Business Plan For Launching A New Rugs And Pashmina Selling Business In Australia

Background of business venture

Starting a new business is always a risky decision and it is related to the calculative venture for the entrepreneurs. Entrepreneurs choose their business ventures and make them successful. Moreover, the business plan must be good enough and this must show the sense of projection for the business. In this report, a business plan of launching a new business in rugs and pashmina selling products in Australia will be described and these products will be imported from Nepal. The aim of the report is to describe business plan and scope of business in Australia with describing market, industry analysis and marketing plan for the business. In the first part, the background of the business will be discussed and mission statement of business will be narrated. In the later part, competition, industry and market analysis will be done based on startup company.

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The business is about selling the deluxe rugs, carpet and pashmina in Australian market which would be imported from Nepal. The new business organisation named Himalayan Beauty is going to launch its business in Sydney. In Sydney, the organisation is opening its first outlet near Seven Hills Business hub and they will mainly sell imported deluxe rugs, carpet and pashmina. The main attraction of the products would be handmade rugs and pashmina from Nepal. Himalayan Beauty has made up a tie with Nepal based handicrafts organisation which is running by women and this handicrafts organisation will be the main suppliers of rugs, pashmina and carpet. Himalayan Beauty is thinking to be selling their products through online also. In order to satisfy the market need, Himalayan Beauty has to increase the supply from Nepal.

  • To provide Australians with pashmina, deluxe rugs and carpet
  • To showcase the quality products in Australian market from prominent handicrafts in Nepal
  • To offer variety of fashionable carpet, rugs and pashmina
  • To create a buzz in Australian market through online presence and sales through exclusive delivery services

Himalayan Beauty will import Nepali quality products and they will sell the products in the Australian market. Himalayan Beauty is going to offer deluxe rugs, pashmina, carpet, Nepali pashmina, rugs with Persian inscription and antique carpets. In pashmina, the fabric is used from Mountain Goat (Changra) to give a look of glossy fur. Quality products will be sold and customers can expect large ranges of a collection of rugs, pashmina and carpet.

In order to assess the market size, Himalayan Beauty has to take up the cue of approaching the local market analysis at first. It is needed that organisation can segment the market. In Australia, the Nepali products of rugs, pashmina and carpet are not available that much. People can buy these products through Alibaba.com as Alibaba sells these products through sellers. Outlets and shops of Nepali rugs and pashmina are not available in Sydney area. Market revenue in Australia from rugs, pashmina and floor covering carpet was $785 (AUD) in the year 2016 (Strategyr.com 2017). In the Australia, the total number of rugs, carpet and pashmina stores are 130.

Mission

Pashmina and rugs shops in Australia are not famous and Himalayan Beauty is going to capture the market. The market growth in 2017 to 2020 is expected to have 1.7% high from the previous time (Ibisworld.com 2017). However, this growth can be accelerated through marketing and market presence of the products. Almost 2000 people are employed in this sector in Australia. The success factors of the products are high as the products are unique in the Australian market and these have access to the channel of distribution also.

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In order to judge the profitability in the market, it is necessary to understand the potential customers. In rugs, pashmina and carpet, the business entity must understand the market value of the products and market value of Nepali products are high as these are rare in Australia (Namgali et al. 2013). Himalayan Beauty can demand high price as the inimitability and rareness of the products are high. Profitability is depended on buyer powers and barriers to entry in the market also, however, Nepali products are so much available in the Australian market.

In new business launching, distribution for products in Australian market must be set correctly, existing distribution channel in the market is a complex and new channel is creating by online marketers. In case of a new brand, the retailers and distribution channel negotiate to capture more margins (Skywaker et al. 2014). In addition, market trends in rugs, pashmina market is price sensitivity as in online, most of the products are available by Alibaba.com with low price, however, the quality of the products are not high. Demands of the products are increasing in popularity of the products is enhancing.

Political factors

· Current legislation and plan of future legislation is helpful in starting a business in rugs and pashmina

· Findings and other initiatives are helpful

· Local as well as internal trading situation provide assistance

Economic factors

· Economic growth of industry

· Trade cycle

· International economic factors

Social factors

· Consumer trend as customers like to decorate rooms and offices

· Media opinion

· Demographics benefits

Technological factors

· Innovation and automation

· Digital economy

· Telecommunication and manufacturing

· Technology development of insulation properties helps Nepal to have carpet fibre

Table 1: PEST factors in industry

(Source: Analysed by author)

In case of global perspective, rugs, pashmina and carpet market is projected to touch US$41 billion by the end of 2020. The customers want now more modular carpet for floor covering. Most importantly, Asia-Pacific region is the fastest growing rugs and carpet market in the world. The main reason behind the growth of rugs and pashmina industry in Australian region is the customers’ preferences, rapid urbanization, increase of office decoration and the middle-class population now prefer rugs and pashmina. 23 million Australians use carpet and deluxe rugs in their houses. The statistics also showed the figure that 46m sq of average carpet is used in each of house (Rubin et al. 2015). In most of the rugs and carpet based organisation to focus on mainly specialised high valued products. In case, products are made in Australia, the manufacturers make it as export-oriented. However, high product substitution is observed that can affect the negative margin over the period to the organisation. In rugs and pashmina market, it is observed as the industry is opting for differentiation of the products. Moreover, in rugs and carpet industry in Australia for last five years, it is seen that the industry is characterized as falling revenue. The industry has been observing the lower employment; production rate is low and rising competition in Australian urban sectors.

Products offering

In the last five years, the industry of rug and pashmina has not been smooth for the organisations. However, in global perspective, the industry in Asia-Pacific region has enough scope to flourish in carpet, rug and pashmina products. In Australia, an exclusive and extensive collection of rugs and carpets are available, customers must know about this. The demand for the rugs and pashmina is average in Australia and maximum manufacturers target the foreign market. In Australia, the Nepali rugs and pashmina have enough potential customers as near Sydney, Nepali market 4 Corner Bazaar is already there. This bazaar provides various types of products to local Nepali community (Haines 2016). Therefore, Nepali products have demanded in the market; the supply should be good in order to meet the market demand. The products should give the unique experience to the customers and Himalayan Beauty is trying to innovate the rugs and carpet in order to customise these according to market needs.

In rugs and pashmina industry in Australia, the buyers’ price sensitivity is low as the buyers’ don’t get enough opportunity to buy these products from the open market. In opening a business of rug and pashmina, the organisations are highly depended on distribution channels (Manalo et al. 2015). However, in Asia-Pacific region, large numbers of customers are there for purchasing carpet and deluxe rugs. The force is low.

Suppliers’ power:

In rugs, carpet and pashmina products, the suppliers play an important role as in Australia; there are a few suppliers who supply these products. Most of the cases, organisations import these products. Large numbers of substitute’s products are there in the market which can be used instead of rugs and carpet. Moreover, high numbers of competition in suppliers are seen as suppliers are limited. One of the major factors in rugs and pashmina industry; it is seen on diverse distribution channel from the suppliers. Himalayan Beauty is going to import the products from Nepal by aeroplane. In case of switching the suppliers, business entities may not have cost benefits as the low cost of switching suppliers (Ali et al. 2017). This force is high.

Industry rivalry:

The market rivalry is medium in this industry as exit barriers are low with industry size is not large. In fashion clothing, the industry size is large; however, this is a limited market with limited customers. In addition, organisations enjoy low storage cost as they can supply large production from the suppliers. In this regard, Himalayan Beauty can face industry rivalry from existing companies. The rivalries are Hali, Eastern Silk, Otto & Spike, Rug Emporium, Alpaca and much more. Moreover, the new organisations can face the issue of online market that is Alibaba.com as this e-commerce supplies the rugs and pashmina products from foreign companies.

Market analysis

The threat of new entrants:

In this industry, the threat of new entry is medium as the scope is high, however, the limited customers are the barrier. New venture may not need to invest a large amount of money in starting a new business. Strong distribution of network is needed for the business to deliver the products to the customers at right time. However, in new entrants, customers do not trust the companies to buy products; string brand names can solve the issues.

Threats of substitutes:

Substitute ranges of the rugs and carpets are high. There are various types of rugs are there in the market. Nylon, pashmina, cotton, Terylene and much more types of carpets are available for the customers. Customers can opt to choose different product, not the exact one which is offering the business. This force is high.

For an organisation, the market can be segmented into four different categories. In demographic segmentation, age, gender, socioeconomic condition and occupation are the main factors for the organisation to choose (Azizul and Jain 2013). In geographical segmentation, location, region, the rural or urban sector of the customers is the target. In behavioural segmentation, the business organisation can choose the customers based on benefits sought by customers, loyalty status, readiness to purchase ad rate of usages of the products. Lastly, the organisation can choose psychographic segmentation of the market. The customers who buy the products according to lifestyles, personality and attitudes are the main targets for psychographic segmentation.

Himalayan Beauty business venture can target the geographic and demographic segmentations for their business. As this business is going to open an outlet in Sydney, the primary target customers should be near Sydney areas. Urban people will be the main target for the business. In today’s life, rugs, pashmina and carpet are not only used by customers to utilise in a house, however, in many educational institutions and offices use these products for decoration. Himalayan Beauty can target the niche and high-income customers for their products who live in Australia and have the taste of decoration. Himalayan Beauty will take premium pricing strategy as the products will be imported from Nepal and upper-middle class people and business class can afford these products.

The marketing objectives of the Himalayan Beauty Company will be:

  • To capture 3% of market share by the end of 2018 in rugs and pashmina industry
  • To grab a loyal customer base in the Australia
  • To open three more outlets in next two years across Australia
  • To reach break-even point and start making profit in next year

Himalayan Beauty is going to offer premium quality rugs, pashmina and carpet to the Australian customers. The business venture will also offer Persian rugs, antic rugs and Nepali handmade carpet. All the products will be imported from Nepal and the products will be handmade by the women in Nepal. The rugs and carpet will be from finest wool and animal skin with various ranges of textures and colours. Products will be available in woven, tufted and knotted kinds with both residential and non-residential purposes. In non-residential purposes, the customers can get healthcare, education, hospitality, retail and office type carpet and decorated materials.

Market growth

Himalayan Beauty is going to take premium pricing strategy at the starting of the business. In Australia, there are not so many brands are available which sell rugs, carpet and pashmina, therefore, prestige pricing would be helpful. Keeping the price high can encourage the customers to buy the products and it creates the favourable perception among customers (Swift and Sanchez 2017).

Himalayan Beauty is going to open its first outlet in Sydney and the distribution channel the organisation takes is based on intermediaries. The products will be made in Nepal and then the products will come to distributors of the organisation. The business entity will take the products from distributors. In case of online distribution of the products to the customers, the organisation will take help of intermediaries or third parties.

Himalayan Beauty will be the start up the organisation and the promotion strategies of the organisation must be cost-effective. Himalayan Beauty is going to follow social media marketing strategies on Facebook and Twitter. According to Haines (2016), content marketing strategy will also be helpful for the organisation as this can attract more customers. The poster on the streets of Sydney and newspaper advertisements will also be helpful for the business. Public Relation will also be needed and the organisation can take ‘viral’ marketing on social media pages by making videos and images.

Expenditure

Year 1

Year 2

Year 3

Sales

AUD 465,530

AUD 510,300

AUD 542,200

Direct costs

AUD 267,450

AUD 292,300

AUD 315, 200

Gross margin

AUD 197,200

AUD 217,300

AUD 235,800

Gross margin %

43%

43%

43%

Payroll

AUD 94,100

AUD 102,560

AUD 104,870

Rent

AUD 24,100

AUD 24,100

AUD 24,100

Marketing

AUD 23,100

AUD 23,000

AUD 32,100

Leased equipment

AUD 1800

AUD 2200

AUD 3200

Utilities

AUD 1500

AUD 1500

AUD 1500

Insurances

AUD 900

0

0

Benefits

AUD 23,000

AUD 25000

AUD 26000

Total operating expenses

AUD 168,320

AUD 181,320

AUD 186,320

EBITDA

AUD 29,430

AUD 35,700

AUD 49,400

Depreciation

AUD 12,300

AUD 12,300

AUD 12,300

Interest

AUD 2,100

AUD 1,600

AUD 1,300

Taxes (including import taxes)

AUD 1900

AUD 2100

AUD 3200

Net profit

AUD 13,200

AUD 19,300

AUD 32,400

Profit/sales

3%

4%

6%

Table 2: Financial projection of next three years

(Source: Estimated by author)

A new venture always has risks with it. Himalayan Beauty can face regarding the products of Nepal handicrafts as Nepali women may produce low-quality products. Market risks will be high in rugs and pashmina industry as the target customers are limited through the scope is high. Financial risks will be there as the business is start-up business and entrepreneurs do not have enough money. Poor investment and lending policies can pose threat to a business. Moreover, competitive risks are competing with the existing companies in the market.

Conclusion 

It can be concluded that rugs, pashmina and carpet industry has scope to flourish in Australia, however, the target customers are limited. Moreover, in last five years, this industry has been facing with low employment and financial objections. Himalayan Beauty is going to start its business in Sydney and also through online and they are going to import rugs, carpet and pashmina from Nepal. The competitors are there in the market and the business is going to take premium pricing strategy and promotional activities to grab the market share.

Reference list

Ali, R.N., Aziz, A. and Iqbal, A., 2017. Potential of Cottage Industry in Azad Kashmir and the Role of Female Entrepreneurship. Journal of Political Studies, 24(1), pp.43-48

Azizul Islam, M. and Jain, A., 2013. Workplace human rights reporting: a study of Australian garment and retail companies. Australian Accounting Review, 23(2), pp.102-116.

Business.gov.au, 2017. Import and export. Business.gov.au. Available at: <https://www.business.gov.au/info/run/import-and-export> [Accessed on 10 Sep. 2017].

Haines, T., 2016. Developing a startup and innovation ecosystem in regional Australia. Technology Innovation Management Review, 6(6), p.24.

Ibisworld.com.au, 2017. Carpet and Textile Floor Covering Manufacturing in Australia Market Research | IBISWorld.  Ibisworld.com.au. Available at: <https://www.ibisworld.com.au/industry-trends/market-research-reports/manufacturing/textile-leather-clothing-footwear/carpet-textile-floor-covering-manufacturing.html> [Accessed on 10 Sep. 2017].

Manalo, J., Perera, D. and Rees, D.M., 2015. Exchange rate movements and the Australian economy. Economic Modelling, 47, pp.53-62.

Namgail, T., Van Wieren, S. and Prins, H., 2013. Pashmina production and socio-economic changes in the Indian Changthang: Implications for natural resource management. Natural Resources Forum, 34(3), pp.222-230.

Rubin, T.H., Aas, T.H. and Stead, A., 2015. Knowledge flow in technological business incubators: evidence from Australia and Israel. Technovation, 41, pp.11-24.

Shakyawar, D., Raja, A., Wani, S., Kadam, V. and Pareek, P., 2014. Low-stress mechanical properties of pashmina shawls prepared from pure hand spun, machine spun and pashmina-wool blend yarn. The Journal of The Textile Institute, 106(3), pp.327-333.

Strategyr.com, 2017. Carpets and Rugs Market Trends. [online] Strategyr.com. Available at: <https://www.strategyr.com/MarketResearch/Carpets_Market_Trends.asp> [Accessed on 10 Sep. 2017].

Swift, K. and Sanchez, E., 2017. The US Carpet Industry: History, Industry Dynamics, and a Simple Model for Short-Term Forecasting. Business Economics, 52(1), pp.57-67.