Professional Documents
Culture Documents
Business Plan
November 27th, 2008
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Table of Contents
Executive Summary .............................................................................................................................. 4
Business Overview................................................................................................................................ 5
Mission Statement ............................................................................................................................................ 5
Value Proposition ............................................................................................................................................. 5
Product/Market Definition ........................................................................................................................... 5
Company Description...................................................................................................................................... 5
Management Team........................................................................................................................................... 6
Board of Advisors ............................................................................................................................................. 7
Value Proposition.................................................................................................................................. 7
The “Burning” Problem .................................................................................................................................. 7
Description of Service ..................................................................................................................................... 7
Benefits................................................................................................................................................................. 8
Market Opportunity ............................................................................................................................. 8
The Industry ....................................................................................................................................................... 8
The Market .......................................................................................................................................................... 9
Competitors ..................................................................................................................................................... 10
Direct Competitors .....................................................................................................................................................10
Indirect Competitors .................................................................................................................................................10
Competitive/Market Entry Strategy ....................................................................................................... 10
Competitive Advantage .....................................................................................................................11
Differentiation ................................................................................................................................................ 11
Imitations .......................................................................................................................................................................11
Improvements ..............................................................................................................................................................12
Entry Barriers ................................................................................................................................................. 12
Partnerships .................................................................................................................................................... 12
LongTerm Growth ........................................................................................................................................ 13
Capabilities ...................................................................................................................................................... 13
Business Model ....................................................................................................................................14
Success Metrics............................................................................................................................................... 15
Scale and Expansion...................................................................................................................................... 15
Marketing & Sales Plan .....................................................................................................................15
Communications Strategy........................................................................................................................... 15
Pricing Strategy .............................................................................................................................................. 16
Distribution Strategy.................................................................................................................................... 17
Sales Strategy .................................................................................................................................................. 17
Marketing and Sales Costs .......................................................................................................................... 18
Operations Plan ...................................................................................................................................18
Base of Operations and Courier Optimization .................................................................................... 18
Product Research and Purchasing........................................................................................................... 19
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Product Cleaning, Assessment and Maintenance............................................................................... 20
Product Rental, Delivery, and Return .................................................................................................... 20
Inventory Management ............................................................................................................................... 20
Website Development and Maintenance............................................................................................... 21
Development Plan...............................................................................................................................21
Prelaunch (Dec ’08Jan ‘09)...................................................................................................................... 21
Launch (Feb ‘09)............................................................................................................................................. 22
PostLaunch and Beyond............................................................................................................................. 22
Key StartUp Costs ......................................................................................................................................... 23
Critical Risks and Contingencies....................................................................................................23
Competitive Entry.......................................................................................................................................... 23
Retail Partnership ......................................................................................................................................... 24
Target Market ................................................................................................................................................. 24
Inventory Management ............................................................................................................................... 24
Financing .......................................................................................................................................................... 25
Financial Plan .......................................................................................................................................25
Key assumptions ............................................................................................................................................ 26
Breakeven/Sensitivity Analysis ............................................................................................................... 27
Appendices ............................................................................................................................................28
Appendix A CV’s of Management Team ............................................................................................... 29
Appendix B Bagnifique Marketing Survey Results.......................................................................... 30
Appendix C – Financial Model ................................................................................................................... 33
Appendix D – Operational Local Responsiveness in Metro Areas................................................ 34
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Executive Summary
Canadian fashionistas have been anxiously awaiting the arrival of Bagnifique, a unique
online rental service for luxury designer handbags.
A phenomenon that is in its infancy, online handbag rental services have been rapidly
increasing in popularity in both the US and the UK markets. However, there remains large
untapped opportunity in Canada!
There are 5.8 million women in Canada between the ages of 20 and 44, most of whom do
not have a high enough disposable income to buy the luxury bags that many so desire. Why
not give them a chance to satisfy their cravings for wearing beautiful things?
We are proposing to give these women a taste of the good life. Bagnifique will cater to the
urban fashionista who would die to wear Louis, Prada and Chanel, but who could never
afford to pay the high price tags. For these women, wearing a knockoff would be
blasphemy.
Bagnifique will solve this burning problem by giving women the opportunity that they have
missed for so long. Whether it’s for that special night out, or just to feel put‐together,
confidant, and beautiful, Bagnifique allows the young fashion‐conscious woman to
affordably achieve the image she desires without diving too deep into her pockets.
We are convinced that Bagnifique will be a great success in the Canadian market for a
number of reasons. First, the Canadian market is rife with fashionable women with minimal
disposable incomes, a fact made obvious by the proliferation of stores like Zara and H&M.
The market is there.
Second, Bagnifique will leverage a powerful and growing trend toward seeking the
experiences of luxury, rather than ownership. This is proven by the success of our
counterparts in the US and the UK as well as by other luxury rental service for such items
as cars, travel destinations, and formal wear.
Finally, we will be applying and improving upon a business model that has proven
extremely successful in other markets.
An untapped market opportunity combined with a strategic business plan, and a passionate
and capable management team, well‐positions Bagnifique to become an entrenched
Canadian national brand.
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Business Overview
Mission Statement
We will give young, fashion forward women the opportunity to rent luxury, designer
handbags they desire but are unable to afford.
Value Proposition
Keeping up with the latest fashion trends can be very expensive. With short‐lived fashion
cycles and astronomically priced handbags, it is impossible for many middle‐class women
to keep up with the trends and buy all the beautiful bags and accessories they desire.
Bagnifique is proposing to solve this problem by offering these women temporary
ownership of the bags they love at fraction of the retail price.
Product/Market Definition
Bagnifique will mostly cater to middle to upper‐class, fashionable, cosmopolitan women,
ages 20‐44 with income ranging from $40,000 to $80,000. These women are fashion‐
forward, value their appearance and likely live close to Canadian metropolitan centres.
They have the disposable income to shop but not to spend on high‐end luxury accessories.
They cannot afford the high‐priced designer bags they so covet. For many of them, carrying
a knockoff is not an option. Bagnifique’s online rental service will provide these women
with access to designer handbags fulfilling their desires for the luxury experience. It will
allow them to carry a like‐new bag as often as they would like for as long as they would like
for a fraction of the retail value of the bag. Our business strategy will allow us to satisfy
these women’s craving and need for luxury items and capture a portion of the disposable
income they are prepared to devote to fashion.
Company Description
The idea for Bagnifique came from its CEO – Joanna Lasko. Last summer as Joanna was
getting ready for a wedding, she put on that same black dress she wore a number of times
before wishing she could afford to dress up her look with a gorgeous purse. Knowing that
plenty of other women face the same problem – a business idea was born – an on‐line
rental of luxury, designer handbags. Bagnifique is a low capex investment that can be
successfully run by an already established management team. Bagnifique will leverage the
knowledge and business acumen of its founder and management to create an entrenched
national brand through operations and marketing excellence, to create widespread
awareness of our service, to surpass the capabilities of our competitor and future
competitors, and to ensure customer loyalty in the face of potential growth in competition.
Bagnifique will differentiate itself in the following ways:
• We will be the first in Canada to offer a bilingual Web site making us the first mover in
Quebec.
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• We will attempt to create an exclusive partnership with Holt Renfrew. This will provide
us with a cost advantage as we will procure bags at a discounted price. This will give us
an inventory advantage through access to partner resources.
• We will employ an optimized courier network to ensure fast and timely delivery. We
will offer same day service to customers in our local area.
The combination of market need, low initial investment required by the business and the
expertise of its well‐rounded and diverse management team will make Bagnifique a
successful venture.
Management Team
President/Chief Executive Officer/Director of Marketing – Joanna Lasko
Joanna is the visionary and inspiration behind this venture. She has a passion for luxury
brands and is a self‐proclaimed fashionista. She also brings with her a background in
advertising and marketing for several multi‐national consumer brands and is an MBA
Candidate of the Rotman School of Management, class of 2009. Joanna will combine her
passion and her experience to acquire and maintain inventory that meets customer
demand, to build strong supplier relationships and to create marketing that connects with
and inspires consumers.
Chief Operations Officer – Salvatore Provvidenza
The COO's primary responsibilities will be to scout potential couriers, set‐up relationships
with these couriers, and develop an effective communication network between the couriers
and the Bagnifique packaging representatives. The COO will also monitor handbag rental
frequencies and will work closely with the CEO to utilize rental analytics in order to guide
handbag purchasing and set price points. Salvatore has a Mechanical Engineering
background and has developed a knack for operations management. During venture
concept development and the creation of this business plan, Salvatore used his operational
knowledge and out‐of‐the‐box thinking to generate a value added and efficient operations
plan. Salvatore was also a strong contributor to many other components of Bagnifique’s
business plan.
Chief Technology Officer/Director of Finance – Arif Bandali
The CTO will be responsible for the design, development, and upkeep of the website. He
will, with cooperation from the Director of Marketing, provide analytic tools to study and
capitalize on the usage behaviours of Bagnifique’s clients on the web site. He will be
responsible for hiring the contractors who will develop the site and, in a pinch, will be
happy to sit down and code alongside them. As the Director of Finance, he will be
responsible for analyzing the revenue/cost model and making sure Bagnifique does not
stray too far from projections. Arif has 5+ years of experience in the software industry, first
with a startup in New York, and then 4 years consulting for Workbrain Inc. He spent a
summer as an associate, working on the trading desk of UBS Securities Canada, and is
currently finishing up his MBA at the Rotman School of Management.
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Board of Advisors
The Board of Advisors and their credentials was listed here.
Value Proposition
The “Burning” Problem
Fashion is an expensive prospect. With fashion‐cycles that are short‐lived, and bags that
are astronomically priced, it’s impossible for many fashion‐conscious women to keep up
with trends and to buy all the beautiful bags and accessories they wish they could.
Bagnifique is proposing to solve this problem by offering these women temporary
ownership of the bags they love at fraction of the price. Rental of luxury goods, such as
yachts, jets, and formal wear has been available for many years. Why not handbags?
According to our survey results, where we asked 100 women how often they wish they
could buy a new designer handbag, 24% responded every 1 to 3 months while another
24% responded every 3‐6 months. However, as seen by their average annual handbag
expenditures, most are seldom able to make such purchases. This indicates that the women
in our target market have desires that are currently unfulfilled due to personal‐finance
shortcomings.
Our service will provide a solution to this problem. It will allow users to carry a like‐new
designer handbag as often as they would like for as long as they would like for a fraction of
the cost of buying the bag outright from a traditional retailer. No commitment is required.
Furthermore, in today’s economic downturn, women have less to spend on the purchase of
luxury items; renting may be the solution.
Our service will cater to fashionable cosmopolitan women between the ages of 20 to 44.
These women have some disposable income to spend on fashion items but cannot afford to
pay the high price tags of designer bags they so covet. For them, carrying a knockoff would
be blasphemy. Bagnifique’s online rental service will provide women with access to these
handbags, fulfilling their desires for the luxury experience.
Description of Service
We will create a unique online service in Canada that gives young, fashion forward women
the opportunity to rent handbags for a weekly or monthly fee. Our collection will consist of
high‐end brand name bags, from everyday totes to formal evening bags. To order a bag,
customers will simply have to browse the collection of current designer bags that are
offered, place the order and it will be shipped to them directly within 3 days. When they are
ready to return it, they simply have to slip the bag into the pre‐addressed shipping box that
will be included when the bag is sent, and drop it off at the post office to be shipped.
Customers can keep the bag for as long as they would like and return it when they are
ready to update their look. Recognizing that different bags serve different functions, the
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service will eventually allow customers to rent up to 3 bags at time. This will ensure that
our customers have the right bag for every occasion. We also understand the personal
connection that women have with the bags once they begin to wear them. For this reason,
we will offer them an option to purchase our bags.
Benefits
There are two primary benefits to this service:
1) We will allow the fashion‐forward woman to affordably achieve the image she desires.
Luxury handbags can cost upwards of $600. In fact, it is not uncommon to see retail
prices over $2,000. The retail industry for luxury products has traditionally catered
to a niche target market: the very wealthy. Through their marketing efforts,
designers have created high demand for these bags as they are seen as very
exclusive. Today, it has become a status symbol to be seen carrying a Prada or a
Chanel. This service will make these bags accessible to an aspirational market
segment as our rental prices will meet our market’s willingness to pay. Although our
survey results showed that women’s willingness to pay was a bit lower than what
we are expecting to charge, we feel that our sample may not have been entirely
representative of our target as over 60% of respondents had income levels below
$50,000.
2) We will allow the fickle fashionista to frequently update her look.
Bagnifique will offer a rental service. Therefore, no commitment is required. Our
customer will be able to change her bags more frequently than if she was buying them.
Furthermore, by frequently renting her bag, she will be able to update her entire look
by changing that one very important accessory. For instance, a woman will feel much
better about wearing her go‐to little black dress for the twentieth time if she knows that
she has a new beautiful handbag to pair it with.
Market Opportunity
The Industry
We are operating in the Luxury Rental Services Industry. Inclusive in the industry are
rental providers of goods and services such as Yachts, Cars, Jets, Bridal, Formal Wear and
Costumes. A new segment has recently emerged – high‐end accessories rentals. This
particular segment is in its infancy but growing rapidly.
Bag, Borrow and Steal was the first to launch in 2004, but serves only the US domestic
market. Since its launch in 2004, it has developed a 250,000 member base. Another US
counterpart, From Bags to Riches, who also launched in 2004, has seen 57% growth in
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revenue. This industry has shown proven demand in the US market but there is still
untapped opportunity in Canada.
The Internet is becoming an increasingly significant distribution channel. In 2005, online
retail revenue totaled 7.9Bn, according to Statistics Canada, which is a threefold increase
from 2003. Furthermore, 7M Canadians made an online purchase in 2005, which
accumulated to over 49M transactions. The survey also showed that 57% of purchases
were made on Canadian Web sites, the remainder from US vendors. As the CDN dollar
continues to weaken, we believe this trend will begin to change in our favour.
We believe that now is the critical time to enter this industry. In the wake of an economic
downturn, consumption of luxury goods will slow. Bain and Co. predicts that global growth
in luxury spending will plunge to 3% in 2009 compared to 6.5% in 2008 and 9% in 2007.
Most relevant to our business are the changes in spending activities of the middle to upper
income segment. Women that once may have considered an expensive bag purchase are
beginning to become much more prudent with their finances. Renting designer handbags
will become the better alternative, as it will still give them the emotional experience they
desire. This phenomenon will serve to hasten the growth in an already rapidly growing
industry.
The Market
This trend is driven by the growth of transumerism. Transumers are defined as “consumers
driven by experiences instead of the ‘fixed’, by entertainment, by discovery, by fighting
boredom, who increasingly live a transient lifestyle, freeing themselves from the hassles of
permanent ownership and possessions.” We will thus be targeting middle to upper‐class,
fashionable, cosmopolitan transumer women, ages 20‐44 with incomes ranging from
$40,000 to $80,000. These women are fashion‐forward, value their appearance and likely
live close to Canadian metropolitan centres. They have the disposable income to shop but
not to spend on high‐end luxury accessories.
As a secondary market, we are also expecting to appeal to fashionable university students.
These women will be an important source for word‐of‐mouth advertising as they are highly
influenced by their peers. As they graduate, they will help drive the growth of our market.
In Canada there are approximately 470,000 women concentrated in the four primary
metropolitan centres – Toronto, Montreal, Calgary, and Vancouver. Our survey found that
40% of women would be interested using our service. However, because of the small
concentrated sample size, we are going to apply a more conservative estimate and assume
10% of Canadian metropolitan women would be interested in our service. Thus the size of
our market is approximately 47,000 excluding university students.
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Competitors
Our target market is made up of women who reap as much or more satisfaction from the
experience of wearing the item than from purchasing the item. Currently, this need is not
being met in Canada.
Direct Competitors
We have only one direct competitor in Canada: Got2haveithandbags.com.
Got2haveithandbags.com launched in February 2008 and does not appear to be managed
very well. It is difficult to locate online and the collection is small and lower end than what
ours will be. Its marketing is unsophisticated and amateur. Furthermore, in speaking with
many potential customers, we have not found one person that has even heard of this
company. Thus, they currently have almost no brand equity.
Got2haveithandbags.com has a first mover advantage. However, we feel this can be easily
mitigated with Bagnifique’s superior offering, as well as its excellence in marketing and
operations.
Indirect Competitors
Bagnifique competes with eBay which occasionally gives consumers the chance to purchase
bags at a lower price than offered at Canadian retailers. However, deals can be hard to find.
Additionally, as the CDN dollar weakens, the opportunity to find a deal on eBay lessens. In
addition there is a high probability of being charged duty at Canadian customs so the price
of the bag is never guaranteed upon purchase.
It should be noted that although we are competing somewhat with traditional high‐end
fashion retailers like Holt Renfrew, and designer stores like Gucci, Prada, and Louis Vuitton,
our threat to them is minimal. Even in the wake of a slowing economy, women who would
normally purchase many luxury handbags will still purchase them, but at a lesser rate. We
do not believe that these women are our customers. In fact, we believe we could potentially
expand the market for such retailers, as Bagnifique will be purchasing our bags from them.
Competitive/Market Entry Strategy
Upon analysis of our competitors and target market, Bagnifique should be able to capture
at least 70% of the market. Bagnifique will leverage our superior marketing and
operations skills to connect with and retain our customers. Bagnifique will also offer a level
of sophistication that our competitor is lacking. To do so, Bagnifique plans to enter the
market with an inventory of 50 of the most sought‐after bags, an attractive and user‐
friendly website that induces repeat visits, and hopefully, an article placement or television
appearance through a medium popular with potential customers.
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Competitive Advantage
Differentiation
As mentioned, our direct competitor does not display the management expertise to satisfy
consumer demand. Additionally, we have spoken to the founder of FromBagstoRiches.com
in the United States, and it does not appear that she has any intention of entering the
Canadian market because of her unfamiliarity with the Canadian consumer. Thus, we feel
the competitive threat to be minimal.
Our service will leverage the knowledge and business acumen of its founders to create an
entrenched national brand through operations and marketing excellence, to create
widespread awareness of our service, to surpass the capabilities of our competitor and
future competitors, and to ensure customer loyalty in the face of potential growth in
competition.
Our primary point of differentiation will be our focus on the more classic, and high‐end
handbags. Our bags will have long product lives and will not go out of style very quickly, if
at all. We will carry bags only from the most exclusive designers.
We will imitate many of the best practices of our U.S counterparts as well as other online
rental services with similar business models. We will also make a number of improvements
to ensure that we maintain a competitive advantage.
Imitations
• We will create an attractive website with high emphasis placed on user‐interface
principles, making it easy for our customers to find the bags they are looking for. We
will segment our collection into smaller segments based on categories that are relevant
to our target market such as “Price”, “Brand”, “Occasion”, “Style”
• We will invest heavily in search engine optimization so our potential customers will be
able to find our Web site quickly and easily.
• We will offer membership options that will provide members benefits and cost savings.
• We will create a loyalty program through our membership plan that functions on a
point system. Customers will automatically collect points for each rental and will be
eligible for a free rental once they’ve collected a specific number of points.
• We will leverage an efficient inventory management system that will ensure that we
have the requested bag in stock at least 80% of the time.
• We will ensure that we develop a thorough understanding of our customers to keep
them satisfied with our service and by using their feedback to make any necessary
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changes. For instance, we will provide an opportunity for our customers to tell us if
there is a bag that we are missing that they would like to see.
Improvements
• We will be the first in Canada to offer a bilingual Web site of this nature making us the
first mover in Quebec.
• We will attempt to create an exclusive partnership with Holt Renfew. This will provide
us with a cost advantage as we will procure bags at a discounted price. This will give us
an inventory advantage through access to partner resources.
• We will employ an optimized courier network to ensure fast and timely delivery. We
will offer same day service to customers in our local area.
• We will offer our members rewards for referrals to create brand awareness via word of
mouth.
• We will offer new members a style assessment via a virtual stylist and will frequently
recommend bags to those customers that we believe will suit their style profiles.
Entry Barriers
Although our business model requires a low capex, which may make it easier for new
entrants, we will erect entry barriers in a number of ways.
First, we believe that we have the marketing capabilities to garner high brand‐equity with
Canadian consumers to discourage them from using a competitive service. Furthermore,
through marketing and PR initiatives such as referral programs and magazine appearances,
we believe our service will achieve scale rapidly which will also help prevent new entrants.
Second, we will create switching costs for our consumers via a loyalty program. Finally, by
securing an exclusive partnership with Holt Renfrew, we will incur a cost advantage as we
will be able to purchase our bags at a lower price than our competitor(s). These savings
can be passed on to our customers.
Partnerships
A number of partners will have vested interest in our service. Because we will be buying
bags at relatively low volumes, and because many luxury vendors are exclusive and
difficult to partner with, we will have to buy most of our bags at full retail value. We will
thus develop relationships with local retail partners that have relationships with these
vendors who will help us to provide the hottest handbags. In return we will purchase our
handbags from these retailers. We are hoping to exclusively partner with Holt Renfrew to
do so. In that case, Holt Renfrew would benefit from our success.
In addition, we would like to put our flyers at the front of small clothing boutiques that our
customers frequent. In return, we will consider including their name or logo on our
website, as well as a link to their website. As our site garners more visits, this may help our
retail partners increase their own customer base.
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Long‐Term Growth
Within five years, Bagnifique will offer a vast selection of handbags, anywhere from 300‐
500, based on consumer demand. Although at first we will buy our bags at retail value, we
would like to eventually form vendor relationships to ensure that we are able to procure at
least 75% of our bags at wholesale prices. Furthermore, we would like to expand our
product offerings to include designer jewellery and other accessory rentals as well.
Capabilities
Together, the Bagnifique team has many of the capabilities, as well as the business acumen,
to achieve success. However, we have recruited an excellent board of directors to
compensate for the expertise we may lack. Our board will be able to provide us with helpful
and timely advice in understanding the luxury apparel and accessories industry, keeping
up with consumer demand, remaining customer‐focused in the ever evolving world of
fashion, and in efficiently operating a Web‐based business. Through on‐going contact and
communication with our board, as well as through the hands‐on experience we will gain by
operating, our capabilities will continuously evolve as needed.
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Business Model
Bagnifique’s primary source of income will be the fees garnered from the rental of
handbags. Supplemental income will come from handbag rental insurance, the purchase of
handbags by interested buyers (at latter stages of functional life), and from annual
membership fees.
The primary operational expenses will be derived from the maintenance and replacement
of existing handbag inventory, courier fees (however, these are passed on to the
consumer), management fees, marketing costs, and website maintenance. Since part of
Bagnifique’s value proposition involves keeping the consumer up‐to‐date with respect to
handbag news, website maintenance will be a daily or at the very least, a weekly, operation
and key success factor.
Secondary expenses exist in the form of warehousing/overhead, packager/cleaner wages,
and research costs. Since the initial start‐up will be operated out of a member of the
management team’s residence, warehouse costs will be minimal. Also, since the tasks
performed by the packagers/cleaners are unskilled and are limited in terms of hours
worked, the wages paid will be low ($12/hr). Further, depending on the labour intensity of
these tasks, the packager/cleaner responsibilities may be performed by members of the
management team. Although training to package, clean and assess bags is necessary, the
time and money needed to facilitate it, is trivial. In terms of research, tasks are primarily
human capital intensive, will be performed by the management team, and thus are included
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in management fees. Sample costs that do fall under research are the purchase of fashion
magazines or tickets to a trade show; these are seasonal and sparse expenses.
Success Metrics
There are numerous metrics Bagnifique must monitor to track and fine‐tune success. As an
overall metric, Bagnifique will use profit margin (or EBITDA) to track operational efficiency
and ensure Bagnifique is capturing maximal value at minimal cost. Inherent to efficiency
will be the tracking of rental frequencies and handbag rental utilization to ensure that the
handbags offered are indeed the handbags with the greatest demand among consumers.
To optimize the value generated from membership fees, Bagnifique will track the
correlation between the rental frequencies of members and non‐members versus rental
price and membership fees, in order to optimize the price points of both, and capture the
greatest value. Since the consumer will not look favourably among constantly fluctuating
price points, the results of this analysis will only be realized on an annual basis. The same
type of optimization analysis will also apply to handbag insurance.
In terms of customer satisfaction, Bagnifique will include customer surveys in order to gain
feedback on current functionality, methods of operation, and means to improve.
Scale and Expansion
The original Bagnifique business model and operational concept of local responsiveness
was designed for Toronto, home to 46% of the target market. As a result, continued
inventory expansion and evolving operational efficiency, with Toronto as the centerpiece,
is a key objective for Bagnifique. This is not to say that, pending a cost‐benefit analysis,
Bagnifique would not consider expanding components of the business model into other
metropolitan areas. If this was the case, an opportunity to capitalize on scalability would
present itself. This scalability would include, but would not be limited to:
• Increased brand awareness due to availability of local responsiveness in other
metropolitan centers
• Stronger partner/vendor relationships due to increased use of service, larger handbag
volumes, and increased geographic reach
• Stronger relationships with local couriers which operate in multiple metropolitan areas
• Additional marketing economies
• Research benefits from a larger and more diversified customer base
Marketing & Sales Plan
Communications Strategy
Bagnifique’s marketing strategy aims to attract, capture and retain its customers. We will
attract potential users to our website through a number of communication techniques.
First, since we operate in the online arena, search engine optimization will be key to
increasing traffic to our site. We must ensure that potential clients searching the web for a
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bag rental service in Canada see our site as one of the first hits on that search. Next, we will
build a strong online presence by advertising on fashion and lifestyle websites (such as
www.sweetspot.ca) frequented by our potential clients. Furthermore, 50 visitors to our site
each month throughout our first year will have a chance to obtain a $20 gift certificate.
Also, the management team will leverage the company’s unique proposition to get publicity
through talk shows appearances and article placements. Finally, we will engage in
traditional advertising and distribute promotional coasters to martini bars as well as
advertise in Canadian fashion magazines such as Lou Lou or Elle Canada.
Once individuals are at our site, our strategy will focus on capturing and enticing them to
become regular users of our services. To accomplish this Baqnifique will have a yearly
membership fee ($10/yr) offering very attractive benefits. First, with each rental, members
will collect loyalty points which they can put towards a free rental. In addition, Bagnifique
members will receive a free weekly rental on their birthday. Finally, members will also
have access to various promotions (such as “rent one bag and get another one for 20%
less”) throughout the year. Thus, the membership commitment will be used to retain our
customers and increase their rental habits. Finally, to stimulate further demand, we will
also offer loyalty points to users who refer their friends to our website.
In order to retain our customers in the long run we will use “new arrivals” notifications and
the Bagnifique newsletter as methods of connection with our clientele. We will tailor the
“new arrivals” emails to match our customers’ preferences as indicated in their
membership form. This push strategy can increase our sales due to the minimal effort
required on the customer’s side. Our clients will also receive Bagnifique newsletter
informing them of any new fashion trends, new designers etc.
Our marketing strategy efficiently communicates the benefits of our services at each stage
of user interaction.
Pricing Strategy
Bagnifique’s pricing strategy will be based on the percentage of the bag’s retail value. As
the retail value of the bag increases, the percentage of the value will be decreased and thus
the rental price will not increase in a 1:1 relationship with the retail value (see the table
below). This strategy is designed to entice users to rent higher‐priced bags. More
importantly, according to our research of handbags’ retail values and our competitor’s
pricing, we found that our strategy will make Bagnifique’s rentals very competitive.
Bagnifique will have two price points: weekly and monthly. The monthly price will
equivalent to two and a half weeks’ rental. This heavily discounted monthly price was
designed to stimulate longer rental periods which, in turn, will decrease our costs
associated with shipping and cleaning of the bags.
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Bag's Retail % of Retail Weekly Price Monthly Price Payback Payback Period
Price Value Period (months)
(weeks)
$ 500.00 6.00% $ 30.00 $ 75.00 16.67 6.67
$ 600.00 5.75% $ 34.50 $ 86.25 17.39 6.96
$ 700.00 5.50% $ 38.50 $ 96.25 18.18 7.27
$ 800.00 5.25% $ 42.00 $ 105.00 19.05 7.62
$ 900.00 5.00% $ 45.00 $ 112.50 20.00 8.00
$ 1,000.00 4.75% $ 47.50 $ 118.75 21.05 8.42
$ 1,100.00 4.50% $ 49.50 $ 123.75 22.22 8.89
$ 1,200.00 4.25% $ 51.00 $ 127.50 23.53 9.41
$ 1,300.00 4.00% $ 52.00 $ 130.00 25.00 10.00
$ 1,400.00 3.75% $ 52.50 $ 131.25 26.67 10.67
$ 1,500.00 3.50% $ 52.50 $ 131.25 28.57 11.43
To illustrate this pricing scheme, consider a Louis Vuitton Monogram Speedy 30 bag that
retails for approximately $626 CAD. According to our pricing strategy (at 5.75% of the
bag’s value), this bag would rent for approximately $35/ week or $86/month. The same
bag can be rented at our competitor – Got2HaveitHandbags – for $66/week or
$165/month. Our scheme will give us competitive pricing that should allow us to capture
our competitor’s customer base.
Of course, we understand that our pricing strategy will also have to be dynamic and
consider competitors’ pricing, style and functionality of the bag. Thus, at times it may be
necessary for Bagnifique to price a bag according to outside research or findings, rather
than follow a strict percentage‐based pricing. For example, if we notice competitors are
offering the same purse at a price lower than our pricing strategy would indicate, we will
need to adjust that rental price. Also, trendy purses with a short lifespan may require a
higher price while classic purses with long‐term rental potential could be priced lower as
their costs can be recouped over a longer period of time. We will also consider adjusting
our pricing strategy as we learn more about the rental habits of our users and the
popularity of our products.
Distribution Strategy
Since Bagnifique is an on‐line service there is no comprehensive distribution strategy. The
bags will be delivered directly from our garage warehouse to our clients using local
couriers (see Operations for more details).
Sales Strategy
Due to the nature of Bagnifique’s business and its on‐line presence, we will not need a
dedicated sales force. The 3 MBA students starting this business will focus on marketing,
advertising and operations. Members of the marketing department will also work on any
partnership opportunities. For example, we might be able to partner with bridal stores or
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movie production companies interested in renting our bags to complement their products
or services. As Bagnifique grows, we will add two service staff who will handle general
tasks including cleaning and sorting the bags.
Marketing and Sales Costs
Our marketing costs are directly associated with the initiatives described above. Largely,
our marketing strategy is low‐cost. Our major expense will be advertising in the leading
Canadian fashion magazine and thus we will only take out two 1/3 page ads in the first
year. We believe the market need, along with our search engine optimization, on‐line
presence and publicity will be sufficient to draw a large number of customers. For details
on the marketing costs, please see financial model in Appendix C. A summary is included
below:
Operations Plan
Our operations plan focuses on delivering our value proposition to the customer through
an efficient and cost effective manner with an emphasis on quality and flexibility.
Base of Operations and Courier Optimization
Bagnifique will operate out of Toronto, not only because it is home to the venture
development team, but also because 46% of the target market resides in the city.
Headquartering in the heart of Toronto will facilitate a courier optimization approach to
handbag delivery and return, which will minimize costs and serve as a point of
differentiation from Bagnifique’s competitors.
Bagnifique’s courier optimization approach consists of teaming with numerous couriers in
order to minimize costs and add responsiveness to the region of focus – Toronto.
Bagnifique is currently seeking out couriers in Toronto and the Greater Toronto Area
(GTA) which match our operational needs profile: timeliness, range, quality service, and
cost effectiveness. The numerous local couriers in the city lowers their supplier power, and
will enable Bagnifique to command competitive prices. In terms of serving the rest of
Canada, Bagnifique is seeking out a major courier (FedEx, Purolator, Canada Post, etc.) to
meet its needs.
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The diagram above depicts the idea of courier optimization. Each red ellipse represents the
area coverage of a Bagnifique courier, with several local couriers serving Toronto and the
GTA, and one major courier serving the rest of Canada. Note that only the customers found
within Toronto and the GTA will be able to utilize the local responsiveness value added
feature of Bagnifique. Pending the success of the venture in other major markets such as
Montreal, Vancouver, and Calgary, Bagnifique will consider adopting the same courier
optimization approach in these markets. The decision will hinge on a cost‐benefit analysis
between the additional warehousing costs and inventory management requirements
versus reduced shipping costs and added revenue as a result of the local responsiveness
service. Please see Appendix D for a diagram depicting local responsiveness in multiple
metropolitan areas.
Product Research and Purchasing
Part of the Bagnifique appeal will be in maintaining a selection of both classic staples and
trendy handbags. In order to stay at the forefront of handbag fashion, Bagnifique’s product
research will include style magazines, trade shows, retail channel data mining, and
respected designer critiques. Also, the website will facilitate consumer feedback and
primary analytics derived from the rental frequencies of individual handbags, various
handbag types (clutch, hobo, satchel, etc.) and most popular designers.
Bagnifique intends to develop a relationship with a high‐end luxury retailer of handbags,
such as Holt Renfrew, in order to purchase its preferred volume and scope of handbags.
Establishing this type of relationship will not only guarantee instance access to most luxury
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handbags, but will also allow Bagnifique to reach purchasing scale with a single retailer and
gain discounted pricing. The sum of these benefits serves as a competitive advantage over
competitors who cannot create the same type of relationship. In the event that this type of
relationship is not possible, handbag purchasing will be at retail price until Bagnifique can
establish sufficient brand equity and scale in order to position itself to purchase at a
discounted price. Relationships with designers will be sought during initial development,
but we do not anticipate capitalizing on these relationships until the second and third years
of operation.
Product Cleaning, Assessment and Maintenance
To ensure that all handbags are rented at the absolute best quality, each handbag will be
evaluated after each rental when returned to the Bagnifique warehouse. All employees will
be trained to handle the various materials used in our designer handbags, and will learn to
value all items in inventory, which will be a function of condition and recouped handbag
capital costs to date. Since part of the Bagnifique model allows customers to purchase
handbags at a latter stage of life, valuation skills are a necessity.
Product Rental, Delivery, and Return
Customers will be able to place their rental requests through the website. These requests
will then be relayed to the warehouse in Toronto where a team will fulfill the order.
Depending on the location and the needs of the customer, the team will select the
optimized courier, and fulfill the order. Each handbag will be carefully packaged, complete
with instructions for the customer, and with a prepaid return slip.
Each morning, couriers will pick up their relevant orders from the Bagnifique warehouse.
As per Bagnifique’s delivery policy, these couriers will have 1 to 2 days to deliver the
packages, which must be delivered during the time of day specified by the consumer. In the
case of a local responsive delivery, consumers can request a rental until 3 hours before the
relevant courier closes for the evening. Also in the case of a local responsive delivery, the
package will be picked up by said courier from the Toronto warehouse as soon as possible
after the order is placed.
When the handbag needs of the customer have been met, they need only follow the
outlined instructions (found both with the initial package and online) to return the
handbag. The return procedure fundamentally consists of repackaging the handbag in the
delivery box, and dropping it off at a major courier outlet of Bagnifique’s choice. Directions
to the courier outlet will also be included within the initial package.
Inventory Management
To ensure that Bagnifique has a sufficient number of handbags (models, styles, and
designers) to match consumer needs, and looking ahead to a future which may include
numerous warehouses throughout Canada, Bagnifique will have an inventory management
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system in place. This system will utilize rental frequency, rental period, and waitlist
lengths for individual bags, in order to determine if it is financially feasible to purchase
another handbag of the same style.
Website Development and Maintenance
Initial website development will be outsourced to a team of 2 developers and 1 designer.
The makeup of the Bagnifique website will be a function of the image we would like to
project, the value added services we will be providing, and the strengths and weaknesses of
competing websites. Website maintenance will be performed in‐house, and will consist of
updating handbag inventory, improving basic functionality, and updating other Bagnifique
features.
Development Plan
Given the fast‐moving nature of our business medium, the web, we feel it is imperative to
bring our service to live status as soon as possible. Too often on the web, a viable venture is
proposed but because of a lack of execution, or at least a lack of speed of execution, the
business does not succeed, as a competitor beats them to market.
At this point we have established customer interest through a survey (Appendix B) as well
as the successful franchises in the United States. Further, a Canadian competitor discussed
above, has just begun business. We have had discussions with those in the fashion industry
to learn the basics of various aspects of the business such as procurement and keeping up
with the latest trends.
An advantage of a business such as Bagnifique is that requirements for employees, real
estate, and thus, capital are relatively low. Even still, we find it helpful to delineate the
timeline of our business into 3 distinct stages as they correspond to our requirements for
capital: pre‐launch, launch, post‐launch.
Pre‐launch (Dec ’08‐Jan ‘09)
Fortunately for Bagnifique, the requirements for capital and real estate at this stage are
extremely low; labour is the only significant expenditure. Given that our customers are
going to be highly fashion‐conscious, we deem design of our site as extremely important.
We classify design into 2 distinct buckets: i) ease‐of‐use/general user interface principles
and ii) pleasing to the eye. We feel we can greatly separate ourselves from the incumbent
based on both of these metrics. In order to enforce this, we will, prior to development of the
site, contract a web designer who places a high emphasis on user interface design to mock
up wireframes of the different pages of the site. He/she will be fairly experienced and
therefore will command in the neighbourhood of $75‐100/hr. After wireframes are
created, she will mock up/create the design of the site with, basically, HTML. At that point,
2 web developers will be hired to code the backend or logic of the site. These 2 need to be
21
potent developers however, the primary requirement will be that they are adept with
platforms such as Ruby on Rails which emphasize convention over configuration and
drastically reduce the time of development of typical database‐driven web applications.
They will likely command $50‐75/hr.
We envision the design of the site taking 1 designer 3‐4 weeks and the development and
testing taking 2 developers 12 weeks.
We envision this stage beginning in December 2008.
Launch (Feb ‘09)
A 2nd relatively major infusion of capital is necessary at this point as we need to purchase
the actual base inventory of handbags. We will start the business with an inventory of 50
bags at an average price of $900. The web developers will continue working on the site
during this period. We will also hire a Search Engine Optimization Expert at this time; with
the site up and running he/she could begin to strategize and implement a plan to ensure
Banifique is at the top of the major search engines following the most applicable contextual
searches. Our requirements for real estate at this point, even though we will be going live,
are nil as the CEO and founder, Joanna Lasko, has sufficient space at her residence to store
the bags.
We envision this stage beginning in February 2009.
Post‐Launch and Beyond
Post‐launch, we plan on continually monitoring the business to adjust to demand.
Therefore, the following is very much in the air. However, we plan on adding 3 bags to our
inventory throughout our first year. We plan on requiring a web developer very sparingly
during this time, primarily because one of our executives has a programming background.
However, a small provision for one developer has been inserted into the financials. Year 2
forward calls for an increase in the number of bags added per month, to 5. We also call for
some temporary help‐approximately 1000 hours of unskilled labor to help with cleaning,
sorting, and packing the bags. We forecast requiring the services of a web developer for 2
weeks of each year going forward.
Beginning in Year 4, we will start retiring bags because of their ‘loved’ appearance. It is
envisioned that 20 bags a year will need to be removed from our inventory. We hope to sell
these bags at a significant discount to our members. We also will require some additional
part time help. Forecasts have moved up to 2000 hours, which is equivalent to one full‐time
helper.
At year 5 we will evaluate whether it is prudent to begin offering accessories and jewelry
for rent. This horizontal expansion will allow our growth to continue as the Canadian
market is not large enough to sustain our early years’ growth numbers.
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Throughout the life of the business we will keep our ear to ground for potential suitors to
acquire the company. Our earnings will drive these attempts, if any, and if an appropriate
multiple is offered, we will certainly entertain and evaluate the offer.
Key Start‐Up Costs
Cost of goods
Labour (web site) 28,000 28,000 16,000
Inventory 45,000
Operating Expenses
Promotions 400
Utilities 150
Office Salaries
Overhead
Marketing
SEO 12,000
Coasters 1,500
Fashion Magazines 8,000
Postcards 850
AdWords/Fashion blog ads 200
TOTAL $28,000 $28,000 $84,100
Critical Risks and Contingencies
Competitive Entry
Since luxury handbag rental services are relatively new and the Canadian market for this
type of service is virtually untapped, there is great opportunity for Bagnifique to capture
value. Along the same logic, there is also great opportunity and strong incentive for
competitive entry. Bagnifique is mitigating this risk by learning from incumbents and is
improving the luxury handbag rental business model in order to become truly
differentiated. Also, by being the first mover with this improved business model,
Bagnifique will be able to gain significant scale over existing Canadian competitors. This
scale, combined with Bagnifique’s other differentiators, will lead to a sustainable
competitive advantage.
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In terms of foreign entry, the development team contacted an American incumbent (Bags to
Riches) as part of our market research and learned that they are not interested in
expanding into Canada. This lack of interest may or may not hold pending Bagnifique’s
success, but the entry lag will allow Bagnifique to establish a foothold in the market, which
will mitigate market share loss and may even make Bagnifique an attractive takeover
prospect.
Retail Partnership
Part of Bagnifique’s competitive advantage involves a partnership with a high‐end retailer
of luxury handbags such as Holt Renfrew. Since negotiations for such a partnership have
yet to take place, there is risk that a high‐end retailer may not find it in their best interests
to sell their luxury goods to a rental service, even with a confidentiality agreement in place.
Taking this risk into account, Bagnifique prepared the financial projections on the side of
conservatism and used the full retail value when inputting the cost of the handbags. The
development team has also begun developing relationships with traditional retail channels
in order to gain access to the necessary volume and scope of handbags. Also inherent in
attempting to develop a relationship with a high‐end luxury retailer, whether or not the
relationship reaches fruition, is the mitigating of risk of another entrant attempting to
adapt the same model. By being the first mover in this sense and exhausting partnership
options, Bagnifique all but eliminates future entrants from applying the partnership model.
Target Market
In spite of Bagnifique’s existing market research, there is still the potential risk that the
Canadian market does not have the sufficient scale or density to make a luxury handbag
rental service feasible. Bagnifique plans to mitigate this risk by exploring the market with
more in‐depth surveys and analysis prior to any major capital expenditures. Even if the
market opportunity results yield a false positive and Bagnifique enters into a less than
favourable industry, operating costs are minimal, and Bagnifique can remain functional
until costs are recouped. Bagnifique also plans to maximize salvage value by carrying
handbags that remain in style for long periods of time and can sustain use without physical
degradation. If necessary, Bagnifique intends to capture the salvage value of the handbags
by selling to an American counterpart or by selling online (Bagnifique website, eBay, etc.).
Inventory Management
One of the difficulties inherent to a rental service is deciding what inventory to carry and
the quantity of said inventory. Bagnifique intends to mitigate underutilized inventory by
performing comprehensive handbag research, and by only investing in handbags which
carry stable, long‐term demand. This research will include surveying the target market
prior to launch, surveying users of the Bagnifique service, speaking with professionals in
industry (critics, retailers, etc.), and monitoring the rental frequencies of handbags already
available through Bagnifique. Bagnifique will also analyze the wait lists of currently offered
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bags to determine if it is financially favourable to purchase additional handbags of the same
model.
Financing
Raising sufficient capital to get off the ground is a risk for any start‐up. Bagnifique
mitigates this risk by using a business model which requires minimal capital outlay.
Bagnique’s management team also mitigates investment risk by staking roughly 25% of the
initial start‐up costs. Raising this capital internally not only reduces the capital required
from outside investors, but also instills an increased level of ownership and responsibility
among the management team, which investors will see as a driver toward success.
Financial Plan
The key drivers in terms of financials are, on the revenue side, bag rentals, and on the cost
side, bag inventory and labour. The projections have been done with an eye towards
conservativism as we would much rather be surprised towards the upside rather than to
the down.
A key point is that our venture is quite lean, both in terms of employees as well as in capital
investment required. Therefore, while the financials may not show extravagant profits,
they are quite strong for an initial $190,000 investment.
Financial projections have been developed for Bagnifique extending out for five years from
initial launch. The table below summarizes the model included in Appendix C. As the year 1
costs occur prior to anything in the way of revenues is earned, we would need an initial
investment of nearly $190,000. This would cover our initial labour (2 web developers, 1
web designer, 1 search engine optimization expert) and our initial inventory (50 bags at an
average of $900/bag). Just prior to a year into business, we are self sufficient and will be
able to sustain without additional outside capital. On‐going, we envision adding 3‐5 bags of
inventory per month. This combined, with our marketing costs, notably the fashion
magazine ads, will be our large expenditures going forward.
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Key assumptions
The key assumptions going into the key summary figures above include:
• Utilization of our bags begins at 10% and ramps up at 5% per month until it hits a max
of 70% near the beginning of year 2
• We have 80‐odd bags for rent at the end of year 1, 140‐odd bags at year 2, 200‐odd bags
at the end of year 3, 260 at end of year 4, and 320 at end of year 5. Inventory, or lack of,
is the limiter in terms of revenues; all demand projections we have conducted lead us to
believe there is more demand than we can satisfy with the modest inventory we are
planning on carrying. However, we would much rather lose some short‐term revenue
rather than overshoot our purchase of inventory. Bagnifique, of course, can simply
purchase additional bags should demand justify it.
• Average rental period is 2 weeks
• The average rental price for the 2 week period is $146.25 (which corresponds to a $900
bag)
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Breakeven/Sensitivity Analysis
As is apparent from the chart above, Bagnifique breaks even just before the 2nd year of
operation. As is also apparent, the venture is much more sensitive to revenue changes than
it is to cost changes. Therefore, although we will be running a lean, cost‐conscious
operation, we will not refrain from quickly ramping up our inventory nor will we skimp on
revenue generating activities, such as marketing, if demand exceeds our projections.
27
Appendices
28
Appendix A ‐ CV’s of Management Team
The CV’s of the Management Team were included here.
29
Appendix B ‐ Bagnifique Marketing Survey Results
Total Respondents: 100
Question 1: How old are you?
Under 25 10.0%
25‐34 86.0%
35‐45 2.0%
Older than 45 2.0%
Answered Question – 100
Skipped Question ‐ 0
Question 2: On average, how much do you spend a year on handbags?
Most frequent responses:
$1000 14.1%
$500 12.1%
$200 11.1%
Answered Question – 99
Skipped Question – 1
Question 3: What proportion of this would be spent on brand name bags?
0% I don’t buy brand name bags 20.0%
Less than 25% 18.0%
Between 25% and 50% 9.0%
Between 50% and 75% 15.0%
More than 75% 21.0%
100% 17.0%
Answered Question – 100
Skipped Question ‐ 0
Question 4: What is your annual income?
0 – I’m a student 37.4%
Under $30,000 8.1%
$30,000 ‐ $50,000 15.2%
$50,000 ‐ $70,000 18.2%
$70,000 ‐ $90,000 12.1%
Over $90,000 9.1%
Answered Question – 99
Skipped Question – 1
30
Question 5: On average, how much do you spend per handbag?
Under $50 18%
$50 ‐ $100 26%
$101 ‐ $200 17%
$201 ‐ $500 34%
Over $500 5%
Answered Question – 100
Skipped Question ‐ 0
Question 6: What Brand name bags do you currently own and wear?
Most common Responses:
Gucci 15.4%
Louis Vuitton 15.4%
Coach 39.5%
Answered Question – 91
Skipped Question ‐ 9
Question 7: What brand name bags would you like to wear? (can choose more than
one)
Fendi 19.3%
Marc Jacobs 48.9%
Gucci 35.2%
Prada 39.8%
Miu Miu 26.1%
Balenciaga 25.0%
Chanel 44.3%
Louis Vuitton 30.7%
Coach 42.0%
Other 25.0%
Answered Question – 88
Skipped Question – 12
Question 8: How often do you wish you could buy a new brand name bag?
Once a week 2.0%
Once a month 14.0%
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Every 1 to 3 months 24.0%
Every 3 to 6 months 24.0%
Every 6 months to 1 year 22.0%
Less frequently than once a year 14.0%
Answered Question – 100
Skipped Question – 0
Question 9: If you could afford it, would you use a service that would allow you to
rent brand name bags for a defined period of time selected by you?
Yes 39.4%
No 60.6%
Answered Question – 99
Skipped Question – 1
Question 10: What would you be willing to pay to rent a brand name bag for a
month?
Under $25 45.3%
$25 ‐ $50 41.1%
$50 ‐ $100 9.5%
$100 ‐ $150 4.2%
$150 ‐ $200 0.0%
Over $200 0.0%
Answered Question – 95
Skipped Question – 5
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Appendix C – Financial Mode
33
Appendix D – Operational Local Responsiveness in Metro Areas
34