The Beach Carrier Case
Mary Ricci created a product concept: The Beach Carrier. It is a large bag designed to carry beach gear to the beach from the car. The bag can be folded down when not in use to make for easy storage. Several pockets are built into the carrier for the stuff the beach goers want to have with them. It is large enough to carry beach chairs as well. The material is lightweight and durable. Ricci intends to have The Beach Carrier available in fluorescent and conservative colors.
The Beach Carrier is a utilitarian product. Style and fashion are secondary to its intended purpose. This poses a challenge when competing against substitute products such as beach bags. A similar product from Shade USA holds a little less and is priced at $ 16.95. A wheel barrel style item called “Wonder Wheeler” sells for $ 59.99. It can carry a substantial amount of material, but it could be difficult to pull through the sand. The Beach Carrier may have a hard time differentiating itself from other products.
Ricci employed a consulting firm to perform a feasibility study. She received some valuable feedback about The Beach Carrier. Ricci based her market research on people that use sunscreen products. Sun protection products are sold nationwide not just at the beach areas. Many people use these products that will never purchase The Beach Carrier. Ricci would receive important feedback by taking a prototype of her bag to some of the beaches to see the response. Ricci also based her market share projections using women who purchase sun protection products. The market share is most likely calculated using the wrong market. Ricci should try to find out the current sales volume for the product from Shade USA. That would be a much better starting place. Overestimating the market and market share can change the feasibility of the entire concept. Another concern is that The Beach Carrier is going to be a very seasonal product. It is more likely to sell in Spring and Summer. This will affect the marketing and production schedules.
Ricci should hire legal counsel and file the necessary patent to protect her product design. She may also need to file trademark and copyright protections. This can be done with her attorney. It would be foolish to promote The Beach Carrier with photos and details to everyone without proper protections. Ricci’s competitors could simply copy the idea and promote it along with their other products.
The mail order marketing strategy will allow Ricci to control where and when The Beach Carrier is offered for sale. This allows her to roll out the product in different areas as she sees fit. It will also provide rapid feedback as to the viability of her concept. If after the first promotion, sales are dismal, the idea may need to be scrapped. This can save precious capital. It can also provide valuable data as to what kind of return can be expected from each promotional dollar invested. It may difficult for potential customers to visualize the product from a small picture and description. Many prospects may have had experience with similar products and assume they are all the same.
The mail order marketing strategy will not connect The Beach Carrier with every potential customer as identified in Ricci’s market potential assumptions. For example, Boating Magazine reported an average monthly subscription of 179,856 magazines for the 6 months ended June 30, 2009 on its Paid and Verified Magazine Publisher’s Statement (http://viewer.zmags.com/publication/cdcfb42a#/cdcfb42a/9). This is much smaller than Exhibit 3A’s 14,891,785 bags to be replaced this year. In fact it represents only 1.2% of the market potential assumption. Also, 97% of the readers are male. Ricci should research the magazine’s demographics before committing her advertising dollars.
The product might be better sold through a large retailer that can put it on display for people to see it. Walmart’s distribution system is sophisticated enough to put the product in stores that will sell it. Ricci may want to reconsider selling through a retailer. The Beach Carrier is a great impulse purchase item. She decided not to sell the concept or license it. If after a better analysis of the market indicates that it will not sell as well as originally forecasted, Ricci might be wise to accept a fee for the idea and move on to the next concept.
The internet poses an interesting opportunity for promoting The Beach Carrier. A well designed website could show video footage of the product being used and customer testimonials. Driving potential customers to the website would be Ricci’s biggest challenge. Keyword search advertising, blog postings, social networking sites, and banner ads are typical promotional methods on the internet. eBay might also be a good place to sell a few for less money. A link to the website in the advertisement would be another technique for increasing traffic. The internet also opens up The Beach Carrier’s market to the entire world.
Ricci wants to maintain control of the quality of The Beach Carrier product. The New England factory has probably created her prototype and given examples of finished work. Ricci needs to stay on top of the finished quality. It is reasonable to expect that the factory’s best work will be on its prototypes. Six months into production may prove a different quality. Production scheduling and scalability should be discussed with the factory. All of these expectations are best put forth in writing between the factory and Ricci. Lead times for orders to the factory were not given, but they must be accounted for in the projections.
Also, given the high cost of manufacturing at $ 6.50 per unit, Ricci should receives bids from Chinese factories. A fifty percent savings would reduce the break-even point and increase profitability. There is a reason that the majority of manufactured goods are coming from China: inexpensive labor inputs.
Initial financing for The Beach Carrier needs to include enough funds for manufacturing the units and selling them during the first phase. A line of credit in place could suffice for future borrowings after the product has successfully sold in the first phase. Assuming a $ 13.99 price and a break-even of 6,900 units, Ricci will need $ 44,850 for first phase manufacturing costs. An additional $ 27,766 is required for first phase fixed costs. Total initial requirements are $ 72,616. The business should begin with $ 100,000 to provide a buffer for unforeseen expenses and cash flow fluctuations. At break-even sales levels, the business will need about $ 75,000 per phase for the next three phases. Much of that will come from sales of inventory in the prior phase. Ricci can evaluate the success of The Beach Carrier at the end of the first phase. This will help minimize some of the capital requirements if the product is not selling well.
The case indicates that Ricci is working with $ 30,000 for her fixed costs of phase one. Capital requirements are higher when manufacturing of the product begins. At $ 30,000 of capital, initial financing is insufficient. Ricci will need a loan, a larger investment, or a partner to successfully operate The Beach Carrier busi