Lifestyle in the UK and many other places around the globe has become extremely interlinked with technology. Research shows that people are increasingly spending a significant proportion of their time on their PCs, smartphones or tablets on a daily basis. The advancement of information technology has given entrepreneurs a strategic platform that did not exist in the past. Businesses are now able to reach millions of potential customer and serve them better by the use of e-commerce. Intelistyle is one such tech startup that retails clothes using the online platform. The company is established in London and was founded in the year 2017 by a team of passionate entrepreneurs seeking to leverage their cutting-edge computer skills and knowledge of fashion. The company uses artificial intelligence to match customer preferences with the latest fashion trends and stylish outfits from the comfort of their homes. Intelistyle helps its customers decide what to wear from their wardrobes, and recommends for the new outfits to purchase.
The company is currently in its early stages of establishing a sustainable market as well as expanding the scale of its operations. This business design will explore the aspects of Intelistyle including a market analysis, product analysis, competitor analysis, financial analysis, operations analysis, among other key attributes of the enterprise.
Market analysis
Intelistyles sells the latest fashion products for all genders, ages, social class, among other demographic characteristics. The company has a website where the customers can make their orders and pay for them on delivery. Intelistyle delivers the goods ordered to the customers within the shortest time possible to avoid inconveniences and enhance customer satisfaction. The company has retained many customers and is attracting more due to the strategies employed. The customers have the opportunity to choose various outfits depending on their tastes and preferences. There are several designs sold by the company to match the client’s taste. The main objective of the company is to help their clients look good with the latest fashion designs. Technology and artificial intelligence are applied to attain their main objective.
The customers get value for their money because of the high-quality products. Free advice is given to the customers concerning the products by a team of professionals in fashion and design. Intelistyle Company gives the customers an opportunity to order designer clothes which are delivered at the comfort of their locations. A minimal shipment cost is added to the value of the product purchased.
There is high demand for the fashion products in the UK hence the sustainability of the fashion business. The UK market generally has a high purchasing power. Fashion is continuously changing and potential customers are looking for the latest designs in the market (Keith, Unger, Rauch " Frese, 2016). The online retailers are convenient hence preferred by the customers. Customers associate the convenience with value addition. Intelistyle has a user-friendly and interactive website where the latest fashion trends can be viewed by the potential customers. The free advice by professional designers has enabled the company gain a significant market share despite being a startup.
Product/ service analysis
Intelistyle ensures that the products supplied to them are of high quality. Meeting customers’ expectations is one of the main objectives of the business. The customers get value for the goods purchased as the quality is assured. The fashion products sold by the company fits all the social status hence affordable to the potential buyers. The products are majorly divided into two segments to capture the needs and pockets of different consumers. There are consumers who are keen on getting value and those who buy the products for prestige. The low-cost products are meant to satisfy the consumers who want to get value for money while the premium products are meant to satisfy the customers who want prestige. The cost of the products is directly proportional to their respective qualities. Intelistyle ensures that the products sold are of good quality whether low cost or expensive.
The company has a reliable supplier hence the guarantee of product availability. The online platform provided for the customers to order the products makes the business operations to run round the clock. The customers are issued with a receipt to verify that they have received what they ordered for. Payment is usually on delivery when the customers get their orders. Credit card payment is preferred other than cash to enhance the ease of transaction. A confidential platform where the customers leave their comments and complaints concerning the product and service delivery is provided by the company. The customer comments and complaints in the portal is a feedback mechanism that assists the company to constantly improve. The company also uses the portal to respond to customer’s queries and complaints. This illustrates their intention to keep their customers happy which enables them to gain more customers through a positive word of mouth. The feedback acts as the opportunities that require the management team to analyse how various systems can be improved. There has been high customer retention since the establishment of the business. The new customers are attracted and this is a sign of efficiency in operations. The business is seeking to expand in the foreign regions due to the high demand of the fashion products.
The designers have the responsibility to ensure that the product matches the expectations of the customers. The quality assurance team plays the role of double checking the products before they are delivered to the customers. The step is meant to ensure that the customers get what they ordered for and get value for their money. The customers are reminded to wait for the products within 24 hours for delivery. The goods are paid for after delivery and the customers are issued with a receipt to verify. Discounts are offered when a customer purchases three or more products at once. The goods are bought in bulk at a 10% discount.
Customer orders are clustered by region to ease the delivery process. The goods are transported on the road since the business coverage has not yet expanded to international regions. Transportation in clusters helps to reduce costs of business.
The latest trends of fashion are posted on their social media platforms for advertisement and promotions. Other media platforms like the televisions and radios help to create the company awareness and the latest trends. Celebrity endorsement is also used as a marketing strategy for the latest trends in fashion. The model of advertisement has proven effective as the number of customers has constantly increased since the establishment.
Competitor analysis
The fashion industry is highly competitive and each company strives to get a sizeable market share (Sahney, 2015). Intelistyle Company has heavily invested in technology to differentiate itself from other online fashion retailers. The website interface where the customers place their orders is user-friendly. Intelistyle acts as a virtual shopping assistant where the clients have the opportunity to get what they require for different occasions. The company has also done market segmentation to match the tastes and preferences of many customers who use their portal.
Most of the online fashion retailers lack an artificial intelligence platform as efficient as Intelistyle’s. Therefore, Intelistyle gets a competitive advantage by implementing technology and artificial intelligence. The products are also delivered within the shortest time possible to avoid inconveniencing the customer. Customer satisfaction is enhanced as the quality of the products is high and the customers get value for their money (Keith, Unger, Rauch " Frese, 2016). The company has also invested in advertisements and promotions which creates awareness of their products. The comments and complaints left by the customers are taken as opportunities for improvement
The free advice given to the customers on what matches their colour tone and body gives the company competitive advantage. Most online retail companies do not implement the same strategy. The potential buyers are attracted by the fact that they get the free advice from professional designers.
Being an online retailer, Intestyle has minimal overhead costs as compared to other traditional retailers. The minimal overhead costs increase the profits margin made by the company. The expenses like rent and utilities are low when the business is primarily online. The workforce is also small in size due to the online operation of the business. The website is maintained and kept secure to ensure that the customers get easy access. Primark, Arcadia, George are the main competitors of Intestyle. They have a large market share since they were established a long time ago.
Intestyle has a strong management team and skilled employees who are ready to push the company forward. Having such a workforce that seeks to add value to the company gives Intelistyle an advantage. The management is constantly evaluating the market to implement fresh ideas. Innovation is encouraged by the company's culture and the workforce is always searching to discover the latest trends in the market.
SWOT analysis
Strengths
Use of technology and artificial intelligence to make the customers decide on what to purchase.
Strong team of professionals in diverse sectors such as information technology, finance, marketing, fashion, and design.
Low operational overheads due to a lean management team and online transaction which eliminates the requirements for physical stores.
Weaknesses
A cut-throat competition in the UK fashion market
Limited financial strengths as compared to established fashion retailers.
Opportunities
Expansion to other regions and abroad.
Increasing demand for fashion products. The fashion industry is expanding with the adoption of the quick fashion concept.
Threats
New entrants in the market who potentially reduce the company’s market share and adversely affect their projected sales.
Exposure to interest rate risks due to the presence of a long-term loan facility.
Price competition from the established fashion retailers.
The risk of cybersecurity as the website can be hacked.
Financial analysis of Intelistyle
Capital structure
The company was established in January 2017 with a startup capital of £200,000. The capital structure comprises of both equity and debt. The founders of Intelistyle had to look for multiple funding sources required to finance the ambitious tech startup. There are several factors that a company has to consider before settling on specific choices of capital source. For instance, debt financing increases the financing cost of the firm which narrows the profit margins. Owners’ equity helps the founders to retain control of the company and enjoy the profits alone. Equity investors demand a unit of ownership in the company and thus the ownership and control is significantly diluted. Furthermore, the investors demand a share of the profits. All these factors are considered in raising the seed capital or when a company has an expansion strategy.
Owners’ Equity
The share capital is composed of the initial contribution of the founders towards the company. Owners’ equity helps the founders of the enterprise maintain a substantial level of control and enjoy a significant proportion of profits. For Intestyle, the owners’ equity amounts to £100,000.
Debt Financing
Debt financing entails both short-term and long-term borrowing from a bank or other credit institutions. The option may be untenable for many startups due to the stringent requirements demanded by banks in terms of collateral and creditworthiness. However, the founders of Intelistyle were able to secure a 10-year long-term bank loan of £50,000.
Venture Capital financing
Venture capital firms usually evaluate the feasibility of a business based on a number of factors. They evaluate the idea, financial projections and the quality of management. Intelistyle was able to source the amount of £50,000 from venture capital. Under this arrangement, the venture capitalist acquired a third of the company and was thus entitled to a profit share in the business. The breakdown of the capital structure is presented in the projected balance sheet below.
Establishment Cost
The establishment cost of a business comprises the research and development cost to establish the artificial intelligence software and development of the company’s customer portal. The total costs related to software development and web design amounts to £ 50,000. The equipment cost for the computers and all hardware required running the artificial intelligence program amounts to £ 100,000. The remaining £ 50,000 was used as the working capital which was used for initial establishment expenses such as the purchase of stock, legal fees, license fees and administration expenses. The breakdown of the capital investments is presented in the balance sheet below.
Sales forecast
The company collected sales revenue amounting to £ 600,000 during its first year of operation. As the company grows and more investment is channelled towards diverse marketing efforts, the company expects to receive a 15% annual growth in sales. Based on these estimates, the company will enter into the profit-making zone from the year 2018 onwards. Operational expenses are also expected to grow uniformly, but they will be offset by a higher rate of sales growth. These estimates are broken down in the projected profit and loss statement below.
Projected 5-Year Income Statement
2017
2018
2019
2020
2021
Sales
600,000
690,000
793,500
912,525
1,049,404
Cost of Goods sold
360,000
414,000
476,100
547,515
629,642
Gross Margin
40%
40%
40%
40%
40%
Operating Income
240,000
276,000
317,400
365,010
419,762
Expenses
Payroll
105,000
110,250
115,763
121,551
127,628
Rent
30,000
30,900
31,827
32,782
33,765
Marketing
30,000
34,500
39,675
45,626
52,470
Insurance
5,000
5,100
5,202
5,306
5,412
General Administration
48,000
55,200
63,480
73,002
83,952
Depreciation
22,500
19,125
16,256
13,818
11,745
Interest cost
5,000
4,500
4,050
3,645
3,281
Total operating expenses
245,500
259,575
276,253
295,730
318,254
Net Profit/Loss
(5,500)
16,425
41,147
69,280
101,508
Corporation Tax
3,121
7,818
13,163
19,286
Profit after tax
(5,500)
13,304
33,329
56,117
82,221
Dividends
-
-
-
42,088
61,666
Retained earnings
(5,500)
13,304
33,329
14,029
20,555
PROJECTED BALANCE SHEET
2017
2018
2019
2020
2021
Current Assets
Cash
34,500
70,054
103,398
94,488
108,900
Inventory
60,000
64,500
69,338
74,538
80,128
Accounts receivable
30,000
32,250
34,669
37,269
40,064
Non-current Assets
Property plant and equipment
100,000
85,000
72,250
61,413
52,201
Software
50,000
42,500
36,125
30,706
26,100
TOTAL ASSETS
274,500
294,304
315,779
298,413
307,393
Current Liabilities
Accounts payable
40,000
43,000
46,225
49,692
53,419
Bank overdraft
20,000
21,500
23,113
24,846
26,709
Accrued expenses
20,000
21,500
23,113
24,846
26,709
Non-current Liabilities
Long-term loan
50,000
45,000
40,000
35,000
30,000
CAPITAL
Owners equity
100,000
100,000
100,000
100,000
100,000
Venture Capital
50,000
50,000
50,000
50,000
50,000
Retained earnings
(5,500)
13,304
33,329
14,029
20,555
TOTAL LIABILITIES AND EQUITY
274,500
294,304
315,779
298,413
307,393
Operational Overview
Organisational structure
The organisation is structured in distinct departments in charge of key aspects of running the business. The core business of Intelistyle is to sell clothing using the online platform to add value to their products. The company does not simply sell clothes but also helps its customers decide on fashion choices. To deliver on its objectives, the company uses the input of fashion stylists and designers. Furthermore, the company relies on the input of experts in mathematics and computer science to design and run their artificial intelligence platform that helps customers make purchase decisions. To ensure sustainability and growth of the business, the company has a business development team in charge of marketing. Finally, the finance and accounting department is in charge of managing the company's financial resources.
The organisational structure is functional in nature comprises of the four core functional areas of business. The departments include information technology, creative, marketing, and finance. The information technology department ensures that the web platform is always running smoothly. It also has a team dedicated to constantly making modifications and improvements from the recommendations of various stakeholders. The creative department houses the experts in fashion who work to identify the latest fashion trends in the industry. Their recommendations are taken up by the artificial intelligence team to make necessary adjustments. The marketing department houses the business development team that design and implement strategies of how to grow the business. Finally, the finance department ensures that all other departments are allocated the necessary resources to run their affairs. The finance department also monitors the revenue streams and then design the relevant financial reports.
Management
The company has a lean team of management due to its relatively small size as of now. At the helm of leadership is the Chief Executive Officer (CEO) is one of the founders and has a solid IT background. He is also the vision carrier for the company. The Chief Operations Officer (COO) is also a co-founder who has a strong background in artificial intelligence. The COO ensures a smooth running of day to day activities. Below the two are the various heads of department who oversee the activities in their respective departments. The Chief Finance Officer (CFO) is the head of the finance department. The Business Development Manager is the head of the marketing department. The Machine Language Engineer is in charge of the IT department and oversees daily operations. The head of Fashion and Design is in charge of the creative department which is responsible for identifying the latest fashion trends in the industry.
Production Process
The company maintains an inventory of clothing which is displayed on the website. The production process is however outsourced to external designers as of now. The company also has physical stores in England and Wales. The website platform offers a unique service to the customers by simplifying the process of picking an outfit from their wardrobes. The service is offered to customers for free. The IT experts and fashion designers working for the company ensure timely updates of the product portfolio displayed on the website. The customers further get recommendations of clothes they can buy to complement their wardrobes. The company has a diverse network for its delivery services in England and Wales. Customers are charged a fixed amount on top of the purchase price to facilitate the shipping process.
Physical space and equipment
The company does not have a physical retail store. The company has an office in London which is the base of operations. The office space is under leasehold terms. The office space also comprises of a lab that is primarily used for research and development with regard to artificial intelligence and computerised applications. The lab is a core component of Intelistyle given that the company is tech based. The Lab houses highly advanced technology equipment and several networked computers that are used to design and run the artificial intelligence platform. The biggest investment for the company as of now has been the creative lab. The company also has a small warehouse which acts as the store for its products.
Conclusion
Successful entrepreneurial ventures are businesses that are able to use innovation to distinguish themselves from their competitors (Sahney, 2015). This business model consists of distinctive parts that enable one to deeply scan the Intelistyle business operations. It begins by introducing the company whereby the founders of Intelistyle used their passion in technology to create a business model comprising of unique features that did not exist in the UK market at the time. For the first time, online shoppers have a virtual assistant that helps them identify the best outfits and how they can be matched. They chose the online platform for their business due to its increasing prominence and its ease of use. Apart from having an excellent idea, entrepreneurs need to thoroughly understand the market. The market analysis helps marketers understand the market segmentation and the unique characteristics that exist in each segment. The analysis of the competitors also helps a business approximate its market share and identify the best marketing strategies to adopt. The next part of the business model is the financial analysis which brings out key aspects such as the capital structure, projected income statement and projected balance sheet. Finally, the operational overview sheds light on the structure of the organisation, the management as well as the day to day running of the enterprise.
References
Keith, N., Unger, J. M., Rauch, A., " Frese, M. (2016). Informal learning and entrepreneurial success: a longitudinal study of deliberate practice among small business owners. Applied Psychology, 65(3), 515-540.
Sahney, S. (2015). Critical success factors in online retail–an application of quality function deployment and interpretive structural modeling. International Journal of Business and Information, 3(1).
