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CHINA MARKET ENTRY BUDGET FOR MANOLO BLAHNIK

 

First brand store in West Nanjing Road, Shanghai: ¥170,000 - ¥250,000 per month

We have calculated the average rent for an 80 square foot shop in the West Nanjing Road area to be ¥186,000. Allowing for varying prices and shop locations we have decided to budget between ¥170,000 and ¥250,000 per month for our own brand store. Our 80 square foot store comprises of 55 square feet of selling space, 5 square feet for a manager/administration office and 20 square foot for inventory storage and staff breakout room. The mall provides toilet facilities.

 

 

Lane Crawford Concession: 20-30% of after tax revenues

Luxury department stores worldwide have adopted the practice of charging high-end brands 20-30% of all after sales revenues for selling space in their stores. By adopting this practice we minimize the risk of entry and only pay based on success. Lane Crawford pay for staff, floor space and sales expenses as long as we provide them with the product and promotion materials. We expect approximately one-third of our initial sales to go thorugh this department store channel. Lane Crawford will also choose in which shops our product will be available, and if the product will be sold online.

 

 

Cost of sales: 40% of selling price

The cost of selling a Manolo Blahnik shoe is roughly 50% of the sales price based on the typical profit margins of luxury shoe brands. These cost margins would be even lower in China due to the increased price point used to compensate for high sales tax and supported for by price elastic consumers.

 

 

Employees: ¥45,000 - ¥67,000 per month

• Manager Salary: We will hire a full time, experienced and university educated manager who speaks fluent Mandarin Chinese and English and will manage our store on a daily basis. Typically a retail manager in Shanghai will work 60 hours a week. The average cost of this caliber of employee in Shanghai ranges from ¥20,000 to ¥30,000 per month.

• Sales staff: We will hire four, young, full-time sales staff in our own brand store who are university educated and fluent in both Mandarin Chinese and English. These employees will typically work from 9am – 9pm and in shifts so there are always three sales staff on the floor. The salary of each employee is between ¥4,000 and ¥6,000 per month.

• Social Media Employee: We will also hire a full-time Chinese social media employee to manage our various online sites and interact with our new customer base. This employee should be fluent in both English and Mandarin Chinese and be university educated with a significant and proven background in successful social media management. The standard cost for this caliber of employee should be between ¥9,000 and ¥13,000 per month

 

 

Marketing Budget: ¥321,000 - ¥429,000 per month

• Brand Ambassador: Liu Wen: ¥900,000 - ¥1,200,000 per season

• Manolo Blahnik Branded events: ¥250,000 - ¥350,000 per year

• Shanghai x Manolo Showroom event at the Peninsula Hotel: ¥130,000 - ¥160,000 (One off cost)

 

Service Innovations:

• Free repairs: Based on an exagerrated prediction 5% fail/break rate over the life of a Manolo shoe, we would estimate a cost of ¥100 for our offer of free repairs to all customers with a certificate of authenticity or receipt of purchase.

• Smartphone App and ‘My Manolo’ Website: We would need to hire an app and website developer to make and maintain our smartphone App and dedicated customized shoe website – mymanolo.cn. This would be a one off cost of ¥70,000 – ¥110,000 and ¥10,000 - ¥15,000 per month for App and website maintenance.

• Purchase gifts: We have also decided to tailor our offering to our target Chinese consumer by offering a free, Manolo matched gift with every shoe, such as a scarf or gloves. The production cost of this gift will be approximately ¥120, to gift the quality which our brand represents.

 

 

Taxes:

Sales taxes in China for luxury shoes are 27% of each purchase. This represents a significant portion of our profit margins and, as explained earlier in our blog, must be accounted for with a price mark up in our Chinese offering. The amount we pay will be dependent on how much we sell.

 

 

Shipping Costs:

We will partner with the logistics firm that already imports Manolo Blahnik products in to Hong Kong, to bring those products in mainland China. Logistics for Manolo Blahnik represent a Head Office cost with entry in to China allowing our board members to off set the existing cost of Asia transport.

 

 

Manolo Selling Price (for the mainland Chinese market)

$800 - $2,200

¥4,950 - ¥13,600