The Beach Carrier

Q1:What is the nature of the product? What are its strengths and weaknesses? A1:The Beach Carrier is a new product concept developed by Mary Ricci. It is a large, lightweight, durable bag that is designed to carry everything required for a day at the beach, including a chair. The Beach Carrier can be folded down to a 12-inch by 12-inch square for easy storage when not in use. It comes with an adjustable strap and various-sized pockets for carrying all types of items to the beach or other outdoor activities (i.e. concerts, picnics, and barbecues).

The Beach Carrier possesses several strengths relative to competitive products in the market, including the following: 1.First, the overall product concept of a single bag that can carry all of the things needed for a day at the beach is a differentiator. 2.Secondly, the Beach Carrier can be easily handled and stored when not in use as it can be folded down to a 12-inch by 12-inch square. 3.The Beach Carrier is large and roomy and contains multiple compartments and different-sized pockets. It can accommodate carrying items varying in size from a bottle of sunscreen to a beach chair or ski boots. 4.It is manufactured in a lightweight, tear-resistant, fade-proof fabric that dries quickly and is thus suitable for a range of outdoor activities. 5.The Beach Carrier will be offered in a variety of fluorescent and conservative colors, where competitive products are only sold in three colors. 6.The selling price of the Beach Carrier will range from $12.99 to $14.99 versus a range of $16.95 to $59.99 for similar, competitive products.

Some of the weaknesses of the Beach Carrier include the following: 1.The Beach Carrier is 36-inch by 36-inch when in use and this size was perceived to be much larger than necessary by many members of a focus group. 2.The Beach Carrier’s overall size may be more cumbersome to handle relative to its top two competitors, the “Caddy-Shack” and the “Wonder Wheeler”. The “Caddy-Shack” is a backpack-type product, while the “Wonder Wheeler” has oversized wheels. 3.The “Wonder Wheeler” is capable of carrying the most items and thus the Beach Carrier is not the market leader in carrying capability. 4.The fluorescent colors of the Beach Carrier are see-through and considered “trendy”, lessening the perceived quality of the bag.

Q2:What are the limitations to the assumptions Ricci has made in determining the market potential? What risks do these present? A2:In assessing the market potential for the Beach Carrier, there are several assumptions that Ricci made that could significantly impact the overall market share potential. These include the following: 1.First of all, Mary Ricci has made the general and often-popular assumption that “bigger is better”. However, a 36-inch by 36-inch bag is huge and would be extremely heavy if completely filled. People may prefer to have a smaller bag and limit the items that they bring to the beach or on another outing. 2.Second, the Beach Carrier utilizes an adjustable shoulder strap for carrying and Mary has assumed that this method would not be viewed as a negative when compared to the “Caddy Shack” (backpack-type) or the “Wonder Wheel” (oversized wheels). However, many consumers would likely view these other carrying methods as an advantage, especially if one is packing lots of stuff including chairs and umbrellas.

3.Next, Mary based her market research on all people who use suntan and/or sunscreen products. This may be a significant overstatement of the market as many people who use these products will never have a need for a large bag. This could dramatically change the break-even point. 4.Further, Ricci based the market potential on the assumption that all women who purchase sunscreen products would be the target buyers of the Beach Carrier. Again, this seems to be a flawed assumption and she would have probably been better off trying to find out the current sales of either the “Caddy Shack” or the “Wonder Wheel”. In my opinion, this also appears to be an overestimate of the market potential and could negatively impact the break-even point. 5.In addition, Ricci has assumed that women buy new beach bags every third year but all three products in this market space, especially the Beach Carrier, promote their level of durability. Therefore, the turnover of bags may not be as frequent as the historical data suggest and thus the market potential may again be overstated. 6.Finally, it does not appear that Ricci’s financial analysis has taken into account the fact that the Beach Carrier will be a highly seasonal product. Therefore, she must account for this fluctuation in production, inventory maintenance, start-up funding, and overall cash flow as well as determining when best to launch the product.

Q3:How can Ricci protect her product design?
A3:In order to the product design and overall business concept of the Beach Carrier, Mary Ricci should retain a patent attorney to conduct a patent search. If the product design of the Beach Carrier is determined to be patentable, Mary and her legal counsel should apply for a utility patent and/or design patent. Until patent protections are in place, Ricci must refrain from promoting the product with photos and/or detailed product descriptions. In addition, Mary should avoid sharing any details of the Beach Carrier with other business people and should not enter into any business relationship regarding this product without oversight from her attorney. Further, Ricci could register the “Beach Carrier” under a trademark to protect competitors from using this phrase. Finally, Ricci needs to develop a detailed Marketing Plan within her Business to detail how she will introduce this technology to the market in order to capitalize on any “first-mover” advantages.

Q4:Is the financing sufficient to fund the roll out of the Beach Carrier as planned? Why or why not? A4:Per the case study, it is unclear exactly how much initial financing that Mary Ricci is seeking for this venture. However, the article stresses that Ricci lacks capital and is considering a small-business loan in the range of $30,000 (and much less than the required $250,000 for marketing the product through traditional retail channels). This minimum amount forms the basis of her analysis as she is highly focused on simply funding the fixed costs for the first phase (3 month period) of the rollout for the mail-order program. While the overall concept of the rollout plan is an excellent example of experimentation and risk-mitigation, this level of funding is insufficient to support the Beach Carrier launch as planned.

First of all, funding in this range is only focused on covering the fixed costs for the first three months of the roll-out. It does not include any of the necessary seed capital to start the venture including patent and trademark filing, securing legal counsel, setting up corporate governance documentation, initial set-up costs for manufacturing and operations, hiring and training employees, conducting manufacturing trials, and deploying the mail-order marketing plan (catalogs and special interest magazines). A conservative estimate of this seed capital could easily be in excess of $100,000.

Second, Ricci is attempting to be conservative by calculating that her break-even point can be achieved by capturing only one-fourth of her target sales goal. However, this assumption is also flawed because it is unlikely that the Beach Carrier will enter the market and immediately establish a steady market share – even with a goal of less than 1% of the “market”. In addition, it was already pointed out in Question #2 that there is a strong possibility that Ricci may have initially overestimated the market potential, and the true market potential is significantly less. The combined effect of assuming an immediate capture of 0.25% of the “market” and an overstatement of the market potential could mean that the Beach Carrier could fall short of this break-even point and additional funding would be required to cover the gap in the few phases.

Finally, Ricci is solely focused on funding the first phase of fixed costs with the initial loan but is not considering the timing of the payments for the remaining three phases of the roll-out. The total fixed costs for the first year of operation are $111,199. It is highly unlikely that the cash flow from operations will be collected in the first phase to cover the fixed costs in each subsequent phase. Therefore, Ricci should strongly consider obtaining enough capital to fund the fixed costs for at least the first year of operation. Therefore, it is my opinion that the total capital that Ricci should be seeking is in the neighborhood of $300,000 to truly give the Beach Carrier a chance for success.