Financial plan

Business Concept

Campus Couches is a furniture consignment store serving Philadelphia area college students. Campus Couches has a physical store front, warehouse, and e-commerce website. For college students who are in need of selling or buying affordable, gently used furniture, Campus couches, Inc. offers customers an online and in-store platform with which to buy and sell furniture in an organized manner. Campus Couches buys furniture from prospective customers in the surrounding community, picks up said goods, and delivers products to paying customers. Our service eliminates the headache of selling, delivering, and searching for affordable furniture from reputable sources. Customers are primarily college students in the Philadelphia area who are looking to buy and sell used furniture.

Campus Couches operates a delivery service, in which an associate will appraise a customer’s old furniture and deliver it to a warehouse to be sold online. Once an item is sold, the item is either moved to the store front to be picked up by the buyer or delivered straight to the interested buyer. Alternatively, customers could bring their furniture to the store front and have it appraised and sold there.

There is definitely potential for warehouses in other cities with college campuses, such as Boston or New York. There is also a possibility to open store fronts with a solid inventory of popular furniture that customers can buy on the spot.

Put simply, Campus Couches buys furniture from prospective sellers and re-sells said merchandise to buyers, primarily in Philadelphia but not limited to college students. This business will take an existing market for price-conscious college students and introduce them to a more organized platform for selling and buying used furniture. This business eliminates the hassle of delivering furniture and gives buyers the security of a reputable retailer, all at an affordable price.

Industry Analysis

Campus Couches, Inc. falls under the used merchandise store industry, or more specifically, used furniture. The used merchandise industry in the US includes about $18,000 stores with a combined annual venue of about $12 billion, and includes companies such as Goodwill and The Salvation Army.1 However the industry is also very fragmented with the fifty largest US companies accounting for just 25% of sales2. Competition in the used merchandise industry is fairly high because of low start-up costs and varies by geographic region. In addition to competitive brick-and-mortar stores, e-commerce retailers and auction websites also offer a wide range of new and used goods at low prices.3 The variety of merchandise coupled with the lack of physical stores help e-commerce retailers achieve greater operational cost savings.4 According to the Philadelphia Yellow Pages, there are about 150 used furniture merchandisers within 5 miles of the Philadelphia area.5 They all seem to be small businesses that rely on local clientele to refresh their product rather than reaching and expanding to more areas. However, only there are no brick-and-mortar stores that serve college students and very few that offer consignment for used furniture. About a quarter of competitors are non-profit organizations that rely on donations to refresh their inventory, such as Uhuru, Habitat for Humanity Philadelphia, and Philly Aids Thrift. Another quarter of competitors specialize in consigning antique furniture, which does not serve the purpose of cheaper, affordable furniture for college students.6 While there are a few businesses that cater specifically buying and reselling to a niche market like Hotel Furniture Liquidators and Boomerang (used office furniture), there is no business existing for college students.7  

1, 2Hoover's Online. Used Merchandise Stores Report. Retrieved October 25, 2014 from Hoover's Online.

3, 4Hoopes, Stephen. (2014). IBISWorld Industry Report 45331: Used Goods Stores in the US. Retrieved October 25, 2014 from IBISWorld database.

5Used Furniture Stores. (n.d.). Retrieved November 25, 2014, from http://www.yellowpages.com/philadelphia-pa/used-furniture-stores

6Uhuru Furniture & Collectibles. (n.d.). Retrieved November 26, 2014, from http://uhurufurniturephilly.blogspot.com/

7Certified Pre-Owned Office Furniture for Sale. (n.d.). Retrieved November 26, 2014, from http://www.boomerangofficefurniture.com/

In the used merchandise industry, the sellers and buyers of used goods are on and same. While some customers are content with donating their used goods to non-profit organizations, others desire cash or credit for sold items.8 With the large selection of companies available in the used merchandise industry, consumers are constantly comparing the pros and cons of different companies. The rise of Internet retail especially makes it easy to compare prices and selection of goods. While inventory varies by company, the cost of such inventory is almost always cheaper than new retail. When per capita disposable income is low, price-conscious consumers are more likely to shop for second-hand goods, according to America’s Research Group.9 Regarding Campus Couches, suppliers and buyers have no bargaining power on prices: our service gives customers a non-negotiable appraisal that sellers can either take or leave. The internet savviness of our clientele makes it easy for them to search for nearby used furniture shops, specific pieces of furniture, or selling prices. However, as stated earlier, there are no other used furniture businesses that cater specifically to college students specifically. Some shops do not even have websites or a gallery of furniture available online for customers to order. Other shops offer delivery, but customers must at least visit that store to know what they are buying. Our business is the only one in the Philadelphia area to offer delivery, opportunity for resale, an online system of organization, and specific marketing toward our clientele simultaneously.

8Hoopes, Stephen. (2014). IBISWorld Industry Report 45331: Used Goods Stores in the US. Retrieved October 25, 2014 from IBISWorld database.

9Hoover's Online. Used Merchandise Stores Report. Retrieved October 25, 2014 from Hoover's Online.

The industry is growing 7% annually, with used furniture being one of the fastest growing segments, according to the National Association of Resale and Thrift Shops.10Start-up costs are low: stores are typically 2000-5000 square feet, and sales per square foot range from $40-$100, which is low compared to most retailers.11Licenses to sell used goods are not expensive and not time consuming or obtain. New entrants may face competition from local establishments for a limited number of potential customers and also struggle with e-commerce retailers like Craigslist linking buyers directly to sellers of used goods.12 Since our company would like to have the convenience of a location in University City to stay close to clientele, it may be difficult to obtain a reasonable store front space that doesn’t encroach on other furniture businesses. For instance, there is already an existing furniture store, Home Furnishings, located at 36thStreet between Walnut and Chestnut streets, that specializes in popular dorm furniture items. There are also thrifted furniture shops at 40th street, at the edge of University of Pennsylvania’s campus. Our company also faces competition from well-established e-commerce and private ad websites like Craigslist and Freecycle that might make it hard to establish our reputation as a new, hassle-free e-commerce website for used furniture.

10, 11, 12Hoover's Online. Used Merchandise Stores Report. Retrieved October 25, 2014 from Hoover's Online.

Sellers of used merchandise face competition from traditional retailers selling inexpensive but new merchandise, as in Walmart, Target, or discount department stores.13Target and Walmart specifically market to college students during back-to-school season, and already have an established relationship with clientele. Ikea also has an established reputation, especially in the Philadelphia area, for selling new furniture. It’s location on Columbus Boulevard makes it easy to serve both Philadelphia and New Jersey students. Its furniture is easy to assemble, reasonably priced, and some items are specific to dorm-style furniture. All the mentioned companies have circulated catalogs and online websites that make it easy for consumers to choose furniture and compare prices. Campus Couches also faces furniture from private online ad websites, like Craigslist and Freecycle, as well as social media forums that can be found on Facebook. Such websites allow consumers to search for used furniture, contact sellers, negotiate price, and even negotiate the terms of delivery from seller to buyer. However, these websites don’t guarantee the sale of used furniture. Some posts may go unnoticed for an extended amount of time because of the sheer number of posts that are created every day. Craigslist and Freecycle also have a reputation for being untrustworthy or unsafe since it is open to the public and anyone can post anything. There is no mediator or certification that ensures the safety of the transaction. Posts on Facebook are similar and limited by friend circles and social groups. Facebook is also not specifically tailored for the selling of merchandise, which can make it difficult for customers to find what they want. Our company offers an organized and safe platform for students to easily sell and buy used and affordable furniture.

13Hoover's Online. Used Merchandise Stores Report. Retrieved October 25, 2014 from Hoover's Online.

Based on the above analysis, the used merchandise environment in Philadelphia is attractive. Campus Couches, Inc. is both an in-store business and an e-commerce website, meaning it reaches a large number of consumers, can compete with other e-commerce websites, and also reduces operational costs. While there may be issues in finding an appropriate location for our business, there are no other existing businesses that offer what we offer: convenience, resale, delivery, and e-commerce. There is an existing market of many college students that are interested in saving money and selling used furniture. As stated earlier, start-up costs are small and upkeep is minimal. Therefore the environment is attractive.

Some strengths of Campus Couches is that we serve a local market, Philadelphia-area college students, allowing us to focus on superior customer service and targeted marketing programs. Serving a specific market allows us to acquire more relevant merchandise, dorm and apartment furniture, which differentiates us from retailers that sell all furniture in general. The Internet-based nature of our business helps to manage inventory, customer information, and reduce the cost of labor. Our website also allows us to compete with classified ad websites and other retailers that offer websites. In our industry, both buyers and sellers are considered customers, and jobs in the used merchandise industry require few skills and pay is low.14

14 Hoopes, Stephen. (2014). IBISWorld Industry Report 45331: Used Goods Stores in the US. Retrieved October 25, 2014 from IBISWorld database.

Some weaknesses of Campus Couches is that the quality of merchandise submitted for appraisal can vary significantly in quality and type. There is no control of what kind of furniture is available at any time or even the quantity of such goods at any given time. Inconsistency in pricing may also pose a problem, so it is imperative to establish a standardized system of appraisal to ensure that our prices are consistent within our firm and still competitive with other companies. Acquiring pricing software can also be very expensive. The turnover rate of employees in the used merchandise industry is high because of low wages, so our company must offer flexible scheduling, ample discounts, and a larger number of employees.15

15Hoopes, Stephen. (2014). IBISWorld Industry Report 45331: Used Goods Stores in the US. Retrieved October 25, 2014 from IBISWorld database.

Campus Couches has the opportunity to develop mobile applications that can help with mobile payments, managing listings, and browsing for furniture. A mobile application also allows for the opportunity to share such experiences on social media, expanding the reach of our business. The acquisition of improved and better-quality used goods will increase consumer interest. Ongoing economic uncertainty encourages shoppers to seek bargain prices: as the unemployment or poverty rate rises, or when per capita disposable income decreases, sales at Campus Couches will increase.16Students are always looking to save wherever they can, especially with the rising cost of tuition, supplies, and housing.

16 Hoover's Online. Used Merchandise Stores Report. Retrieved October 25, 2014 from Hoover's Online.

Campus Couches faces the threat of classified ad websites, which have an established reputation and connects buyers to sellers directly. Consumer taste drives demand and can also impact inventory: what may be considered tasteful and convenient one year may not maintain the same image years later, leaving some merchandise outdated and virtually unsellable. Also, more and more websites are being created existing companies in order to keep sales on their books. For example, Goodwill launched Shopgoodwill.com and Mygoodwill, an online auction site for employees and associate organizations.17

17Hoopes, Stephen. (2014). IBISWorld Industry Report 45331: Used Goods Stores in the US. Retrieved October 25, 2014 from IBISWorld database.

Overall, Campus Couches is at an advantage to compete with brick-and-mortar stores and e-commerce websites. Campus Couches serves a specific market of college students, making merchandise relevant to the customer. The web-based nature of the company also allows for a wider array of merchandise available to more consumers and also allows for lower operational costs. However, the company must be sure to have a larger number of employees to make up for the turn-over rate of the industry. The company must also be very wary of pricing policies. In order to stay competitive, Campus Couches must focus on e-tailing, standardized pricing, and establishing a reliable relationship with customers.

Campus Couches faces a moderate amount of competition from well-established brick-and-mortar stores. Goodwill Industries International is a network of 165 local, autonomous member organizations in the US and Canada.18 With over 2,900 brick-and-mortar stores, Goodwill focuses on customized job training for the disabled and homeless.19 Retail stores sell clothing, books, and other donated goods and proceeds fund the organizations’ employment provision services. In 2014, the company estimated about 76,000 employees, with 261,975 individuals who gained meaningful employment through Goodwill over the years.20 Goodwill has also launched an online auction website, ShopGoodwill.com, which sources products from donation and auctions them online, making them competitive with other e-commerce merchandisers. Although the company has undergone some speculation due to its questionable employment practices, Goodwill has thrived during recent economic downturns, like other companies in the industry. Goodwill’s revenue is expected to increase at an annualized rate of 9.3% to reach $3.9 billion.21

Although Goodwill has a positive, community outreach identity and partakes in e-commerce, the company does not offer a delivery service. The closest Goodwill locations are located at Front Street and 7th Street, making accessibility for non-commuter students difficult. The site is also strictly auction-based and sellers make no profits from sales. Students are more likely to shop at Campus Couches because of the profit from second-hand items and the convenience of delivery.

18, 19, 20, 21 Hoover's Online.Goowdill Industries International, Inc. Retrieved November 29, 2014 from Hoover's Online.

The Salvation Army is an evangelical part of the universal Christian Church. Like Goodwill, this organization offers outreach programs for the homeless, addicts, elderly, and disabled. The Salvation Army operates 1,266 thrift stores called Salvation Army Family Stores, and offers clothing, furniture, books, and other inexpensive goods.22 Proceeds from stores go toward the operation of the Salvation Army Adult Rehabilitation Centers.23 The company discloses limited financial data, but is estimated to reach $600.3 million in 2014.24 The Salvation Army has virtually the same advantages and disadvantages as Goodwill. The closest Salvation Army Family Store is located in Upper Darby, PA and does not offer delivery, compensation, or even an e-commerce platform.

22, 23, 24Hoover's Online. The Salvation Army National Corporation. Retrieved November 29, 2014 from Hoover's Online.

Ikea is the largest brick-and-mortar furniture retailer in the area, and also the world’s top furniture retailer. Although Ikea offers limited delivery services, Ikea uses flat packaging, enabling customers to assemble their furniture at home.25Ikea’s low-price retail concept sustained it during the global financial crisis in both the UK and the US and continued to remain popular when economic times were better.26 Ikea had $37.2 billion in sales in the fiscal 2013 year with an increase of 6% to the prior year.27 Ikea also distributes 210 million catalogs a year and sells its goods online, giving the company plenty of exposure.28 Visits to the website totaled 1.2 billion in 2013, and the catalog app has been downloaded 9.7 million times.29 For college students looking for affordable, reliable furniture, many turn to Ikea because of their easy-to-assemble furniture. Ikea has been marketing to college students for years and the company prides itself on simplicity. While it may prove difficult to out-market Ikea, Campus Couches has the advantage of focusing on local Philadelphian college students. Campus Couches is also capable of creating a mobile applications and a website that connects buyers to sellers through the company, making the service more personable. Campus Couches also offers delivery for all products, and the location of Campus Couches is more accessible than Ikea’s location on Columbus Boulevard. Campus Couches is also capable is reselling Ikea furniture, so if a buyer wanted to purchase a specific Ikea product, it is possible to find it via Campus Couches.

25, 26, 27, 28, 29Hoover's Online. Inter Ikea Systems B.V. Retrieved November 29, 2014 from Hoover's Online.

Craigslist is a web forum for locals in metropolitan areas in the US. Posts include listings for jobs, housing, companionship, events, and the sale of goods and services. According to Hoover’s, after many years of rapid expansion, the company’s growth has dropped from 185% in 2009 to 43% in 2012.30 Any person can create a post, with the exception of job posts which require a posting fee. The posts are limitless and just about anything can be found via Craigslist, including used furniture. However, there is a mixed bag of products. Some sellers may not offer delivery or negotiable prices, and there is a lingering precaution for safety in online transactions. Campus Couches offers a more focused range of products (used apartment or dorm life furniture) sold by students for students on a safe, mediated platform that offers delivery. The Campus Couches website also organizes product by category and clearly lists price. In this way, Campus Couches is at an advantage compared to the cluttered, free-to-post nature of sites like Craigslist, Facebook, or Freecycle.  

30Hoover's Online.Craigslist, Inc. Retrieved November 30, 2014 from Hoover's Online.

In terms of how our product will be distributed, Campus Couches offers a delivery service and a physical store-front. The delivery service is used for online, thrifted product or unwieldy furniture bought in-store. Buyers can either have furniture delivered or pick it up themselves. The physical store-front contains a solid inventory of popular furniture. It is possible that in the future, Campus Couches can hold pop-up shops, events where student ambassadors can promote the business and students have the opportunity to shop for furniture at a discounted rated.

Market Analysis

Description:

According to information taken from the US Census Bureau, in 2010 there were 149,405 Philadelphians enrolled in college or graduate school. This is a 29% increase since 2000, when there were 115,671 Philadelphians enrolled in college or graduate school. (2013 Annual Report, 2014) Such a significant growth in ten years leads us to believe that Philadelphia is going to continue to develop and thrive as a city that attracts people to attend college here.

This year, The American Institute for Economic Research ranked Philadelphia number 12 out of the 75 top college destinations which was organized by population size. Philadelphia was placed into the “major metro” category. The methodology of the rankings were based on comparing each locations overall economic and academic environment, quality of life and employment opportunities. (Aier.org, 2014) Thus proving more to our point that Philadelphia is on the rise as an attractive city for college students to attend which will increase our business.

From 2000 to 2010, Philadelphia gained 50,306 new residents within the age range of 20 to 34 years old. This is the first time Philadelphia has seen an increase in population since the 1950 Census Bureau. (2013 Annual Report, 2014) Although our specific target market is aged 20 to 25 years old, and some of that significant increase includes ages outside our target market, it still proves that Philadelphia is becoming popular for people in their 20’s and makes it a more desirable city.

Based off this research, we know there are many customers in our target market. In order to be successful we must enter the market in a strong unique way to gain our first customers, impress them enough to retain them, and allow them to spread the word about their great service.

Primary Customer Description:

As we will be pursuing a B2C model, our primary customer are our customers. We believe our primary customer will be located in the Philadelphia area and attend one of the colleges or universities there. Thus making the age of our primary customer anywhere from 18 years old to 25 years old as we plan to attract both undergraduate and graduate students.

People in college generally need new furniture after living in the dorms and after their first year students are constantly switching apartments and houses. For instance, many students will spend a year in a house that needs to be furnished and the following year move into a fraternity house or sorority house that is already furnished. This would leave the student with the trouble of finding someone to store the furniture or have a difficult time selling it on companies like Craig’s List. Our company would help students in making these moves less stressful in a seamless manner.  In addition, as we are a consignment furniture store, college students are known to always be on a budget and watching their money as it is an expensive time in their life. Since all the colleges and universities are considered city campuses, having a car is not required here. By providing a delivery service we can help alleviate the struggle of renting a uhaul or other means of transporting furniture.

Primary Research:

In order to know if Campus Couches is a feasible business, we conducted primary research. We facilitated interviews with 20 people from our target market. As we all go to Drexel University and are undergraduate students, we thought it was important to interview 20 people who all could provide us with a different insight and opinion. Therefore, our 20 respondents included undergraduate and graduate students from Drexel University, University of Pennsylvania and Temple University.

Our findings were helpful and encouraging. Out of the respondents, 85% claimed they would try our service at market introduction. One respondent gave their reasoning and explained that our company “sounds more reliable than Craig’s List, so why not”.

When asked where the respondents usually buy their furniture, 75% stated IKEA. When asked if this company could meet their needs, there was also a 75% answer of yes, it will meet their needs. When these 15 respondents explained how it could potentially meet their needs, they gave us the feedback we had been wanting to hear. Overall, the respondents explained how getting furniture from IKEA was overall a troubling experience. Many respondents complained about finding a way to get to IKEA and back was difficult and setting up the furniture was a daunting task as well. Campus Couches would provide delivery and since the furniture has been used previously it will already be set up, thus improving the whole experience for our customers.

When asked what our customers would expect to pay for our product and service, our answers vary greatly as there are various pieces of furniture that vary in size. As stated in our financial section, we assume the average price will sold at $80 per unit. Although we received a variation in price from all the respondents, 70% answered more than $80 per unit. Which leads us to believe we will be pricing our product at a relatively good price and that our target customers will be willing to pay for it.

Entry strategies:

There are various marketing tactics we are going to utilize when entering the market to acquire our first major customers.

We are first going to try and establish a partnership with a non-profit organization, Campus Philly. According to Campus Philly’s website, their mission is to fuel economic growth by encouraging students to study, explore, live and work in the Greater Philadelphia tri-state region. Campus Philly has been an established organization for over 13 years and over the years they have accumulated numerous partners in order to connect and assist the college students in Philadelphia. This is a great platform for us when first beginning as they have a strong following on various forms of social media. We will offer certain discount codes such as “Campus Philly” to provide to their customers and blast on their social media platforms. This will also allow us to see how many customers we get from Campus Philly and if we should continue investing time with the organization.

In addition, we will establish relationships with off-campus housing apartments. For instance, The Courts, which is located in University City, always displays brochures for local food stores and other businesses. The Courts does not offer furnished bedrooms so we would give them brochures to display near the front desk. We could also establish an agreement for a packaged deal, meaning, if someone signs a lease with The Courts, they get a 10% discount on their purchase from our website. The courts will be providing us with promotions to our target market and we will be encouraging our potential customers to sign with them as well.

The final tactic we will use and that will be imperative to our success is our referral program. As word-of-mouth marketing is continuously proven to be effective and important to a company’s success. This will hopefully get our brand name out in the market and encourage repeat customers. If someone refers a new customer, we will reward that person with a $25 gift card on their next purchase. The gift card will expire in six months, so many customers may not use their gift cards which will save our company money in the long-term, however, it will make our customers feel as if they are being rewarded which will establish a relationship between our brand and our customers, thus creating loyal customers.

Through these various partnerships and promotions, we are sure to enter the market in a profound way setting us on the course for great success.

Product Development Plan

Our team will be hiring an experienced furniture appraiser and professional marketer. We will also hire two consultants, an accountant and attorney. Our business will sell furniture both online and in store which will be approximately 5,000 square feet and will be open eight hours during the weekdays and ten hours on the weekends. The furniture we obtain to sell will first be appraised by two employees and a percent of final sale price the seller will receive will be set at the time of agreement. The percentage that our company will aim to receive from each sale will be between 40 and 60 percent of the final sale price.

Financial Plan

New Venture Development Timeline

Phase 1:

Register Business

Acquire Permits

Acquire Location

Consult with others in the Business

Phase one = 6-9 months

Phase 2:

Review Leasing Plans

Develop Store layout

Arrange Business Location

Choose optional Advisors

Join Local Chamber of Commerce

Apply for Business Loans and Credit

Phase 2 = 4-6 months

Phase 3:

Business Filings Done

Have Licenses Validated

Have Permits Granted

Renovate Property

Open Checking Accounts

Develop Ad Campaigns

Phase 3 = 1-2 months

Phase 4:

Make Final Changes to Property

Acquire Inventory

Hire Employees

Make Business Cards and Brochures

Finalize Ad Campaign

Install Cash Registers and Equipment

Phase 4 = 1 month

Phase 5

Train Employees

Stock Inventory

Launch Ad Campaign

Open Business to Public

Phase 5 = 1-2 months