1. B US INE S S P L A N BY
P L A NNING A HE A D
B O OTS : VE NDING M ACHINE S
BY NATHALIA FISHER
NATASHA IVANOVIC
2. 2
Table of Contents
Executive Summary....................................................................................................................... 3
Introduction.................................................................................................................................. 4
Product......................................................................................................................................... 4
Mission Statement ........................................................................................................................ 5
Objectives..................................................................................................................................... 5
Beauty and Personal Care Industry................................................................................................. 6
The Main Competitors................................................................................................................... 8
Consumers.................................................................................................................................... 8
Product Strategy ........................................................................................................................... 9
Price Strategy...............................................................................................................................10
Place Strategy ..............................................................................................................................10
Promotion Strategy......................................................................................................................10
Operational Plan ..........................................................................................................................11
Financial Plan...............................................................................................................................13
Conclusion...................................................................................................................................15
References...................................................................................................................................16
3. 3
Executive Summary
The businessconsists onvendingmachinesthatwill sell beautyandpersonal care productsinspecific
locationsacrossLondon.The locationsare 15 major train,underground,andcoachstations,5
airports,and5 major Londonnightclubs.Now aday,consumersare requiringmore productson-the-
go due to the fast-pace lifestyle(Mintel,2013).The vendingmachines fulfilconsumerneedsof
convenience,accessibility,anditisan easyand quickway to purchase goods(Euromonitor
International,2009).
The beautyand personal care industryisa growingsector,andby Bootsbeingthe UK leadingbeauty
retailergivesacompetitive advantagesoverpotential competitors (Mintel,2013). The beautyand
personal care vendingmachines have the smallestpercentagein the marketof vendingwithonly1%
of the global value sales (EuromonitorInternational,2009). It givesBootsthe opportunityof being
the marketleaderinthissectorin the UK. The potential competitorsforthe vendingmachinesector
are convenience stores,andstoreswithlongopeninghours.
The main targetgroup forthe vendingmachinesare women,andsecondarilymenbetween25and
45 yearsoldwho will potentiallybuybeautyandpersonal care productsontheirwayto work,or a
businesstrip.The vendingmachinesinnightclubswill primarilytargetmenandwomenbetween18
and 35 yearsoldwhofrequentthe club.
The promotionstrategyforthe newBoots vendingmachineswillfocusonsocial mediaadvertising.
The objective is tocreate awarenessof the locationsof the vendingmachines. Anadvertisingagency
will be hiredtocarry out the promotionthroughTwitterandFacebook. Bootswill give awaybeauty
and personal care relatedprizesthatwill be hiddenbehindthe productssoldinthe vending
machines.
The vendingmachineswill use alreadyexitingBootsoperational system.The productswillcome from
the warehouse;will be deliveredbyexitingBootsstaff tothe locationsof the vendingmachines,and
it will be refilledonce ortwice a week.The supplychainwillworkas shown below:
Staff will be properlytrainedtorefill the vendingmachines.Bootswill use existingcustomerservices
to deal withanycustomers’issues.Staff will be trainedtocarryout propersolutionforthe
customers.Todeal withmaintenance of the vendingmachines,Bootswill use the engineersfromthe
companywhere the vendingmachineswillbe boughttomaintainandfix the vending.
The beautyand personal care vendingmachinesare veryprofitableandare expectedtoreachthe
break-evenpointinthe firstyear. The overall profitispredictedtoincrease significantlyfrom
Warehouse Distribution
Vending
Machines
Consumer
4. 4
£118,865.60 (firstyear) to£176,372.00 (secondyear),due tothe decrease of costs andincrease of
sales. Furtherprofitincrease isexpectedforthe thirdyear of £182,091.25.
Introduction
Due to urbanizationpeopleare livinginafast-pace lifestyle,whichopenstonew business
opportunitiestoofferthese potentialcostumersproductson-the-go(EuromonitorInternational,
2009). The personal care and beautysector isthe smallestsectorinthe vendingmachinesmarket,
whichgivesthe opportunitytoBootstoexplore thismarketandpotentiallygainagreatmarketshare.
The Boots beautyandvendingmachinesfulfil the consumers’needof havingproductsefficiently, and
withgreataccessibility.IncountriessuchasFrance and Italythe conceptof beautyvendingmachines
has beeninuse fora fewyearsandhas beenprovedsuccessful (EuromonitorInternational,2009).
There isgreat opportunitytouse prime locationssuchastrain,coach, and undergroundstations,
airports,andnightclubstoreach the final consumer (EuromonitorInternational,2009).
Product
The newproduct proposal designedforBootsUK Limitedisanenvironmentallyfriendlyvending
machine consistingof arange of beautyproductsformenand women.The aimisto have the
machines’strategicallyplacedwithinthe maintrainstationsinLondon,the mainairportsandalsoa
selectionof central Londonnightclubs.The productwill notjustbe aestheticallypleasing;itwill
incorporate Greentechnologyinordertokeepupwithgrowingenvironmental consciousness.The
demandforGreenproductscontinuestoexpand(GreenBusinessBureau,2013) soby tappingintothis
marketthe companyis able to create positive publicrelationsandbenefitfromcostsavings.
Thisideaisnot necessarilydue toacomplete gapinthe market as there are similarproductsthathave
beenreleased.ForExample, “BeautyMart”UK Limiteddesignedavendingmachinewhichthisyear
(2013) has become availabletouse inHarveyNicholsLondon,howeverthisparticularreinventionof
the traditional vendingmachine includesproductsof ahighexpense andisconsequentlyaimedata
highclasstarget market,comparedtothe psychographicsegmentationthatBootsmarkettowards
(Young,2013). Therefore,there isagapfor the same product that reachesa differentiated
demographicsegmentof consumers.Inordertodo thisthe machine will includeproductsthatare
currentlypartof Bootsproduct portfoliowithinthe stores,the average price of the productstobe
includedinthe machinesis£2.64 (see finance section).
5. 5
Mission Statement
Mission - Our missionistobecome the world’sleadingpharmacy-ledhealthandbeautygroup.We
seektodevelopourcore businessesof pharmacy-ledhealthandbeautyretailingandpharmaceutical
wholesalingacrossthe worldandbecome asignificant playerinmanymajorinternational markets
Purpose - Our purpose isto deliverproductsandservicesthathelppeople lookandfeeltheirbest.
Values- We believe inmakingadifference andare proudof the contributionwe make tothe wellbeing
of the communitieswe serve.
(Alliance Boots,2010)
The product reflectsthe changingdemandsof consumersforamore time effective,convenient
shoppingexperience,therefore bylaunchingaproductthat meetsthese demandsBootscancomply
withBoots ‘Mission’of becominga‘significantplayer’withinmarkets.Bootspurpose isto‘deliver
productsand servicesthathelppeoplelooktheirbest’.Bycreatingaproduct that isavailable 24/7 it
allowsthispurpose tobe enforcedwithinalongertime scale.Usuallythe productsare onlyavailable
duringstore openinghoursandwhenorderedonlinethere isadeliverywaitingperiod.The productsin
the vendingare therefore able totargetpeople whoare travelingatanytime and people innightclubs
whichon average stayopenuntil 3 am when.Notonlywill the machinesbenefitthiscustomer,they
will alsocontribute towardsthe marketingof Boots.
Since the recessionthere hasbeenamajorcutback inconsumerspendingdue toa lackof confidence
inthe marketandlack of disposableincome peoplecangenerate (EuromonitorInternational,2012).
Howeverpeoplestill purchase‘essentials’butare justmore wary of price.Also,the factthat the
professionalservicesegmentwithinthe Beautymarkethasdeclined,thishasresultedinmore people
purchasingbeautyproductstouse at home (Monk,2013). Withregardsto this,the ideaof havinga
vendingmachine holdinganumberof essential,beautyandpersonal care products,isperfect forthe
currentmarket.This“fast track shopping”approachallowsforadaptationof the constantchange in
demandof consumershoppingbehaviour.The machine alsooffersaconvenience factorasthere isthe
optiontopay by card and notesinsteadof traditionallyhavingtouse change.
Objectives
BusinessObjective:
• To install sustainable vendingmachinesinspecificlocationssuchastrain,underground,andcoach
stations,airports,andnightclubs.
• To achieve the profit forecastforthe next3 years,10% +/-
• To focuson the ideaof creatinga convenient,reliableproductinordertomeetthe changing
demandsof consumers
6. 6
Operational Objective:
• To maintainthe physical appearance of the vendingmachine andtomake sure stockis refilledon
regularbasis
• To monitorsalesinorderto identifywhichproductsare sellingbestorworstto helptoincrease
sales.
Marketing Objective:
• Increase vendingmachinelocationawareness
• Increase salesof the vendingmachine productsthroughthe marketingcampaign
Beauty and Personal Care Industry
Overthe yearsthe beautyindustryhasdevelopedrapidlyandtodayitworthalmost15 billioninthe
UK in 2012 (Mintel,2013) . As menare purchasingmore beauty andpersonal care products,beauty
industryisexpectedtogrowby8.5 % bythe endof 2014 (Mintel,2013). .
Bootsis one of the biggestbeautyandhealthretailerinthe UKand ownsits ownlabelssuchasN7,
Botanics, 17 and Naturals(EuromonitorInternational,2012).These productshave hada fastgrowth
and have reachedoverseasmarkets(Mintel,2013) . Boots has twodifferentvisions, toconcentrate on
beautyandpersonal care as well ason pharmaceutical side,suchaspharmaciesandhospitals (Boots,
2013)
In the past twoyearssalesof beautyand personal care hasrisenand itis estimatedthatitwill
continue torise inupcomingyears (see Figure 1) (EuromonitorInternational,2012).Despite the
recession,the premiumbeautysegment isstillgrowing(Mintel,2013).Consumersprefertobuytheir
personal care productsin discount storesandsupermarkets,due tothe availabilityof buyinginbulks
and promotional sales (EuromonitorInternational,2012).
7. 7
FIGURE1
UK: Consumerspendingonbeautyandpersonal care productsthroughretail channels (incl.VAT) 2007-11
Beloware the UK leadingbeautyretailersmarketshare. Asseenbelow,Bootsisthe UKleadingRetail.
UK: Leading15 beautyretailers’share of total consumerspendingonpersonal care goods,2011.
8. 8
The main competitors
The main competitorsinthe BeautyRetail marketare A.S.WatsonUK (Superdrug,Perfume Shop,
Savers),LushRetail Ltd,Space NKLtd, and The body Shop (Mintel,2013).
Bootsis facingstrongcompetitionfromgeneral merchandisersandsupermarkets thatare getting
biggersharesinthe market(EuromonitorInternational,2012).Superdrugisstill the maincompetitor
inthe beautyretailingsectorwhichisthe secondlargestbeautyretailerinthe UK (Mintel,2013). In
the vendingmachine sectorthe potential competitorsare convenience stores,andstoreswithlong
openinghours (EuromonitorInternational,2009).
The beautyand personal care vendingmachines have the smallestpercentagein the marketof
vendingwithonly1%of the global value sales (EuromonitorInternational,2009). Due to lack of
competitionin thisspecificvendingsector,Bootshave agreatopportunitytogrow in this market.
To betterunderstandthe competitionandthe advantagesof the vendingmachinesaSWOTanalyses
was created:
Source:(EuromonitorInternational,2009)
Consumers
Vendingmachines fulfil consumerneedsof convenience,accessibility,anditisan easyandquickway
to purchase goods(EuromonitorInternational,2009). Consumersare requiringmore productson-the-
Strenght
- Fast-pacedlifestyle where consumer
requiresproductson-the-go
- Convineintlocationsforconsumers, such
as airport,stations,andnightclubs
Weakeness
- Consumerperceptionof productssoldin
the vendingmachinesasbeingexpensive
- Vandalismcanlimitsitesforthe vending
machines
Opportunities
- Withraise in technologyvendingmachines
are becomingmore secure,consume less
energy,andacceptwide range of payments,
as cards, notes,andcoins
Threats
- Competitionfromconvenience stores,and
storeswithlongopeninghours.
- Environmental andrecyclinglawscreates
highercostsand challengesforvending
machinesowners
SWOT
9. 9
go due to the fast-pace lifestyle(Mintel,2013).The urbanization hasledtobusierconsumers,
especiallyinbigcitiessuchasLondon,Tokyoand New York (EuromonitorInternational,2009).It has
beenevaluatedthatJapanhasthe biggestamountof vendingmachinespercapita inthe world
(Ashcraft,2013). It's not a surprise,asmajor citieshave limitedspace,busypeople,relativelyhighcost
of labour,andaccommodatingenvironmentforvendingmachines.
The Boots vendingmachineswill fitinthe bigcityenvironmentof Londonandfulfil the consumers’
needsof productson-the-go.The main targetaudience are women,andsecondarilymenbetween25
and 45 yearsoldwho will potentiallybuybeautyandpersonal care productsontheirwayto work,or a
businesstrip. The vendingmachinesinnightclubswill primarilytargetmenandwomenbetween18
and 35 yearsoldwhofrequentthe club.
VendingMachineshave anegative consumerperspectiveof beingexpensive,sell low-qualityproducts,
have technical problem, anddonotaccept cards (EuromonitorInternational,2009).With raise on
technologymanyof these problemsdonotexistanymore.Bootsvendingmachineswill be positioned
itself inthe marketasenvironmentfriendlyvendingmachines,withconvenience of locationand
products,easyto use,andas extensionof standardandqualityof the stores.
Product Strategy
Bootswill be the firstpharmacyto offerproductson-the-goinvendingmachines.AccordingtoMINTEL
Report“BeautyRetailing”(2013) there is a needinthe marketfor beautyandpersonal care products
on-the-go.Consumersare lookingforaccessibilityandconvenience (MINTEL,2013), andBoots can
meetthese needsbyproviding essential beautyandpersonalcare productsinappropriate locationsto
helpconsumerstosave time.
To meetthe environmental lawstandards,the vendingmachines are environmentfriendly,meaning
that theyare 26% more energyefficientthanaregularvendingmachine. It will alsobe recycledbythe
ElectronicWaste Companywhenitreachesitsendof the life cycle.
The product soldwill be careful selectedaccordingto locationof the vendingmachines.Vending
Machinesinclubswill have a productdifferentiationof male product (hairgel,deodorant,perfumes
etc.) inthe mentoiletandfemale products (make-up,hairspray,perfumes,bodylotion,tamponsetc.)
inthe womentoilet. Instationlocation,suchascoach, trainand underground,andairports will include
products the people mayneedon-the goandbefore goingtoa trip (make-up,toothpaste,wipes,
plasters, handsanitizersetc.).Havingdifferentkindof productsinthe vendingmachines will helpto
reach a widertargetaudience in the market(Smith,1990).
10. 10
Price Strategy
The price strategyfor the vendingmachineswill differentiateaccordingtothe locationof it. Boots
vendingmachines locatedinunderground,trainandcoach stations,andairports will follow the same
price than Bootsstores inCentral London,whichare 5 to 10 pence higherthan pricesin otherBoots
(EuromonitorInternational,2012). It will give afairprice to customersthatwill be able torelyon
havingBootson-the-goandpayingreasonableprice forthe goods.
The vendingmachineslocatedinclubswill sellsthe productinapremiumprice at 20 to 30 pence
more expense thanBootsstore locatedoutside Central London.Because of the lackof competition,
fastand accessible service,andconvenientlocationapremiumprice isthe mostappropriate forthe
vendingmachinesinthe clubs (Barrow,Barrow,&Robert,2008).
Place Strategy
The vendingmachineswill be allocatedin15 majorstationsaroundLondon,includingtrain,coach,
and underground.Itwill alsobe in5 majornightclubsin London,andin5 airports,that are
Heathrow,Luton,Gatwick,Stansted,andCityAirports.
The locationswere chosenaccordingtobuyerbehaviour(Jobber,2010).Now a day, people are
alwaysina hurry, andtheyexpectservicestobe fastand accessible (MINTEL,2013). Accordingto
MINTEL (2013) report, 67 % of Britishwomenapplytheirmake-upinthe publictransportontheir
wayto work.Lookingat thistrend,the vending machineswill use thisopportunitytoreachthese
womenwithon-the-gobeautyandpersonal care productsinstationsandairports.
The nightclub locationwill be agreatopportunityto fulfil the needof beautyandpersonal care
productswhenpeople are outinnightclubs.The vendingmachineswould substitutethe use of staff
inthe toilets sellingbeautyproducts.Usingthe productsfromthe vendingmachineswill also
guarantee a highstandard of hygiene.
Promotion Strategy
The promotionstrategy forthe newBoots vendingmachineswillfocusonsocial mediaadvertising.
The objective is tocreate awarenessof the locationsof the vendingmachines. The campaignwilllast
one month.A social mediaadvertisingagencywill be hiredtocarryout the campaignon Facebook
and Twitter,andan agencywill be hiredtocreate a website forcustomerstoclaimthe prizes,and
learnmore aboutthe promotion andvendingmachineslocations.
11. 11
The campaignconsistin voucherprizesthatwill be hiddenbehindthe productsthatare soldin the
vendingmachines.The voucherprizeswill be relatedtobeautyandpersonal care products.The
prizeswill be spadays,beautytreatments,giftcardsto spendinstore (varyingfrom20 to 100
pounds),andbagsof beautyandpersonal care products.
The agency will be responsible forthe promotionof the campaigninTwitterandFacebook,andto
sendcluesaboutlocationandproductsthat may have a prize hiddeninit.The campaignwill create a
straightcommunicationwiththe customersthroughsocial mediaandcreate awarenessof locations
of the vendingmachines.
Operational Plan
BootsUK isa retail company,the termretailermeaninganindividual oracompany,of whomsells
goodsto the consumer(Wolinski &Coates,2008). The term supplychainmeaningnetworkof
entities;isitdirectlyorindirectlyinterlinkedandindependentinservingthe same customer. It
involvesvendors,of whichsupplyrawmaterial,aswell asproducerswhoconvertthese raw
materialsintoproducts,stockingthese products,beingdistributedtoretailersandretailersof whom
provide these goodstothe enduser.(Robertetal.,2010)
On that basis,thisishowour supplychainforBootsUK will look,withourintendedproduct
proposal:
Describingthe process,firstof all, startingoff withBootswarehouse,wherethe productswill be
stored.There are several warehouses,basedonregionswhere BootsissituatedthroughoutLondon.
From the warehouse,the nextstage isthe distribution,wherevehicles;vanswilltravel across
branchesinwhichthe vendingmachine are situatedtorefillthe machines,this procedure will be
carriedout by existingBootsstaff,whowill workparttime andwill be trainedtobe dealingwiththis
vendingmachine concept,andwillalsoneedadrivinglicense,aspart of the criteria.The procedure
afterthat, will be the vendingmachineitself,whichwill vendthe products,inaccordance todemand
and seasonal trendsof itslocation.The final stage isthe consumer,the enduserinwhichthe
productswill reachoutto, providingthe conveniencetobuyfromthe vending,ratherthanqueuing
up instore.
Whenstocksof the vendingare runninglow,aprogram will informthe supplierthatitneedstobe
refilled.The vendingwill be refilled whenstockisat 50% of capacity.Furthermore, the vending
machines will alsoacceptcardpayments,aswell asnotesand coins.
Warehouse Distribution
Vending
Machines
Consumer
12. 12
Below isa listof potential productstobe soldin the vendingmachines:
Tampons
Condoms
Tights
BodyLotion
Hand Gel
Nail Polish
Deodorant(male andfemale)
Hair Gel
Hair Spray
Lipstick
Lip Balm
AntisepticCream
Plasters
Mascara
Contact lenssolution
Disposable contactlens
Mini perfume bottle
CompactUmbrellas
Sunscreen –Seasonal
As brieflymentioned,some of stockinwhich will be held are seasonal and basedondemand where
the machine issituated.Forexample vendingmachinesin nightclubs, willhave productssuchashair
gels,anddeodorants. .Andthe differenttypesof productsprovidedwill be of the bestsellingbrand,
due to limitedspacing.
Some of the productswill be Bootsownbrands,to maximize profitandincrease Bootsownbrand
salesandawareness.The vendingmachineswill alsosell premiumbrandssuchasL’Oreal to fulfill
consumerdemand.
Existingstaff will needtocarryout training,inorderto fullyunderstandandcarryout theirrole in
refillingstockof the vendingmachines.The trainingwill take uptoa week.The maintenance of the
vendingwill be providedbythe companywhere itwill be bought. Inaddition,routine checkswill be
carriedout, inorderto verify if the machinesare fullyfunctioning,whichshouldprevent issues.If
issuesare to arise,wherebythe machinetakessomeone’s money,withoutgivingaproductin
exchange,orissueswithcreditcardsandso forth,we will use existingBootscustomerservice todeal
withthe issue.Furtheradditional training of customerservicesstaff willbe carriedout,inorderto
make staff well preparedindealingwithsuchmatters.The numbertothe customerservice,will be
providedinthe cornerof the vendingmachines,inbold,soitcannotbe missed.If itresultsto
manuallyfixingthe machines,due tothe technical issuesthe consumerisdealingwith,Bootswillbe
inpartnershipwiththe companyof whoprovidesthe vendingmachines,asdiscussed, inorderto
come downand fix it.
13. 13
Financial Plan
Anticipatessalesfor the product in terms of unitsand sales
The top rankedproductsbasedon theirvalue share atbootsare colourcosmetics,suncare and skin
care, witha value of 12.9%, 20.2% and 6.45% respectively(EuromonitorInternational,2012).Based
on thisinterpretation, arange of productswas selected basedonconsumerdemandwhichis shown
inthe table below.Inaddition,eachproductcarriesa differentvalue,soanaverage price needstobe
calculated.The average unitprice inthe vendingmachine is(£44.90/17) = £2.64
Product (Example) Price in £
Lip Balm 1.99
Nail Polish 1.89
Tampons 1.29
Condoms 2.99
Tights 4.00
BodyLotion 1.50
Hand gel 1.30
Mascara 2.99
Plasters 2.05
AntisepticCream 2.55
Eye Drops 3.10
Suncream seasonal 3.99
Umbrellasseasonal 4.99
Total 44.90
Average Price (44.90 / 17) = 2.64
Sales
Bootsrevenue hasincreased by18% inthe previousfinancial yearanditisexpectedtosee afurther
growthof 3% inthe comingyears(BootsAnnual Report,2012). There will be 40 machinesallocated
across publicplacesinLondon.Each machine will have acapacityof 20 product lineswith10
productsin eachline.Atfull capacitythere will be 200 productsavailable inavendingmachine.Itis
estimatedthateachvendingmachine will sell 600unitseach monthinthe firstyear and itwill be
refilledonce ortwice a week.Thatmeans(600 x 12 x 40) = 288,000 unitsa yearin the firstyear.This
isrisk anticipation,howeverthe figuresare generatedbasedonthe capacityof the vending
machines.
Costs Involved
To launchthe newproduct,fixedandvariable costsare involved.Bootswill require 40vending
machineswhichwill be purchasedatacost of £2499.00 each.The total cost will be £99960.00
(intelligentvending.co.uk). The amountwill be paidoverafive yearsperiodwithanAPRof 12%.
14. 14
Annual repaymentswill be £2274.40, which includes12% APR.Eventhough,itis a large sunkcost,
the profitsgeneratedthroughthe vendingmachine will coverthe costseasily.
It will costBootsaveragely£1.60 perproductto buy itfrom the manufacturerandthe mark-upwill
be 65%, whichwill leadtothe average sellingprice of £2.64. There will be anadditional costof £295
a year formaintenance,whichwill be providedbythe companyfromwhere the vendingmachines
will be purchased.
In the firstyearit isplanned anadvertisingcampaignof costof £50,000, whichwill increasethe
target marketaware of the newvendingmachines.Inthe firstyearthe advertisingcostswill be
£60000, whichis£50,000 for the campaignand £10,000 forthe restof the year.In year2 andyear 3
the advertisingwillbe less,£10,000 respectivelyeachyear.
Some existingworkerswillbe trainedtore-fill the vendingmachinesandtheywillgetpaidata rate
of £9 perhour.The shiftandthe amount of hourswill dependonhow emptythe vendingmachines
are.However,the estimatedcostforwageswill be around£2000, whichmeans£24000 annually.In
addition,the vendingmachinesare eco-friendlyandconsume 26% lesselectricity.The expectedbills
for the electricitywill be £70 a monthfor eachvendingmachine,so (70 x 12 x 35) = £29,400 annually.
Break – Even Analysis
‘Breakevenanalysisisusedtodetermine whenyourbusinesswill be able tocoverall itsexpenses
and begintomake a profit’ (SBA.gov).The break-evenpointcanbe calculatedintermsof units with
the followingformula.
Fixedcost £119214.40 = 126152 units
Contributionmarginperunit (£2.64 - £1.695)
Bootswill breakeveninthe firstoperatingyearforthisproduct.Asthe costs are relativelylow,the
companyonlyneedstosell 126152 unitsto covertheirfixedcosts.Asthe estimatedunitssoldwillbe
252000 inthe firstyear,Bootswill break-evenintheirfirstyear.
Estimated Profit& Loss Account for Year 1, 2 and 3
As seenbelow,profitandlossaccountshave beencreatedforthe nextthree years.Eachyear,the
saleswill increaseby3%.Variable costis£1.695 per unit.
Year 1 Year 2 Year3
SalesRevenue £665,280.00 £685,238.40 £705,795.55
Variable costs
Wages £24,000.00 £25,956.00 £26,734.70
Cost to purchase £403,200.00 £413,696.00 £427,755.20
Total Variable costs £427,200.00 £439,652.00 £454,489.90
ContributionMargin £238,080.00 £245,586.40 £251,305.65
Fixedcosts
Maintenance £3,540.00 £3,540.00 £3,540.00
15. 15
Advertising £60,000.00 £10,000.00 £10,000.00
Finance paymentsformachines £2,274.40 £2,274.40 £2,274.40
Electricity £29,400 £29,400 £29,400
Rent £24,000.00 £24,000.00 £24,000.00
Total FixedCosts £119,214.40 £69,214.40 £69,214.40
Profit £118,865.60 £176,372.00 £182,091.25
Year 1 Year 2 Year 3
units sold 252,000 259,560 267,347
The profitand lossaccount isshownforthe followingthree years.As seenthe overall profitwill
increase significantlyinthe secondyear,from£118,865.60 to £176,372.00. Thisis because the
advertisingcostshave fallenandthe saleshave increased.Although,the variable costshave slightly
increased,itislessinproportionthanthe salesandreductionof fixedcosts.Furthermore,itis
expectedtosee afurtherincrease inprofitinyear3.
Conclusion
The beautyvendingmachinesare agreat opportunity forBootstoexpandtheirbeautyandpersonal
care products.It has a solidprofitablemarginaswell asa low cost.Implementingthisbusinessplan
will give Bootsanadvantage of beingthe firstpharmacyinUK to provide beautyandpersonal
productsin a vendingmachine.
Due to the urbanizationproductson-the-gowillbe evenmore requiredtosave consumerstime.The
vendingmachinesare alsoenvironmentsustainableandconform tothe environmental laws,what
offerslowriskinthe purchase of the machines. Itisalsolow risk,as the break-evenpointisreached
before the firstyeariscompleted.
16. 16
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