Ideas and entrepreneurial motivation may result in nightmares and huge losses if the business founders do not consider the feasibility of venturing into the market. The difference between successful and unsuccessful entrepreneurs is based on decision making in key issues such as determining on which business to venture in and which investments they should not make. According to Scarborough and Cornwall (2015), the optimism and enthusiasm crumble due to the inability of the idealistic individuals to define workable strategies. The sentiment demonstrates that failure to understand the market and competition results in a lack of innovative strategies to enter and succeed in any market.
It is essential to note that competition is in every business therefore, the feasibility analysis does not depict the uncompetitive market to join, but the strategies to enter, and grow a small business without incurring unanticipated risks and losses. This study undertakes a feasibility analysis of the recently proposed business venture. The past study proposed to begin a gift basket company in Miami, Downtown by the name Seventh-Heaven Designers. However, during the proposal, it was evident that the gift basket industry and the market has great potential and risks. Hence, the need to undertake a feasibility analysis to understand the industry better before determining whether to start the small online company.
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Industry and Market Feasibility
The gift basket industry comprises of thousands of small retailers and large dominant suppliers that are able to package and deliver goods in an entire state, region, nationally or globally. Most of the large companies have diversified service and product delivery such as refrigerated trucks and warehouses to store their products. However, the retailers in the industry focus on creating value for products and bridge the gap between the producers or large-scale wholesales and the consumers. Therefore, these retailers embark on designing package wraps and using different styles, designs, and materials to make the products attractive to the consumers. According to Dooley (2014), the packaging is one of the most important ways for retailers to maximize their sales and profits. The article predicted that the packaging industry is bound to continue growing due to the preference for online shopping. Hence, the market is increment of number of competitors in the sector and dominant forces such as Amazon challenging the entry of new companies into the market. However, most of the big companies do not engage in gift basket packaging and delivery services. These companies use their online e-commerce hubs to sell all types of goods rather than focusing on gifts. Therefore, the retailers that use both brick and mortar integrated to e-commerce channels to enhance their sales.
The gift basket industry’s growth in developed nations is growing rapidly due to the increment and acceptability of the e-commerce among the customers, therefore, a start-up company should aim to lower the delivery costs, engage in discounts and promotions, establish accessible and fast ordering and checkout online platforms and reduce the delivery time. Studies on same-day delivery enterprises demonstrate that consumers are willing to pay at most 6% for same-day delivery (Hausmann, Herrmann, Krause & Netzer, 2014). The ability to engage in same-day deliveries at lower prices than the competitors can result in gaining market share for a new entrant.
Lastly, the integration of the existing firms and producers means that it is unlikely to compete with the firms that have built strong business relations, therefore, it is vital to engage with wholesalers, supermarkets, fast food, and groceries before targeting to work with the big companies or producers. This factor also affects the gift-shop and consumer relationship and loyalty. Consumer theory argues that consumers are willing to purchase a good from their loyal brands or from a seller they know or have delivered to their satisfaction for a higher price than purchase from a seller they do not know will deliver. The essence that the market comprises of two types of customers; individuals and corporations depict that new businesses must choose on the potential consumers. Individuals are people who purchase gifts, for instance, a husband purchasing Valentine's gift basket for his wife. Corporations are companies that require for instance daily flowers. The corporations make up the best clients due to the nature of the products in the industry but it is difficult for new entrants to attract these consumers.
Product and Service Feasibility analysis
The products and services are seasonal. That is most people tend to buy gifts during holidays or to celebrate memorable events. For instance, during valentines’ individuals tend to purchase gift baskets, which contain flowers and best wines for their loved ones. However, different companies engage in diversified goods and services to ensure that they make high sales during the low seasons by including gift baskets for weddings, condolence, hospital visitations, among other common interactions. The designs, style, texture, and materials of the basket, commodities, arrangement of commodities, and the display of the complete gift baskets on online web pages and in stores determine the willingness of a consumer to purchase a product. Price of baskets does not mainly affect the premium buyers who purchase some of the most expensive gift baskets but it can influence the willingness of middle-class and millennial to purchase.
The retailers in Miami such as Joyce Basket, The Sweet Tooth, and Loveliest Gift Designs have some of the most dynamic supply and demand chains. The three companies dominate the market due to their ability to negotiate and maintain a working relationship with the suppliers and buyers. The companies design packages and determine the products to include in a single basket depending on the consumers and the events. The essence that these gift basket companies have been in operation for more than 10 years in Miami makes them the favorite for the consumers due to their services. However, most of their gift baskets products are expensive thus demonstrating that there is room to low the prices of similar goods. It is important for new companies to engage in lower prices or discounts to attract potential customers, however, such an action would result in the bigger and much-established firms to engage in price wars due to their advantage of scale. The reaction of such firms would result in huge losses for the new company.
Financial Feasibility Analysis
The company does not require high starting capital because most of the products such as paper and sisal or other types of biodegradable materials are cheap. The machines and equipment to design the packaging are cheap and does not require a large warehouse to store the products because the retailer can use the producer or wholesaler’s warehouse. However, the high competition and the preference of same-day delivery means that a small company must employ messengers to deliver the goods. The high competition and number of small-scale gift basket companies mean that new business must accept lower commissions from wholesalers, which may limit the profit margins with expected losses in the first two quarters of a financial year. The seasonality of the products also limits the growth of a new firm. These factors limit the accessibility of loans as capital and sustenance during the initial stages and during off-peak periods. However, government initiatives offer loans at low interests to motivate entrepreneurial among the citizens. The access to such loans is vital for the first and second financial year. However, recent studies demonstrate that once a gift basket retailer hits the ground it is one of the most profitable businesses. In the U.K. for instance, most packaging and delivery retailers are making more than 10% of the value of the products they package and deliver as profits (Hausmann, Herrmann, Krause & Netzer, 2014).
Entrepreneurial Readiness
The industry is complex due to the size, the number of firms in the area, their market share, seasonality of the products and the dynamic of the market segment. Entrepreneurs must be creative, innovative and risk takers (Scarborough and Cornwall, 2015). The entrepreneur studied the market, industry and financial accessibility. It was evident that craft, flexibility, and willingness to accept lower commissions in the initial stages of the business enables faster growth of the company. The willingness of the entrepreneur to forgo short-term profits and miss gaining stability means that the entrepreneur is willing to incur losses in the first and second years to cement the foundation of the small business (Frazier, 2010). The short-term losses are recoverable within the third year of the business life. Therefore, suppressing optimism and understanding reality in the bid to become innovative demonstrates the readiness of the entrepreneur.
Conclusion Based on Assessment
The feasibility analysis changed the understanding of the gift basket company. It was evident that the chances of failure were higher than the chances of succeeding. Therefore, there is a need for modification of the plan. The company needs to understand the market channels thus proposes engaging in making baskets and paper packaging bags for the first six months to gain access to the current companies in the industry. Making and designing baskets from biodegradable materials and paper packaging bags is a task that one can perform at home and can start selling to retailers, individuals, companies, and wholesales and gift basket companies (Møller, Rubach & Hanssen, 2010). The exposure in a lesser competitive and a task that requires less than $750 to commence is a favorable risk rather than entering the market blindly.
References
Dooley, R. (October 13, 2014). How Your Packaging Improves Customer Experience. Retrieved on August 21, 2018 from https://www.forbes.com/.../2014/.../how-your-packaging-improves-customer- experience/
Frazier, S. G. (2010). How to start a home-based gift basket business . Guilford, Conn: Globe Pequot Press.
Hausmann, L., Herrmann, N., Krause, J., & Netzer, T., (March 2014). Same-day delivery: The next evolutionary step in parcel logistics. Retrieved on August 21, 2018 from https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/same-day-delivery-the-next-evolutionary-step-in-parcel-logistics
Møller, H., Rubach, S., & Hanssen, O. (2010). Evaluation of sustainable packaging in the Norwegian shopping basket 2001-2007. Packaging Technology And Science .
Scarborough, N. M., & Cornwall, J. R., (2015). Entrepreneurship and Effective Small Business Management, Global Edition .
