Portfolio Project: Stomp Drum Shop Retail Business Plan | CSU-Global MKG 410 – February 2015
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Transcript of Portfolio Project: Stomp Drum Shop Retail Business Plan | CSU-Global MKG 410 – February 2015
Running head: PORTFOLIO MILESTONE: STOMP DRUM SHOP 1
Portfolio Milestone: Stomp Drum Shop Business Strategy
Julieta Randall
MKG410 – Retail Marketing/Management
Colorado State University – Global Campus
Eva M. Ananiewicz
February 28, 2015
PORTFOLIO MILESTONE: STOMP DRUM SHOP 2
Executive Summary: Stomp Drum Shop Business Strategy
Stomp Drum Shop is a "mom and pop" independent drum and percussion goods retailer
that focuses on personalized customer attention, product value, and knowledgeable assistance in
the suburban town of Georgetown, Texas. The competitive advantage of this business--after 7
years of being in business--can be felt in the local community, at local schools drum programs
and supplies, professional musicians wanting services from Austin and across nearby towns, and
long term customer loyalty. Stomp Drum Shop's fair pricing has allowed this advantage. In this
strategic evaluation, current market situation and financials will be evaluated, available and
future products will be elaborated, and projected financials using available information will be
produced.
What Stomp Drum Shop will do set itself aside from other independent and big drum and
percussion goods retailers (like the case of Jerry Ryder, Danny Ray, and Guitar Centers), is to
offer competitive advantage by offering discount programs to working musicians and students,
weekly classes given by customers themselves (giving the store control of the weekly scheduling
and allowing them a place to work for free), and giving fellow drum novices, hobbyists, and
professionals a place to build a network for exchange, whether it is physical or notified via social
media.
Owners Steve and Patricia Roger project the complete ownership of the commercial
building the shop is in 7 years, but in the short-term, they project a profit of by implementing
adjustments, such as: once-a-year family store maintenance (performing fixtures themselves that
can be tax deductible and cost less), make less but more strategic advertisements utilizing social
media and sponsored posts, learning social media lingo for better reach, cutting back on
purchasing from questionable quality manufacturers, having the aforementioned drum classes on
PORTFOLIO MILESTONE: STOMP DRUM SHOP 3
3 of 6 days of the week (which will bring customers), and extending store hours in certain
sensitive times of the year.
Strategic Objectives
Mission
To create a fraternal community of drum professionals and enthusiasts who are willing to teach
others in their community and to offer top notch personalized attention to the customers' needs.
Objectives and Goals
· To expedite payments owed towards the property.
· To provide music lessons in the facilities by qualified community members to
improve store’s revenue, reach, and word-of-mouth.
· To be the best boutique specialty drum store in the Austin, Round Rock, and
Georgetown area.
· To keep and maintain a gross profit margin of
· To adapt to adapt to the industry’s financial times and still make a profit.
Keys to Success
· Mom and Pop approach to customer service, prompt transactions, extreme care
with equipment, quick response special orders, good relationship with suppliers, and top quality
available stock.
Company Summary
Stomp Drum Shop is an independently owned, drum specialty store located in the
Williamson County’s city of Georgetown, Texas. It differentiates itself from competition with a
"mom and pop" customer service approach and most recently, lessons by the community
members themselves.
PORTFOLIO MILESTONE: STOMP DRUM SHOP 4
Company Ownership and Management
Owned jointly by Steve and Patricia Roger, Stomp Drum Shop was started during an
incubation planning that went from 2008 to 2009, which is when it launched in officially. Steve,
a former sales associate himself, learned sensitive ownership information when he worked at
Sam Ash, New York in the nineties. Cunningly so, he kept notes and contact numbers to most
suppliers and manufacturers whenever it was time to re-stock. He established good relationships
with them and his sales numbers spoke volumes. When he and Patricia were getting ready to
have a child in the mid-nineties, they decided to move to his hometown Round Rock which is
middle way to Georgetown or Austin, Texas. Here, he and former bookkeeper at a real estate
company Patricia did a market study plan about the area that they lived in. The start-up money
included: store fixtures, legal documentation, insurance, inventory expenses, cash requirement,
equipment, and mortgage down payment of $95,000 (property value is $182,500, with yearly
fixed mortgage payments of $12,000 for 7 years). The initial total of the start-up was $160,500.
Company location and facility. Stomp Drum Shop is located in the commercial address
of 2005 S Austin Ave., Georgetown, TX (ZIP code: 78626), It is conveniently placed in a
popular suburban area where local restaurants, coffee shops, and other small businesses are
located. The hours are Monday through Saturday 9-6 P.M.
Product and Service Description. The shop offers a varied line of drums, percussion
instruments, and accessories including: cymbals & gongs, hardware, sticks & mallets, drum
heads, world percussion items, kid percussion, concert percussion, marching drums, cases and
bags, mallet percussion, parts, and more. Brands sold include: Toca, Tama, Roland, DW,
Zildjian, Meinl, Sabian, Latin Percussion, Ludwig, Gibraltar, Pearl, and more.
PORTFOLIO MILESTONE: STOMP DRUM SHOP 5
The services include: returns, special orders, rare requests, light fixtures, drum lessons,
occasional free lessons (by semi-famous friends of the owners who come to town), and special
events accommodations.
Use of Technology. The store uses an integrated mid-to-low level debit and credit POS
system by Pacific Amber Technology (Amberpos.com, 2015), a dedicated computer system with
Windows 2009, two laser code scanners (one for incoming inventory and another to bring up
customers), and one cashier system. With Patricia's background as a bookkeeper and Steve as a
sales person, they are managing just fine.
Future Services or Products. To an increase in demand for school's instruments, they
wish to re-stock more efficiently student kits, value kits at the right sensitive times so that they
don't take up too much warehouse or shelf space when these orders take place. As mentioned
before, a special sound-proof area in the back will serve as the teaching space for students and
teachers.
Market Analysis Summary
According to City Data (city-data.com, 2015), the estimated median household income in
their two zip codes (78628 and 78626) was $58,111 and $81,294 respectively. Nielsen’ PRIZM
segmentation systems also sheds light in aspects of the area. What this system does is divide
American households into lifestyle categories according to geographic segmentation (Urban,
Suburban, Second City, Town/Rural, Town, and Rural), life stage group, social group, income
producing assets, age, education, employment, race/ethnicity, household composition, income,
household tenure, and urbanicity (Claritas.com, 2015). What this system unravels is consumer
behaviors, shopping patterns, and media preferences as it categorize every household in the
United States in terms of 66 demographically and behaviorally distinct types, or so called
PORTFOLIO MILESTONE: STOMP DRUM SHOP 6
"segments." Life stage groups are divided into Young, Family, and Mature (Y, F, and M); Social
groups are in terms of urbanization, such as: Urban, suburban, second city, town and rural (U, S,
C, and T). For instance, in the area 78626 produces these segments: 20 Fast-Track Families-
Upscale Middle Age w/ Kids, 50 Kid Country USA- Lower Mid Younger w/ Kids, 37 Mayberry-
ville-Upper Mid Older w/o Kids, 32 New Homesteaders-Upper Mid Younger w/ Kids, 13
Upward Bound-Upper Middle Age w/Kids. The median income range here is 50-75k, but it also
goes up to 150k, which means that it's a rather well-off community. It's a penetrable market,
most importantly because it's located to the music scene attraction of Austin, Texas.
Figure 1: PRIZM Analysis for 90028 (Claritas.com, 2015)
Competitive Comparison
Market competitors in the area are two independent drum and percussion goods retailers
with the names of Jerry Ryder's Drum Shop in Austin and Danny Ray's Music in Round Rock.
The big competitor is in Round Rock as well, which is Guitar Center.
Industry Analysis
According to the NAMM’s (National Association of Music Merchants) 2014 Global
Report and Industry Analysis (NAMM.org, 2015, p. 23-24), the industry in 2013 declined 4.0%
to $381.6 million. This may seem impacted by the existence of electronic drum kits (impacting
also the lack of sticks and drum head sales). Even though it may seem negative, electronic kits
are mostly used for convenience of practice, and on a positive note, educational percussion and
hand percussion are on the rise, plus traditional drum kit sets are still the most sold in the big
picture. This is good news for Patricia and Steve who are about to break in deeper into
educational percussion and drum teaching. Since people are being more cautious with their
money since the Big Recession, having a small town drum store as a place to connect, interact,
PORTFOLIO MILESTONE: STOMP DRUM SHOP 7
and try out drum instruments, motivates the consumer to buy. Selling instruments is a sensitive
thing, and even though there is an important online sector purchasing online, customers like to
touch and feel the instruments that they will play with. Besides, great institutions like Guitar
Center (to be acquired by Bain Capital) or
Sam Ash (closing stores nation-wide), will
give opportunity to small shops like this one
(Kirn, 2014).
Marketing strategy
Our fair pricing methods include:
price-matching, negotiation and bartering,
and student and teacher's discount. Most
recently, the shop has a Facebook and
Twitter page where sensitive information, promotions, sale events, schedule of classes, and free
drum events are posted.
Service or Product Support
What gives us competitive edge is our willingness to work with people and retain their
loyalty. We will teach our customers how to make the best use out of their instruments and give
them pointers on how to improve themselves. We have a 30-day return policy, more than most.
Sales Strategy
Our sales strategy approach is not up selling, but to give the right instrument to the right
type of person. Other competitors like Guitar Center, opt for pushing expensive sales to novices
who don't know any better or just trying to sell to just sell. We have a different approach.
Figure 1: Retrieved from NAMM.org (2014)
PORTFOLIO MILESTONE: STOMP DRUM SHOP 8
Financial Plan
The owner's joint salaries go to $90,000 and the store's 2013 year profit went up to
$182,500. They are saving for their son's college fund and the plan is to send him to Texas A&M
University to major in Business (with a Music Minor), so they don’t plan on taking in more
salary in the 2015 annual cycle. David is a drummer himself—Buddy Rich being his favorite—
and would like to create his own brand of drums one day.
Current Profit-and-Loss Statement 2014
Also called income statement, a profit-and-loss statement provides a detailed summary of
the income of a business including operating expenses, taxes, sales totals, and cost of goods sold
(Berman & Evans, 2013, p. 306-307). The nature of all expenses in this business are operational,
including: salaries for the owners, advertising (local radio, yellow pages, small printing of flyers,
posters posted around town), supplies (such as: paper, pens, pencils, stamps), shipping costs,
yearly cost of insurance for the business, maintenance (painting walls, cleaning products, hiring a
cleaning crew every two months), and other expenses. It's important to mention that Steve and
Patricia have a total of yearly fixed mortgage payments of $12,000 (with an initial down
payment of $95,000). Since the store has been doing well (and hopefully for years to come) their
current plan is fixed to 7 years so that they finish paying the property value of $182,500. They
plan on owning this commercial lot so that their son can eventually create his own shop inside
the facility and hopefully, expanding it. What this is does is give insight into what needs to be
done for profit planning, like cutting costs in supplies and maintenance.
PORTFOLIO MILESTONE: STOMP DRUM SHOP 9
Stomp Drum Shop, Fiscal 2014 Profit-and-Loss Statement
Itemization Amount ($)
Net Sales $700,550.00Cost of goods sold $260, 600
Gross Profit $439,950.00Operating ExpensesSalaries $90,000.00Advertising $6,000Supplies $2,000.00Shipping $1,800.00
Insurance $5,000.00Maintenance $3,500.00
Mortgage payment $12,000.00Other ____ $1,950
Total $122,250.00
Other costs $15,000.00Total costs $137,250.00
Net profit before taxes $302,700.00Taxes $120,200.00
Net profit after taxes $182,500.00
Balance Sheet
What a balance sheet does is to understand equity and value of a property with its assets
(as in: ownership, fixtures, equipment) vs. the debt related to the liabilities of running the
business (i.e., payroll, accounts payable, loans, mortgage). As Pope mentions (2005), it is “like a
snapshot of the entity,” which is why it is also called a “statement of financial position (Pizam,
2005, p. 49)”. Basically, this is how accountants can compute the net worth of a business minus
its liabilities, which can alter the way decisions are made in terms of risks, such as: taking in
PORTFOLIO MILESTONE: STOMP DRUM SHOP 10
more debt, lowering debt, making larger mortgage payments, and investing in
upgrading/maintaining the business.
Stomp Drum Shop, Fiscal 2014 Balance SheetAssets Liabilities
Current CurrentCash on Hand $30,000.00 Payroll expenses payable $8,500.00
Inventory $100,000.00 Taxes Payable $19,000.00Accounts Receivable $2,300.00 Accounts Payable $55,000.00
Total $132,300.00 Short-term Loan $3,000.00
Total $85,500.00
Fixed (present value) Fixed
Property $182,500.00 Mortgage $84,000.00
Building $70,000.00 Long-term Loan $8,000.00
Store fixtures $8,000.00 Total $92,000.00
Equipment $3,000.00 Total Liabilities $177,500.00
Total $263,500.00 Net Worth $217,850.00Total Assets $395,800.00 Liabilities + Net Worth $395,800.00
PORTFOLIO MILESTONE: STOMP DRUM SHOP 11
Benchmarking in the Industry
With benchmarking, Patricia and Steve can set standards and measures based on their
industry sector, which is instrument retailing (Berman & Evans, 2013, p. 520). This information
is difficult to obtain, so they will opt to purchase it for a low fee from an official provider. The
NAMM 2012-2013 U.S. Music Retail Revenue at a Glance compares those two years in terms of
sales and profit (NAMM.org, 2014, p.7).
PORTFOLIO MILESTONE: STOMP DRUM SHOP 12
Business Ratios: 2014 vs. 2015
Business Ratios compare profit and loss amounts in each of their categories in terms of
percentage (up or minus). Here are the contrasted amounts for 2014 and 2015.
Stomp Drum Shop, Business Ratio 2014-20152014 2015 Percentage (%)
Figure 2: Retrieved from NAMM.org (2014)
PORTFOLIO MILESTONE: STOMP DRUM SHOP 13
Net Sales $700,550.00 $695,095.00 -0.78Cost of goods sold $260, 600 $240, 400 -7.75
Gross Profit $439,950.00 $454,695.00 3.35Operating ExpensesSalaries $90,000.00 $90,000.00 0Advertising $6,000 $4,000 -33.33Supplies $2,000.00 $1,800.00 -10Shipping $1,800.00 $1,800.00 0Insurance $5,000.00 $5,000.00 0Maintenance $3,500.00 $2,010.00 -42.57
Mortgage payment $12,000.00 $12,000.00 0Other ____ $1,950 ____ $1,403 -28.05
Total $122,250.00 $118,013.00 -3.47
Other costs $15,000.00 $14,000.00 -6.67Total costs $137,250.00 $132,013.00 -3.88
Net profit before taxes $302,700.00 $322,682.00 6.6Taxes $120,200.00 $110,200.00 -8.3
Net profit after taxes $182,500.00 $212,482.00 16.43
Projected Profit-and-Loss for 2015
Considering that the industry is not doing well, the Roger family projected less net sales,
instruments bought/acquired, as well as lowering operating expenses in certain aspects. The
projected profit would be of $29, 982 which is a 16.43% in profit.
Stomp Drum Shop, Projected Profit-and-Loss StatementItemization Amount ($)Net Sales $695,095.00Cost of goods sold $240, 400Gross Profit $454,695.00Operating Expenses
Salaries$90,000.00
Advertising $4,000Supplies $1,800.00Shipping $1,800.00
PORTFOLIO MILESTONE: STOMP DRUM SHOP 14
Insurance $5,000.00
Maintenance$2,010.00
Mortgage payment $12,000.00Other ____ $1,403
Total $118,013.00Other costs $14,000.00Total costs $132,013.00Net profit before taxes $322,682.00Taxes $110,200.00
Net profit after taxes $212,482.00
Conclusions
The Roger family has had a rather conservative idea of how they should work their
upcoming years’ expenses. Cutting down expenses and being able to lower their tax bracket, they
could potentially come out at a gain and not at loss. Even though their balance sheet evens out in
case a rainy day comes, they should consider more cash assets and profits as liquid amounts. It is
smart of them too to keep paying themselves a lower joint income and to do maintenance
themselves. Giving back to the community by providing a place for music lessons is also a smart
move.
PORTFOLIO MILESTONE: STOMP DRUM SHOP 15
References
Berman, B., & Evans, J.R. (2013). Retail Management: A Strategic Approach (Twelfth ed.).
Upper Saddle River, NJ: Pearson Prentice Hall.
Claritas (2015). PRIZM. Retrieved from
http://www.claritas.com/MyBestSegments/Default.jsp
2010 U.S. Census (2011)
Retrieved from http://www.census.gov/2010census/popmap/ipmtext.php?fl=49
Armstrong, G., Adam, S., Denize, S., & Kotler, P. (2014). Principles of Marketing. Pearson:
Australia.
Amber Technology POS (2015). Retrieved from http://www.amberpos.com/
Kirn, P. (2014). Deep in Debt, Big Retailer Guitar Center May Be Acquired. Create Digital
Music. Retrieved from http://createdigitalmusic.com/2014/03/deep-debt-big-retailer-
guitar-center-may-acquired/
NAMM (2014). Global Report 2014. Retrieved from
https://www.namm.org/files/ihdp-viewer/global-report-2014/
A7352D4907B25A95B2CE27A075D3956F/2014MusicUSA_final.pdf
Schiffman, L., & Wisenblit, J. (2015). Consumer Behavior (Eleventh ed.). Boston: Pearson.
City Data (2015). Georgetown Texas. Retrieved from
http://www.city-data.com/zipmaps/Georgetown-Texas.html
Yelp.com (2015a). Jeff Ryder’s Drum Shop. Retrieved from
http://www.yelp.com/biz/jeff-ryders-drum-shop-austin
Yelp.com (2015b). Danny Ray’s Music. Retrieved from
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http://www.yelp.com/biz/danny-rays-music-round-rock
Yelp.com (2015c). Guitar Center Round Rock. Retrieved from
http://www.yelp.com/biz/guitar-center-round-rock
Pizam, A. (Ed.). (2005). International encyclopedia of hospitality management. Amsterdam:
Routledge.
Adrian, T., & Shin, H. S. (2011). Financial intermediary balance sheet management. FRB of
New York Staff Report, (532).