2. Executive Summary
Damn Heels was a business idea originated fromHailey Coleman who experienced a hurting foot
from wearing high heels duringa night out. As a result, she had to take off her high heels and
walked home with bare feet. To her, she was feeling awkward. She knew that she could do
something about it and she was being entrepreneurial: she was eager to apply the business
knowledge she learned from university.
Back home, she hired a designer onlinewho designed some prototypes that met her
specifications.Shealso needed to find a reliablemanufacturer to make these flats and bags.She
had the numbers of the costs of labels,shoes,bags,shipping,and storage.She was also thinking
about different ways and incentives to distributeDamn Heels.
Coleman wanted to know whether there would be any evidence to supporther idea, so she
devised a survey which confirmed her understanding:a lotof females, especially youngwomen,
were hurting from wearing high heels duringtheir night out. What’s more encouragingwas that
those who surveyed liked the idea of havinga pair foldableshoes (flats) readily available.
With prospective customer waiting,there’s only one thing Coleman was worried about. She
needed solid analysisdonein a scientific manner to ensure her success. She needs to figure out
her variablecosts,fixed costs, and breakeven units. In addition,sheneeds to know where her
product stand among other direct and indirectcompetitors.
There were four directcompetitors and one indirectcompetitor that was identified.We have
evaluated their positions and competitiveness through the marketing mix. We have also
attempted to find different ways to promote and distributeproducts more effectively and those
were discussed in the alternatives.
With the knowledge at hand,she has the followingoptions.
Alternative 1 and 2 explore ways to effectively sell Damn Heels whileminimizingcosts.In an
environment where every squarefoot is valued,strikinga balancebetween reachingpotential
customers and managingcosts has become difficult.Motivingpotential customers to make the
firstmove was also discussed in these alternatives.
We do not recommend Alternative 3 and 4, as these turned out to be i neffective, time
consuming,and posts risks.Wealso do not recommend status quo as we found Coleman was
highly motivated and she was serious aboutlaunchingher business with passion.Wewould like
to see her successful.
Through analysingthenumbers and alternatives,we believe Coleman can give it a try. She should
pursue her entrepreneurial adventure as the she has the rightknowledge and expertise. Our
projections ensured her success even in the worst casescenario.Even in the worst casescenario,
she was still better off startingher own business than havingto find a job elsewhere. We have
fully evaluated the market and its potential. We scan the competitive environment to ensure
that Damn Heels could out compete others.
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ProblemStatements
Hailey Coleman wants to know if she should pursueher dream for her innovativeflatshoes
entrepreneurial venture.
Company Objectives
Hailey Coleman needs to figure out the production and salecostof her Damn Heels in order to guarantee
the success of her business.In order to do so,she needs to:
Identify costs related to the production and saleof her product
Recognize fixed and variablecosts
Calculateprofitmargin and projectprofitability atthree levels:low, medium, and high
Company Background
Hailey Coleman always wanted to apply her entrepreneur skillsas a business student.She had an idea of a
type of shoes that not only help ease her foot pain from wearing high heels but also lightand portable
after a nightin London, England,in 2007.
Coleman hired a designer in March 2009, went to several cobblers in China for shoes and shoe bags,and
researched about the current market includingcompetition and consumer insights. She thought about the
shippingmethods, storage, and where her products should be sold at. She needs to know whether this is
a feasiblebusiness idea by 2010 in order to decide whether she should officially launch her business.
SituationAnalysis
Strengths
Foldableshoes,innovativeproduct
Sleek design that appeals youngwomen
Portableand lightweight
Relief pains caused by wearinghigh heels
Competitive pricing
No fixed costs
Weaknesses
Lack of experience
Lack of financingoptions
Zero marketing campaign
Not the firstone to propose this product
No chain retailer distribution channels
Opportunities
Absence of bigname competitors
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Market survey confirms 93% participants felthurt
Market survey confirms 43% positiveintend to purchase
Market survey confirmpricingis within reasonablerange
Threats
Comparableproducts are available
Innovativebut easy to replicatethe design
Lack of produce awareness
Low entrance requirement – anyone can do it
Market Analysis
Canadian footwear industry had been growing but the growth slowed down since2007 financial crisis.By
2014,it was forecasted $5.7 billion.Accordingto IBIS World,Ontario has the largestshoe industry
concentration (IBIS World,2016). Ontario is also a major retail hub dueto its largepopulation and tourism
popularity (IBIS World,2016).Accordingto Statistics Canada,Toronto had highest level of schooling
(Statistics Canada,2009).
On Google Maps, downtown Toronto has the highest concentration of pubs,bars,lounges, restaurants,
and night clubs,makingit ideal for Damn Heels to make its presence.
Toronto, especially downtown, is home to University of Toronto, OCAD University,and Ryerson
University,as well as George Brown College. Enrollment in University of Toronto alonein 2008 was 66,154
students (City of Toronto, 2008).As those who were surveyed were mostly collegestudents, there was
enough population to supportthe demand of Damn Heels.
Segmentation
Segment # 1 2 3
Name Frequent goers Occasion goers Non goers
Qualifying
dimensions
Who? Very activein social gathering Somewhat active Avoids social events
What? Female collegestudents Female collegestudents Other
When At nights At nights Other times, including nights
Where? Pubs,bars,lounges, clubs,
restaurants
Pubs,bars,lounges, clubs,
restaurants
Other places
Why? Thrills,meeting new people,
hangouts, fun-seeking
Relax,relief, have some fun Other ways of havingfun,
relax,and socialize
How? Visitsocial placemore than 3
times per month
Visitsocial placebetween 1 to
2 times a month
Not visitsocial placeatall
Segment
size
28% + 7% + 6% + 3% + 4% =
48%
42% 10%
Determining
dimensions
Benefits
sought
Thrills,meeting new people,
hangouts, fun-seeking
Relax,relief, have some fun Other ways of havingfun
Usage rate Frequent Less frequent Rarely
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What is the targeted market?
Women, 20-25,who likegoingout to lounges, restaurants,and pubs at night in high heels for more then 3
times a month, who attend post-secondary institutes,whosefeet hurt from wearinghigh heels.
What is their current market?
Damn Heels has yet to start selling.However, itremains the same with the target market
What is their potential market?
Women, 20-25,who likegoingout to lounges, restaurants,and pubs at night in high heels who visitthese
places between 1 to 2 times a month, who attend post-secondary institutes,whosefeet hurt from
wearing high heels.
Competitive Analysis
Damn Heels faced only indirectcompetitions as competitors were based in the U.S.
4P’s
Name Product Place Price Promotion
Spare
Pear
Foldable
shoes
Online 24.50 USD Website, social media,
collaboration with MTV
Delicate
Soles
Foldable
shoes
Online,retailers near
Las Vegas
20 USD, free shipping Portion of profit goes
to shoerelated charity,
social medias,news TV
Footzy
folds
Variety
of shoes
Online,retailer 25-30 USD Email exclusiveoffers
Fit In
Clouds
15+
selection
Online,retailer 19-25 USD Onlinesale
Ballet
Slipper
Ballet
slipper
Online,balletschool,
speciality stores
From 4 CAD to 40 CAD,
seller dependent
None
Damn
Heels
Foldable
shoes
Restaurant, pubs,
lounges, nightclub
20 CAD, tax included Where Damn Heels
were being sold
Damn Heels competitors did not offer retail locationsatwhere foldableflats were needed most, i.e. night
clubs.Damn Heels competitors did not operate within Canada.
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Name Advantage Disadvantage
Spare
Pear
Celebrity endorsed, MTV collaboration Very small market
Delicate
Soles
Social responsibility, very affordablepricing,
simple(only in three sizes and four colours)
Small business in Las Vegas area,lowmarket
penetration
Footzy
folds
15+ variety, more other leisurefootwear,
designer made, USA wide shipping
Foreign currency incurs additional costs with
3% above posted rate, addition shippingfee
Fit In
Clouds
30+ variety, foldableshoes only,do one
thing really well,USA wide shipping
Foreign currency incurs additional costs with
3% above posted rate, addition shippingfee
Ballet
Slipper
Extremely lightweight
Very wide pricerange
Virtually no carryingbagrequired
Not designed for walkingon streets
Easily torn
Not readily availableon streets
Damn
Heels
Stylish,convenient placement, affordable
pricerange comparingUS counterparts
Lack of ad campaign,lack of official website
to promote it
None of Damn Heels competitors had yet to enter the Canadian market.
positioningtable
Quality
Damn
Heel Delicate Spare Footzy
Fitin
Clouds
Price
Ballet Ballet Ballet Ballet Ballet Ballet Ballet Ballet
Financial Analysis
Variablecosts are:costper set was 2.48 USD/pair (plus 18%import duty) plus 1.68 USD/bag (plus 7%
import duty). Packagingcostwas 0.08 USD per set, and brand labels would cost0.25 USD per set. Her
variablecostwith shippingwould be 5.73 CAD/set.
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Fixed costs are:2000 units were the minimum order. Ship by air took 2 weeks for 600 USD from order to
delivery,which means orders must be increments of 2000.600 USD was converted to 642 CAD based on
exchange rate on 2009-08-01 of 1 USD = 1.07 CAD. Selling on consignment would costs 20% of saleprice.
Website cost1500 CAD. 70% of sales were estimated from retail,and 30% were from online. Designer
costwas unknown. 300 CAD/month is used as storage cost.
As projected, the net income Coleman could earn was 44084.88 CAD/year with low projection. She would
only have sell 204 sets to break even. It makes sense for her to launch her business,especially thesurvey
already records people’s willingnessto buy.
Key Factors
Key Opportunities
Confirmed demand
Absence of multi-national competitors
Key SuccessFactors
Sleek design
Easy to carry
Reasonably priced
Awareness this is almost always here
Key Uncertainties
Competitive Reaction
Consumer Acceptance
Consignment partner reaction
Choosingthe best consignment partners
Alternatives
1 – Sell at Salons and SPAs
Salon and SPAs are the places where women go prior to attending important events atnight. These places
provideservices to women who want to enhance their appearancesuch as hair and nails.Aplacement at
the shelf serves as a reminder for women to get prepared for the event.
Placingthem on consignment of 20% of the salepricegives establishmentowners enough incentives to
placethem atprominent locations in order to draw attentions of the potential buyers.
Pros:
Hundreds of locations acrossGreater Toronto Area
Effectively target potential buyers
No costof saleuntil the actual salehas taken place
Avoids shelvingfee
Cons:
20% of consignment fee makes a dent in profit
Not all establishments wantto placethe product
Negotiating with each establishmentis time consuming
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2 – Sell at bars, pubs, lounges,and nightclubs
Placingproducts atthe entrance of these establishments with signs saying“heels arehurting? Try me” or
similar attracts immediateattention from those who were in need of instantrelief. Itwould be the ideal
placefor patrons who were ready to head home from havingfun.
Pros:
Product placement is rightat where it was needed
Huge traffic flowhelps the success rate
Hundreds of locations acrossGreater Toronto Area
No costof saleuntil the actual salehas taken place
Avoids shelvingfee
Cons:
Lighting could affect the outcome of sales
Only 43% gave firm positiveanswer
The uncertainty of sober customers
3 – Sell at clothingstores such as HBC and Sears
SellingatHBC and Sears increases productacceptanceas Damn Heels reputation is backed by these
stores. However, Coleman must find a way to negotiate with these retail giants for specific terms.
Pros:
Increased productexposure
Product being sold atretail giant
Guarantees long-term sales
Cons:
Negotiation process with retail giants may be long
Retail giants generally receiveproducts from distribution outlets with largehouse accounts
Decliningsales in Sears and HBC was known
4 – Open a retail booth at large shoppingmall
Coleman may consider openinga booth at a heavy traffic retail mall.Shewould have full control on how
she want to display products.
Pros:
Full control on how she wants to operate her business
No more consignment fee means more profitgoes towards her
Dedicate herself in more personalized sellingapproach
Cons:
High rent from the mall
She would have to attend the booth for longhours
Hours are restricted by mall hours
5 – Launch a website
Coleman may act accordingto her friend’s adviceon launchinga website, which can be used for both
product promotion and taking orders from customers. Coleman would be complete free to sell clients
anywhere.
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Pros:
Full control on how she runs marketing campaign
Take and fulfill orders in a more efficient way
Reach customers across the country
Cons:
Website maintenance would become an issuein the future
Cyber security
Potential shippingcostfor either Coleman or customers
6 - Status Quo - shouldalways be one of your alternatives
Of course,Coleman may choose to keep her dream in the dream. Coleman fears the business may fail and
may not have enough financial backings.
Pros:
Failureproof
Sense of security
Does not loseany money
Free from commitments
Cons:
Unable to realizeher dreams
Unable to practiseher business skills
Missed an opportunity to make her firstfortune
Recommendations
Alternative 1 and 2 are recommended. Coleman must choose venues that arewillingto partnership with
her. Sellingon consignment enables Damn Heels reach potential customers in a faster manner, without
incurringany costfor display (shelvingfee) in the long-term, and storage spaces arevaluablefor any
business or individual in downtown Toronto. Though 30% of $20 may not seem much incentive for venues
to startselling,their customer volume were large enough to generate an agreeable return simply by just
havinga product sittingthere.
Secondly, there are lots of businesses of this type in Toronto area,which indirectly helps Damn Heels
exposure, for free, if sellingon consignment.
Sellingatchained retail locationsmay not work for Coleman as shehas yet to establish her business.It
would be hard for chain retail locations to accepther product as itwas not proven s uccessful in practice.
SellingatMall by renting a booth restricts Coleman’s ability to reach her target customers at places where
this product is needed. She would also haveto devote far greater effort on justone location whileher
schedules arebeing restricted by mall hours.
ActionPlan
Coleman should carry outher actions immediately to seizethis opportunity to test her great idea.
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Date Item Description
Immediately Get in contactwith her
previous employer Le Papillon
Discuss and obtain permission of placingproductdisplay at
the restaurantand negotiate sellingon consignment
7 days Social Media campaign Setting up Facebook page, twitter, and Google+ to promote
awareness
1 month Contact “This is London”, Circa,
and Lot 332/Ultra
Using Le Papillon’sexample,negotiate with these business
about product display.
37 days Select three salons and SPAs Observe traffic flowand evaluateperspective selection
45 days Confirm with selection Conduct survey to confirm selection
56 days Contact three salons and SPAs Negotiate details aboutproductdisplay and consignment
63 days Select three other businesses Observe traffic flowand evaluateperspective selection
70 days Confirm with selection Ensure the selected venues meets the requirement
Contingency
In caseAlternative 1 and 2 did not meet the 4000 unitsaleexpectation, we must exploreways to boost
sales by adoptingAlternative 5. First,launchinga website would cost 1500 CAD. However, it would enable
Coleman to reach this relatively untapped market at a wider scale,and Coleman got to keep all the
profits.
Second, a website provides a platformfor those who are ableto anticipatethis need and plan ahead.
Third, havinga website enables Coleman to explore different ways of doingmarketing campaigns.For
example, shecould run Christmas saleand set a certain discountto entice new customers.
Third, instead of sharingprofits with other partner businesses,shepockets all the profitwhich in turn can
be used to make the business morefinancially stable.
Appendix
Exhibit1 – Cost breakdown and break even analysis
Variable
costs duty
after
import CAD
perpair 2.48 0.18 2.9264 3.131248
bag 1.68 0.07 1.7976 1.923432
package 0.08 0.0856
label 0.25 0.2675
shipping 0.321
Total
cost/set 5.40778
USD/CAD 1.07
Fixedcosts
website 1500
rent 300 CAD
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shipping 600
per
2000 642
Total 2442
consign 0.2
websale 0.3
retail 0.7
Break even unit = Fixed costs / (saleprice- variablecost)
= 2442 / (20 - 5.40778 – 20 * 0.13) = 203.6 = 204 units
Exhibit2 – Projected Income Statement
Damn Heels
Projectedincome statement
For the year ending2010-11-
30
Low Probrable High
4000 11000 30000
Revenue 80000 220000 600000
Cost of sales 21631.12 59485.58 162233.4
Salestax 10400 28600 78000
Gross margin 58368.88 160514.4 437766.6
Expenses
Website setup 1500 1500 1500
Rent 3600 3600 3600
Consignment 11200 30800 84000
Shipping 1284 3531 9630
Total expense 14284 36131 95430
Netincome 40784.88 121083.4 339036.6
References
References
City of Toronto. (2008). Toronto's universities and colleges. Retrieved from City of Toronto:
https://www1.toronto.ca/wps/portal/contentonly?vgnextoid=dcd1dd32bd50b310VgnVC
M10000071d60f89RCRD&vgnextchannel=c40132d0b6d1e310VgnVCM10000071d60f8
9RCRD
IBIS World. (2016, Nov). Shoe Stores in Canada: Market Research Report. Retrieved from IBIS
World: https://www.ibisworld.ca/industry/shoe-stores.html
Statistics Canada. (2009, 10 05). Average earnings of the population 15 years and over by
highest level of schooling, by census metropolitan area (2006 Census). Retrieved from
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Statistics Canada: http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/labor51c-
eng.htm