Business plan for a new start-up company

Food, water, house and communication are the 4 essentials for the human being in the 21st century. Without these 4 elements, none can survive today but there is another element that must be added to the list especially for women. The 5th element that is a necessary item for women today, is beauty products and makeover items. In an independent survey, it is found that almost $300000 is spent by a woman in the USA on an average in her lifetime. According to another website report, it is found that 96% of Hong Kong female consumers use cosmetics or skincare products. An age group of 35-44 in Hong Kong female are spending around $5000HK in a year. The market penetration rate in Hong Kong beauty market is around 96% which is higher than any other country. [Chan, T. C., et.al2007]
The business perspective for beauty business is getting better day by day as women are becoming conscious about “how they look?” Not only women, nowadays the male population have also started using beauty items to look good. Selling beauty item physically can’t fulfil the demand of the wider market. To cover that much area, a business needs good logistics or supply chain, people, finance and most importantly communication network. The concept of online trading has made this possible where an entrepreneur sitting in the USA is able to sell a product to a Hong Kong customer. This system can be applied in beauty care segment as well. [Yeung, H. W. C. (1997)]
This report is basically about a start-up organization in Hong Kong which will serve beauty products to both female and male customers of Hong Kong and nearby country (in future) online. The speciality of this online business platform is the sale of Herbal and Ayurvedic beauty items which are rare in Hong Kong market. In addition to selling of beauty items, the organization will provide a beauty class through its online channel and also in social media platforms. [Liu, J. L et.al2013]

TTT Beauty Shop is a one-stop platform for all beauty requirements of both male and female. Unlike other beauty shops, this shop is virtual in nature. The beauty shop deals with only Herbal and Ayurvedic items which is better for our health and no side effect is there too. The business is initially to carter Hong Kong market for at least 3 years than to move for international business. Mrs Jennifer Rousey is going to be the CEO of the organization and headquarter will be at Lamma Island. [Leong, S. (2006).]
Mission- We offer the product and service to people which make them feel good, look good and be good. 
Vision- We deal with high quality, natural and innovative beauty products that are friendly to user and environment which will guide us to be a leading brand and the first choice for the customers. 
Values- We believe- Real beauty, honesty and trust, unmatched quality, user-focused, innovation, trend setter and socially responsible corporate citizen. 
Company Goal- To make our product and service available in all parts of Hong Kong.
Objectives- 1.To be a leader of innovation in the beauty industry that will give a new dimension to beauty among female and male.2. To bring Herbal and Ayurveda importance to beauty care in Hong Kong. 3. To contribute in sustainable development in Hong Kong Society. [Tuli, S.,et.al2018]

Global Beauty Industry is rising at 4% p.a. In future this rate is going to increase. The reason behind such immense growth in this sector is the desperateness of looking good outside to the people who see. Especially it’s the female population that has become more concerned about how they look. This has given the opportunity for the entrepreneurs to enter into this market with a wide range of products. Today this sector consists of skincare, cosmetics, hair styling, removal and colouring, nail and eyebrow setting, tanning salons, massage centres, shower and shaving products, perfumes or deodorants, colognes and a lot more. Skin Care accounts 36% of total beauty business globally. [ Burns, P. (2010). ] 
Hong Kong is one of the largest and fastest-growing beauty markets. It is due to duty free import possibility from Hong Kong to China, the industry is getting better and better. By the end of 2015, Hong Kong witnessed around $2.5 billion USD sales which was mostly dominated through imports of cosmetic products. China is the largest supplier to Hong Kong. As the people are accepting personal care and beauty products more and more, the growth rate is also increasing from 2 to 3% by 2017. Even experts have predicted the emergence of whitening technology, as the people are using anti-ageing and other skincare products more. 
China, USA and Korea are the 3 key players who are supplying beauty products into Hong Kong. As the Hong Kong customers are consisting of both premium and mass-market nature, these nation suppliers are trying to keep the price competitive in nature. 
Why importing of beauty product in Hong Kong is so high than its domestic production? The clear reason is about the rules and regulations. There is no such import duties on cosmetics, toiletries and skin products in Hong Kong. Moreover, no registration is required for cosmetic items. This is why Hong Kong is a premier destination of this industry. World’s top 10 brands like L’Oréal Paris, HUL, Ponds, Lakme, P&G, TRESemme etc. are making 70% of total business in Hong Kong. There are some local producers like O’ slee skincare products, Whealthfields Lohmann and Walch brand who are doing here. [Frodey, C. A., et.al2008] 
The market size of Hong Kong beauty market is around $2.7 billion USD. The demand is highly concentrated due to fact that Hong Kong receives a large number of tourists every year. The import is going to increase by 2-3% in the following years. The reason will be the increase in mass-market customers who are regular with such items. 

Consumer profile- It is the age group from 30-49 which accounts 31.35 of total population are the biggest user of beauty products. Hong Kong is witnessing an increase in male population who use cosmetics and personal care product more than the female buying rate (male-3% growth and female-2.5%). It is also the visitors from China (around 45.8 million) which is positioning into the second spot of Hong Kong beauty products. This is so, because Chinese people are finding the product pricing is comparatively lower to what they have to pay in China. 
The influencing factor- Hong Kong customers are mostly influenced by a wide range of fashion magazines, TV advertisements, Social media, blogs and other such media. Hong Kong people are preferring online shopping more than traditional or direct selling as they believe they can get more information, better option and competitive pricing on their purchased items. This is reflecting in Beauty industry as well. 
With the increase in logistics service, many beauty product marketers are moving towards online marketing. 
Product trends- There is a significant rise in demand of Korean beauty products than US, Japan and French brands. Facial mask that contains snail cream is among the most popular beauty product in Hong Kong. Korean products are popular in the makeup and hair colour segment. US and European sunscreen, BB (Beauty Balm) and CC (Correct and Cover) are popular here. 
Mostly it is the diversity in Hong Kong population, the innovation of beauty items and the emergence of the use of natural ingredients are the key factors that are driving Hong Kong Beauty Industry. 

TTT is going to be the first Beauty business in Hong Kong that will supply only Herbal and Ayurvedic cosmetics and other beauty items. All its product are pure natural and free of side effects. Here is the list of product and service the organization is going to offer online-
Aloe Vera Gel- This product is a skincare product which will help to remove any skin problems like rashes, pimples, oiliness, acne etc. It is 100% natural and no outside chemical is added to it.
Face Wash- This product is made of Neem (Azadirachta indica), basil, Ale Vera, orange peel etc. which will remove the dirt in skin and will make face brighter. 
Moisturizer cream- This product will help in maintaining moisture of your skin and body throughout the day. The product consists of Shea butter, Chamomile and Olive oil that help in preventing dehydration and early ageing problem. 
Face Scrub- This scrub will help in removing dirt, blackhead, whitehead, death skins etc. which will make your face look better. It uses apricot which helps in keeping skin softer, smoother and glowing. 
Body lotion- As Hong Kong is facing pollution these days, thus the body lotion came with a motive to kill germs like bacteria, parasites, fungus etc. it includes turmeric and other rare category oil that will not only kill germs but also will keep skin smoother. 
Anti-wrinkle cream- Protecting skin especially under eyes is essential. This product is meant to protect your skins and help eliminating aging signs which make you look older and dull. 
Crack Heal Cream- This cream will repair cracked heels within a few days. It will reduce discomfort due to cracked heels. It will not only cure cracked heels but also will keep it away from any infection chances. 
Shampoo- The shampoos are 100% natural and only herbal ingredients are used. For ex- use of myrtle, Neem, acadiaconcinna etc. 
**The speciality of above mentioned products are that both male and female can use these items without any fear.  
Apart from that the company will offer foundation, eyeliner, lipstick, mascara etc. for the Hong Kong women. For men, beard cream made of natural ingredients, fitness and body growth powers etc. are there. 

Service- Most of the beauty product suppliers are not demonstrating or explaining the use and significance of product but TTT will do it for all its customers. TTT will have a video tutorial on its own website, application and social media platform regarding use, its significance, harmlessness of use, result of real customers. This will be only $2HK for customers to access anytime and even they can provide feedback and suggestions in the comment box below so that in future, TTT will come with better product and service option. 

Here is the projected sales graph for 4 years-

 

Sales Forecast- As globally demand for Herbal and Ayurvedic products are growing rapidly, we are expecting a similar flow in Hong Kong market as well. Especially in skincare and hair care segment, the growth is expected to be 41% in near future. Moreover the decline in demands of US, France and other European country beauty product marketer, we are expecting a significant response in our product and service. As we are obtaining the materials from China, Indonesia, India, Japan and Korea, there will be enough stock availability all the time which won’t lead to stock out like other online platforms. [Blank, S. (2013).]

 

Budgeted Expenses Up to 3 Years- 

 

Particulars	Amount (in $’000HK)
Preliminary Expenses (Registration and other legal proceeding)	600
Shopify SEO and Analytics	650
Human Resource Management	350
Product procurement (Strategic business partners)	1030
Branding and promotion	1400
R&D	650
Logistics and Supply Chain- Payment vendors	970
Commercialization (up to 3 years)	1300
Total	6950

 

Cash flow- AS the business is going to sale items on cash basis not on credit so TTT can expect a quick cash recovery may be within 4-5 days of sale at maximum. The expenditure will be mostly to acquire product and run the system. Thus an abstract cash flow statement can be placed as-(1 year projected amount)

 

Particulars	Amount (In $’000HK)
Purchase and vendor cost	450
Salary and other administration	250
Selling and distribution	395
Cash collection from sales	(142)
Cash used in operating activity	943
Fixed assets and investment	425
Cash used in Investing Activity	425
Issue of shares and other debts	(395)
Financial cost	75
Cash flow from Financing Activity	(320)
Net cash used in 1st year	1042

[Helfert, E. A. (1994).]

Breakeven analysis- It is very difficult to estimate breakeven point as the forecasted figures may not be right. Until business starts, it not possible to locate the fixed and variable cost properly. Still on projected basis, we can find break even as-

Breakeven point :-
So from the above we can see that in 4th year of the business, TTT will reach its break even. Thus exactly we can’t say, it may reach earlier if sales grow at higher rate or may delay. [Helfert, E. A.,et.al2001]

Consumer Acceptance- Hong Kong has diverse culture and majority of the population are either from China, Japan, Korea and other Asian countries. These people prefer to use natural products so that they can avoid any skin diseases and other health issues. The growth in demand for snail cream face mask is one of best example to show how the people in Hong Kong are accepting natural brands than other foreign brands. As per an independent survey, it is found that organic beauty market is going to be $22 Billion by 2024 worldwide i.e. growth rate of 2 times to what we have witnessed in 2016. The common reason of acceptance can be summarized as-
•    Skin and body absorbs what we put on them, so natural products won’t harm or skin and body.
•    Expose to different chemicals which cause harm to skin and body.
•    Natural beauty items are no allergic nature.
•    Organic products keep skin and body element balancing. 
•    Healthier body and mind
•    Chemical products cause pollution thus natural product is better.
•    Traditional wisdom- History, culture, tradition etc. influence. 
Talking about online acceptance then annual growth rate of 8.9% in e-commerce selling with 59.8% (expected in 2018) user penetration are the significant indicator of how Hong Kong people are accepting e-retailing. 70% of people think online shopping convenient and around 64% of women would like to shop online. Near about 16% of online shoppers are buying personal care items. These all statistics can prove that selling beauty items online in Hong Kong is a good business opportunity for TTT. [Chen, Y.,et.al2018]

TTT beauty shop is going to use its own name for the product it will offer to customer. It means every product will come with a prefix TTT. Here are the steps that TTT will follow to make brand impression on people’s mind. 
The TTT brand will display organic or natural flavour of business with the beauty product it is offering to customers in Hong Kong. It is going to target mostly from the age of 18-60 years both male and female in Hong Kong. TT would like position itself as the 100% natural beauty product in minds of customers. To promote brand and product, it will go for TV ads, posters and classified display in newspaper and magazine. More focus will be on social media platforms. The logo will be two Neem Leaves and tagline is made from nature. From second year onwards, majorly the brand promotion will focus on word of mouth strategy. [Yeon Kim, H et.al2011] 

As TTT is an online platform to sell the natural beauty products, the major challenge is to have a quick but efficient logistics service that will provide complete business solutions to TTT. At first, the beauty products will be procured from suppliers across Hong Kong and other countries. This will follow JIT system as TTT doesn’t want to compromise with the quality of product. In the meantime, the Customer Relationship Team will take orders in the CMS system.  This order will be sent to our logistics provider Yamato Logistics (HK) Ltd. They will carry the products from the store house using their own transport means to supply the product within 2 days maximum. Initially, the logistics will be outsourced from this 3PL. later once, the business runs well and business is set to go international operation, it will approach Fed Express. [Hoffman, L. (2004).]

The target market is basically the age group from 18-60 years old people in Hong Kong. It is mostly the people who are outgoing nature i.e. stay most of time outside either for studies, work, business or for sports, gym, entertainment, adventures etc. The beauty product need comes when a person is exposed to sun, heat, pollution etc. This this age group seems to be perfect for the TTT group. One more reason is the use of e-commerce among these age group which is going to be 80% very soon. If we go more specifically then, it is the Millennium women and men who are very conscious about their look and body will be the major market. Apart from that TTT will soon launch childcare beauty products if the existing product clicks the market. [Kunkel, T., Doyle et.al 2014]

Geographical factor- TTT online beauty shop is targeting the Hong Kong province for initial years to the people who care for their skin and body. The shopping can be done at any part of Hong Kong which will be delivered within 2 days at max. 
Demographic factor- TTT shopping is for both male and female falling under the age group of 18-60 years. The price of the product will be comparatively lower to what the foreign brands are offering. Basically women segment is going to be the major market.
Psychographic- This product will be acceptable by almost all categories of people. As the product is ensuring no side effects and health problems, it will in regular use for most of the people. Those who like nature related products and chemicals will certainly like the brand. As the number of natural product users increasing, it shows a good sign for TTT to start operations soon. The concept of online shopping is making it cooler. [Wang, J. (2018).]
Behavioural- Those who like to buy value for money for them it is a good option. Once customer use the product, they will repeat it and also become loyal to this brand. It is the benefit that TT products will give brand loyalty and personality to it. [Malarvizhi, J.,et.al2018]

To know the competitor’s action, at first TT needs to look at own position. Here is the SWOT analysis for TTT online shopping.

Strength •    Natural product dealing •    Being first in market •    Logistics support •    CMS solutions	Weakness  •    New concept natural product selling •    100% online operation •    Dependence on supplier and logistics provider
Opportunity  •    Emergence of natural product demand •    Support from government •    E-commerce rising •    High revenue prospects	Threat  •    Existence of foreign brands and their popularity •    Change of their marketing strategy •    Uncertainty of natural product demand and buying online

[Sengar, A et.al2017]

Industry Rivalry- Beauty segment is already competitive in Hong Kong as more than 10 foreign brands are doing business here. Despite they have received decline in their sales, their change in market strategy (moving towards natural product) and support of huge promotional campaign is helping them to create loyalty. Even some local players have made a good impression on Hong Kong population. It will be a challenge to bring natural product in an online platform. (High)
Bargaining power of buyer- Natural beauty products are not much available or limited here. We are among the few which will provide 100% herbal products. Customer expects a lower price to natural products and also a perception of new brand should not charge much. This will put pressure on setting price for TTT. (Moderate) 
Bargaining power of supplier- As the products are natural and made of some rare ingredients which may or may not be seasonal cultivation, thus TTT needs to be highly dependent upon its supplier and to pay the amount they need. TTT has gone for strategic partnership in 4-5 countries which will help to reduce the impact of price still dependency will be there. (Moderate to High)
New entrant- As the demand for natural product and online shopping is growing, in near future more and more players will jump into this market and will affect the business of TTT. Even the foreign company can come up with own natural brand (for ex- HUL indulekha) to compete with it. (Moderate to High)
Substitute product- At present, TTT product is going to be substitute for the chemical beauty care thus in near future no such substitutes are available. May be making beauty items at home can be clubbed as substitute to this business. (Low) [Ghoshal, S.,et.al2018]

TTT is going to be a revolutionary business idea in Hong Kong personal and beauty care market. As the demand for natural or organic product is growing, the time is perfect for TTT to start operation soon. With the addition of online shopping into it, it will get a good response from the Hong Kong people as they are getting involved with technology for shopping. Competitions from foreign brands are there and they have made an image in people’s mind but TTT promotional strategy and concept will drag attention towards it. Overall, it is going to be successful if the predictions go right. 

 

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