Evaluation of Eclipse Retail Business Plan

Eclipse Retail, Inc. is an Internet retailer of discounted designer fashion, jewelry and home furnishings. While its business plan presents opportunities and competitive advantages that may set the company apart from its competitors in the traditional retail sector, there are several aspects that warrant questions and further investigation. Opportunities and Risks
Market
In retrospect, the late 1990s did see tremendous technological advances and a proliferation of the Internet use. This, combined with the sizable market of off-price apparel, present a great opportunity for Eclipse Retail which would combine the two sectors and capitalize the traditional apparel market with the use of E-commerce. However, the business plan fails to provide sufficient information to substantiate its statement on the growing use of shopping online in the apparel market in the 1990s.
Given the E-commerce websites such as Amazon.com and Ebay.com, there is no doubt that there is an existing Internet-based sales market that supports a group of consumers that are comfortable with making transactions online. However, given the unique nature of the apparel shopping, which often times requires an in-person experience in order to try on the apparel, it is not yet clear how receptive the shoppers will be if this traditional shopping experience is completely taken online.
In addition, there is uncertainly surrounding the estimated size of the online apparel market, as the analogy between catalog and Internet-based apparel sales is worth further scrutiny. Depending on the demographics and the consumer behavior of the catalog shoppers, catalog apparel sales may not be a good representation of the potential growth of the Internet-based sales. Before making any attempt to estimate how much of the catalog sales could potentially be translated into online sales, market research (for example survey, focus groups, etc) could be conducted to better understand the consumer behavior and how receptive the catalog shoppers will be to an E-commerce discount retail website. The same methodology could be used to on current customers of traditional retailers and factory outlets.

Company
The company is characterized by a unique business model that combines E-commerce with the discounted retail of designer apparel, jewelry and home furnishings. With its revenue stream being essentially single stream volume-based sales, a critical factor to consider is to
Target Customer (acquisition, support/return/styling advice, retaintion)

Resources
- People
There is not sufficient information on the qualification and experiences of each member of the management team. While collectively the team has experiences in consulting, law and Internet commerce, additional information on their specific experience would be needed to substantiate their contribution to this venture. It is also not clear whether they have worked (successfully) together previously.
In addition, the management team seems to lack experiences and expertise in the retail and fashion sector. A strong network and knowledge in retail is needed both to operate the company successfully and to understand and compete with the company's competitors, while a team member with experiences in fashion would be able to implement the operating plan of developing content relationships with fashion magazines.

Technology
Very limited information on technology is revealed in the business plan.
Operation (Inventory management, international fulfillment?)

Deal/Investment Size
The business plan states that $10 million dollars are required to “complete development of the venture and expand the company's offerings”. However, no details are provided as to the proposed term and the timing of the funding, or the scope under which the capital will be utilized. Under the proposed business model, it could be assumed that part of the funding will be used to build the product inventory to support the expected sales growth from 1998 to 1999; at the same time, this rapid sales expansion also warrants the question as to whether the company will be financially prepared for the upgrade in technological infrastructure and possible higher overhead cost.
In addition, it would be helpful to have information on the current financial situation of the company and the source of initial funding since the inception of the company.

While additional information can be obtained through the management team, a lack of clarify in the business plan raises a flag as to whether the team is qualified at all for this type of venture.

Financial Projections
The financial projection presents 1998 year-to-date actual data, in addition to projections for 1999 and 2000. Since the website was launched in September 1998 and the business plan was prepared prior to/during November, it should be reasonable to assume that the 1998 actual data is based on two-month period September through October. In order to make the 1998 actual data more comparable to the 1999 and 2000 annual projections, one way would be to linearly extrapolate the 1998 figures by six (two months x six = twelve months).
Given the two-month costs of $1.2 million for Sales & Marketing and $1.6 million for G&A, the annual estimates for 1999 and 2000 appear to be conservative, especially given the significant increase in net sales assumed for these years, even after taking into account limited degree of economies of scale in G&A and the possible front-loaded nature of Sales & Marketing expenses.
Furthermore, it would be helpful to have the underlying assumptions for the projected sales figures. Since the company is essentially a first-mover in the online discount retail sector, there is no historical data of any precedent company that could be used as a check.