Pre-Feasibility Study

BOUTIQUE
(Women Designer Wear)

Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6th Floor LDA Plaza Egerton Road, Lahore
Tel 111 111 456, Fax: 6304926-7 Website www.smeda.org.pk
Helpdesk@smeda.org.pk
REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE
PUNJAB SINDH NWFP BALOCHISTAN

8th Floor LDA Plaza Egerton 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
Road, Lahore Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Tel 111 111 456, Fax: Karachi. The Mall, Peshawar. Airport Road, Quetta.
Tel: (021) 111-111-456 Tel: (091) 9213046-47 Tel: (081) 831623, 831702
6304926-7 Website Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922
www.smeda.org.pk Helpdesk-khi@smeda.org.pk helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk
helpdesk@smeda.org.pk

May, 2007
Pre-Feasibility Study Boutique (Women Designer Wear)

DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject
matter and provide a general idea and information on the said area. All the material
included in this document is based on data/information gathered from various
sources and is based on certain assumptions. Although, due care and diligence has
been taken to compile this document, the contained information may vary due to any
change in any of the concerned factors, and the actual results may differ substantially
from the presented information. SMEDA does not assume any liability for any
financial or other loss resulting from this memorandum in consequence of
undertaking this activity. Therefore, the content of this memorandum should not be
relied upon for making any decision, investment or otherwise. The prospective user
of this memorandum is encouraged to carry out his/ her own due diligence and
gather any information he/she considers necessary for making an informed decision.
The content of the information memorandum does not bind SMEDA in any legal or
other form.

DOCUMENT CONTROL
Document No. PREF-57
Revision 2
Prepared by SMEDA-Punjab
Approved by GM Punjab
Revision Date May 14, 2007
Issued by Library Officer

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1 INTRODUCTION ...........................................................................................5
1.1 PROJECT BRIEF ............................................................................................5
1.2 OPPORTUNITY RATIONALE ...........................................................................5
1.3 PROPOSED CAPACITY ...................................................................................5
1.4 TOTAL PROJECT COST ..................................................................................6
2 CURRENT INDUSTRY STRUCTURE .........................................................6

3 MARKETING..................................................................................................6
1.1 TOTAL .........................................................................................................7
4 RAW MATERIAL...........................................................................................8
4.1 RAW MATERIAL ...........................................................................................8
5 PRODUCTION PROCESS FLOW ................................................................8
5.1 PRODUCTION PROCESS FLOW .......................................................................8
6 PRODUCTS .....................................................................................................9
6.1 PRODUCT MIX..............................................................................................9
Ethnic Wear.......................................................................................................9
Contemporary Wear ..........................................................................................9
Western Wear ....................................................................................................9
2.1 COSTS OF GOODS SOLD AND OTHER EXPENSES ............................................10
7 HUMAN RESOURCE REQUIREMENTS ..................................................10

8 MACHINERY/EQUIPMENT DETAILS.....................................................11

9 PREMISES FOR SHOP AND STITCHING UNIT .....................................11

9.1 RECOMMENDED MODE FOR RENTING A SHOP ...............................................11
9.2 INFRASTRUCTURE REQUIREMENTS ..............................................................12
10 PROJECT ECONOMICS..........................................................................13
3.1 PROJECT COST ...........................................................................................13
4.1 PROJECT RETURNS .....................................................................................13
5.1 FINANCING PLAN ....................................................................................... 13
11 KEY SUCCESS FACTORS.......................................................................14

12 THREATS FOR THE BUSINESS.............................................................14

13 FINANCIAL ANALYSIS........................................................................... 15
13.1 PROJECTED INCOME STATEMENT .............................................................15
13.2 PROJECTED CASH FLOW STATEMENT.......................................................16
13.3 PROJECTED BALANCE SHEET ...................................................................17
....................................................................... ERROR! BOOKMARK NOT DEFINED.
14 KEY ASSUMPTIONS................................................................................18

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14.1 PRODUCTION ASSUMPTIONS ....................................................................18

14.2 OPERATING ASSUMPTIONS ......................................................................18
14.3 CASH FLOW ASSUMPTIONS ......................................................................18
14.4 EXPENSE ASSUMPTIONS ..........................................................................18
14.5 FINANCIAL ASSUMPTIONS .......................................................................18

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1 INTRODUCTION

1.1 Project Brief

The pre-feasibility study focuses on the establishment of women designer wear

Boutique including the operations of apparel designing, manufacturing, selling and
marketing. The study has been designed to capture the dynamics of the Boutique
industry, with its many components and possible strategic opportunities.

1.2 Opportunity Rationale

Clothing is a beautiful visual demonstration of the social and emotional needs of

people wearing it. It also portrays in a clearly understood visual manner, what people
of different cultures and styles want socially. Fashion, through times, has gone
through so many rapid changes and bizarre extremes that it has examples of nearly
every kind of clothing function.
However, in a boutique business, the specifications and descriptions of the designs
and clothes are so general that they can fit more than one costume, which actually
are quite different in nature from each other and this is solely dependent on the taste
of the people.
The range of Pakistani dresses is remarkably wide, according to the vast cultures,
geographical differences, purchasing capacities, influence of the western culture, and
bewildering diversities of the ethnic groups. One has, therefore, to sift and isolate,
and then relate and bring together, the ideas for creating various designs, which can
fit in the context of the fashion in vogue and the culture in practice.
In reference to Pakistan, the Boutique business is quite in vogue but has yet to be
formalized. The market of this enterprise is quite scattered and unorganized. There
are a few major players in Boutique business and these entrepreneurs have also taken
an initiative based on their caprice and experience in the field of fashion design.
However, there is a massive potential in this field, if one has the ability to design and
market his/her products through introducing innovative designs both in stitching as
well as the fabric sector.
Furthermore, there is massive export potential in this sector, as the demand of
Pakistani dresses, especially in countries like UAE, USA, and UK, is massive due to
a high number of Pakistani expatriates who have settled in these countries. The
Boutique business can also be expanded into a more profitable venture by providing
stitching facilities to other boutiques, which do not own a stitching unit or are
lacking this facility.

1.3 Proposed Capacity

The Boutique business capacity is greatly dependent on the market size and the
number of potential clientele one can attract. Furthermore, the women fashion wear

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garments will be designed through a contracted designer and then stitched through
in-house stitching unit. On average, a designer can supply forty designs per month
from which nearly thirty designs are selected on average. Approximately, total
capacity of the defined unit with 5 stitching machines (basis on 8-10 hours shift) will
be about 7501 dresses. The breakup of the total number of dresses will be as follows:
Total designs selected by designer 30
Number of dresses in each design 5
Number of dresses in each size 5
Total Number of dresses 750
This production and sales capacity is estimated to be economically viable and
justifies the capital as well as operational costs of the project.

1.4 Total Project Cost

The Boutique shop needs a total investment of about Rs. 1.83 million. This includes
a capital investment of Rs.1, 299,430 and a sum of Rs.530, 680 as working capital.

2 CURRENT INDUSTRY STRUCTURE

Currently, the boutique industry is relatively unorganized and is scattered in and
around the posh areas of the metropolitan cities of Pakistan i.e. Lahore, Islamabad,
Karachi, Peshawar, and Quetta. The boutiques in Peshawar and Quetta, mostly sell
the traditional dresses having indigenous/local designs, whereas the ones in Lahore,
Islamabad, and Karachi deal in fashion wear greatly influenced by the west and the
local trends in vogue. As such, there is no exact detail available of the number of
boutiques, especially in women wear, because there is no association or link between
these enterprises. The reason being the business rivalries and the competitive
structure of this industry. However, one can name a few major players in the
business such as Indifference, Generation, Parahan, Nee Punhal, Bossini, Kapre
Waghera, Maria B, Nina’s, and some individual designer players like Beegee’s,
Nilofar Shahid, Nadia Mistri, Amir Adnan, Shayan Malik, and Sahar Saigol.

3 MARKETING
The marketing of boutique follows the conventional marketing pattern which is
dependent on selection of venue of the outlet/s and the product mix (designs and
sizes), as well as the promotional strategy. Furthermore, the boutique owner has to
marketing techniques like:
 Usage of print media i.e. printing of posters and pamphlets as well as displaying
it and distributing it at proper places
 Advertisement in print media i.e. newspapers and fashion magazines, etc.

1
This production also includes additional suits that will be prepared on orders/outsourcing/CMT
(Cutting, Manufacturing and Trimming) per month in order to utilize the maximum capacity of the
stitching unit.
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 Usage of electronic media i.e. projection of the boutique in fashion programs,

advertisement on television, and provision of dresses to various television plays
and films.
 Event arrangement like fashion shows and photo-shoots.
 Usage of e-commerce i.e. launching of website and advertising on web.
Moreover, in order to keep abreast with the emerging trends and client tastes,
surveys regarding customer satisfaction/needs should be a regular feature of this
project.
As this project of Boutique deals in designer women wear, therefore the product mix
will comprise of different styles of the female dresses in different sizes. Whereas, the
styles will be Shalwar Kameez, Q-lots, Pajama Kameez, Frocks, Kurta, Peeshwaz,
Party dresses, Casual Dresses and other prevalent dresses based on the market
trends.
Apart from this, there is a vast export potential in this industry, which is evident
from the export figures of 1998-99 (available from the data of Federal Bureau of
Statistics-FBS).
SITC2 Code Product Classification 2000 – 2001
Value (Rs. “000”)
8422102 Suit women cotton not knitted 1,415,124
8422103 Suit women synthetic not knitted 501,917
8422104 Suit women (other textile material not knitted) 46,861
8422202 Ensembles women cotton not knitted 2,107
8424002 Dresses women not knitted 463,346
8424003 Dresses women man made fiber not knitted 63,438
8424004 Dress women other textile not knitted 17,723
8424006 Shisha embroided dresses of cotton 286
8427006 Baluchi Kameez of Silk 27
1.1 Total 2,510,826
Source: Federal Bureau of Statistics
Even these figures represent the formal export patterns of women dresses from
Pakistan and are not representative of the export of these dresses taking place on
informal level. Most of the women dresses prepared in Pakistan are exported to
USA, UK, Germany, UAE, Saudi Arabia, France, Belgium, Netherlands, and South
Africa.
The end users of these dresses in foreign countries are mostly Pakistani and Indian
women who have immigrated to these countries.

2
Standard International Trade Classification
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4 RAW MATERIAL

4.1 Raw Material

The raw-material required for such sort of projects, would be as follows:

 Fabric: The fabric, which is the basic raw material requirement for a boutique
and a major component of the cost, can be obtained from wholesale markets or
from markets specializing in designer cloth at Faisalabad, Karachi, and Lahore.
 Accessories: Accessories such as buttons, laces, zippers, elastics, threads,
needles, embroidery threads, glasses, etc. will be procured from the local market
at competitive rates.
 Labels, tags and packaging: Labels and tags can be obtained on order, as these
serve as an identity for the boutique and are useful for promotion.

5 PRODUCTION PROCESS FLOW

5.1 Production Process Flow

The process for converting fabric in designer wear garments follows the below
mentioned sequence:
 Design: The initial process starts from the designing phase. Various patterns of
clothing and the fashions in vogue, which also relate to the tastes of the
concerned clientele, are designed. This is done by the contracted designer as
he/she will provide the basic designs of which the fabric will be converted into
the designer wear garment. On average, a designer is supposed to provide 40
designs per month or 100-120 designs per season i.e. three months. From these
designs, approximately 50% of the designs are selected for further development
of clothes.
 Pattern Making/Cutting: Based on the designs selected, patterns for cutting are
developed and based on these patterns, fabric is cut, embroided, block printed,
and processed accordingly.
 Stitching: The cutting is then followed by stitching, which can either be done by
the in-house stitching unit or by outsourcing it 3. Labels are also attached to the
apparels in this process.
 Finishing: The final phase is that of finishing, in which the garment will be
checked for quality control and will cleaned (if required) for final presentation at
the outlet. The garments will also be tagged for identification of sizes, prices,
addresses, handling instructions, etc.
 Presentation/Market: Once the designer wear garment is ready after going
through the above-mentioned process, it is presented at the outlet/shop for sale to
the clientele.

3
In case of over-lock stitching, it will be done in-house. The stitching of buttonholes as well as elastic
embedding will be outsourced. This will cost approximately @Rs.5 per dress.
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Designing Pattern Making Embroidery

Finishing Stitching Cutting

Presentation Market/Clientele

6 PRODUCTS

6.1 Product Mix

Products will be priced at the high end to reflect the quality and exclusiveness
associated with the brand. High-end materials such as Crinkle Chiffon, Georjot
Chiffon, Chinese Raw Silk, Medium Silk, Leafy Print Jamawar, Chamose Silk etc
will be used. This boutique will offer following product categories of women wears:
 Casual Wear
 Semi Formal Wear
 Formal Wear
Each product category will include the following product lines:
Ethnic Wear
Formal Wear – Party dresses and special occasion dresses
Contemporary Wear
Fusion Wear – Combination of eastern and western wear, suitable for the
international market as well.
Western Wear
Tops, Pants and various other styles
The combination of outfits for the proposed outlet will be as follows

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Table 6-1 Product Mix

Category % Of Total Outfits
Casual Wear 34%
Semi Formal Wear 33%
Formal Wear 33%

Table 6-2Average Sale Price

Category Ave. Price per outfit
Casual Wear 3,200
Semi Formal Wear 6,000
Formal Wear 15,500
2.1 Costs of Goods Sold and other Expenses
Cost of goods sold has been taken as a percentage of the sale price. The percentage
of cost for each product category is as below:
Table 6-3 Percentage of Cost
Category Cost (percentage of sales)
Casual Wear 35%
Semi Formal Wear 32%
Formal Wear 30%

7 HUMAN RESOURCE REQUIREMENTS

The project of Boutique requires the following Human Resources/Staff:

Table 7-1 Staff Salaries

Positions Required Salary per Month Salary per Annum
Production Staff
Designer 1 15,000 75,000
Tailor 5 7,000 175,000
Press/iron man/finishing 1 4,000 20,000
Dyer 1 5,000 25,000
Total 295,000
Administrative Salaries
Sales girl 2 6,000 144,000
Office boy 1 3,500 42,000
Guard 1 5,000 60,000
Peon/sweeper 2 2,500 60,000
Total 14 306,000

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8 MACHINERY/EQUIPMENT DETAILS
The boutique will require a small in-house stitching unit. The cost of the stitching
machinery will be as follows:

Table 8-1Machinery Detail4

Stitching Machinery 5 No. Rs/Unit Rs
Single needle lock stitching machine 4 19,900 79,600
Over lock Machine 1 56,800 56,800
Embroidery 1 29,900 29,900
Total 166,300
Furthermore, the following will also be required to setup a Boutique:

Table 8-2-Office Equipment

Other Equipment No. Rs/Unit Rs
Computers 1 25,000 25,000
Computer printer 1 12,000 12,000
Telephones 2 3,500 7,000
Fax machines 1 12,000 12,000
Software 1 30,000 30,000
Total 86,000

9 PREMISES FOR SHOP AND STITCHING UNIT

9.1 Recommended Mode for Renting a Shop

It is recommended that the proposed location for the said enterprise be a posh area,
where people have the buying capacity for women fashion wear. The size of the
shop should be at least 800 Sq.ft i.e. 20 feet front and 40 feet depth. Furthermore, a
small building will be required to establishing the stitching unit. One viable option is
to rent a small house for this purpose.
The shop will be obtained on rental basis, and the rent estimation for such a shop is
Rs 56,000/month. According to the prevailing practice, 6 months rent as advance
and three months rent as security would be required for renting the shop. It is
assumed that security is a one-time expenditure, whereas pre-paid rent will only be
given at the beginning, while establishing the boutique. After first six months, rent
will be paid on monthly basis.
The cost estimates for setting up the Boutique are as follows:

4
Prices has been quoted by SINGER sewing company, Pakistan
5
Though the prices here are given of the new machines but second hand machines are also widely
available which can function properly and can reduce the project cost too.
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Table 9-1 Rent Cost Detail

Rs
Security for renting shop/outlet (Rent @ Rs.56,000 168,000
per month. 3 months rent as security)
Interior decoration (installing lighting, mannequins, 437,884
hanging racks, mirrors, glass panes, cash counter,
and other décor, etc.)
Security for renting a house for installing the 45,000
stitching unit (Rent @ Rs15,000 per month)

9.2 Infrastructure requirements

The project will have the following infrastructure components:

Table 9-2-Infrastructure Requirement

Description Sq.ft
Main shop 600
Try Room 36
Small Store 100
Kitchen 64
Building for Stitching Unit 10 Marla House

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10 PROJECT ECONOMICS

10.1 Project Cost

Description Cost (Rs.)

Machinery & equipment 166,300
Furniture & Fixture (Interior Decoration) 437,884
Office equipment 86,000
Security Deposits for Premises6 213,000
Pre-operating expenses
Salaries7 31,000
Promotional Expenses 67,246
Total Capital Cost 1,299,430
Working Capital
Raw material (Fabric & Accessories) 104,680
Prepaid Rent (Boutique and Stitching Unit) 426,000
Total Working capital 530,680
Project Cost 1,830,110

10.2 Project Returns

Internal Rate of Return (IRR) 67%

Payback Period (Years) 1.50
Net Present Value (NPV) 3,684,374

10.3 Financing Plan

Financing Rs.
Equity 60% 1,098,066
Debt 40% 732,044

6
Security Deposit for Boutique and for Stitching Unit
7
One month salary of Production staff
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11 KEY SUCCESS FACTORS

There are a number of factors, which contribute towards the success of a project. In
case of the project of Boutique, some of the Key Success Factors are as follows:
 Proper care while producing dresses should be adopted
 Proper Inventory management i.e. keeping minimum inventory as per past sales
trends.
 The dress designs should be according to the emerging trends and fashions.
 Designing of dresses according to the consumer tastes/preferences gathered
through consumer surveys.
 The location of the outlet should be properly selected and attractively decorated
so as to target the clientele effectively.
 The customer satisfaction should be given due importance, because it is the
customer satisfaction, which can increase the sales. Hence, excellent customer
service should be provided.

12 THREATS FOR THE BUSINESS

 Competitive Structure of the market
The market of the boutiques is highly competitive; therefore if the entrepreneur is
not well responsive to the tastes and response of the clientele as well as the fashions
in vogue he/she may not be able to capitalize the opportunity properly.
 Pilferage in the designs
The designs which a designer produce can be sold by the staff even before that
design is launched and that can pose serious threat to the business because in the
fashion industry it is the uniqueness of the design which matters.
 Selection of the wrong venue
Selection of the wrong venue can be a major hurdle in achieving the desired business
objectives.
 Selection of the wrong design
If the designs are not selected according to the tastes of the clientele then it can be
detrimental for the business, so the clientele taste should be properly tracked.
 Tax
Improper documentation of the sales receipt record may lead to problems with Tax
department.

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13 FINANCIAL ANALYSIS

13.1 Projected Income Statement

Rs(000)
Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X

Sales/Revenue 3,362 3,920 4,533 5,206 5,943 6,749 7,631 8,595 9,646 10,225
Cost of Sales 1,428 1,606 1,806 2,027 2,269 2,545 2,836 3,153 3,500 3,701
Gross Profit 1,934 2,315 2,727 3,179 3,674 4,204 4,795 5,441 6,146 6,524
Operating Expenses:
Administrative Expenses 534 563 595 629 666 705 336 360 386 402
Rent 852 937 1,031 1,134 1,247 1,372 1,509 1,660 1,826 2,009

Operating Profit 548 814 1,101 1,416 1,761 2,127 2,950 3,421 3,934 4,113
Financial Charges 97 77 56 36 10 - - - - -
L C + Bank Charges - - - - - - - - - -
Profit before Taxation 450 737 1,045 1,380 1,750 2,127 2,950 3,421 3,934 4,113
Taxation 20% 90 147 209 276 350 425 590 684 787 823
Profit after Taxation 360 590 836 1,104 1,400 1,702 2,360 2,737 3,147 3,291

Acc. Profit b/f - 360 950 1,786 2,890 4,290 5,992 8,352 11,089 14,236

Accumulated Profit c/f 360 950 1,786 2,890 4,290 5,992 8,352 11,089 14,236 17,527

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13.2 Projected Cash Flow Statement

Rupees
(000)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Profit before Financial

Charges & Taxation 548 814 1,101 1,416 1,761 2,127 2,950 3,421 3,934 4,113
Amortization 32 27 23 20 17 14 12 10 9 7
Depreciation 25 23 20 18 17 15 13 12 11 10
605 864 1,145 1,454 1,794 2,156 2,975 3,443 3,954 4,130
Working Capital Change 67 8 8 9 10 12 12 13 14 9

Cash from other Sources

Owners 1,098 - - - - - - - - -
Bank Finance 732 - - - - - - - - -
1,830 - - - - - - - - -

Total Sources 2,502 872 1,153 1,463 1,804 2,168 2,987 3,456 3,968 4,139
Applications:
Fixed Assets 252 - - - - - - - - -
Preliminary Expenses 213
Re -Payment of Loan 244 223 203 182 157 - - - - -
L C Charges - - - - - - - - - -
Tax 90 147 209 276 350 425 590 684 787 823
799 371 412 458 507 425 590 684 787 823

Cash Increase/(Decrease) 1,703 501 741 1,005 1,297 1,743 2,397 2,772 3,181 3,316

Opening Balance - 1,703 2,204 2,945 3,950 5,247 6,990 9,387 12,159 15,340

Closing Balance 1,703 2,204 2,945 3,950 5,247 6,990 9,387 12,159 15,340 18,656

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13.3 Projected Balance Sheet

Rs(000)
Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X

Tangible Fixed Assets 227 204 184 166 149 134 121 109 98 88
Preliminary Expenses 181 154 131 111 95 80 68 58 49 42
Current Assets:
Accounts Receivable 67 78 91 104 119 135 153 172 193 204
Cash in Hand / Bank 1,703 2,204 2,945 3,950 5,247 6,990 9,387 12,159 15,340 18,656

2,178 2,641 3,351 4,331 5,609 7,339 9,729 12,497 15,680 18,991

Owners Equity:
Capital 1,098 1,098 1,098 1,098 1,098 1,098 1,098 1,098 1,098 1,098
Accumulated Profit 360 950 1,786 2,890 4,290 5,992 8,352 11,089 14,236 17,527

Long Term Loan 586 439 293 146 - - - - - -

Current Liabilities:
Current Portion
Accounts Payable 135 153 174 197 221 249 279 311 346 366

2,178 2,641 3,351 4,331 5,609 7,339 9,729 12,497 15,680 18,991

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14 KEY ASSUMPTIONS

14.1 Production Assumptions

Number of Stitching Machines 5

Production Capacity (No. of dresses per month) 750
Capacity Utilization for the first year 55%
Self Production (% of total production) 60%
Dresses manufactured on CMT basis (% of total production) 40%

14.2 Operating Assumptions

Hours operational per day 8

Days operational per month (Production) 25
Days operational per month (Boutique) 25

14.3 Cash flow Assumptions

Account Payable Cycle (Days) 10

Account Receivable Cycle (Days) 15(of 30%
of sales)

14.4 Expense Assumptions

Promotion Expenses after Year 1 (% of expected sales) 2%

Machine Maintenance 1%of
machinery
cost
Raw Material Price Growth rate 1%
Payroll growth rate 5%
Machine Maintenance growth rate 5%
Rent growth rate 10%

14.5 Financial Assumptions

Project Life 10 Years

Debt: Equity 40:60
Interest Rate on Long Term Debt 14%
Debt Tenure 5Years
Debt Payment per year 2

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