Feasibility Study

- The Odiham Project

A Stewart Scott Assessment

Background..........................................................................................................................3
Objectives............................................................................................................................4
Primary Objective............................................................................................................4
Secondary Objectives.......................................................................................................4
Objective One..............................................................................................................4
Objective Two..............................................................................................................4
Objective Three............................................................................................................4
Objective Four ............................................................................................................5
Objective Five..............................................................................................................5
Objective Six................................................................................................................5
Analysis of Demand Research.............................................................................................6
Concessions......................................................................................................................6
Ages Ranges.....................................................................................................................6
Former Martial Artist Ratios............................................................................................6
Interest Levels..................................................................................................................6
Analysis of Local Competition............................................................................................7
Analysis on Expert Opinion (Sensei)...................................................................................8
Consumer Confidence......................................................................................................8
Ability to Compete...........................................................................................................8
Licensing..........................................................................................................................9
Costs...................................................................................................................................10
One-Off Costs................................................................................................................10
Ongoing Costs................................................................................................................10
Suppliers.............................................................................................................................11
Proposed Chain Of Distribution.....................................................................................11
Pricing Strategy..............................................................................................................11
Conferring with the Herb Shop..........................................................................................12
Executive Summary...........................................................................................................13
Bibliography......................................................................................................................14
Background
As a resident of Odiham, and a martial arts enthusiast, I have noticed a distinct lack of a
martial arts supplies retailed in Odiham. More in depth consideration, and perusal of the
high street has lead me to believe that it would be feasible for the following reasons:
• Martial arts such as Qui-Gong and Tai-Chi are used to treat various conditions
associated with age, this knowledge coupled with the local demographics I have
observed lead me to perceive a gap in the market.
• Not only in Odiham, but the whole county is lacking such a retailer, and with a
successful promotion strategy, customers would be plentiful.
• There is also a distinct lack of competition, and the market has low barriers to
entry, making market relatively easy to penetrate.

As you can see, the chosen towns are situated very closely together, with trains and roads
connecting them all, and as someone who walks to Winchfield and back daily, I can
safely say it’s not hard, or it shouldn’t be for people with martial arts body conditioning.

It is also the case, that due to the closeness of the towns, that martial arts classes will
contain people from towns other than the one in which the class is situated. This will not
only help spread the word of mouth promotion from region to region, forming a web as I
expose multiple classes to my marketing strategy.
Objectives
Primary Objective
To undergo a feasibility study into the potential of opening a martial arts retailer in
Odiham.

Secondary Objectives
Objective One
‘Research demand levels for a martial arts retailer in Odiham.’
This objective will involve questionnaires to random people on the street in the following
locations;
• Fleet
• Odiham
• Winchfield
• Hook
As well as asking enthusiasts in local dojo, presenting them with the same questionnaire,
but also asking them about far less static opinions.
These results will then be analysed, and the potential demand evaluated.

Objective Two
‘Investigate local competition levels and evaluate threat levels’
This objective will involve perusing the local high streets of the four locations from the
first objective, as well as using answers obtained from the questionnaires and
conversations, also attained in objective one. This data will be analysed and the threat
level ascertained.

Objective Three
‘Research the total costs of the initial set-up of the business’
This objective will involve estimating refurbishment costs of the premises as well as the
initial cost of the rent.
Objective Four
‘Research supply levels and establish a pricing strategy’
This objective will involve using both the prices from suppliers for stock demanded and
the prices suggested by my potential customers (found in objective one) as well as the
prices of my competition (if any(found in objective two)). PED will also be taken into
account.

Objective Five
‘Calculate the overall costs, revenues and thus profits of the business’
This objective involves calculating total revenue, which can be found by “Average
turnover per sale * Number of sales” as well as the initial costs, and the subsequent ones,
which will both use the formula “fixed costs + variable costs”, but the initial costs will
include one-off payments. The contribution could also be used to find the break even
point.

Objective Six
‘Confer with the local herb shop, and sensei to try and establish trade agreements’
This objective will involve lengthy discussions with the above potential stakeholders, so
as to try and not only avoid competition, but also allow for a firm customer base, and
word-of-mouth promotion.
 Analysis of Demand Research
Concessions
The questionnaires were only answered by 100 people, this is a very small test group and
could well raise concerns as to the impact of anomalous data. The comments from the
Sensei are my other form of primary data, and are in my mind, highly accurate as many
(most notably Jon Wicks) have been in the industry for quite some time and as such have
a fairly fluent knowledge of the status quo in the market.

Ages Ranges
Looking at the data that I collected, it would appear that much of the population are either
above, or below middle-age. This would lead me to identify two major customer groups,
the elder customers, who are more likely to value far ‘softer’ martial arts, with the aims
more around health benefits (My figures support an interest for this) and as such, would
be more interested in books, and medicinal herbs. The other group, younger range of
customers, are more likely to be interested in hard, combative arts and as such, my store
would have to stock weapons and possibly offer a post-board system that could help
students find sparing partners. Increasing the amount of entrants to my store.

Former Martial Artist Ratios

As I suspected, there are many people who are not martial arts. If, however, my search is
representative, and indeed, 17% of the population of Fleet, Hook, Winchfield and
Odiham are indeed current, or former martial artists, if these figures are representative of
the whole population (41,281 people), then there are 7017 people who are likely to be
interested, and might well pass the word of the store around even if they don’t buy
anything. This data leads me to believe that asking martial artists with whom I am
acquainted with, to perform demonstrations in Basingstoke high-street wearing gear that I
would be selling, possibly even allowing bystanders to try the gear on for themselves,
adding to the personal touch that appeared to be highly valued by my test subjects.

Interest Levels
The data for the demand interest levels is far more
 Analysis of Local Competition
Local competition was found to be non-existent. This, on the surface would appear to be
a great thing, as it would grant any martial arts retailer a regional monopoly, with a
market share of 100%. This, wouldn't come anywhere close for forming a monopsony
and such would not allow for the dictation of prices for suppliers, but would however
allow for prices for consumers to be set markedly higher than the national market price
increasing contribution, a vital figure to keep as high as possible in the opening year to
help recuperate from the relatively large initial costs.

However, this might not necessary be the case, as it might indicate that the research I
carried out on local demand levels is unrepresentative, as one could argue that were a
proposition such as this so lucrative, an entrepreneur would have already taken advantage
of it. It might also be an early indicator that the initial costs, chains of distribution, or
some other aspect of the business might well have teething issues that are unforeseeable
to a feasibility study made in such a short time as my own.

The question remains, 'how do I know which, or what mixture of the above are the case
in reality.' One way to find out would be to ask additional test subjects the same
questionnaire, to modify my questionnaire in light of practical experience to help
minimise anomalous results (or the impact thereof.) Another way, would be to investigate
other aspects of this business start-up, but to do so very shallowly, hoping to find a factor
that could account for the absence of competition in this market, in a process of
elimination.
 Analysis on Expert Opinion (Sensei)
I have interviewed four martial arts instructors (each specialising in the arts detailed
below), asking for advice concerning the sale of equipment, and any troubles they might
forsee, and though each raised unique issues, a number of points raised were very similar,
they are detailed below.
 Tai-Chi Quan
 Karate
 Kickboxing
 Aikido

Consumer Confidence
All of the instructors unanimously mentioned at some point that when people get lessons,
or buy equipment, they need to know that they can trust the source from which they
came. Not only for the sake of value for money, but also that martial arts training can be
very dangerous, and equipment that lets you down can cause injury.
This could be an issue, as I (or anyone else who goes ahead with this idea) are unlikely to
be trained (and trained well) in every last item sold in the store. There will be questions,
as always, and the inability of the shop owner, or his staff to answer them could well
generate a lot of negative PR. It would be even worse if I aimed for a low price-range
market segment, and people, not knowing the risks, were injured as a result of using
equipment that I (or anyone else who goes ahead with this idea) sold.

Ability to Compete
(The Sensei operate on a JIT system, which has similar ramifications, but got me thinking
along the following lines, with reference to the % of people that use on-line purchasing
for their equipment) Most of the on-line stores are unlikely to hold masses of stock, as
their relations with the producers are so good, and they, unlike I (or anyone else who goes
ahead with this idea), would be able to have a chain of distribution with far less
intermediaries adding value along the way, making them far more price uncompetitive
than my store could hope to be.
Outwardly, this would seem to be a serious problem, but it could well be, that my over-
heads which add value to the products I intend to sell, could well possess effects that
would outweigh the additional costs in the mind of the consumer. My questionnaire
showed that face-face sales was an important feature to many of the test subjects. This
indicates that they might well be ready to pay a little more for the same product, sold in
my shop, than they would for that good bought on line. Things like delivery charges,
possible breakages and the lag between order placement and delivery could also tip the
balance in my favour. Especially when imperfect consumer information is taken into
account.
Licensing
The sale of weapons in the UK is a closely monitored and highly regulated affair (unlike
in the USA) and there are many laws governing the sale&purchase of weapons of which I
was not aware. Simple things like having the correct licence for the correct blade, and so
on, as well as customers signing a disclaimer for legal coverage in case they try to sue the
store.
This could be a large issue, though, without further research, research that would go
beyond the scope of this feasibility assessment, the extent to which they are a threat
remains unknown, though, to any entrepreneur considering implementing this idea, I
could suggest in-depth legal research of weapons sale.
 Costs
This section will be divided into two sections, the one off initial costs, and the ongoing
costs. The variable costs will be covered in the pricing strategy.
Nota Bene: The property referenced to in the costs section is one in Basingstoke, as
research showed no properties available in Odiham possessed the required properties.

One-Off Costs
Refurbishment (all costs assume 25sqm shop floor)
− Flooring(@£3/sqm) = £75
− Wallpaper(@£1/sqm (assuming wall height of 2m)) = £40
− Shelving = £400
− Fitting Costs (Quote from local internal designer) = £100 (excl materials)
− Oriental Lamp-Shades = £30
− Posters = £50
− Other = £75
− Total = £770
Marketing Promotion
− Flyers = £100
− Performances = £400
− Other = £10
− Total = £510
Overall Total = £1280

Ongoing Costs
(Measured per year)
Wages, assuming staff paid at £10/hour, and store being open 9-5 mon-sat, and 11-4 on
Sundays, can be found by this formula 10(52(6(8)+5))*£
Wages = £27,560
Heating = £?
Lighting = £?
Rent (Basingstoke, Hampshire, RG24 8AL) = £17,500
Total = £45,060
 Suppliers
Proposed Chain Of Distribution
Looking around at the possible chains of distribution that my business could use, I ended
up with two main alternatives:

Producer --- My Store

Producer --- Middle man --- My Store

The top would appear to be the more lucrative, given the smaller number of
intermediaries. This however, deeper research has shown, is far from the case. The entire
reason for choosing the first one would have been to cut costs, however, without the
economies of scale possessed by 'The Middle Man' in terms of being able to transport the
good internationally, demand lower prices, and buy in bulk, the top chain would be very
costly. However, by making use of 'The Middle Man's' economies of scale, it would
appear that, though a small amount of value is added, costs are in fact lower, delivery
response times quicker, and chance of damage to goods in transit, also lower.

Pricing Strategy
Looking at the costs, we can see that the heaviest costs will occur every year, and we can
also see that the USP of this business, the face-to-face selling comes at a high cost. My
pricing strategy is devised as follows:
By averaging all of the spending habits of my customers, and using them to form a ratio,
I have determined, that my procurement can be divided up into the following segments
-
-
-
-
The initial investment is so small, that I have discounted it, as almost anyone engaging in
this venture could afford to draw £1,280 from personal funds.
For the store to break even, it will need to turnover £45,060/annum. Adding all of the
averaged spendings together, and then averaging those averages, after which multiplying
by the number of potential customers (y) multiplied by what I believe to be a reasonable
probability (z) by that average, we can find the average customer spending per year, in
my store, across all products. Then, by dividing that by my total rolling costs, I can find
what fraction (which could be converted to a %) of profit margin that I must charge.
Nota bene: After the first few months, prices could be raised, to generate some retained
capital, and the new profit margin (aka value to be added) can be found by simply using
the rolling (costs*-1) + profit required as the original cost figure (or just ignore the
polarities)

Conferring with the Herb Shop

The owner of the shop, as well as her main physician weren't very keen on the idea of the
trade-collaboration scheme that I suggested, their main reasons were as follows:
 The herbs they possess are very unvaired
 The few herbs that they do possess should not be taken without a prescription, and
it is unlikely that any of my staff would have the qualifications to write one.
 They doubted the potential of the idea, and the effect that it could have on their
corporate image.
 They were of the mind that their business and my own would operate in
completely different markets, and that for all intensive purposes, the gap between
those markets was unbridgeable.
Executive Summary
Bibliography
Local martial arts classes
http://www.guildford.gumtree.com/guildford/02/6643902.html
http://www.su-ha-ri.co.uk/main/index.php?
http://www.sarahgoodall.co.uk/
http://www.fleetaikidoclub.org.uk/
http://www.martialartsclubs.com/byarea/hampshire.php
Proof that certain arts befit the aged
http://www.martrix.org/Gigong.pdf
Real Estate
http://office.flexas.com/property_details.vc?propertyId=1325