Madeline Ruth: Consignment Clothing
Cindy Chavez, Sophia Dauphin, Morgan dePaulo,
Catherine Romeo, Kathryn Smith, Hannah Wyatt
University of Mary Washington
December 8, 2011
Marketing Plan Table of Contents
1.0
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4.0
4.1
4.2
4.3
5.0
5.1
5.2
5.3
Executive Summary
Situation Analysis
Market Summary
2.1.1
Market Demographics
2.1.2
Market Needs
2.1.3
Market Trends
2.1.4
Market Growth
SWOT Analysis
2.2.1
Strengths
2.2.2
Weaknesses
2.2.3
Opportunities
2.2.4
Threats
Competition
Product Offering
Keys to Success
Critical Issues
Macroenvironment
Marketing Strategy
Mission
Marketing Objectives
Financial Objectives
Target Markets
Positioning
Marketing Mix
3.6.1
Product/Service
3.6.2
Price
3.6.3
Promotion
3.6.4
Place
Marketing Research
Financials
Break-even Analysis
Sales Forecast
Expense Forecast
Controls
Implementation
Marketing Organization
Contingency Planning
1.0 Executive Summary
Madeline Ruth, located in Fredericksburg, Virginia, is a high-end women’s consignment
store, which is launching a new marketing plan in hopes of attracting more business and raising
profits. In hopes of attracting local area women from ages 15-50, the management positions
Madeline Ruth as a trendy, affordable, friendly, high-end women’s consignment clothing store.
An opportunity that Madeline Ruth can continue to take advantage of is the local college
community. The University of Mary Washington, located within two miles from the store, helps
increase the stores sales and foot traffic. Another opportunity is the economic situation of the
United States; there is a rise in the trend of consignment shopping. As the economy has declined
since 2008, shoppers are more inclined to shop at a consignment store that offers luxury clothing
at a cheaper price, such as Madeline Ruth.
Some recommendations for Madeline Ruth to reach potential clientele are participation in
local University events, as well as Fredericksburg area Holiday festivals and sales promotions,
such as offering sales incentives to loyal customers. Management should also place promotional
ads for the store in the University of Mary Washington newspaper and school agenda.
Madeline Ruth has been open for two years. In order to break even, 77 items need to be
sold at an average cost of $29 each per month. On average, the store’s total profit is $7,055.85
per month. If suggested recommendations do not meet the company’s objectives, Madeline Ruth
has incurred enough profit to implement a contingency plan.
2.0 Situation Analysis
2.1 Market Summary
2.1.1 Market Demographics
Fredericksburg is a small city, an hour outside of both Washington D. C and Richmond.
It has a total population of 24,286; the median age is 28.8 (U.S Census Bureau, 2010). The
University of Mary Washington, located in Fredericksburg, accounts for 4,300 (Marty Morrison,
2011) of Fredericksburg’s total population. Madeline Ruth is located on Caroline Street in the
heart of downtown Fredericksburg. The population of students makes up the largest age group in
Fredericksburg, ranging from 20- to 24- years old. Fredericksburg is predominately female,
which accounts for 13,142 of the population.
Fredericksburg is a very diverse city that is made up of families from different
backgrounds ranging from affluent families to those less fortunate. Of this population, 3,044
couples are living in traditional households, those made up of a husband and wife. Of these
families 1,250 are raising children under the age of 18 years old. Single mothers raising children
alone account for 1,388 of the families in the area. Single households consist of 3,419 out of the
total population in Fredericksburg.
2.1.2 Market Needs
About 65% of Mary Washington students live on-campus; they create a large portion of
business for the Fredericksburg area. The student population is 64% women, which contributes
to the desire to shop and search for cheaper clothing (College, 2011). A high-end consignment
shop that caters to women of all ages is convenient for an area of such diversity.
With the fall in the economy, many families that were once able to afford retail prices are
now giving their business to second hand consignment shops. Customers of Madeline Ruth are
able to purchase from all types of stores ranging from Old Navy to Saks Fifth Avenue. Madeline
Ruth offers customers high-end clothing at lower prices; it is more realistic and affordable
alternative for many families. Madeline Ruth not only offers cheaper clothing, the store allows
customers to sell clothing on consignment with the maximum profit return of 50% of the selling
price
2.1.3 Market Trends
The recent decline in the economy has spiked a trend in consignment shopping.
Consumers no longer have excess money to buy brand new, full price, high end clothing.
Madeline Ruth is an alternative shopping destination; customers are offered the same high end
clothing, slightly used, for a cheaper price.
It is the management’s responsibility to watch fashion trends to remain competitive in the
same industry. Madeline Ruth must track trends in order to offer the best selection of current,
high-end, luxury clothing to consumers. The trends in fashion depend on the seasons. For fall/
winter 2011 the major trends are white dresses, white trousers, printed skirts, cable knit sweaters,
printed jackets with a tie at the waist, hue (mustard color), polka dots, rust-color coats, maxiskirts, lace, plaids, 70s inspired day dresses, jade green dresses, bright pants, mod shaped
dresses, colored accessories, and bright coats. (Elle, 2011) In preparation for spring/ summer
2012 the major trends are projected to be Amazonian print, color- blocked dresses, anoraks,
over-sized prints, orange dresses, pink short suits, pastel shades, metallic basics, peplum skirts
and dresses, bright blue dresses, slitted skirts, and sequin sweaters. (Elle, 2011)
2.1.4 Market Growth
There is potential growth in the market of high-end women’s consignment clothing. As
the economy continues to decline, it is more likely that shoppers will spend money on
consignment clothing rather than paying full retail price for generic clothing that can be found by
most retailers nationwide. Another aspect of market growth is the increasing population in
Fredericksburg, which has increased by 26% in the past 10 years. The growing population offers
continuous opportunities for Madeline Ruth because as the population grows so does the target
market. The population of the area is ever changing as the University of Mary Washington
accepts new students every year. If Madeline Ruth can profit from their loyal customers, then the
reputation of Madeline Ruth will be passed down through the generations. Madeline Ruth has
been in business for two years; there is potential growth for this new company if the proprietor
takes full advantage of the opportunities that arise.
2.2 SWOT Analysis
2.2.1 Strengths
Madeline Ruth has many strengths, one of which is that the store has the ability to keep
up with the changing trends. Once a trend has gone out of style, it is removed from the sales
floor and donated to local women’s shelters. This constant change of inventory makes customers
excited knowing that they will not see the same clothing they saw two months ago.
Not only does Madeline Ruth offer high-end clothing for a low price, the store also offers
quilting classes and alterations services. This is a considerable strength for Madeline Ruth
because many pieces of clothing can be altered to fit almost any body, allowing many
opportunities to make a sale. By making alterations, Madeline Ruth increases sales, builds
customer relationships, and satisfies consumers with superior customer value.
Another strength of Madeline Ruth is having a Facebook and website. Surfing the web is
a convenient alternative to driving through downtown Fredericksburg traffic. Madeline Ruth’s
Facebook posts pictures of newly received clothing and also updates the store’s hours of
operations. The website shows select clothing and updates the page with incentives and sales.
2.2.2 Weaknesses
The parking and store’s hours of operation are a weakness for Madeline Ruth. During
business hours, it is hard to find a parking spot along the crowded streets of downtown
Fredericksburg or in front of Madeline Ruth. The hours of operation are limited. Madeline Ruth
is closed on Mondays; this may be an inconvenience for some loyal customers.
Madeline Ruth is a small retail space, approximately 400 square feet, with inadequate
capacity to display the volume of consigned goods that enter the store daily. The store can only
display a limited amount of merchandise and cannot manage heavy foot traffic. In order for
customers to maneuver through the store, the management must utilize the available retail space.
2.2.3 Opportunities
Madeline Ruth has three major opportunities; one of these is to take advantage of the
local events in the Fredericksburg community in order to gain recognition and return business.
By being involved with local community events such as the Christmas parade on December 3,
2011, Madeline Ruth will have the opportunity to network with local retailers and advertise the
consignment store.
Another major opportunity for the Madeline Ruth would be to take advantage of the
University of Mary Washington demographic in the area. College students have limited buying
power, which provides students an incentive to shop at consignment stores. Madeline Ruth has
the opportunity to make events that coordinate with the activities of the college such as Free
Stuff Fair Day and Club Carnival.
A further opportunity for Madeline Ruth is the declining economy that makes retailers
compete for the same clientele. Madeline Ruth has the opportunity to capture market share by
remaining relevant through innovation meaning that in order to win over customers entails
staying on top of the trends, paying attention to customer’s need and wants faster than all
competitors or buying out the competition to gain customer information lists.
2.2.4 Threats
Madeline Ruth has two main threats; one of these is intense competition. There are
competing consignment stores not only in the area, but on the same street, Caroline Street,
including Monkees, Re-Run Shoppe, and Present & Past Treasures. There are retailers such as
Target and Wal-Mart that offer clothing at low prices, Goodwill, and discount stores such as
TJMaxx, Ross and Marshalls that discount designer prices. The threat of outlets at Potomac Mills
Shopping Mall further increases competition for Madeline Ruth.
The economy is the second threat for Madeline Ruth. The current economy is in a
recession with high unemployment and inflation among other factors. The threat is if the market
turns around, the possibility of customers taking their business to larger retailers because of their
returned buying power. The economy in a recession allows the store to thrive due to the fact the
shoppers are in need of affordable clothing, but a change in economy could alter shopping at
consignment stores like Madeline Ruth.
2.3 Competition
The competition for Madeline Ruth consists of consignment shops and wholesalers in the
Fredericksburg area, the Internet offering online shopping, and local outlet malls. Other
consignment clothing stores in Fredericksburg include Plato’s Closet, Re-Run Shoppe, and
Happily Ever After and other women’s clothing stores on Caroline Street in downtown
Fredericksburg.
Living in the digital age, many retail stores offer online shopping. It is very easy and
convenient for people who do not like going to outlet malls or those who do not have the time to
commit to the shopping experience. There are also websites such as eBay and amazon.com that
allow people to sell their own goods for a price they want. Instead of selling used clothes to
Madeline Ruth where the customer may receive 50% of profit, a person could sell their items on
eBay and keep 100% of the profit. They can also post an asking price with the possibility of
earning even more if more than one person wants to bid on it.
Outlet malls are very popular and the Potomac Mills Outlet Center is a major attraction
for shopping for people who live in the Fredericksburg area. For one, it is an indoor mall so
weather is not a factor to those wanting to shop. There are also many different types of clothing
stores in the outlet mall that cater to both men and women of all ages. Large outlet mall facilities
are a definite competition for any small boutique, especially since outlet prices are cheap as well.
2.4 Product Offering
Madeline Ruth is a women’s fashion boutique that offers more than just clothing. The
store is a high-end boutique that offers designer brands, shoes, handbags, and even jewelry. By
offering consignment services, Madeline Ruth is affordable. As mentioned earlier, if a customer
consigns clothing at Madeline Ruth, they can receive up to 50% of the profit that is made from
the sold items.
The boutique also likes to offer a variety of clothing styles from vintage to designer high
fashion. The idea is that there is something for everyone. In addition to clothing and accessories,
Madeline Ruth also offers alteration services and quilting classes.
2.5 Keys to Success
One of the factors that will ensure the success of Madeline Ruth for years to come is that
it is a small business that has the ability to change the direction of their goals at any time. Other
factors that will ensure the success of Madeline Ruth are the fact that people are always looking
for ways to get their money’s worth out of everything they can, including clothing. Madeline
Ruth offers consignors a percentage back on the clothing they bring in to sell. This is incredibly
appealing to anyone who is looking to save the time and the hassle of having to sell their clothing
themselves. Customers are looking for designer and vintage clothing at lower prices than that of
other retailers. These two incentives will ensure the success of Madeline Ruth.
2.6 Critical Issues
The underlying factor that can affect Madeline Ruth is the economy. With downturns in
the economy, people may keep their clothing to reuse or pass down to family members. This
would create a shortage in inventory for Madeline Ruth, which would reduce profits. Another
issue is the trend of people being environmentally conscious; the green movement could increase
the trend of consignment shops, Madeline Ruth could then have more competition in the area.
2.7 Macroenvironment
Madeline Ruth targets women of all ages, “We always try to have something for
everyone, embracing all tastes and styles (“Madeline Ruth”, 2010). Based on the location of the
business, female students at the University of Mary Washington as well as female residents in
the Fredericksburg area make up the demographic of the business.
The poor economy is the greatest economic factor that affects the business of Madeline
Ruth. Consumer spending is affected by lowered incomes, the fallen housing market, mortgages,
and the unemployment rate among other things. However, data shows that “last month’s
[November 2011] drop in the unemployment rate from October’s nine percent reflected a
594,000 decrease in the number of people saying they were out of work.” (Chandra, 2011). This
particular economic factor may increase consumer spending, which will be helpful to the retail
market.
The increasing price of gas negatively affects the natural environment of Madeline Ruth;
people are spending their money on necessities, such as heating bills and transportation instead
of on clothing. As stated by Mouawad and Bunkley, “Low-and middle-income families are
typically hurt most by a higher price for energy because they spend a higher portion of their
household budget on gas and heating bills.” (Mouawad & Bunkley, 2011). Also the “Go-Green”
campaign is an incentive for consumers to go shopping at Madeline Ruth since they will be
recycling their clothing which ties into the cultural environment.
The ‘Go-Green” campaign is a way for consumers to feel better about themselves, and
what they are doing for the environment. Consumers can purchase recycled clothing at Madeline
Ruth, as well as save money on designer and vintage clothing. This makes people feel
environmentally friendly, and makes them happy that they were able to save money.
Madeline Ruth has a Facebook page, as well as a website. The company is able to reach
out to the masses and connect with potential customers through this media. However, the website
should be updated more often. Other social networking sites such as Twitter should be consulted
as well, so Madeline Ruth can reach a greater number of potential customers. Twitter will also be
able to provide updates more quickly and efficiently to those loyal customers of Madeline Ruth.
A tracking system should also be set in place within the store so the company can record their
frequent customers and their preferences. This way, when Madeline Ruth receives an item that
fits those preferences, an e-mail can be sent out alerting a specific customer of the item.
With the elections of 2012 coming up, there has been great debate between parties about
increasing taxes on the rich, otherwise known as ‘The Buffet Rule’.
“The Republicans are protecting millionaires from paying their fair share of taxes and
standing in the way of new nearly two million American jobs, they are also blocking a payroll tax cut
that would allow all working people in the US to take home a bigger share of their paycheck.”
(PresidentialCandidates.us, 2011).
Consumer spending will be affected as the elections near because consumers are unsure of how
their paycheck will be affected. If the law is passed, spending will most likely increase since
consumers will be taking home a larger portion of their paycheck, allowing for more spending on
their wants.
3.0 Marketing Strategy
3.1 Mission
Madeline Ruth does not currently have a mission statement, so it had to be made from
scratch. After doing some research and consulting with the owner, a mission statement that
would best embody the company objectives was created. The mission statement for Madeline
Ruth is as follows:
“Our goal is to provide a fun, affordable, convenient environment for women's fashion,
and to make each customer’s experience memorable and unique.”
3.2 Market Objectives
For the past two years, Madeline Ruth has relied on word of mouth for marketing itself to
the Fredericksburg area. Print advertising is very expensive, the few customers it may attract is
not worth the cost of the advertisement. The only form of print advertisement that management
has ever used is the Fredericksburg walking map. Word of mouth has proven sufficient for local
customers, and the walking map is carried by almost every tourist. Madeline Ruth also uses the
networking site, Facebook. Facebook works better than almost any print advertisement in a
paper or guidebook. It has become a go-to source for anything a customer may need to know
about a business. It also allows for interaction between the manager and the customer, which
helps build strong customer-owner relationships, a very important aspect of owning a small
business. Whenever marketing on Facebook, the goal is to catch fans' attentions to attract them
to the shop over the next couple of days after the post goes live. Madeline Ruth is marketed as a
local, more affordable option for name brand clothing.
“When marketing the store in any way, Madeline Ruth’s one and only goal is to continue
building regular clientele.” (Austin,2011) Being consignment, the store has to build a consistent
pool of consignors and shoppers. Both loyal clientele and loyal consignors are necessary for
Madeline Ruth to be profitable.
3.3 Financial Objectives
Madeline Ruth is a new store; it has only been open for two years. The main goal in
those first couple of years is to break even financially. Before thinking about turning a profit, the
company has to spend some time finding its niche within the community. Management must get
to know their customers and tailor the product offerings to continuously supply customers with
new, enticing items to keep them interested and coming back. Every month business owners
must pay their bills such as rent, employee salaries, and utilities. Over the course of a few years,
it is certainly a goal to make a profit. For a consignment shop profit is seeing any number over
zero. The whole point of a business is to make a profit; turning profit within the first year is
impressive for an investor. Unlike the typical boutique, consignment shops do not have front end
product costs. Madeline Ruth pays for the merchandise only after having made money from it,
so any money the company makes is profit.
3.4 Target Markets
As a fashionable consignment shop, Madeline Ruth’s target market consists of women
from all economic classes. Madeline Ruth states that “they always try to have something for
everyone, embracing all tastes and styles,” (Austin, 2011) the store targets groups of women
ranging from teenagers to adult women. Due to the proximity to the University of Mary
Washington, many customers are college students. The management at Madeline Ruth connects
with its customers, especially the market of college students, through the Facebook page.
Madeline Ruth’s target markets, women and college students, appreciate the affordability of
designer clothing conveniently located in the heart of downtown Fredericksburg.
3.5 Positioning
Madeline Ruth aims to serve all types of women with their many varieties and styles of
clothing. Therefore Madeline Ruth is seen as a fashionable, affordable, trendy, local,
convenient, and friendly consignment shop where a customer can find great clothing and
accessories. The shop is viewed as a large closet rather than just a clothing store. Alicia Austin,
the manager, also likes to reiterate that they always try to have something for everyone.
3.6 Marketing Mix
3.6.1 Product/Service
Madeline Ruth offers a wide variety of products such as, shoes, shirts, jewelry, skirts,
dresses, accessories, hand bags, and more. Not only does the store offer many different products,
but also many different brands. Madeline Ruth sells clothing from Target, Ann Taylor, Glam,
Van Eli, Christian Dior, Marc Jacobs and more. The company’s policy for consigning is, the
“items must be in “like-new” condition and must be purchased within the last two years unless
they are vintage pieces”. (Madeline Ruth, 2011) Also, the merchandise needs to be free from
rips, tears and stains. If the merchandise is in poor condition, then Austin will sell it at a sale
price, or won’t accept it at all. Having this policy helps to keep the quality high and keep
customers happy with the store’s products. Not only does Madeline Ruth offer name brand items
for a low price, but the company also offers quilting classes, alterations and sewing courses.
3.6.2 Price
Madeline Ruth’s prices vary; prices can be as low as $1.00 and as high as $500.00. The
store offers many discounts. After an item has not sold after four weeks, it gets marked down by
50%. After an item has been there for six weeks, it will be marked down by 75% of the original
marked price. After eight weeks, the item will get placed on sale racks to be sold for $1-3
dollars. Madeline Ruth also offers other discounts throughout the year. On the company’s
Facebook page, there may be a post that states 25% off of hand bags for this weekend only.
3.6.3 Promotion
The promotion for the company is by word-of-mouth, through first-time customers and a
loyal clientele base. Madeline Ruth does not promote by using large budget advertisements, only
inexpensive advertisements, its employees, satisfied customers, and self-promotion.
One of the greatest advantages for promoting the store strictly by word-of-mouth is that it
is free-of-cost and the information is more authentic. Madeline Ruth is a consignment shop that
knows that clothes should be accessible to the masses at an affordable price, so there is no car
salesman delivery, only genuine help from the employees trying to help the customer find the
most appropriate clothing suited to their needs.
The owner of the boutique, Alicia Austin, is the ambassador of the brand, knowing
everything about her retail from the newest merchandise that is in, updating the social networks
to re-arranging the floor sets for a more pleasing visual appeal for customers. The selfpromotion of the brand is evident in the change of floor sets especially with creating outfits from
consigned clothing in order to give customers an idea on how to wear the clothes.
3.6.4 Place
Madeline Ruth is located in the historical district of Fredericksburg --Old Fredericksburg-making the location of the store well-known and accessible. Good parking depends on the day;
it may be difficult to obtain close parking on the weekends. The privately owned store has only
one location on Caroline Street, but has an online venue to communicate to customers. The
social network Facebook features new arrivals to keep clients updated on the newest assortment
of clothes and customers can call the store to place items on hold.
Madeline Ruth is a proprietorship; there is not a distribution center. The boutique is not a
wholesale venue so it keeps stock within the confines of the store.
3.7 Marketing Research
With the wide range of prices and designers, Madeline Ruth is a brand bargain shopper’s
paradise. The Fredericksburg demographics showed that students and individuals ages 20 to 25
are the largest group shopping and living in downtown Fredericksburg. After sitting downtown
watching the people that enter the store, it was effortless to gather the information about the
types of people that were interested in what Madeline Ruth had for sale. Women seemed to be
the most curious about the store and entered. Since Madeline Ruth caters to women of every age
and economic status, the ages of these women ranged from about ten years old to about 45 years
old. These individuals thoroughly enjoyed the quaint store and the low prices of the
merchandise, with the grand surprise of finding a Christian Dior leather jacket.
Upon entering the store, the store owner mentioned that not only is she an owner, she is
also a customer. Austin studies magazines such as Vogue to check out the latest fashion trends to
help keep her store up-to-date. Not only does she learn the trends from magazines, she watches
certain TV shows that are fashion based that give her a glimpse into the fashion world.
Online fashion blogs and comments on social networking sites such as the store’s
Facebook, help keep her ahead of the fashion curve. With the help of media displaying the
hottest fashion, the owner and buyer of Madeline Ruth is able to purchase certain items for the
store that are indeed “in” for this season. Online shopping has become a large source of
information for Madeline Ruth.
4.0 Financials
4.1 Break Even-Analysis
Madeline Ruth does not have many expenses. The only expenses for the company are as
follows: Insurance- $100.00/m; Rent- $1000.00/m; Wages-$493.00, Utilities- $145.00/m; Taxes$490.15/m. After summing the total expenses, Madeline Ruth has a fixed cost of $2,228.15. The
consignment shop has no variable costs. Therefore, Madeline Ruth has a total cost of $2,228.15.
For the month of September her sales were $9,284.00, giving a total profit of $7,055.85. The
average price per item is $29.00 and the average sale per customer is $50.00.
Given this information, the computed break-even volume is 77 units. ($2,228.15/
($29.00-$0.00). Madeline Ruth must sell at least 77 items in order to break-even. Given the
average price per item of $29.00 and a variable cost of $0.00, the contribution margin can be
computed. The contribution margin is 29% ($29.00-$0.00/ ($0.00). This means Madeline Ruth
makes of profit of 29% of sales after paying all of her expenses.
Madeline Ruth’s break even sale is computed by fixed cost divided by contribution
margin ($2,228.15/29%), which is $7,683.28. This means Madeline Ruth needs to sell $7,683.28
in sales to break even.
4.2 Sales Forecast
Due to the poor economy, “consignment is one of the safest businesses to have. People
now have to rethink and change the way they shop and spend.” (Austin, 2011) Austin does not
plan ahead for future sales. Consignment is a highly profitable type of business to enter.
Currently with the change of economic status, Madeline Ruth is working hard to maintain its
current customers and gain new customers by its “main objective to have brands and styles that
draw people’s attention at prices they can afford.” (Austin, 2011) Madeline Ruth is not a public
store therefore Austin is not concerned with market share. However, if Madeline Ruth intends to
grow as a company and continue to prosper, management must begin to study and enhance their
market share of high-end women’s consignment in the Fredericksburg area.
The only form of forecasting Madeline Ruth uses is seasonal wear and trend forecasting.
They accept clothing and other items seasonally rather than building up a mass wardrobe of
clothes. “I accept spring and summer clothing from February to the end of July, and accept fall
and winter clothing August to the end of January.”(Austin, 2011) The manager tries to keep the
store fully stocked in accordance with the special occasions and events that occur in downtown
Fredericksburg and on the University of Mary Washington campus. Parents Weekend and the
store’s Holiday Open House are predicted to be highly profitable weekends for Madeline Ruth.
Austin chose the small store scale kind of business to “ensure that the racks are always
filled with clothes and ready for every busy shopping day and season.” (Austin, 2011) She takes
into consideration events in the community that will boost sales, but does not spend a whole lot
of time sales forecasting.
Items are chosen based on possible future fashion trends, ability to sell, profitability, and
quality. Austin says that she declines a lot of items that people bring in to consign. She turns
away anything that is very outdated or not considered vintage. “If a piece is not trendy or does
not have the potential to be trendy it is turned away. One of the defining factors (of) Madeline
Ruth is the fact that (the) racks are well edited, so it is important (for management) to be very
selective.” (Austin, 2011)
In order to find clothing that will sell, Alicia has subscriptions to fashion magazines that
display the hottest and newest fashion. These trends will help forecast what brands and style of
clothing her clientele are likely to buy. Fashion blogs and store websites aid in this trend search.
Alicia is also an avid shopper and uses her own personal judgment and experience when it comes
to choosing proper clothing.
There is always reduced price clothing in the store based on how long it has been there.
The manager tries to keep a “wide range of prices in the store so that there is always a deal to be
found rather than having a weekend where everything is 40% off.” Austin tries “to do what is
best for the store based on location, their clientele, and their inventory.” (Austin, 2011)
4.3 Expense Forecast
Direct costs are costs that “are those traceable to a single cost object” (Wild, Shaw &
Chiappetta, 2009). The only directs cost that Madeline Ruth incurs is from the stores alteration
service. These direct expenses are mostly like to remain constant unless the company becomes a
higher-volume store or decides to have more product offerings.
Indirect costs are, “costs incurred for the benefit of more than one cost object.” (Wild,
Shaw & Chiappetta, 2009). The indirect expenses of Madeline Ruth include the rent of the
building space, insurance on the building space, Austin’s salary, the employee’s salaries, the cost
of utilities (heat and electricity), the subscriptions to fashion magazines, and any accounting that
must be done in relation to the business.
All these expenses will remain constant unless, as stated with direct expenses, the
company aims towards becoming a higher-volume store. If this were to happen, management
will have to find a larger building space, which will increase all the indirect expenses previously
listed, except for Alicia’s salary.
5.0 Controls
5.1 Recommendation/Implementation
The management at Madeline Ruth should start implementation of the new marketing
proposal throughout the next twelve months. In December, Madeline Ruth should take advantage
of the holiday season to kick-start the new plan. Fredericksburg city holds the annual Christmas
parade on December 3rd; Madeline Ruth should hold a “Holiday in Style” event that evening.
Management would invite loyal customers to come celebrate the season with champagne and
10% off all sales if they bring a friend. This event would be posted on the company’s Facebook
page, Twitter account, and personal mailings to those invitees. Management should post pictures,
prior to the event, of their newest arrivals and decorated storefront as to entice customers to
attend. As the Christmas season comes to an end, management should send out New Year’s
cards wishing those customers who attended the “Holiday in Style” best wishes for the New
Year, along with a thank you for their business. Management must remember to acknowledge
their loyal customers.
Madeline Ruth donates unsold clothing to local women’s shelters; management should
use the opportunity of the winter season to donate remaining winter coats to local churches as a
winter coat drive. This would be an opportunity for Madeline Ruth to use social marketing to
share their charity contributions with the local community.
As the seasons begin to change, management at Madeline Ruth must begin to prepare for
spring by making customers aware of the new seasonal apparel in the store. The process can
begin with pictures of new clothing on social media networks and a small ad in The Bullet, Mary
Washington’s student run newspaper. This small advertisement would cost $80 but the benefits
of grabbing the attention of female students would surpass the costs.
Mary Washington students leave for summer at the end of April. Madeline Ruth should
hold “College Nights” on a Tuesday and Wednesday for those loyal students who will soon be
leaving Fredericksburg for three months. This is a great opportunity for management to
showcase their best clothing, as this could be a profitable event since this will be the last
opportunity for most students to shop before summer.
During the summer months, Fredericksburg is crowded with tourists. Madeline Ruth
always places an ad in the Fredericksburg walking map as a guide for tourists to locate the shop.
The summer months are a lull for the shop because Madeline Ruth relies on word of mouth and
many loyal customers are on vacation. Madeline Ruth should use the summer months to sell
clothing that is not popular among college aged women. Management should use these months to
prepare for the rush of customers that will arrive at the end of August.
The opening week of school is annually the most profitable week for Madeline Ruth.
Management should work with the University to place an ad in the school agenda, which has
other local business’ information. Mary Washington also holds a Free Stuff Fair, here local
businesses set up tables and talk to students. At the school’s events, Madeline Ruth should
inform students of the product offerings and location.
5.2 Marketing Organization
Madeline Ruth consists of three employees. Alicia Austin--the owner--who handles all of
the book keeping, managing, scheduling, etc. Lilly and Kasey are the only other two employees.
These employees are part time, key holders, cashiers, and sales persons. Madeline Ruth is a very
small company and is mainly run by the owner.
5.3 Contingency Planning
Madeline Ruth has been in existence for a little over two years, and seems to be on the
path to great success. “Data show(s) that, across sectors, 66 percent of new establishments were
still in existence 2 years after their birth, and 44 percent were still in existence 4 years after.”
(Campbell, 2007) Based on this statistic, Madeline Ruth is still in a period of uncertainty, so now
especially Austin must plan to prevent the failure of her business.
Contingency planning is an alternative, or a “Plan B,” a business has set in place in the
event that the original proposition does not fulfill company objectives as anticipated. One
possible option to help Austin fulfill those company objectives would be to simply increase
advertisements, and the mediums through which they are done. This can be accomplished by
placing an ad in the Fredericksburg publication The Free Lance-Star which is not only available
in print, but online as well. Austin can also implement a radio commercial in which potential
customers, who do not necessarily visit or pass by Fredericksburg on a regular basis, can become
aware of Madeline Ruth and what it has to offer.
If the increase in advertisement does not help, Austin can look into the possibility of
teaming up with another, more established, consignment store such as Plato’s Closet or
Monkee’s. Austin can offer to hold their inventory and carry their merchandise for a share of the
profits, while still being able to manage her own store and operate under the name of Madeline
Ruth. This could be beneficial to both parties as the partner would be able to display a larger
variety of merchandise, which in turn could generate larger profits. Austin would benefit by
being able to share in these profits.
Another option is to change the direction of the business and steer away from
consignment. One way in which Austin can accomplish this is by expanding on some of the
current offerings of Madeline Ruth, like the art quilting classes she offers once a year. She can
offer this class more often, as well as classes on a variety of other skills women in the
Fredericksburg area may be interested in learning (sewing, crocheting, etc.), and become a
workshop of sorts. Along with this, she can sell the materials needed to take the class within the
store and create two different points of income.
Another possibility is for Madeline Ruth to become a retail store in which only new
merchandise is sold. Austin would have to work with local, or even national companies to create
an inventory, and considering the size of Madeline Ruth, she would not be able to buy in bulk
which would increase already substantial costs. This contingency plan would be the most
difficult to implement, especially when considering that strong competition like Macy’s and
Kohl’s are located nearby.
As a last resort Austin could shut down Madeline Ruth. However, before announcing her
intention to do so, she should make one last attempt to bring in customers and sell what she can
at regular price. After making this attempt, she should have a “Going out of Business” sale where
all items in the store are offered at a discount, and profits can be salvaged wherever possible. The
clothes that do not sell can be donated to the local women’s shelter. This contingency plan would
be a financially smart move for Austin to make if she continuously fails to break-even each
month.
As of right now Madeline Ruth is successful and Austin should continue moving forward
with her current plans. However, the above contingency plans are something Austin should
prepare in the event that her current business venture takes a turn for the worst, and fails.
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