The Shock Shop is a medium-sized retailer of electrical goods. It has developed from a family-run business that started up in Bristol and expanded into other major towns. It now has six shops all in the south-west of England. They sell a variety of electrical quipment ranging from personal computers and palmtop computers to stereos and other hi-fi.
| General information |
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| Product: | A variety of electrical products: personal computers, palmtop computers, music systems and personal stereos, white goods (fridges, freezers, washing machines and dishwashers), televisions, videos and cameras (still and video and all digital models) |
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| Market: | Generally specific to the 6 towns it operates in in the South-West. |
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| Ownership: | A private limited company with most shares owned by families of the two founders and the founders themselves having 60% between them. |
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| Financial Information |
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| Turnover: | £1.75 million |
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| Profit: | £148,000 |
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| Ratios: |
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Profit margin : | 8.5% |
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| Gearing (level of debt): | 10% |
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| Acid Test Ratio: | 0.8 |
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| Return on capital employed (ROCE): | 28% |
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| Cost structure: | Reasonable indirect costs associated with each individual store, but mainly direct costs from employment and purchase of stock. |
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| Marketing |
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| Marketing strategy: | The company relies mainly on passing trade and word of mouth. |
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| Average market growth over last 5 years: | The market has grown quite quickly (12% per year) with many new products coming onto the market providing a growing level of demand. |
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| Market prospects: | Good. Growth looks set to continue, but recession or economic slowdown could lead to sharp falls in demand. |
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| Types of marketing used mainly: | Mainly point of sale but some advertising in local newspapers and magazines. |
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| Product |
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| Characteristics: | The demand for the products is very dependent on the state of the economy. When there is a high 'feel-good factor' demand will increase significantly. |
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| Price elasticity of demand: | Electrical goods retailing is a price-sensitive market and so price elasticity is relatively high. |
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| Income elasticity of demand: | Income elasticity is also high as people's spending patterns are strongly linked to the level of economic growth. |
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