries for labor, as Nike has and other companies as well. Our manufacturing and transportation expenses would be less than if we were to import our product from foreign markets which would help reduce our start up costs. Reduction in initial costs would enable us to redirect the money we save into our advertisement or distribution channels or even pass the savings onto our customers.. Our focal point in our competitive niche remains our environmental sensibility. Since shoes are an indispensable component of our everyday attire, embracing a shoe like Hempsy would revolutionize the way we consume. That shift would perhaps influence other companies to divest from harmful synthetic fibers and switch over to hemp based production mediums.
The deterrent barriers to enter would be hemp legislation both federally and on a state level along with the stigma associated with hemp or other marijuana related products. Stigmatization of hemp and marijuana dissuades many from fully accepting hemp as an agricultural commodity and a medicinal pharmaceutical and not just a psychoactive drug. Other barriers to growth are global competition, limited research on hemp, and obstructed access to certified seeds.
Certain restrictions apply depending on the strain of hemp and the intended purpose. Hemp is also known as industrial hemp which refers to the various Cannabis Sativa species that are non-psychoactive. Today thousands of products have been incorporated with hemp, which has been popularly grown as a renewable source for raw materials. The fibers and stalks from the plant have been famously used in clothing, construction materials, paper, and plastic composites. Opening hemp footwear shops in the country has started gaining interest to business people especially in states whose regulations and conditions favor better reception of the products. Hemp shoes are lightweight, mold resistant, and strong shoes that are ideal during warm weather and when engaging in outdoor activities. This type of footwear is common in modern states that are liberal. Opening online hemp shoe shops in states such as Texas, which prohibit hemp-based products, can be risky if at all possible. Before opening an online hemp shoe shop in the United States, it is important for an entrepreneur to consider the specific state and country’s regulations concerning hemp-based products in order to avoid violating any laws.
For many centuries, hemp and its products have been prohibited in the United States. However, currently, hemp is taking root in America soil. The 2014 federal farm bill has given farmers located in industrial hemp legislation states to grow and harvest hemp. The 2014 federal farm bill, also known as the Agricultural Act of 2014, was passed on 7th February 2014 by the United States Congress and signed into law by former President Barack Obama. The bill reauthorized federal programs such as pilot programs to encourage farmers to grow, harvest, and research on hemp (Fine, 2014).The Industrial Hemp Farming Act of 2015 was introduced by a group of U.S. senators that was meant to give allowance to the American farmers in producing and cultivating industrial hemp. This meant that hemp would be removed from the government’s list of controlled substances. The Act was meant to exclude industrial hemp from the definition of marijuana. It defines hemp as a plant Cannabis sativa L plant with its parts containing a delta-nine tetrahydrocannabinol concentration of less than 0.3%. This meant that hemp meets the concentration limit of the country’s state law (Congressional Research Service, 2015).
On 1st January 2017, the California Industrial Hemp Farming Act became effective after being signed to the law authorizing the commercial production of hemp in the state. California is one of the 30 states that has passed legislation relating to industrial
hemp. The California Industrial Hemp Farming Act revises the definition of marijuana so as to exclude hemp by defining it as a fiber and oilseed limited to the non psychoactive Cannabis sativa L. It enacts provisions that relate to the growing of hemp by imposing certain procedures and requirements on the growing of the plant (National Academies Press, 2017).
The California Health and Safety Code is an Act in California that supports programs associated with industrial hemp. The Act defines hemp as a fiber that is limited to the various types of Cannabis sativa L having not more than three-tenths of 1% of tetrahydrocannabinol (THC). Although the act supports the growing of hemp and its products, all commercial growers and entrepreneurs must register with county agricultural commissioner, which involves conjunction of fees (Hecht, 2014).
Although the growing of hemp and its integration with other products such as footwear is still being discouraged in the United States of America, the benefits of the plant commercially are slowly shifting the government’s perception. In states like California, which have legislation that support hemp and the selling of its products are great areas for opening online hemp shoe shops. The online platform will provide a wide market and the regulations in the state will assist in setting up of the shops easily without retaliation from the public and government.
In conclusion, our pervasive market analysis has solidified our Hempsy’s capability to thrive in the hemp based industry. Our innovative hemp shoe will compete with its competitors and thrive by fulfilling the shortcomings of conventional shoes. The environmental consciousness structure of our shoe will be our defining facet that will attract shoe enthusiasts and environmentally aware customers.
