Business plan

Amaxi shop
Auto parts online business sales

May, 2018
London, UK
Table of Contents
Executive Summary...................................................................................................... 2
Business details ........................................................................................................... 3
Economic Overview ..................................................................................................... 4
Market Analysis ........................................................................................................... 7
Customer Need ............................................................................................................................... 7
Target Market ................................................................................................................................. 7
Market Segmentation ..................................................................................................................... 8
Competitor analysis ................................................................................................... 10
How we plan to compete .............................................................................................................. 11
Marketing & Pricing strategies ................................................................................... 12
Pricing ........................................................................................................................................... 13
Operations Plan ......................................................................................................... 15
SWOT Analysis ........................................................................................................... 16
Financial Requirements .............................................................................................. 17
Personal Evaluation ................................................................................................... 20
References................................................................................................................. 21
Appendix ................................................................................................................... 22
List of figures ............................................................................................................. 23

Executive Summary

We are Amaxi Shop: A London-based drop-shipping online spare car parts’ store that
aspires to align suppliers with customers, maximizing shared value between them.
Bearing low risks for the company, our drop-shipping business model allows for
experimentation in terms of online inventory. While we still rely on our suppliers for
order delivery, we are also capable of compiling an extensive product portfolio at a
low cost. Since payments for us are commission-based, which narrows opportunities
for high profit per sale rates, we highly rely on our developed and focused marketing
strategy to generate volume of sales, providing valuable content to our customers.
With a comprehensive marketing plan, comprising a variety of channels and a
flexible pricing policy, as well as loyalty schemes that attempt to generate network
effect, we target the customer segments with the greatest value to us. Profit for our
business is projected to be achieved at the end of 3rd year (£ 12,604.00).

Business details

Amaxi shop is a London based drop-shipping startup with an extensive offer of spare
parts for passenger vehicles and car kits to consumers across the UK. We support a
wide variety of spare parts’ brands with precise description, photos and reviews
which help customers to make a confident choice. After our market research, we
discovered that consumers want to save time and money buying spare parts online
(fast website), enjoying variety and convenience of payment, seeking for trustworthy
consumers’ review and product description.
Given the example of car aftermarket is expected to grow figure, our mission is to
offer affordable spare car parts to the national market (with a plan for European
expansion) by an effective, fully functional website with relevant filters for quick
research. Our goal is to build trust and long-lasting relationships with our customers
and suppliers', create a go-to place for car enthusiasts and those who need quick and
economical car products.
Our target groups are:

Mechanics- Auto repair, maintenance and servicing garages

Car Owners (Do-it-for-Me (DIFM))

Automobile spare parts’ retailers

Car enthusiasts (DO-It-Your-Self (DIY))

(All spare parts we offer in our drop shipping business are categorized in the table at
the end of the Business Plan in the Appendix 1.)

Our value propositions:

 Steady and reliable supply

Functional website-fast website, variety of filters, constantly

improving user experience UX

Affordable prices

Trustworthy reviews and rating system

Building community and connecting people (review, rating

system & forum)
Helpful customer service, 100% response rate, short response
time

Secured purchasing

The commission our business takes is 15% of the price of the sold product.

Address: North Kensington, Kensington, W10 6BN Greater London, London.

Economic Overview
In the following page, we perform PESTLE Analysis for our business:
Element Factor
The element that has been identified
 Brexit-impending tariffs on
exports to the EU
 UK industries show shy
improvement in 2019
Political estimation figure 10
 UK barred from negotiating
with third countries until it
leaves EU source
 No regulation compelling car
drivers to find the franchised
network
 UK has a vibrant Start-up
environment source
 UK GDP growth and customer
spending are expected to slow
down in 2019 (1.6%)figure 8, 9
 Drastic depreciation of Pound
Sterling-inflation rate is quite
stable 2019 (2.2)figure 8 which
Economic
means no increase of
investments figure 8 and unstable
currency
 Employment rate low figure 8
4% in the second quarter of
2018
 Millennials more often enter
into start-ups source
Business Impact
What is the business impact of this factor?
 This might influence our sales
outside of UK, killing Amaxi
competitiveness against the EU
rivals. Possibilities to move the
company to EU country later on
 Allows us to be confident in the
automotive industry and the private
and public demand for the spare
parts in UK
 This brings uncertainties with the
trading conditions
 Opportunity for car mechanics and
independent shops and for us to be
their suppliers
 Government supports small business
financially with grants. Venture
capital is available to tech companies
in London source
 It might influence sales, we need to
put efforts in differentiation and
marketing
 It can impact our profits while
currency exchanging
 No problem with the source of
employees
 Low entry barriers compel us to be
more flexible and innovative
  Increase online shopping due
to price, convenience, parts
availability and a wide range
of products figure
 Increase of interest in DIY (Do-
Sociological It-Yourself) and DIFM (Do-It-
For-Me) especially millennials
 Customers demanding great
customer service and shorter
shipping time
 Shipping services are more
and more efficient source
 Online Aftermarket sales
estimated to rise figure 13
Technological
 New software for drop
shipping and technology
improvements
 Sole traders have right on tax
write-offs for equipment source
 Sole traders are eligible to VAT
when turnover is over £85,000
Legal source
 Compared to the rest of the
G20 the United Kingdom is a
low tax region source
 UK government give grants to
low emission vehicles source
Environmental  Eco-friendly packages for
shipping
Table 1: PESTLE analysis
 Relevant information related to our
customer segments
 They will first of all search on internet
for better deals and higher quality
 Our marketing and business strategy
is oriented to support the demands of
our customers
 Improve our deliveries
 We plan to expand globally in the
future
 These question the price of the new
technologies
 We have £5,000 worth equipment;
the tax savings help us in expenses
 For purchases in the UK, for us is a
relevant information
 Following Brexit, Corporation Tax will
drop to 17%, from current 20%
 Demand for spare parts for low
emission vehicles will dictate our offer
 Our plan is to investigate the
packaging solutions our partners use
while sending spare parts
Market Analysis

Customer Need

Customers are becoming increasingly sensitive to price, delivery times and

convenience and thus are turning to online shops. As they seek affordable prices,
availability and extensive product portfolio, they still seem to consider health and
safety a major factor in their decisions and demand low return rates. For this reason,
they expect accurate product descriptions – including specifics of the product
journey - as well as swift and responsive interfaces that aim to simplify the buying
process. E-shops which respond to their requests offering optimized balance
between price and quality, while they make sure to meet their promised delivery
times, are more likely to capture the largest market shares in the future.

(Needs can slightly variate per customer segment. Indicatively, convenience is more
important to standard end customers in comparison to b2b customers.)

Target Market

According to a 2017 SMMT report, about 100,000 people in the UK browse

automotive aftermarket websites for price and offering comparisons, while the
projected size of UK's aftermarket for 2022 is £28 billion. As the same report
demonstrates, 2016 was the 6th consecutive year of growth for the industry, as a
result of a continuous increase in the number of vehicles on the British streets.
What's more, compared to the rest of the European markets, Brits appear to be
considerably more attentive when it comes to their cars' maintenance needs.

The number of vehicles serviced annually in the UK exceeds 30 million. Drivers

receive such services via a network of 42,544 locations (35,099 of which are
independent, 7,445 franchised).
The domestic market size for the automotive e-commerce (UK) amounts to £ 0.904
billion and projections indicate a rise up to £1.58billion by 2022.

Overall, the UK aftermarket has all the typical characteristics of a fragmented

industry. Within its environment, distributors’ retail chains, independent garages and
online retailers compete with each other intensely. However, over the latest years its
online aspect has experienced the rise of Amazon and eBay. (Find more about them
in the following section.)
Figure 1: Online Auto Parts Porter’s Five Forces Industry Analysis

Market Segmentation

DIY (Do-It-Yourself) DIFM (Do-It-For-Me) Workshops (& Automobile

parts & Accessories Retailers)

 search for less  go online shopping for  so far in a relatively

technical – easier to
replace parts (i.e. ,
glass and lighting
products, filters,
electrical parts)
 5 times more likely to
perform maintenance
on their cars
 Usually older age
groups
more intricate parts
(i.e. exhaust system
components and
computers)
 expect flexibility in the
shipping process and
take social media into
consideration for
recommendations
 Usually millennials
under-addressed stage
- in the region of
Germany, UK, France
and Sweden only 1/3
of online stores target
workshops
 workshops have the
capacity to assemble
even complex parts
 extensive presence of
the independent
network (64%) in the
UK
Figure 2: Customer segments and purchasing online Source: Roland Berger Strategy Consultants
Competitor analysis

Euro Car Parts

Their website enjoys mostly positive reviews and a Clearance part on which they
offer additional discounts on discontinued codes. Their large network of physical
stores affords them great flexibility in terms of order fulfilment, on top of which they
also offer free next day delivery service on select products.

Buy Car Parts UK

They are an exclusively online car parts store, giving a great range of options to the
customer. Specifically, their stock comprises 500,000 parts of both popular and
obscure brands. Their website is offers great usability, featuring a search function
and distinct product categories. They ship for free for orders above £140.

Online Car Parts UK

They offer an even greater variety of options both in terms of brands and
components, counting 1,000,000 parts in stock at any time. The layout of their
website gives a lot of room to the logos of the brands, parts of which the consumer
can locate on it. It features tyre search at a prominent position on its homepage.
They too ship for free for orders above £140.

Amazon and eBay

 Amazon dominates online retail – Plans for same-day delivery to counter the
greatest weakness of the online spares market

 eBay motors offers extensive inventory – Addresses standard end customers

through special service offerings

The two powerhouses have taken up key positions in the market, covering about
10% of the £0.8 billion online UK aftermarket. (Notably, they already top the US auto
parts online sales list.) Their competitive advantage lies on their abilities to use their
brand names to strike deals with suppliers and to the appeal of their long-tested
distribution networks to the mass audiences.
How we plan to compete

We will begin from stressing our wholesale side and attempting to build a clientele
of aftermarket professionals, since although the potential of such segments remains
mostly untapped, the majority of our competitors seems to lack or insufficiently
target them. To this end, we are stressing supplier quality assurance, which none of
our competitors mentions at prominent place on their website, and employing
pricing policies tailor-made to their expectations. We anticipate a reaction from our
competitors and potential attempts on their part to disrupt our advance in this
segment, however, with the marketing plan presented in the following section, we
aim to secure our position against them.

Another field to pursue competitive advantage upon, is functionality of the website.

Not only should we make sure to feature a broad product portfolio, but also to
market products in a more than sufficient way.
There are still improvements to be made in this regard and we plan to employ both
online market research and Analytics capabilities to constantly iterate towards a
better user experience. Pricing optimization tools will be used to inform our
discounts’ area. The aforementioned aspects along with in-time shipping services are
expected to attract individual customers and also mitigate the disadvantages created
in customer service levels in comparison to brick-and-mortar stores (indirect
competition).
Marketing & Pricing strategies

Since the marketing strategy of Amaxi e-shop centers maintaining low costs, we will
start as a market trader. Timely, our goal is to differentiate and act as a strong niche
player. We put attention on listening customers’ feedback, cultivate lifetime loyalty,
strong customer service improving their experiences with us. This way, our value-
driven marketing can ensure brand loyalty and business success for us as a niche
player in a saturated market.

In the Table below is presented out communication plan.

Customer Segments Communication plan * Additional options**

Mechanics- Auto repair, Internet advertising
maintenance and servicing Newspaper advertising
garages Sponsorships
Social media-
Facebook, LinkedIn, Instagram,
You Tube, Twitter
Trade shows
Marketing collateral
Press releases
B2B Email campaigns
Relationships & Networks
Strategic Partnerships
Blogging
Newsletter
Forums
Reviews and Rate
Word-of-mouth
Car Owners (Do-it-for- Internet advertising
Me(DIFM) Newspaper advertising
Sponsorships
Social media-
Facebook, LinkedIn, Instagram,
You Tube
Blogging
B2C Email campaigns
Customer loyalty scheme
Newsletter
Forums
Reviews and Rate
Word-of-mouth
Automobile spare parts’ Internet advertising
retailers Newspaper advertising
Sponsorships
Social media-
Facebook, LinkedIn, Instagram,
You Tube
Trade shows
Press releases
Marketing collateral
 B2B Email campaigns
Relationships & Networks
Reviews and Rate
Blogging
Newsletter
Forums
Reviews and Rate
Word-of mouth
Internet advertising

Social media-
Car enthusiasts (DO-It-
Facebook, LinkedIn, Instagram,
Your-Self (DIY))
You Tube
Trade shows
Relationships & Networks
B2C Email campaigns
Reviews and Rate
Customer loyalty scheme
Blogging
Forums
Reviews and Rate
Word-of-mouth
* 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.
**depending on budget
Table 2: Communications plan

Part of later marketing inbound strategy is to create a comprehensive sales funnel,

where our efforts in helping customers climbing loyalty ladders, will be translated.
Through our carefully planned communication plan, we plan to raise awareness and
encourage customers to be our advocates. Our aim is to create a loyalty program to
our customers who will get discount on every purchase made at our e-shop.

Pricing

Two distinct pricing strategies will be employed, each to accommodate one of the
two different market segments we target.
Induction Phase: During the firm’s initial months of operation, and while its main
focus remains building traction and getting attention from its target audiences, we
mean to lower our profit margins and to try to offer as competitive prices as
possible. Therefore, and keeping in mind that manufacturers’ recommended prices
exist generally to serve their own goals and should not necessarily be adopted,
competition pricing methods will be applied, to ensure lower prices than those of
our direct competition, where possible.
Going Forward: On the wholesale side of our business, the preferred strategy will be
tiered pricing. In this price model, price per unit is defined within ranges. Specifically,
price per unit decreases each time a certain quantity within a “tier” is reached. The
goal is to prompt professionals to move towards higher volume packages.
Concerning our DIY target audience, that promotes price comparison, coupons and
promotional offers, competition pricing for individual products we’ll be maintained
even in later stages. Once we’ve established our position in the market and nurtured
relationships of trust with our customers, pricing will be adjusted to reflect future
costs and to manage profit margins accordingly to our future goals.

Figure 3: Marketing mix- 5Ps

Operations Plan

Our business model is based on drop-shipping which is by definition of Shopify “a

retail fulfillment where store does not keep the products it sells in stock. Instead,
when a store sells a product, it purchases the item from third party and has it
shipped directly to the customer.” We identified the third-party business partners:
 automobile retailers,
 spare parts manufacturers,
• glass manufacturers’.

With careful investigation and clear communication with suppliers, we make sure
that production/supply abilities are completely aligned with the customer’s demands
and our business growth. As well we observe the shipping conditions’ they rely on.

From the private funds, we will engage web developer and UX designer who will
create functional, neat and user and mobile friendly e-commerce website. We will
introduce rating and review systems in order to help our users to make valid
purchasing decision. This also create trust to our platform and keep our customers
with us, preventing them not to avoid our platform and go directly to suppliers. The
suppliers need to ship products in the period of 24h from received order. In our
terms and conditions, we clearly state the 14-day returning period which is
obligatory to our suppliers. The complaints will be handled within 3 days by our
suppliers.

Figure 4: Drop shipping scheme Source: Shopify

SWOT Analysis

STRENGTHS (+) WEAKNESSES (–)

•Low start-up cost required, low
overheads
•Wide variety Product Portfolio
•Low order fulfillment costs
•Less Risk
•Innovative Culture and functional
website
•Customer-centric policies for focusing
on customer needs, feedbacks
•Limited control over order fulfilment
and lead times
rd
•Relies on 3 party’s stock
•Possible Limited profit per sale
•Little experience
• Workforce expansion is limited
• New to business world

OPPORTUNITIES (+) THREATS (–)

•Average car age on the rise

•Competition impacting sales
•Growing Demand for digital services
•Amazon rise in the DIY market
•Untapped potential in the online
• Limited source of financing
Wholesale market
• Difficulty to expand business in short
• Our business sector is expanding, with
term period
many future opportunities for success
•Developments in technology could be
• Global business, reaching outside of UK
pricey
• Local government wants to encourage
local businesses
Figure 5: SWOT analysis
Financial Requirements

The company will be started as a sole trader involving lower accounting costs and tax
liabilities. The payment of income tax (20%) is based solely on the business profits.
Reimbursement to friends and family is arranged at free will of founder without
interest rates. We found opportunities to build our business based on lower costs
due to support of Britain government for startups. Also, visits on tradeshows and
fairs related to business are free for us, due to strong connections we have.
Equipment consists of 3 laptops and printer. The company will be based in the home
office of the founder in London.

Start-up Expenses
Fixed Costs
Legal and £ 100.00
Permits
Equipment £ 5,000.00
Website £ 5,000.00
Development
Web Hosting £ 30.00
and Domains
Paid £ 100.00
Advertisements
Brochures £ 500.00
Licences for £ 50.00
website
Total Fixed
£ 10,730.00
Costs
Average Monthly Costs
Accountant £ 200.00
Electricity bills,
gas, water, £ 100.00
telephone
Website
£ 50.00
Maintenance
Telephone £ 42.00
Salaries /
£ 6,000.00
Wages
Total Average
£ 6,392.00
Monthly Costs
x Number of
£ 12.00
Months:
Total Monthly
£ 76,704.00
Costs
Total Startup Expenses £ 87,434.00
Start-up Assets
Owner Funding
Owner 1 Cash £ 150,000.00
Other-
£ 20,000.00
Friends&Family
Total Owner
£ 170,000.00
Funding
Other
Grant 1 £ 15,000.00
Total Other
£ 15,000.00
Funding
Total Start-up Assets £ 185,000.00

Table 3: Startup costs

Estimated Number of Sales, selling price (per unit) and Cost of Sales(per unit)-we
estimated increase in sold items. Average price per unit: £ 75.47

Number of Sales Year 1

Tyres 326
Batteries 194
Brake parts 140
Sales forecast 3 year
Starter motors 60
Other parts 400 £90,000.00
Total 1120 £80,000.00
£70,000.00
Unit Price Year 1 £60,000.00
Tyres £ 47.98 £50,000.00
Batteries £ 68.13 £40,000.00
Brake parts £ 62.42 £30,000.00
Starter motors £ 128.83 £20,000.00
Other Parts (avg.) £ 70.00 £10,000.00
Total £ 377.36 £-
Year 1 Year 2 Year 3
Unit Cost of Sales Year 1
Tyres Batteries
Tyres £ 40.78
Batteries £ 57.91 Brake parts Starter motors
Brake parts £ 53.06 Other parts Total
Starter motors £ 109.51
Other parts £ 59.50
Total £ 320.76

TOTAL NET SALES Year 1 Year 2 Year 3

Tyres £ 2,346.22 £ 4,500.00 £ 6,000.00
Batteries £ 1,982.58 £ 4,200.00 £ 5,250.00
Brake parts £ 1,310.82 £ 2,632.50 £ 4,875.00
Starter motors £ 1,159.47 £ 2,925.00 £ 9,750.00
Other parts £ 4,200.00 £ 31,500.00 £ 52,500.00
Total £ 10,999.10 £ 45,757.50 £ 78,375.00

Table 4: Sales projection Figure 6: 3-year Sales forecast

Fixed and Variable costs
Fixed costs per year
Rent-running from home
Accountant
Electricity bills, gas, water,
telephone
Website Maintenance
Telephone
Salaries / Wages
Licenses for website
Web Hosting and Domains
Total
Table 5: Fixed and variable costs
Profitability & Break-Even-Point analysis
INCOME
Total Operating Income (OI)
Total Non-Operating Income
Total INCOME
EXPENSES
Total Operating Expenses
Total Non-Recurring Expenses
Total EXPENSES
Net Income Before Taxes
Taxes
NET INCOME
Table 6: Profit and Loss statement
Expected profit could be achieved at the end of 3rd year (£ 12,604.00).
Selling Price (average per unit)
Total Startup Expenses
Profit per unit
Break-even point (Start-up
expenses/Profit per unit)
Table 7: Break-even point
£
Variable cost per unit £
£ - Website improvements £ 500.00
£ 2,400.00 Marketing expenses £ 50.00
Tyres £ 40.78
£ 1,200.00
Batteries £ 57.91
£ 600.00 Brake parts £ 53.06
£ 504.00 Starter motors £ 109.51
£ 72,000.00 Other parts £ 59.50
£ 50.00
Total £ 1,320.76
£ 30.00
£ 76,784.00
2019 2020 2021
£ 10,999.10 £ 45,757.50 £ 78,375.00
£
£ 15,000.00 £ 15,000.00
-
£ 10,999.10 £ 60,757.50 £ 93,375.00
£ 77,520.00 £ 77,570.00 £ 77,620.00
£
£ - £ -
-
£ 77,520.00 £ 77,570.00 £ 77,620.00
-£ 66,520.91 -£ 16,812.50 £ 15,755.00
£ - £ - £ 3,151.00
-£ 66,520.91 -£ 16,812.50 £ 12,604.00
£ 75.47
£ 87,434.00
£ 11.32
7723.31 pieces
Personal Evaluation

The founder got a score of 63% via The General Enterprising Tendency test. The
proposed actions will be undertaken until the founder feels more advanced in
business and decision making.

Figure 7: Results of GET2 test

Word count: 2093 (excluding figures and tables)

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Appendix

Appendix 1.

List of Categories of Spare Parts

Filters
Engine
Windscreen Cleaning System
Belts, Chains, Rollers
Suspension and Arms
Brake System
Ignition and Glowplug System
Electrics
Clutch / Parts
Body Parts, Lights, Mirrors
Drive Shaft and CV Joint
Transmission
Engine Cooling System
Fuel Supply System
Exhaust System
Shock Absorbers, Coil Springs, Leaf Springs
Interior and Comfort
Propshafts and Differentials
Pipes and Hoses
Sensors, Relays, Control units
Heater
Steering
Air Conditioning
Gaskets and Sealing Rings
Bearings
Oils and Fluids
Repair Kits
Towbar / Parts
Lights
List of figures

Figure 8. UK Economy Source: PwC

Figure 9: Uk Growth and Exports Source: OECD Economic Outlook Database

Figure 10 : UK Industry Source:PwC Figure 11: World’s 20 Largest
Economies Source :US Department of
Agriculture

Figure 12: London received £ 2.45 bn of total capital raised

Figure 13. Source: Hedges & Company