Module:

Business Intelligence MS7SL83O

Student Number (UWL Registration Number):
21511692
Assignment Name:
Setting up a woman’s clothing online shop in Kotahena
Lecturer Name:
Nishantha Hewavithana
Word Count:
1997 (Excluding Executive Summary, Table of contents, References,
and Appendices)

1
 Executive Summary
Kotahena Fashion Queen (hereafter known as KFQ) is a woman’s clothing online shop to be
opened in Kotahena. The idea to set up the business was to fulfill a gap and to offer clothes at
reasonable prices. It will focus on females who look for fashion as its main target market. KFQ
owner will be the sole proprietor and use her experience to manage the online clothing store.
It plans to break even within the first year of commencing business. Although the clothing
business has been in decline due to COVID 19 and subsequent economic issues, consumers have
now started to look for fashionable and trendy clothing. Therefore, it is expected that this online
store will fulfill a gap in the clothing market and keep up progress with the passage of time in the
future.

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 Contents
1. Introduction ............................................................................................................................. 4
2. Industry analysis ...................................................................................................................... 4
3. Business aims and objectives .................................................................................................. 5
3.1. Company overview ....................................................................................................................... 5
3.2. Aims and objectives. ..................................................................................................................... 5
4. Main operational areas and customer / strategies .................................................................... 6
4.1. Differentiation strategy ................................................................................................................. 6
5. Use of IS and IT....................................................................................................................... 7
5.1. Product .......................................................................................................................................... 7
5.2. Use of data mining ........................................................................................................................ 7
5.3. Use of AI ....................................................................................................................................... 7
5.4. Internet .......................................................................................................................................... 7
5.5. Marketing ...................................................................................................................................... 8
5.6. Sales .............................................................................................................................................. 8
5.7. Sustainability................................................................................................................................. 8
5.8. HR ................................................................................................................................................. 8
5.9. Barriers to adopt BI solutions in clothing industry ....................................................................... 8
6. Capital formation & B/E analysis ............................................................................................ 9
6.1. Impact of cost of returns ............................................................................................................... 9
6.2. Startup funding requirements. ....................................................................................................... 9
6.3. Income statement .......................................................................................................................... 9
6.4. Break even analysis..................................................................................................................... 10
7. Conclusion ............................................................................................................................. 11
Bibliography ................................................................................................................................. 12
Appendix A ................................................................................................................................... 13
Appendix B ................................................................................................................................... 13
Appendix C ................................................................................................................................... 14
Appendix D ................................................................................................................................... 15

List of figures
Figure 1 Yearly net income
Figure 2 Monthly income (year 02)

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 1. Introduction
With growth in technology, online fashion industry has increased. Online shoppers directly
purchase goods using internet. Availability of services 24 /7, unlimited selections, parking issues,
and delays at queues are some reasons for popularity of online shopping. (Swinyard & Smith ,
2003) argue that most online shoppers are young, wealthy and computer literate. Lower barriers
to entry, lower expenses, visual content, and ability to access prices, reviews, and product details
are some advantages of online shopping. According to (Imo, 2013) clothing serves intrinsic,
communicative and socio- psychological functions.
This is a business plan to set up a woman’s online clothing shop using online platforms. This
includes sections on business objectives, main operational areas, use of IS and IT, and financial
plans. The problems relating to setting up a new online clothing business, solutions, and financial
plans will also be discussed.

2. Industry analysis
KFQ will operate in retail online business especially for women. The demand for woman’s
apparel is unstable and depends on their earnings and fashion trends. According to (Botti, 2019)
fashion business contributes to about US$3000 Bn globally which is world’s two percent of
GDP. (Amankwah, et al., 2014) stated that in 2010 alone, New York fashion business provided
more than 10 Bn. USD by way of salaries.
Porter’s five forces framework can be used to determine competition in online clothing business.
(Porter, 1980) states that this model explains how competitive forces affect industries and helps
managers to take measures using their company’s competitive advantages.
KFR’s profits will depend on the power of its competitors, potential newcomers, and
relationships with suppliers and substitutes. The barriers to entry in clothing business are
comparatively low and establishing a single retail business does not need many resources.
Though clothing industry is concentrated there is potential SMEs. Consumers’ switching costs
and threat of substitutes are also low. According to (Kautish & Sharma, 2018) online shoppers
save time and money on travelling, get discounts, and prefer the variety of product ranges on
display. Though recent economic slowdown, and COVID 19 had negative impact on clothing
industry, there are indications that progress is made towards recovery in clothing industry.

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 3. Business aims and objectives.

3.1.Company overview
The aim of this proposal is to fulfill a gap in Colombo’s clothing market. KFR will combine
features of existing stores to meet market requirements as best as it can. Until now, female
shoppers have been compelled to evaluate benefits and sacrifices of following options.

I. The shopping Centre

Though a shopper can find expected quality with branded products at realistic prices, because of
large scale production, she will be unable to keep up her individual style.
II. Upmarket store
The upmarket store offers quality products in a beautiful environment at exorbitant prices. The
prices of dresses range between Rs.10,000 to 25,000 at most Colombo’s upscale boutiques.
III. Others
In other shops, products are affordable, and she is not compelled buy standard products.
However, she is forced to make compromise on quality because with the fall in prices, quality
tends to decrease.
IV. Online shopping
The opening of option (IV) will provide her with key elements of service including selections. It
is practically possible that she can find items what she has been searching for.

3.2.Aims and objectives.

- To offer shoppers clothing and accessories to make them feel confident
- To stock clothing and accessories which are not available elsewhere
- To breakeven within the first year of operations
- To present customers best of clothing, and designs.

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 4. Main operational areas and customer / strategies
Since the online shop has to provide products to suit the latest fashion trends, the target
customers will be from 15 to 40 years females who use internet.

4.1.Differentiation strategy
Following will differentiate KFQ business:
- Offering interactive chats.
- Considering solutions based on latest technology to power buying experience
- Offering content with own long and short description
- Adding videos and images
- Answering queries and keep customers informed on order status.
Some operational activities are given below.
a) Warehousing
The items that come from suppliers will be stored in a warehouse. KFQ will display them on
online platform for customers.
b) Payment options
Presently several payment options are available. KFQ will accept payments from payment
options such as PayPal. ‘Cash on delivery’ is safe for buyers, but fees are charged.
c) Stock management
Data from online shopping channels will be analyzed for data driven decisions by KFQ to save
expenses because poor stock management leads to supply chain costs.
d) Setting up social media profile
Attempts will be made to find out about KFQ customers and valuable content will be posted in
social media profile after researching which posts customers like and share.
e) Packaging
KFQ will focus on packaging making shoppers feel that they are receiving a gift rather than an
order by adding personal touches.

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 5. Use of IS and IT
(Lai & Turban, 2008) argue that users must have confidence about IT they are using and the
companies which designed the technology have to develop safe applications to carry out online
transactions. (Eundeok & K.P Kim, 2008) argue that future trends in fashion reveal that the use
of technology will contribute as an agent for change in developing special type of fabrics with a
focus on individual comfort. Social media is highly integrated into shopping experience. IS & IT
can be used in online clothing business when they are networked, and secure.
The following are some strategies how KFQ will compete using technology.
5.1. Product
Appearance matters a lot in online and website will be designed attractively. Navigation will be
sampled with simple menus. (Rippé, et al., 2017) state that present day shoppers opt to refer
phones rather than talk with a sales assistant while shopping. According to (Shankar, 2014)
customers generally rely on phones to look for details about a product to compare, and request
for help. Jeans, T- shirts and shoes are some products.

5.2. Use of data mining

With data mining tools, patterns and relationships can be found to make informed decisions.
KFQ will use data mining to predict trends, forecast customer demands, optimize prices, and
identify customers.

5.3. Use of AI
Since AI helps clothing brands to evaluate data and estimate trends KFQ will use AI specially to
design its products to suit its target market.

5.4. Internet
To get maximum benefit from KFQ website, a web designer will be employed to promote the
brand. Customers will be provided with facilities to buy online. As the site traffic increases,
fashion advice and newsletters will be added. KFQ’s website will have graphics, animations, and
shopping carts providing security. User friendly facilities to send email and dedicated staff to
answer enquires will be provided with the use of video, images, reviews, and testimonials.
Every time a customer makes a purchase, customer information such as name, address and
number of purchases will be recorded in KFQ’s software.

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 5.5.Marketing
Local print media, and networking are some marketing strategies. (Srinivasan & Srivastava,
2010) argue that attractive nature of retail stores helps to create a joyful experience and
influences the purchase decision of a customer. KFQ will carry out a promotional plan and some
examples are:
- Using social media since digital advertising is expensive.
- Generating traffic on social media and Instagram.
- Showcasing visual photographs to attract customers.

5.6. Sales
KFQ plans to increase sales by targeting new customers. Returns will have to take place with 20
days. KFQ will strive to:
- Use a clean navigation structure.
- Showcasing social media

5.7. Sustainability
KFQ will strive to reduce harm to environment by using IT solutions and save energy during
operations.

5.8. HR
- To employ those who love fashion.
- To outsource to an IT company to design and manage website to reduce employee costs.

5.9.Barriers to adopt BI solutions in clothing industry.

Cost of BI systems, slow adoption of BI in companies because of dependence on experience,
employee’s resistance to new technology, lack of company funding, and lack of technical
training are some barriers.
• Some challenges of online clothing stores
The following are some challenges:
- Because online shoppers depend on images, they return more due to their doubts about
size differences. Too many returns are an expensive problem.
- Due to COVID 19 fashion industry has seen disruptions mainly because people were
allowed to work at home resulting in absence of social life.

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 - Lack of fitting rooms for customers to make purchasing decisions. (Beck & Crié, 2015)
state that many customers finally decide to purchase products at changing rooms.
- Customers will have to wait till products reach them.
- Risk of fraud.

6. Capital formation & B/E analysis.

Key assumptions are given below. It is expected that if 100 customers visit a website in a day,
five will buy a product from an average website. It is assumed that five products will be sold in a
day at the start. Based on this, the income and expenses will be calculated.
6.1.Impact of cost of returns
Returns add online business’s expenses and reduce revenues. Therefore, margins have been
estimated a bit higher because cost of returns reduces margins. This was done because too many
returns is an expensive problem in online business. This is evident from the projected net income
as a percentage of total revenue as shown in Appendix C.
Figure 1. Retail & whole sale price assumptions
Products Price (retail) Percentage of Price(wholesale) Product cost.
collection
Jacket Rs.15,000 17% Rs.10,000 Rs.7000
Dresses Rs.16,000 22% Rs.9000 Rs.5000
Tops Rs.9000 31% Rs.4500 Rs.3000
Bottoms Rs.10,000 25% Rs.5200 Rs.3000
scarves Rs.4000 3% Rs.2000 Rs.1200
Accessories Rs.4000 3% Rs.2000 Rs.1200

In this table, first three items are grouped together as product A and other three as product B.

6.2.Startup funding requirements.

Startup expenses and long-term assets of KFQ are expected to be Rs. 370,000 and Rs. 37,000
each. Total funds needed Rs. Rs.4,107,000. The breakdown of items is shown in Appendix A.
A part of this capital requirement will be funded by promoter’s family members. Appendix B
gives detailed breakdown.
6.3.Income statement
Assuming that KFQ will achieve sales of Rs.25,120,000 by end of year 1, net loss of Rs 8,490,
000 was reported. A detailed statement is given in Appendix C. A detailed monthly sales for
year 2 is found in appendix D.

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Figure 1: Yearly net income

6.4.Break even analysis.

At break -even point, total costs and total revenues will be equal. At this point, there will be no
gain or no loss. The following chart gives monthly profits and losses for year 2 operations. Year
2 was chosen because KFQ incurred a loss in year 1.
It does not consider the startup amount Rs.370,000 which is a negative figure. The figure
indicates that KFQ will break even after January. However, when the negative balance from
startup of Rs.370,000 and the loss of Rs.8,490, 000 in Year 1is considered, the KFQ will actually
break even after April in Year 2.

Monthly Income : Year 02

5000
4000
4286
3000
2000 2834
1930
1000
148 267 580 340 250 420 670 395 740
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Figure 2: Monthly income (year 02)

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 7. Conclusion

This report is based on a business idea to set up a new online clothing store. It was observed that
too many returns, poor stock management and disruptions in fashion industry due to frequent
changes in styles are some of the issues confronting online clothing business. Though BI offers
some possible solutions to such issues, it was found that cost of BI software, resistance to adopt
new technology, and the dependence of experience rather than analytical tools are some
challenges in the implementation of BI.
It is recommended that KFQ to focus on operational areas such as managing returned stocks and
to provide the required information in online platform enabling customers to make purchase
decisions using IT & IS to mitigate the challenges. Offering interactive chats, keeping customers
on the order status and considering solutions based on technology are some other
recommendations to differentiate KFQ from tis competitors.

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 Bibliography
• Amankwah, A. M., Baidoe, W. & Chichi, C. A., 2014. Ripple effect of a vibrant fashion
industry on graduate unemployment. Kumasi. Department of Industrial Art, Kwame
Nkrumah University of Science and Technology.
• Beck, M. & Crié, D., 2015. “I virtually try it ... I want it ! virtual fitting room: a tool to
increase on-line and off-line exploratory behavior, patronage and purchase intentions”.
Journal of Retailing and Consumer Services, Vol. 40.
• Botti, . R., 2019. “Fashion sector outsourcing to African countries: taking advantage of
low-cost labor?”, in Moreno-Gavara, C. and Jimenez-Zarco, A. (Eds), Sustainable
Fashion. Palgrave Studies of Entrepreneurship in Africa, Palgrave Macmillan, Cham.
• Eundeok , K. & K.P Kim, J., 2008. “Forecasting the US fashion industry with industry
professionals – Materials and Design”. Journal of Fashion Marketing and Management,
13( 2), pp. 256-267.
• Imo, B., 2013. Adoption of the Kenya National dress as a basic for developing a decision
making model for the local industry. a case of Nairobi, Kenya. PhD. Kenyatta University.
• Kautish, P. & Sharma, R., 2018. “Consumer values, fashion consciousness and
behavioural intentions in the online fashion retail sector”. International Journal of Retail
and Distribution Management, 46(10), pp. 894-914.
• Lai, L. & Turban, E., 2008. Groups‟ formation and operations in the Web 2.0
environment and social networks. Group Decision and Negotiation, pp. 387- 402.
• Porter, E. M., 1980. Competitive strategy: Techniques for analyzing industries and
competitors.. New York: Free Press, 1980.
• Rippé, C. et al., 2017. “Under the sway of a mobile device during an in-store shopping
experience”,. Psychology & Marketing, pp. 733-752.
• Shankar, V., 2014. Shopper Marketing and the Role of in-Store Marketing. In Shopper
Marketing and the Role of in-Store Marketing, Emerald Publishing Limited.
• Srinivasan, S. R. & Srivastava, R. K., 2010. Creating the futuristic retail experience
through experiential marketing:Is it possible? An exploratory study. Journal of Retail &
Leisure Property, p. 193–199.
• Swinyard, . W. & Smith , S., 2003. “Why People (Don’t) Shop Online: A Lifestyle Study
of the Internet Consumer”. Psychology & Marketing, 20(7), p. 567–597.

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 Appendix A

• Startup expenses
Expenses Amount
Advertising & Promotions Rs.25,000
Rental advance for store Rs.200,000
Licensing & permits Rs.20,000
Miscellaneous Rs.25,000
Office & store supplies Rs.10,000
Prepaid insurance Rs.25,000
Wages Rs. 20,000
Utilities deposit Rs.25,000
Travel Rs.20,000
Total startup expenses Rs. 370,000

Appendix B
• Startup assets
Assets Amount
Cash required Rs.200,000
Start up stocks Rs.3,500,000
Long term assets
Furniture & fittings Rs.22,000
Office equipment Rs.10,000
Others Rs.5000
Total long-term assets Rs. 37,000
Total assets (Rs.37000 + Rs. 200, 000 + Rs. Rs. 3,737,000
3,500,000)
Total requirements (Rs.370,000 + Rs. Rs. 4,107,000
3737000)

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 Appendix C

• Forecasted Income Statement for 5 years.

Revenues Year 1 Year 2 Year 3 Year 4 Year 5
(Rs.000)
Product A Rs.15,120 Rs. 32,000 Rs.35,000 Rs.38,000 Rs.40,000

Product B Rs.10,000 Rs.20,000 Rs.24,000 Rs.25,000 Rs.28,000

Total Rs.25,120 Rs.52,000 Rs.59,000 Rs.63,000 Rs.68,000
Revenue
Expenses &
costs
Costs of Rs.6,100 Rs.11,000 Rs.11100 Rs.11300 Rs.11800
goods sold
Rent Rs.5000 Rs.5100 Rs.5200 Rs.5300 Rs.5400
Marketing Rs.1000 Rs.1100 Rs.1120 Rs.1125 Rs.1130
Salaries Rs.18,500 Rs.19,000 Rs.19200 Rs.19400 Rs.19800
Other Rs.350 Rs.370 Rs.400 Rs.410 Rs.420
expenses
Total Rs.30950 Rs.36570 Rs.37020 Rs.37535 Rs.37550
expenses &
costs
Earnings (Rs.5830) Rs.15430 Rs.21980 Rs.25,465 Rs.30,450
before
interest,
depreciation
&
Taxation
Depreciation Rs.360 Rs.360 Rs.360 Rs.360 Rs.360
Earnings (Rs. 6190) Rs.15070 Rs.21,620 Rs.25105 Rs.30090
before
interest &
tax
Interest Rs.2300 Rs.2060 Rs.1770 Rs.1470 Rs.1180
Pretax
income
Net (Rs.8490) Rs.0 Rs.0 Rs.0 Rs.0
operating
loss
Income tax - Rs.150 Rs.200 Rs.250 Rs.270
expense
Net income (Rs.8490) Rs.12860 Rs.19,650 Rs.23,385 Rs.28,640
As a % total - 24% 33% 37 % 42%
revenue

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 Appendix D
• Monthly profits: year 2
Amount
Months (Rs.000)
Jan 148
Feb 267
Mar 580
Apr 2834
May 340
Jun 250
Jul 420
Aug 670
Sep 395
Oct 740
Nov 1930
Dec 4286
Net Income (Year 02) 12860

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Introduction

• Mission
• Summary
- To offer shoppers clothing and accessories to
- This is a business plan to set up a woman’s make them feel confident.
online clothing shop.
- To break even within the first year of
- Its products consist of jackets, dresses, tops, operations.
bottoms and accessories.
- To present customers best of clothing, styling
- Analysis of Porters Five Forces model reveals
that there is room for expansion. and designs.
- To stock clothing and accessories which are
not available elsewhere.
 PROS CONS

• No need to have large sales • An online shopper will spend

Pros and staff. less time in
your online platform compared to
cons of brick-and-mortar shop.
online
clothing • No need for building, • Too many returns.
carpeting, and lighting.
store
• Profits are higher. • Higher competition.

• Start up costs are lower. • No personal touch.

• Online stores are easy to set up. • Trust issues about the quality,
and getting refunds.
Use of • Information Systems • Differentiation
Strategies
information - Data mining
systems and - Offering interactive chats.
- AI
information - Adding videos and
technology - Internet
images.
- Product design
- Answering queries &
- Stock management keep customers informed on
order status.

- Considering solutions
based on latest technology.
 - Cost of BI systems

- Slow adoption of BI because of dependence on

experience

Barriers to adapt BI
solutions in clothing - Employees’ resistance to new technology

stores.

- Lack of company funding

- Lack of technical training

Challenges of online clothing
stores

• The problem of too many returns. Online shoppers

depend on images about size differences.

• Absence of social life due to permission granted to work

from home due to COVID-19.

• Lack of fitting room facilities.

• Customers will have to wait till the products reach them.

• Risk of fraud.
 Recommendations & Conclusions

• Recommendations • Conclusions

- Recommended to focus on operational areas to - Margins have to be slightly higher to cover

manage return stocks.
- Recommended to offer required information in an
online platform to enable customers to make
purchase decisions using IT and IS to mitigate
challenges.
excessive returns.
- Total start-up expenses Rs.370,000
- Capital required Rs.4,107,000.
- Break-even point in April Year 2. In year 1, the
business incurred a loss.