Racing Parts Store (Strategy & Implementation Summary)

Executive Summary

Company Summary

Products & Services

Market Analysis Summary

Strategy & Implementation Summary

Our strategy is based on serving the niche of entry-level racers well. This area is full of small race teams that can't get products or services from the major vendors who focus only on professional race teams.

Also:

• What begins as a customized version of a standard product, tailored to the needs of local racers, can eventually become a niche product that will fill the needs of similar racers across the country.
• We are planning our marketing strategy so that we can eventually reach specific kinds of racers across broad geographic lines.
• We focus on satisfying the needs of entry-level race teams.•.
• We focus on follow-on technology that we can take to the masses, as opposed to leading edge technology that aims at the professional race teams.

Marketing Strategy

The retail marketing strategy of Southeast Racing Parts centers on creating a corporate identity that clearly defines our market niche in terms that benefit our customer. Other specific strategies that will be used follow:

1. Print Ads—Keeping the Southeast Racing Parts name in front of the customer while getting established will be necessary. We plan on running limited space ads in the local racing newspapers to keep our name and phone number in front of the consumer. We may attempt to showcase a single product in an effort to return revenue from the ad. Our past experience has been that showing measurable revenue from these types of ads is difficult. In the future we plan on utilizing Stock Car Racing and Circle Track (both national magazines) as a method of increasing our sales revenue.
2. Press Releases—The local racing papers: the Racing News, Late Model Digest, Dirt Late Model Digest, and the Pit List have offered to run releases and/or stories concerning the opening of Southeast Racing Parts. Stock Car Racing magazine has also extended us the same offer. We will also use the above media to run new product releases.
3. Race Car Sponsorship—Entry-level racers can be persuaded into running the Southeast Racing Parts logo on their race car in exchange for a token discount on purchases and/ or for receiving technical support.
4. Decals—We will have decals manufactured with the Southeast Racing Parts logo. We will include the decals with all of the orders that we ship. Entry-level racers in particular enjoy displaying decals on their race cars, haulers, tool boxes, etc.
5. Apparel—We know several people in the area who produce NASCAR apparel. A line of premium Southeast Racing Parts apparel could be designed and produced in very short runs to reduce inventory costs. These can be sold or given away with qualifying purchases to further expose the Southeast Racing Parts name.
6. Grand Opening—A Grand Opening is the most successful of any in-store promotions. With manufacturer support, a large number of door prizes can be given away while instantly building a mailing list. Loss leader pricing on a few high volume consumable products will attract in-store traffic. Vendors will subsidize loss leader pricing with a rebate or kickback. Appearances by local racing celebrities would also expose potential customers to Southeast Racing Parts.
7. Trade Shows—We will exhibit at approximately four local trade shows annually. Revenue that we produce at the shows will outweigh our expenses for attending.
8. Word of Mouth—By giving first-time customers great service and a fair price, the word is sure to spread. Also, the many industry and racer contacts that we already have in the area will prove to be most beneficial in spreading the word.

All marketing decisions with regard to specific media choices, frequency, size, and expenditures will be conducted on an on-going basis with careful considerations of returns generated.

Pricing Strategy

Our customers are especially sensitive to value. We must ensure that our price and service are perceived to be a good value to the racers. However, in the nearly thirty years of experience that we have accumulated in the racing industry, one message rings true: someone can always beat you on price.

Therefore, our pricing strategy is to be competitive within the various product categories, but not to rely on the selling price to overshadow the other advantages of doing business with our company. We will sell ourselves on the basis of a diverse line of quality products, that are readily available, reasonably priced, and backed up by our extraordinary customer service. The products will be checked prior to shipment and all promised shipping dates will be met.

We will strive for a gross profit margin of 30 percent, increasing that to 33 percent by year four.

Promotion Strategy

Our most important vehicle for sales promotion will be our catalog, which is discussed later in this plan.

Distribution Strategy

Our customers will buy our products at our location. However, we anticipate a significant amount of mail order sales in order to meet or exceed our Sales Forecast. We will receive orders by mail, phone, or fax, process them immediately, and ship the goods via United Parcel Service.

In the event we are out of an item or we don't stock it, many of our vendors have offered drop shipping as a service to us. This will allow us to keep our service at a high level, yet let us keep our inventory levels in check.

In the future, electronic commerce with a secure website will be thoroughly investigated for feasibility.

Sales Strategy

Because Southeast Racing Parts is a new entity, we understand that we will have to prove our company's worth to racers in order to earn their respect and business.

Most importantly, we need to sell our company, not necessarily the products. We will need to push our service and support capabilities.

Sales Forecast

The following table and related charts show our present sales forecast. We are projecting sales to grow at the rate of 30 percent for the next three years.

Our seasonality, as shown in the chart, is a factor in the racing industry. We will tend to sell much better in the period January through June, while sales trail off in late summer and fall.

Management feels these forecasts are highly attainable.

Sales Forecast Details

When Performance Racing Industry completed its annual survey, the resulting figure for total number of racers was 385,000. Within the survey they also found that 150,000 of those were oval track racers. The survey also showed $1.5 billion in annual retail sales for all segments, with 48 percent of that total ($720 million) derived from the oval track segment. By dividing that number ($720 million) by the number of oval track racers (150,000), the average annual retail purchases of oval track racers equals $4,800. From our past experience, we believe that each customer we have would spend on average 25 percent of that figure ($1,200) with our company. Finally, by dividing our first year sales forecast ($350,000) by $1,200 (average annual customer purchases), it shows that we will need 292 customers to support the sales forecast numbers. We believe, by and large, that these are realistic and attainable numbers.

Strategic Alliances

We have the ability to build strong strategic alliances with many of our suppliers, some of which are listed below.

• Smith Racing. They will do "whatever they can" to help us succeed. Possibly supply us with a show car to display in our showroom.
• Motorsport Industries. They will set us up as a W.D. without the buy-in requirement.
• Raleigh Products, Inc. They will set us up as a W.D. and could also be persuaded into extending us special terms.
• Racing Accessories, Etc. They will set us up as a W.D and help out as needed with additional terms.
• Jalopy Shop. They have set us up as a dealer and will drop ship when needed.
• A&I Industries. They will work with us by drop shipping direct to our customers and also by acting as a "paper" warehouse so that we may order direct from the manufacturer for a nominal billing fee.
• Racemore, Inc. They will supply us with used testing equipment at no charge. They have indicated that they would also extend special terms and/or dating on initial stocking order.
• Winner's Circle. They will supply us with their 94-page 4-color catalog at no charge.

The following two local warehouses will help us immensely in keeping our own inventory levels in check, while still giving our customers fast service:

• Andy's Storage
• Wherehouse

Approached properly, these vendors and many others will assist Southeast Racing Parts in becoming a force in the marketplace.

Management Summary

Financial Plan