Waterstone's Financial Analysis

Waterstone’s: Child-day-care-while-you-shop

Financial Ananlysis

The day care exists in the basement of the already existing child section hence it does not require any major development cost. The main fixed cost expenditure is the direct labor cost of 252 pound, which derives from hourly wage of 6.31 pounds as per the highest minimum wage in the industry. We have proposed the day care facilities only on Thursday evenings (late evening shopping day in Oxford), and Saturday and Sunday full day. Based on the opening timings, we calculate the service hours to be 20 hours.

Proposed day care timing: Thursdays are open from 3.30 to 19.00,  on weekends full day: Saturday 9.00 to 19.00 and Sunday 10.30 to 17.00

Reference: http://www.iopeningtimes.co.uk/Waterstones/Oxford/

The indirect fixed cost comes from renovating and decorating the day care. Decoration constitutes of adding armchair, sofa, children table and chair, carpets and rugs to the room. To push the sales of DVDs we also propose to add TV and a DVD player in the section. All the property cost have been considered at the current retail price.

Reference: http://www.ikea.com/gb/en/catalog/categories/departments/living_room/sofas_armchairs/

The core offering of Waterstone’s to kids are books and toys. We incorporate books and toys as well in the one-time indirect fixed cost at the merchant’s cost price. Books price range from 3.99- 29.99 pounds at Watersone’s and toys price range from 3.99- 47.99 pounds. That gives us an average cost of a book and a toy sold at the Waterstone’s of 12 and 15 pounds respectively. Retail margin on toys is usually 40-60 percent, which helps us set each toys price at 10 pounds. Similarly, retail margin on a physical book sale is minimum 40 percent. Thus, we set a cost of 8 pounds on each book used in the cay care.

References: http://www.toyretailersassociation.co.uk/retailers/starting-retailing

http://www.outskirtspress.com/articles_retailmargin.html

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