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Project Documentation.doc.doc
Project Documentation.doc.doc
Project Documentation.doc.doc
Project Documentation.doc.doc
Project Documentation.doc.doc
Project Documentation.doc.doc
Project Documentation.doc.doc
Project Documentation.doc.doc
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Project Documentation.doc.doc

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  • 1. COM-MART Executive Summary COM-MART wants to create an eBay like marketplace for developing world merchants to sell to consumers in developed countries. With the virtual marketplace, COM-MART has a vision of having $1 billion of flow by 2008 resulting in $100 million (10%) in revenues. COM-MART has important social goals in addition to its financial goals. It wants to enrich and preserve 10,000 artisan communities in developing countries around the world and create 1 million jobs. eBay used the collectibles beachhead to start its marketplace and then sell all kinds of products/services. COM-MART intends to use WCF (World Community Fund) branded products made by artisans as its beachhead and then encourage sale of all kinds of products by developing country merchants. To get a WCF endorsement, a merchant must agree to transparent pricing and share in the mission of enriching communities by repatriating ‘tips’ paid by customers of back to the local communities. We expect the growth by the virtuous cycle: the more listed inventories and the more people visiting the site, vice versa. Decent products produced most cost-effectively under international standards and with the most affordable price attract traffic. Our biggest barrier to entry will be that most people will get daunted by the complexity of the challenge, as evidenced by the fact that companies like world2market.com burnt up $100 million of investor’s money and sank. We estimate PROFIT in Year 1, because online marketplace business model is a fabulous one. Our funding requirement for the 1st year is around $1 million; around $5 -$10 million in year 2 and on. Funding requirement (in Year 1 Year 2 Year 3 thousands) Online Marketplace building cost 437 3227 16385 Operating expenses 450 4500 22500 Total Funding requirement 887 7777 38885
  • 2. Business Overview An important part of our business model is to reengineer the existing value chain where for a product that retails for $20 the artisan gets $1, the developing country exporter gets $4 and the US Importer gets $16. This chain has a lot of waste and by eliminating waste and using the web effectively we believe we can get a far greater % of the retail value back to the developing country. We plan to use entrepreneurial market makers in the US to drive sales building on models such as Avon, Tupperware etc while avoiding some of the negative connotations associated with models such as Amway. Year 1 Year 2 Year 3 Year 4 Flow ($million) 10 100 500 1000 Revenue (%) 0 0 0 0 Revenue ($ million) 1 10 50 100 Exporter 5 100 500 1000 Countries 1 2 20 100 US cost/Total cost 1 1 1 1 Overseas cost 0.25 3.14 17.33 39.98 Profit/Loss 0.008 1.03 6.67 11.15 Caveat: Reaching $1 billion of flow is vital to build a sustainable business and that will be hard if we were to limit ourselves to artisan products. Another important aspect is to create a movement around Community Friendly Products like ‘buy green products’ movement which will create a sense of community amongst our buyers. COM-MART will also provide options to a customer to ‘tip’ a producer directly and to get feedback on how the ‘tips’ are used. For our plan to work we have to solve complex logistics problems and attract • Merchants in developing countries • Market Makers in developed countries • Consumers in developed countries Market Opportunity There is a huge appetite in US for international goods. COM- MART has a potentially very large market size. According to US Census Bureau, trade from China to US reached $113.5 billion in 2002, and trade from India reached $10.9 billion. Therefore, $1 billion flow in 2005 is a very small fraction, considering all trade volume from developing countries to US. Even though the trading volume between developing countries and the US has increased in double digits in the last 10 years, the importing channel has not been updated much with the evolvement of the information technology, which is connecting people worldwide as easily as clicking the mouse. To suppliers, it’s a pain because middlemen usually are not willing to put them into connection directly with parties in US. Even if suppliers eventually build direct connections with their US counterparts, suppliers have no means to contact the end customers in US. Due to the broken of the last-mile supply chain, the suppliers lack market information of the real demands in US market. They don’t have the right channel to reach their end-users either. Actually, those suppliers who are doing business with US
  • 3. market at least have participated into this global supply chain, even though they play clumsily. There are still thousands of individual artisans and cottage workers in developing countries who have no way to get them involved into global business transactions. Their lives are miserable, because what they have produced, if cannot be sold within 10 kilometers of their residence, just go wasted. Even people in their own country cannot know what their suburban brothers are doing because of information blockade. However, some of those individual artisans actually are masters of local arts and some of them are relics of local culture. For most consumers in US, they miss opportunities to enjoy richer culture from developing countries and suffer paying much more for commonalities that cost actually little to produce. Their living standards are decreased by the invisible hand of trading barriers. The traditional importers and exporters are competitors of COM-MART concept. They will be finally obsolete once suppliers in developing countries and the consumers in the developed countries can find each other by themselves. Some e-commerce advocators like Eziba (www.eziba.com), Novica (www.novica.com) and Getafrica (www.getafrica.com), try to boost business and cultural exchange, but they are all niche players. They carry their own categories of products, act as online middlemen with specialties rather than create a public market place to facilitate cross-continent trading. They also follow high price, high margin and low volume strategy under the assumption that US customers pursue only exotic and unique products in developing countries, while they satisfy their basic demands for commodities in US. There are some B2B websites like Alibaba (www.alibaba.com), but C2C or B2C international trading has not yet carried by any websites in a large scale. In contrast, COM-MART pursues low-margin, high volume and value shopping strategies, which must work because people just like shopping in this way. Market Solution • Service COM-MART is dedicated to build a virtual market place to facilitate small to medium suppliers in developing country to find their customers in developed countries, first in US. In terms of services for suppliers, COM-MART will first start its mission in India. COM-MART will recruit suppliers and help recruited suppliers to build their own stores online. COM-MART will see the needs so as to decide whether partners with international shipping companies such as FedEx or DHL to facilitate international shipping. In terms of services for consumers, COM-MART is innovative for the Market Maker concept. Market Makers are entrepreneurs as well as experts on the goods that they promote on behalf of COM-MART. Market Makers are designed to purchase sample products from COM-MART and show to the potential customers with the sample. In this case, E-commerce’s innate disadvantage, i.e., the inability to touch and feel, can be overcome. Potential customers can save time from browsing tons of web pages, but buy what they really want and buy quality products only with much cheaper price. Consumers
  • 4. can become market makers also as long as they feel like to promote COM-MART’s products to their acquaintances. Market Makers get a 5% to 25% commission based on the sales revenue they achieve. Consumers can also help to improve the living and working standards of artisans in developing countries through ‘tipping’. COM-MART will provide space for customers to ‘tip’ producer communities directly and make sure that the ‘tips’ are repatriated by the exporter to the local producer community to improve their living and working conditions. • Prototype For details of prototype, please go to www.suvy.com. • Remove the pain To suppliers in the developing countries, they can access COM-MART’s website either at home, internet café or with the help of COM-MART’s representatives at their own countries. Language barriers are to be removed because COM-MART is built under multi-lingual system. Suppliers can wait until consumers in US find them, and then Suppliers may need aggregate shipment orders and export into US under the help with COM-MART’s representative. For any requests from consumers, consumers may contact COM-MART’s representatives directly. At the same time, COM-MART will be responsible to collect customers’ feedback, so that suppliers can improve their own SKUs. As for consumers, once they are introduced to COM-MART’s website and products by a market maker, they can shop among a large selection of goods with much cheaper price from developing countries, no matter commodities or unique handcrafts. Consumer may, through COM-MART’s website, monitor the usage of funds established for the purpose of improving communities in the developing countries. Consumers may even contact the local producer communities who have made the products they purchase, aided by COM- MART’s multi-lingual system. Consumers can also have a virtual tour of distant communities with the help COM-MART’s video steam of local community. Imagine how fun it is to see who made your quilt and how they lives on the other side of the world. • Entry barrier Recruit of reputable suppliers: The suppliers that COM-MART recruit firstly will be inspected by COM-MART’s representatives at the developing countries. To get a WCF endorsement, a supplier must agree to transparent pricing and share in the mission of enriching communities while making a fair return. COM-MART may preferably select suppliers who conform to international working standards, for example ISO4000, and utilize the network of supplies to gather local individual artisans. Recruited suppliers are encouraged to sign non-competition agreement with COM-MART for certain years, therefore, COM-MART expect to retain high percentage of the best quality suppliers. Recruit of passionate customers: For the same reason, COM-MART will recruit the passionate consumers in US with relatively low cost. COM-MART’s customers are encouraged to become market markers and therefore establish long-term relationship with COM-MART.
  • 5. Local advantage in India: In COM-MART’s management team, there are people coming from India. With their local knowledge, the recruitment of suppliers, local government support from India, and even local PR can be much easily accessible. Since COM- MART’s local representatives in the developing countries also play very important role, COM-MART’s management team with local knowledge can select best candidates as local representative also. The Market • Identification of customers Total retail in the US in 2003 was US$3 trillion and out of that online retail sales was US$114 billion. Forrester Research predicts that ecommerce in the U.S. is set to grow at a 25 percent compound annual growth rate for the next five years to reach $217.8 billion by 2007. This will account for 8 percent of total retail sales. The World Bank's Department of Commerce estimates the current market for traditional, handmade arts and crafts is $22 billion in the United States and $280 billion worldwide. Sales on Ebay in 2003 are estimated at $20 billion making it the world’s 50th biggest retailer. Looking at the way EBay is grown this target is modest and achievable. • Industry analysis and forecast Online shopping is dominated by portals of 2 groups: America Online (AOL), MSN and Yahoo! as the 1st group; Amazon and eBay as the 2nd group. While AOL, MSN, and Yahoo! are generating plenty of sales for their retail partners because they provide the cross-platform promotional experience to consumers, these portals are facing competition from the 2nd group. Just over two years ago, the big three could command any deal they wanted, but things are different now. Retailers aggressively pressure portals to make deals pay off. Furthermore, portal shopping sites are undifferentiated, and competitors like Amazon and eBay, are breathing down their necks to steal their business. Amazon is a portal because it aggregates retailers and shopper. Because Amazon has a high concentration of online shoppers that make more money and spend more online than any other site's audience, it's an attractive portal partner to any retailers. eBay is also a portal even without complicated partnerships. With US consumer online auction sales expected to reach $54.3 billion in five years, and eBay's share projected to be 85% to 90% of that. The company seems on a course to dominate online auction sales. Like Amazon, eBay aggregates sellers and millions of attractive online shoppers. eBay launched fixed-price and auction storefronts for major retailers. It charges a listing fee, a percentage of the sale, and optional site placement fees. And retailers don't need a formal relationship with eBay to start selling, they just need one person in-house to run auctions, or they can outsource the work to an auction software management vendor like Andale.
  • 6. The structure of shopping portals probably will maintain in the next 2 to 3 years, because it’s extremely costly to drive online traffic to a website unknown. COM-MART is considering building its own website on top of one of the 5 portals. eBay is the most favorable because of COM-MART and eBay can be highly complimentary. Management Team Business Advisor - Mr. Sanjay Bhargava: Sanjay has a bachelor's degree in Mechanical Engineering from IIT Bombay (Class of 1978) and an MBA from IIM Ahmedabad (Class of 1980). He is also a a certified cash manager (CCM) and an accredited ACH professional (AAP). He is a 2002-2003 Reuters Digital Vision Fellow at Stanford University. His first success was with Citibank in India where he built a cash management business which moved 5% of India's GDP and was used by 275 of the top 300 companies in India. He moved to Thailand to head transactional services business for Citibank and built the custodial services business market share from 1% to 36%. In September 1999 he joined PayPal as a founder employee and was the main business architect for all the back office functions of PayPal. He is the inventor of "random deposit to verify bank accounts". This has been used by over 5 million consumers and was the key element that made the PayPal business model profitable. Business Lead – Rahul Barkataky: Financial Analysis COM-MART is determined to be a true international cross-border marketplace, facilitating whatever people want to exchange but cannot or are very difficult without COM-MART. The financial model will be similar to eBay’s. COM- MART charges 10% of the transaction value that each community or supply achieved through COM-MART; in return, COM-MART provides local community service to the sellers and their communities, online tools such as different ways of listing, sales tracking, shipment assistance to sellers and buyers, marketing campaigns with the theme of social conscious-raising, and a lot of PR to drive traffic to the site. Pro Forma Income Statement: Assumptions: Each community carried by COM-MART will have a similar eBay store. Therefore, cost is based on the eBay equivalent charges for each store listed. Net revenue: based on 10% of the transaction flow Cost of net revenues includes: 1. web/store hosting expense- 50% of the community will have anchor store structure by $499.95/month; 50% of the community will have featured stores charged by $49.95/month 2. Basic store inventory listing including gallery fee-$0.06/each listing/month 3. Upgrade inventory listing fee (highlight, bold, featured in search), applies to half of the community - $27/month Operating expense: 1. Sales and marketing: 30% of the transaction flow
  • 7. 2. General and administration: 10% of the net revenue 3. Others: 20%, 15%, 10% and 10% of the net revenue, respectively in 4 years Income tax provision: 40% corporate tax rate Pro-Forma Income Statement (In thousands, except otherwise specified) Year 1 Year 2 Year 3 Year 4 Flow 10000 100000 500000 1000000 Revenue 10% 10% 10% 10% Net Revenue 1000 10000 50000 100000 Cost of net revenue 437 3277 16385 36410 Web hosting (anchor stores) 200 1500 7499 16665 Web hosting (featured store) 20 150 749 1665 Store basic inventory listing 1 7 36 80 Store enhanced listing 216 1620 8100 18000 Gross Profit 563 6723 33616 63590 Operating expense Sales and marketing 250 2500 12500 25000 General and administration 100 1000 5000 10000 Others 200 1500 5000 10000 Total operating expense 550 5000 22500 45000 Income from operations 13 1723 11116 18590 Provisions for Income Tax 5 689 4446 7436 Net Income 7.85 1033.86 6669.30 11,154 Social Analysis The success of COM-MART is even more important to the people living in developing countries, who struggle in survival and preliminary safety. Some children in developing countries sacrifice their education to work in cottage industries; however, what they produce may be not appreciated in their vicinity at all. Ethnical tradition of culture and arts could be extinguished even before this side of the world can know and help. People live in poverty, strive for communication and work hard with bleed. They must be helped in macro-environment before their sparks for life can be generated. So, COM-MART can help even the poorest communities in developing country: Health: improve life-expectancy of people in poverty with better nutrition, better medical care, better living conditions because their produce can generate better monetary return for them Human Capital Development: help contribute to the local tax base due to more employment and increase wages for low-income population Community Development: increase prosperity in local communities due to increased commerce Education: increased cultural exchange and retain cultural relics, increased education opportunities for children living in poverty, potentially decrease cost to society of crime associated with poor school attendance
  • 8. Social return Quantifier: (in thousand) Year 1 Year 2 Year 3 Year 4 Flow 10000 100000 500000 1000000 ‘Tips’ to communities 500 50000 25000 50000 (assuming 5%) Communities 67 500 2500 5556 Income for each 7.5 10 10 9 communities

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