BUSINESS PLAN 'Shopping and Entertainment Center'
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- Английский
- 23.05.2014
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Adaptation of this business plan is possible for similar project worldwide.
Business Plan Description
Role of shopping and entertainment center (SEC) extends beyond the consumption today. Due to the growing tendency of shopping centers attendance by the Russians, their concepts must be formed according to the structure of consumer preferences with the allocation of a special place to entertainment establishments. That’s why the project idea is the construction of shopping center of entertaining character with elements of pricing concept for attractiveness of broad population masses of Moscow.
Target audience: young families with average or above average income, that live in the *** district in Moscow.
Market analysis
|
Market |
Main tendencies |
|
Consumer market |
Retail trade turnover was characterized by stable annual growth for 2008-2013 and amounted to ** trln RUB at the end of 2013, which exceeds the result of previous year by *.%. According to the Rosstat, *.5% of retail trade turnover were formed by trade organizations and individual entrepreneurs, the share of retail markets and fairs amounted to **.5% last year (in 2012 – 89,4% and 10,6% accordingly). Due to the results of the second quarter of 2014, the sales of products have reduced in Russia – the first time for five years. Since April till June of current year the Russians had been spent ** trln RUB on food, which is less by 0,1% than the indicators of similar period in 2013. |
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Retail space market |
In 2014 the record input volume of new retail space (about *** thsd sq m) will be expected in Moscow. The share of vacant space has increased from 2.5% up to **% in the second quarter of 2014. This indicator will amount to **% by the end of the year. The demand for the most qualitative projects still is at the highest level. The maximal rent rates still remains at the previous level (** – ** USD/sq m/year. Herewith the decrease of average rent rates is possible (they are in the range ***– *** USD/sq m/year). |
Competitive environment. The undeniable advantage of developed SEC is that it is the only trade enterprise of such format in over *** district of Moscow. Nevertheless, the competitive influence of those shopping complexes, which are situated along the same lines of communication, should not be underestimated, especially accounting the fact of broad awareness of population about them. Retail trade enterprises, the amount of which in *** district is 90, as well as restaurants, cafes and bars in their total amount of 25 can make indirect competition for developed SEC.
Choice of SEC concept. Since the SEC is considered by the Russians as a place for leisure activities more often, this has identified the centerline idea of SEC construction. But due to the reduction of goods consumption in Russia, it is advisable to lease the space to trade operators selling their commodity at democratic prices that will contribute to attraction of large flow of buyers.
«***»SEC must be associated among visitors as a shopping center with a large pool of major network operators, oriented on wider population, and offering so extensive range of products as it is possible in a single center.
Approaches to the risks mitigations:
– risk of low attendance of buyers: the awareness of population of *** district about developed SEC, creating of excitement around its opening. It is necessary to include such kinds of promotion as outdoor advertising, advertising flyers, creation of profile groups in social networks and search engine optimization of site of «***» SEC;
– risk of uneven visiting of SEC separate zones by buyers: for risk avoiding the complex of SEC flow control and accommodation of trade operators in accordance with consumer logic is offered.
Finance of project
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Financial indicators |
Units |
Value |
|
Net profit |
USD |
*** |
|
Revenue for 3 years of operating |
USD |
*** |
|
Necessary investment |
USD |
*** |
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NPV |
USD |
*** |
|
IRR monthly |
% |
2% |
|
IRR annual |
% |
**% |
|
Payback period |
months |
27 |
|
Discounted payback period |
months |
32 |
Excerpts from Research
The construction of SEC is planned in ***district of *АD in Moscow on the lot approximately equal to 2.4 ha.
Positive sides of SEC location:
- two metro station of various branches with passenger turnover of 48,550 and 42,740 people a day are placed near;
- a good public transport interchange;
- an average congestion of motorways leading to SEC amounts to 1-2 points on a ten-point scale.
Negative sides of SEC location:
- poor visibility of SEC because of the dense housing of *** district;
- about 40% of population of SEC coverage is younger or older than working age.
All floors of «***» SEC will be spatially connected by vertical communications: escalators, elevators and stairs. It is planned that they will penetrate the building and layout it by functional zones: trade, sport, office, children’s, play, which leads to economic favorable and quick moving of visitors inside the building in accordance with aims of its visiting. The project will be one of the not numerous complexes, where single level heated underground parking with total amount of car places ** is implemented.
By the results of the second quarter of 2014 in general over the Russian Federation the sales of food have reduced for the first time during five years. In particular in Moscow only in January and May of 2014 the real cash income of population exceed the indicators of similar period of previous year. According to the data of Mosgorstat, the share of payment exactly for goods and services is still dominant in total population expenses – more than 60% at June of 2014. Although this indicator decreased by 14% in comparison with the beginning of 2013.
The existing tendencies indicate that it is necessary to add one more emphasis to entertainment character of projected SEC, which is a democratic of prices. The advertising of SEC must show the budget variants of different goods purchase. Constantly increasing population of Moscow and insufficient amount of retail space (*** sq m/1 000 people) leads to the reorientation of significant part of client base from small trade enterprises to large SEC, where the price level is lower (the prices without significant damage for owners will decrease through economies of scale – due to the reduction of share of fixed costs per unit of goods).
Moscow market was replenished by *** thsd sq m of new space in the second quarter of 2014, which exceeds the yearly indicator of 2013. By the results of the first half of 2014 the total supply volume was amounted to ** mln sq m. The important fact is that since 2015 the tax rate will be determined depending not on the total but on useful building area (like it was earlier). Based on the foregoing, it is possible to make a conclusion that the competition for analyzed SEC in the Moscow retail space market has increased by an order during the current year.
The initial capital expenditures for concept development, purchasing of land lot, building materials and the SEC construction itself amounts to *** USD. The annual charges of *% of revenue as remuneration of invited specialists from the management company is anticipated by the project. The necessary budget for advertising and marketing amounts to *** USD.
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List of Tables, Charts, Diagrams and Figures |
3 |
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Executive Summary |
6 |
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1.0. Project Description |
8 |
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1.1.Basic Characteristics of Initial Project |
8 |
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1.2.Performance of Constriction Works |
12 |
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2.0. Market Analysis |
14 |
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2.1.Analysis of Consumer Market in Moscow |
14 |
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2.2 Analysis of Retail Space Market in Moscow |
25 |
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2.3.Analysis of SEC Service Area |
31 |
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3.0. Competitive Environment |
35 |
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3.1. Objects of Retail Trade in *** District of Moscow |
35 |
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3.2. Closest Competitors of SEC by Territorial Principle |
36 |
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3.3. Competitive Advantage of «***» SEC |
37 |
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4.0. Actualization of Project Preliminary Brokerage |
38 |
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4.1. SWOT-analysis |
38 |
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4.2.Choice of SEC Concept |
38 |
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4.3. Plan of SEC Development |
41 |
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4.4. Approaches for Risks Mitigation |
42 |
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5.0. Development of Project Financial Model |
46 |
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5.1. Project Stages |
46 |
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5.2. Project Assumption |
49 |
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5.3. Capital Expenditure |
50 |
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5.4. Plan of Space Leasing |
51 |
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5.5. Volumes of Space Leasing |
52 |
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5.6. Plan of Revenue |
53 |
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5.7. Variable Costs |
59 |
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5.8. Fixed Costs |
60 |
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5.9. Taxes |
61 |
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5.10. Profit and Loss Statement |
62 |
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5.11. Cash Flow Statement |
66 |
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5.12. Indicators of Economic Efficiency |
74 |
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5.13. Initial Investment Analysis |
74 |
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6.0. Sensitivity Analysis |
78 |
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6.1. Changing of Rent Rates Level |
78 |
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6.2. Changing of Variable Costs Level |
82 |
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6.3. Changing of Fixed Costs Level |
85 |
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6.4. Changing of Capital Expenditure Level |
88 |
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6.5. Changing of Discount Rate |
91 |
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INFORMATION ABOUT THE «VTSConsulting» COMPANY |
94 |
Tables
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Table 1.Population Distribution of Moscow by Sex and Age |
15 |
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Table 2. Dynamics of Real Cash Incomes of Population in Moscow |
17 |
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Table 3. Purchasing Power of Cash Income of Population |
21 |
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Table 4. Consumption of Basic Foodstuffs in Households of Moscow (based on a sample survey of household budgets of Moscow, per 1 inhabitant a year) |
22 |
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Table 5. Comparative Analysis of Indicator Dynamics of Population Provision of Enterprises of Consumer Market in Moscow at 01.01.2014 (According to the Data of Prefectures of Administrative Districts) |
24 |
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Table 6. Basic Indicators of Retail Space Market in Moscow in Q2 2014 |
27 |
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Table 7. Main Characteristics of *** District |
32 |
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Table 8. Analysis of Provision by Objects of Consumer Market in *AD of Moscow at 01.01.2014 |
34 |
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Table 9. Amount of Objects of Retail Trade and Catering of *** District |
35 |
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Table 10. Shopping Centers, the Closest to «***» SEC by Territorial Criterion |
36 |
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Table 11. Matrix of SWOT-Analysis |
38 |
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Table 12. Summary Characteristic of Concept Types of Shopping Centers |
40 |
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Table 13. Advantages of «***» SEC Format |
41 |
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Table 14. The First Stage of «***» SEC |
47 |
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Table 15. Project Assumption |
49 |
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Table 16. Basic investment costs, USD. |
50 |
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Table 17. Plan of Space Leasing (Year 1 of Operational Stage of «***» SEC) |
51 |
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Table 18. Plan of Space Leasing (Years 2-4 of Operational Stage of «***» SEC) |
51 |
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Table 19. Volume of Space Leasing (Year 1 of Operational Stage of «***» SEC |
52 |
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Table 20. Volume of Space Leasing (Years 2-4 of Operational Stage of «***» SEC) |
52 |
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Table 21. Plan of Revenue (Year 1 of Operational Stage of «***» SEC) |
53 |
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Table 22. Plan of Revenue (Years 2-4 of Operational Stage of «***» SEC) |
56 |
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Table 23. Variable Costs (Year 1 of Operational Stage of «***» SEC) |
59 |
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Table 24. Variable Costs (Years 2-4 of Operational Stage of «***» SEC) |
59 |
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Table 25. Fixed Costs (during All Years of Operational Stage of «***» SEC) |
60 |
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Table 26. Taxes (Year 1 of Operational Stage of «***» SEC) |
61 |
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Table 27. Taxes (Years 2-4 of Operational Stage of «***» SEC) |
61 |
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Table 28. Profit and Loss Statement (Year 1 of Operational Stage of «***» SEC) |
62 |
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Table 29. Profit and Loss Statement (Year 2 of Operational Stage of «***» SEC) |
63 |
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Table 30. Profit and Loss Statement (Year 3 of Operational Stage of «***» SEC) |
64 |
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Table 31. Profit and Loss Statement (Year 4 of Operational Stage of «***» SEC) |
65 |
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Table 32. Cash Flow Statement (Year 1 of Operational Stage of «***» SEC) |
66 |
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Table 33. Cash Flow Statement (Year 2 of Operational Stage of «***» SEC) |
68 |
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Table 34. Cash Flow Statement (Year 3 of Operational Stage of «***» SEC) |
70 |
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Table 35. Cash Flow Statement (Year 4 of Operational Stage of «***» SEC) |
72 |
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Table 36. Indicators of Project Economic Efficiency |
74 |
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Table 37. Sensitivity Analysis of Changing of Rent Rates Level |
78 |
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Table 38. Sensitivity Analysis of Changing of Variable Costs Level |
82 |
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Table 39. Sensitivity Analysis due to Changing of Fixed Costs Level |
85 |
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Table 40. Sensitivity Analysis due to Changing of Discount Rate Level |
88 |
Charts
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Chart 1. Dynamics of Population Number in Moscow |
14 |
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Chart 2. Dynamics of average per capita income in Moscow for 2009-2013 |
18 |
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Chart 3. Dynamics of Share of Payments for Goods and Services in Total Amount of Population Expenses in Moscow, % |
20 |
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Chart 4. Share of Retail Trade Networks in Formation of Retail Trade Turnover |
25 |
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Chart 5. Balance of Retail Property Market in Moscow |
26 |
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Chart 6. Volume of Quality Retail Space per 1 000 inhabitants in Moscow, sq m |
28 |
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Chart 7. Volume of Quality Retail Space per 1 000 inhabitants in European Cities, sq m |
28 |
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Chart 8. Dynamics of Maximum Rent Rates in Moscow, USD/sq m/year |
30 |
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Chart 9. Input Volume of Quality Retail Space in Moscow |
31 |
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Chart 10. Dynamics of Revenue, EBITDA, EBIT during Operational Stage of Project, USD |
74 |
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Chart 11. Dynamics of Net Profit during Operational Stage of Project, USD |
74 |
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Chart 12. Dynamics of Net Profit due to Changing in Rent Rates Level, USD |
79 |
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Chart 13.Dynamics of NPV due to Changing in Rent Rates Level, USD |
79 |
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Chart 14. Dynamics of IRR due to Changing in Rent Rates Level, % |
80 |
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Chart 15. Dynamics of Payback Period due to Changing in Rent Rates Level, months |
80 |
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Chart 16. Dynamics of Discounted Payback Period due to Changing in Rent Rates Level, months |
81 |
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Chart 17. Dynamics of Net Profit due to Changing in Variable Costs, USD |
82 |
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Chart 18. Dynamics of NPV due to Changing in Variable Costs, USD |
83 |
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Chart 19. Dynamics of IRR due to Changing in Variable Costs, % |
83 |
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Chart 20. Dynamics of Payback Period due to Changing in Variable Costs, months |
84 |
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Chart 21. Dynamics of Discounted Payback Period due to Changing in Variable Costs, months |
84 |
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Chart 22. Dynamics of Net Profit due to Changing in Fixed Costs, USD |
85 |
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Chart 23. Dynamics of NPV due to Changing in Fixed Costs, USD |
86 |
|
Chart 24. Dynamics of IRR due to Changing in Fixed Costs, % |
86 |
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Chart 25. Dynamics of Payback Period due to Changing in Fixed Costs, months |
87 |
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Chart 26. Dynamics of Discounted Payback Period due to Changing in Fixed Costs, months |
87 |
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Chart 27. Dynamics of NPV due to Changing in Capital Expenditure, USD |
88 |
|
Chart 28. Dynamics of IRR due to Changing in Capital Expenditure, % |
89 |
|
Chart 29. Dynamics of Payback Period due to Changing in Capital Expenditure, months |
89 |
|
Chart 30. Dynamics of Discounted Payback Period due to Changing in Capital Expenditure, months |
90 |
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Chart 31. Dynamics of NPV due to Changing in Discount Rate, USD |
91 |
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Chart 32. Dynamics of Discounted Payback Period due to Changing in Discount Rate, months |
92 |
Diagrams
|
Diagram 1. Distribution of Moscow Population by Sex, % |
15 |
|
Diagram 2. Distribution of Moscow Population by Age, % |
16 |
|
Diagram 3. Structure of Using of Cash Income of Population in July 2014, in % of Expenses |
19 |
|
Diagram 4. Distribution of SEC under Construction in Moscow in 2014, % |
29 |
Figures
|
Figure 1. General Plan of «***» SEC |
10 |
|
Figure 2. Plan of 4 Floor of «***» SEC |
11 |