Evelyn looks slightly taken aback. “Well, Jessica Silva designs clothing that is flattering to women who aren’t anorexic like some fashion models. Her clothes are classy, sexy, and an excellent economical choice for professional women. In other words, she designs clothing for people like herself. She is athletic but not anorexic, and she has curves like most women. Her prices are above off-the-rack department store clothing, but so is the quality. She really has targeted the professional women’s market in comfort, fit, and pricing. If you’re an entry-level businesswoman, her clothing might be too expensive, but if you fit into the upwardly mobile or professional level of employment, the quality, costs, and designs are a perfect fit. She chose her perfect market. Let me put it into perspective for you. Why don’t you wear designer suits? You can obviously afford them.”
He chuckles and answers immediately, “Because I am too damn cheap to spend that kind of money when an eight-hundred-dollar suit works just as well for me as a two thousand dollar one would.”
Evelyn nods. “Exactly. If Jessica Silva were designing men’s suits, her prices would range between eight hundred and fifty dollars and one thousand two hundred dollars. Rival designer suits in style and quality are currently selling for over two thousand dollars. If you could find less expensive suits that have the same quality as the more expensive ones, would you buy them rather than what you can get off the rack?”
Sean nods, beginning to understand. “Yes, of course I would.”
“There you have it. That’s what Jessica has accomplished with her designs. So, how are we going to market Beauty Boutique Clothing?”
Sean laughs and insists, “I haven’t agreed to do so yet!”
She rolls her eyes. “I’ve been with you too long to accept your bullshit. Admit it. You’re intrigued by the possibilities and challenges of taking on something so foreign to you that it actually excites you, doesn’t it?”
Sean smiles, “Yes, it does. I’m just not sure Ms. Silva can afford SGM, and I’m not very benevolent when it comes to our fees for services. We are good at what we do, and this type of expertise comes with a hefty price.”
“Understood, but if she can, can you help her take her company to the next level?”
He nods slowly. “Yes, I could help her, but the next level for her is to establish a global market and international recognition. With that comes the threat of hostile takeovers and buyouts. Is Ms. Silva ready to play in that arena? I’m not sure she is. Nothing from our last meeting was convincing.”
“Well, you were an asshole during your last meeting, and you know it,” Evelyn chides.
“I agree, but many people are going to be assholes to her if she goes international. I have my doubts about her, Evelyn, and only she can change that.”
Tuesday morning, Evelyn and Bradley are back in Sean’s office. Evelyn is amazed by how calm Bradley looks and recognizes why as soon as Sean opens the conversation with, “So, Bradley, what did you discover?”
Bradley sits up straighter. “Well, Mr. Green, the fashion market exceeds two hundred and fifty million dollars in the United States alone and is dominated by roughly fifty large international designers. Accessories expand the market by another one hundred million dollars. On top of that, you have fragrances, shoes, and men’s clothing. In other words, there is plenty of growth potential for Beauty Boutique Clothing. Production in emerging growth countries like Brazil is definitely viable with production costs being cut by forty percent, with a fifty percent reduction not being out of the realm of possibilities. Two major hurdles any American company will face in relocating into Latin America are political corruption or payoffs and a relatively unskilled labor force. Shipping costs to the United States will add approximately five to eight percent of the overall production costs. Brazil is a little better off in both of these arenas because the country is encouraging United States company investments, so the political payoffs will be more reasonable than other Latin American countries. Apparel industry labor is a little stronger because of Nike apparel and others that have production facilities already established in Latin America. There is a strong national identification with the Brazilian soccer team association, and any support shown for them will increase name recognition and branding dramatically, as demonstrated recently by Nike’s marketing strategy in Brazil. The fashion industry is an emerging market in Brazil. A designer or quasi-designer label will garner a premium sales price due to status bias or identification needs of the local population. Purchasing power is on the rise in Latin America. Locals are hard working, and women especially are becoming a much more predominant force in the labor market than ever before, due to the very high divorce rate and single-parent family dynamic. There is tremendous potential for a small designer and manufacturer to thrive, because the market isn’t large enough yet to attract large designers. It will be much easier to establish a market presence in Latin America at this point. Therefore, the potential to capture significant market penetration in the fashion apparel industry is virtually unhindered by any significant competition. There is, however, significant risk in being industry leader in emerging untested markets. If the producer has an established market elsewhere, the ability to produce product at a significantly reduced cost without inducing child labor will increase profitability in the already established distribution channels and ultimately will enhance vertical integration and increased sales. Capitalization will be a major concern for smaller manufacturers, and turnaround times will be slower until employees are fully trained.” Bradley finished with a proud look on his face and waits for Sean’s response.
Finally, Sean asks, “What about quality control issues?”
Bradley immediately answers, “That will depend on the organizations training programs and procedures. I believe it would be a short-term issue with proper training for the relatively uneducated labor pool. But once the staff is fully trained, I don’t see it being any more significant than at any other facility worldwide. Finally, initial calculations indicate an increased profit margin of at least twenty-five percent in existing markets if production is done in Latin America, perhaps higher once the labor pool is properly trained and production is at or near capacity. In short, the scenario you laid out to me last week is, in my estimation, totally viable given no dramatic shift in political or economic times, globally.”
Sean nods his approval. “Thank you. You’ve done an excellent job on your research, and I appreciate the speed at which you accomplished everything. Well done!”
CHAPTER 8
FINDING YOUR NICHE
Monday morning is a sweltering day in San Francisco, with temperatures in the mid-nineties. It’s the type of day single professional men love in the business district—the type of day when women remove their business jackets and wear silk tops. The gentle breezes off the bay often cause the blouses to lie tight against the women’s bodies, leaving the male imagination reeling. Sean, however, is completely oblivious to these facts.
He arrives at his office early and is finishing his final calculations and inserting them into his presentation when Evelyn gently knocks on his door, peeks in, and says, “Ms. Silva is here for your eleven o’clock.”
“Thank you. Please show her in to the conference room. I’ll be in shortly,” Sean replies, barely glancing up from his work.
Evelyn nods and obliges. After Jessica is seated at the conference table, Evelyn gets her fresh fruit and coffee, and tells her Sean will be in momentarily. Jessica thanks her and looks out the conference room windows.
What an absolutely stunning view of San Francisco Bay, she thinks. She becomes mesmerized by the brilliant colors on the sails of the many sailboats and wonders how many employees skipped work to enjoy such a gorgeous day. Her thoughts are interrupted when Sean enters the room and apologizes for running behind schedule. He gets a small plate of fruit and a cup of coffee before sitting with her at the table.
After a moment, he opens the conversation. “Jessica, thank you for the gift basket an
d scotch. They were very much appreciated.”
She raises a fine-haired eyebrow and corrects him, “First, it’s Ms. Silva, and second, you’re very welcome. Thank you for the lilies.”
Sean leans back in his chair with his usual smirk and says, “Okay, then. Ms. Silva, we need to get something straight before we begin today. I loathe formalities. I work on a first-name basis with all of my potential and existing clientele. My calling you by your first name isn’t a sign of disrespect, and I apologize if it has been regarded as such in the past. What we do here at SGM requires us to develop a deep trusting relationship with our clients, and I find that trust can be hindered by such formalities as titles and gender designations. That being said, can we please talk on a first-name basis as we move forward?”
Jessica looks surprised, considers for a moment, and then gives him a small, dainty smile and nods affirmatively.
“Very well then. Thank you, Jessica. I also need to extend to you an additional apology, as I have been told I was quite rude to you during our last meeting. In fact, Evelyn told me I was an asshole.”
Jessica laughs aloud, nods again, and says, “Yes, you were actually very annoying. But I will never be dismissed like that again as long as I live, so I guess I owe you a thank you for giving me that wake-up call.”
Sean smiles belatedly. “I understand, and again, I am sorry. I felt set-up and blindsided. Bonnie has that effect sometimes, I’m sure you know. Since then, I have been doing a lot of research and have asked my staff to do the same. We compared notes based upon our independent findings and have come to virtually the same conclusion. But before we get into the particulars of our findings, I want to hear from you what you are hoping SGM could do to help you take Beauty Boutique Clothing to the next level. What are your hopes, visions, and strategic plans to accomplish the goals you have?”
Jessica is momentarily stunned. What the hell happened with this guy? I was expecting a rude, pompous ass, yet today he seems genuinely interested in understanding and perhaps even helping me…
“Well, this may take a little while. I don’t want to interfere with your schedule. Shall we set up another meeting and just cover the basics today?” she asks.
Sean waves a hand, his watch flashing in the sunlight let in by the large windows. “Don’t concern yourself. I’m sorry I neglected to tell you, but I have allotted two hours today and have arranged for lunch to be catered. I can also free my afternoon, if we are making progress today. That is, of course, if you have the time in your schedule?”
She considers for a moment, then says, “Let me make a few phone calls to rearrange a few minor appointments. I’m delighted you are at least willing to consider a proposal from the Beauty Boutique.”
Sean nods. “Absolutely. Let me know when you are ready.”
Both Jess and Sean clear their schedules for the rest of the day, and Jessica begins to lay out her dreams for her company in the coming years. She tells Sean she believes her company has hit a point where sales and profits will level off if there isn’t some expansion into foreign markets.
“I understand there will be a need to capitalize such a business expansion, but I’m not sure where and how it should be undertaken. I know my niche market very well. I’m between off-the-rack department store clothing and designer labels, and I want to stay there.” She looks up from her notes, directly into Sean’s eyes, captivating him yet again. “I want to dominate the professional women’s clothing market.”
Sean asks, “What about lines other than clothing? Say, shoes or handbags or fragrances?”
Jessica slightly shakes her head. “I’m a clothing designer. I’m good at it. I don’t know a thing about fragrances or handbags. In my estimation, the footwear market has too many significant players who design incredible products for me to compete with. A new company could be undercut in pricing from the start and forced out of the market before any real success is experienced. Beauty Boutique Clothing has a unique niche, and I’ve had tremendous success filling a need that high fashion designers aren’t interested in, and the department store clothing lacks in quality. I have established lower prices and extreme quality as the norm. I don’t think I could keep that promise in other categories. I also don’t believe I have the financial capability to expand into France, Italy, or Germany, so I have been looking at the former Soviet Union markets. I know there is a major pent-up demand, but I’m not sure about the consumer purchasing power quite yet.”
Sean nods, satisfied with her answers, then says, “You also have to deal with a significant political environment that is unstable at best and completely corrupt at worst, without any real indication which force will prevail. Where do you see your sales in two years without any expansion? Where do you see them with expansion? What are your projections for any type of expansion you may consider? How do you see Beauty Boutique Clothing implementing your expansion strategy? Finally, what are your capitalization or financing needs and plans for this considered expansion?”
Jessica pauses to think for a moment, and Sean can almost hear the wheels turning in her brain. He’s finding that he enjoys discussing business with her. “Well, let’s see if I can handle those questions in order. In two years, without expansion, I see the Beauty Boutique’s revenues leveling out right around two million dollars per annum and remaining stable with minor rises and declines in the ten percent range. With a proper expansion and choosing the right market, I see us doubling or tripling our sales revenue with perhaps a decline of profitability initially of five-to-ten percent due to higher distribution costs. Once our distribution systems, both vertically and horizontally, get the bugs worked out, profitability should increase by ten-to-fifteen perfect per unit sold. My projections are based primarily upon increased distribution costs, with manufacturing remaining in the United States and finding appropriate commercial space to showcase and sell our designs via our own outlets in whatever market or markets we choose to pursue. Our expansion strategy would be to continue what we are currently doing and marketing through our own stores. In this manner, I can maintain control of customer service and the high quality of the shopping experience we have successfully developed thus far—”
Sean interrupts, “So, just to clarify, you intend to manufacture in the United States, increase production, and market through individually owned storefronts? Is that correct?”
Jessica nods. “Yes, exactly. In this manner, the major costs are finding and securing appropriate commercial spaces for retail sales in the new market or markets. Finally, I plan to fund this expansion through savings and increased sales.”
“I see,” Sean replies, considering her drive and strategies. There is a knock on the door, and Evelyn pokes her head in.
“Lunch has arrived,” she tells them.
“Let’s take a breather momentarily to enjoy our meal,” Sean says, and Jessica nods agreement.
They enjoy their catered lunch with Sean’s merlot and dessert cannoli, including small talk about the weather and their mutual friends, Mark and Bonnie. When Sean resumes the business discussion, he begins by telling Jessica he has a proposal he wants her to consider.
“Since our first meeting, I have done a fair amount of research and thinking about how SGM could help the Beauty Boutique. What I have discovered is that you have a very interesting niche market that has tremendous growth potential, as most designers have neglected it. Jessica Silva designs, as I’ve been told, are appreciated for their quality and pricing, but because of your limited exposure to various markets, you are virtually unknown except to the very few in your target market. One of the problems I see is, once your success becomes known and other designers see the market potential, competition could become quite intense, and you should have at least three or four years of designs ready to roll out on very short notice. I agree with you that the Beauty Boutique needs to develop deep market penetration and market share by the time this niche market potential is recognized by others. Much like the footwear industry, you need to
be prepared to drive newcomers in your niche market out by way of pricing and tight profit margins. This brings us to the fact that your distribution channels are extremely shallow, even anorexic, since they are limited to your corporate-owned boutique. Research indicates you have resisted selling outside your properties, and unless you intend to open a vast number of outlets, your market penetration will remain insignificant compared to others in the industry. Your profit margin per piece is very good for an American-manufactured product, but you’ll need to cut the price by at least thirty-five percent if you intend to dominate the niche market.”
Jessica interrupts Sean and says, “That’s impossible if I want to maintain the same quality. It’s not realistic and you can’t fake quality.”
Sean smiles. “That’s a good assessment, if you’re manufacturing in the United States.”
Jessica mildly shakes her head, processing, then says, “If you’re outside the United States, you have labor force issues, distribution issues, and quality control concerns. Additionally, I am vehemently opposed to using child labor or sweatshops and will go bankrupt before I will consider either of those options.”
Sean smiles again genially. “Have I suggested either of those options?”
She gives him a suspicious look. “Not yet, no.”
“Nor do I ever intend to. You jumped to several conclusions that are way off the mark. First, let me point out you already have distribution issues much larger than you have anticipated. Quality control is always an issue in your chosen industry, and salaries make up your largest labor force issue in the United States. So these concerns aren’t going away no matter what is eventually decided.”
Uncontrolled Spin: The Power and Danger of Spin ( Un missable Series Book 1) Page 6