Business Model Development

Nowadays, many people make purchases through the Internet, and according to Chen et al. (2018), nearly 15% of online shoppers are subscribed to receive certain products regularly. The subscription e-commerce market “has grown by more than 100 percent a year over the past five years” and allowed retailers generate billions of US dollars in sales annually (Chen et al., 2018, par. 2). Although the subscription e-commerce is mainly popular in the West, this market also provides many opportunities for new entrants in Oman since the country has a high level of information technology penetration and local younger consumers catch up with global trends quickly.

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Thus, the new business will utilise the online subscription commerce approach and will capture another growing trend: an increasing consumer interest in cruelty-free and healthy lifestyles. The company will offer a range of meal kits to choose from that will include different types of vegan snacks, sweets, plant milks, organic grains, teas, nuts, and other goods that will be both produced by the hired cooks and purchased from the partners in the food industry. The boxes will be delivered to signed-up customers every two weeks or a month. In this way, the business will occupy the niche in the Omani market where other companies still underperform.

Overall, any similar enterprises still do not exist in Oman. Some European and US subscription boxes ship their kits to the country, yet the majority of them focus on beauty products: Look Fantastic Beauty Box, Kiss Me Lipstick Club, and others (Subscription boxes, n.d.). It was possible to locate only one subscription company that specialises in the sale of vegan goods that ships kits to Oman – Vegancuts (Vegancuts snack box, n.d.). Thus, the proposed company will have to deal with only a limited number of competitors, and its success will primarily depend on the quality of the overall business model.

A Model for the Vegan Subscription Box Business

Market Segments and Value Propositions

Target market segments

The business will primarily target younger consumers (age 18-35) of different genders and ethnic backgrounds, who belong to the middle or upper social-economic class. They are technology-savvy and utilise social media regularly. The potential customers can live among different settlements in Oman, yet the majority of them come from densely inhabited and lively urban areas.

Value propositions

The Vegan Subscription Box will be the most convenient way to try out unique and delicious cruelty-free foods, both artisanal and branded. All the products in the meal kits will meet consumers’ interests in ethical and health-conscious lifestyles. Besides, the company will offer choice flexibility by allowing the customisation of subscription boxes.

Customer relationships/branding

The customer-brand relationships will be based on a mutual interest in the vegan lifestyle and its multiple aspects: ethics, health, positive contribution to environmental protection, and so forth. Thus, the brand and its potential consumers will have similar self-images and this similarity is expected to result in customer loyalty and commitment. The relationships will be maintained through the provision of the exceptional quality of service and uniqueness of products.

Marketing Plan

Marketing Mix

Product

The Vegan Subscription Box will offer high-quality freshly-made and branded vegan foods, which are either never were present in the Oman market before or are available in a limited number of places. Thus, the main product values will be quality and uniqueness. Besides, meal kits will be customisable and every person will be able to either choose a pre-made option or create their own. All products will be packaged by using environment- and vegan-friendly materials, featuring the designer logotype of the brand.

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Price

Considering the uniqueness and quality of products/service, the prices will be above the average in the global subscription e-commerce market, with the majority of boxes priced approximately 60 USD (excluding the shipping costs). However, the customisation service will provide individuals with an opportunity to make their kits more affordable, depending on the number and type of goods they will decide to include. Moreover, frequent shoppers and long-term customers will have access to special offers and discounts.

Promotion

Advertising activities will take place online and primarily on social media. By using the principles of online marketing, the brand will aim to create a community for the target audience and personalise their communication experiences on both the business’s website and social media pages. Moreover, it will collaborate with some influencers and employ them as brand advocates to increase consumers’ awareness and attraction.

Place

All sales will be web-based, yet the business will have a small storage and manufacturing facility, as well as an office space, located in Muscat. The business will employ a mixed distribution approach. It will undertake a direct-to-customer approach when selling its own products and also will play a role of distributor for goods obtained from partners. The delivery activities will be outsourced to a reliable third-party enterprise whose services will be identified as the most cost-effective.

Scalability

The Vegan Subscription Box will be established as a small enterprise with the capacity to process up to 750 meal kits a month. The volume of sales and the overall scope of workload are expected to increase within the first six month along with the range of goods and options offered by the company. However, initial focus will be on the increase of operational efficiency, cost saving, and other aspects of earning management.

Resources

Capital Available and Capital Needed

Currently, the business only has human resources to manage the strategic side of the project. There is a need to hire skilled workforce for the production of artisanal vegan goods (n=2), marketing (n=2), sales and purchase (n=2), order management and processing (n=2), office management (n=1), IT management (n=2), financial management (n=1), and HR (n=1). It is necessary to take a bank loan of at least 150,000 USD to cover the initial expenses and purchase the needed equipment. Moreover, the business is yet to develop its network of commercial contacts and partnerships with small and large producers of plant-based foods located both in Oman and internationally, logistics companies, and sellers of raw materials required for the creation of original vegan produce.

Operations Plan

Risks

Risk Risk impact Risk probability Risk index Controllable Key risk indicators Measures
Payment security and user confidentiality 3 2 6 Y Data update rate,
cyber-attacks, system failures.
Maintenance of IT system security, implementation of security protocols and the overall management plan, compliance with standards.
Box delivery delay 3 3 9 Y Reliability of suppliers and logistics partners, infrastructure problems, financial instability. Contract management, regular supplier/partner evaluation, development of long-term partnerships with verified enterprises.
Inventory management issues and increased complexity due to order customisation 3 3 9 Y Product shortage, delayed box assembly and shipment, errors in order fulfilment. Employee education, development and implementation of efficient inventory monitoring system, use of flexible supply chain arrangements (for instance, JIT).

Partnerships

The main partners will include plant-based food producers, raw material suppliers, and logistics companies that will be responsible for the delivery of meal kits.

Key Activities, Critical Success Factors, and Strategic Options

The key activities will be targeted at the development of a consistent brand image and long-term relationships with existing and potential consumers. Thus, the business will prioritise marketing, yet operations management and strategic planning aimed to ensure that all consumer interests and needs (including timely delivery of boxes and their high-quality content) are met will be important as well because the company’s success will largely depend on customer satisfaction. Besides, satisfied consumers can facilitate the promotion of brand awareness through word-of-mouth cannels. Considering the key activities linked to the fulfilment of consumer needs, the company may diversify its product portfolio in the long run and offer other types of goods for people interested in ethical lifestyles.

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Financial Plan

Costs, Sales, and Profit

Costs, Sales, and Profit

Balance Sheet

Opening Year 1 Year 2
Assets
Cash 50,000 18,460 11,560
Accounts receivable 60,000 49,320 92,470
Inventory 50,000 44,380 83,220
Current assets 160,000 112,160 187,250
Long-term assets 200,000 200,000 560,000
Total assets 360,000 312,160 747,250

Liabilities

Accounts payable 35,000 29,590 55,480
Other liabilities 25,000 27,420 36,900
Current liabilities 60,000 57,010 92,380
Long-term debt 150,000 101,950 403,650
Total liabilities 210,000 158,960 495,030

Equity

Capital 100,000 100,000 150,000
Retained Earnings 50,000 53,200 101,220
Total equity 150,000 153,200 251,220
Total liabilities and equity 360,000 312,160 747,250

Cashflow

Year 1 Year 2
Net income 3,200 48,020
Add back depreciation 50,000 140,000
Changes in working capital
Accounts receivable 10,680 -43,150
Inventory 5,620 -38,840
Accounts payable -5,410 25,890
Other liabilities 2,420 9,480
Cash flows from operating activities 66,510 141,400
Amount paid from long-term assets -50,000 -500,000
Cash flows from investing activities -50,000 -500,000
Proceeds from long-term debt 460,000
Proceeds from issue of share capital 0 50,000
Repayment of long-term debt -48,050 -158,300
Cash flow from financing activities -48,050 351,700
Cash flow -31,540 -6,900
Beginning cash balance 50,000 18,460
Ending cash balance 18,460 11,560

Breakeven

Revenue 400,000 750,000
Net income 3,200 48,020
Cash balance 18,460 11,560
Free cash 16,510 -358,600
Free cash flow 16,510 -342,090
Year 1 2

Reference List

Chen, T. et al. (2018) ‘Thinking inside the subscription box: New research on e-commerce consumers’, McKinsey & Company. Web.

Subscription boxes that ship to Oman (no date) Web.

Vegancuts snack box (no date). Web.

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