Company Summary

Bluespa is a multi-channel concept, combining a wholesale distribution network with a retail strategy, e-commerce, and a consumer catalogue. The face of retailing is changing. These changes are creating the potential for a new business model. This model will eliminate the need for a traditional brick and mortar retailer to open thousands of doors in order to reach the market, yet not eliminate the need for brick and mortar. At the same time it will eliminate the heavy ad spending that has been associated with e-commerce by utilizing a brick and mortar retail presence to develop brand awareness. Portions of this model exist in successful retail companies like Williams Sonoma and Crate and Barrel. Other pieces exist in successful wholesalers like Bliss and Clinique. A few players have even touched on all the pieces (i.e. Aveda, MAC and Ralph Lauren). By utilizing this multi-channel approach we will be able to reach the niche market for quality personal care products rapidly and efficiently. It will allow us to develop Bluespa as the brand for quality skin and body care products within our target market. Our target consumer is interested in total mind nd body fitness. She most likely participates in yoga, tai chi, pilate's or some form of mind and body program. She is a professional over the age of 25 with a hectic lifestyle and high disposable income. Her busy lifestyle creates the need for self centering and pampering. She appreciates quality-–especially in concert with service and selection. Bluespa will provide this customer with a total fitness brand. We are working with some of the best manufacturers globally to develop, and bring to market, high-quality products for skin and body care. In addition we have developed a Bluespa line of yoga and fitness apparel, a natural extension of the brand. These products have been developed utilizing the finest fabrics and proven fit specifications. Bluespa garments will provide the active female consumer with a brand of apparel designed for her and sold in an environment she can relate to.


Brick and mortar:
The first Bluespa store is scheduled to open in Portland, Oregon in 2001. The store will be 1,700 square feet located in the Pearl District, a highly successful urban redevelopment area that has converted the warehouse and brewery district of old Portland to a residential and retail gem. The lofts in "the Pearl" range in price from $200,000 for a studio to well over $1,000,000 and they are sold long before completion. There will be over 50,000 residents in the Pearl when it is fully renovated. The old Weinhardt brewery has recently been purchased by Federal Realty and is being converted into a downtown shopping area. The Bluespa location is situated in the heart of the Pearl.
Wholesale:
We plan to launch Bluespa wholesale at the New York Accent On Design show in the third quarter of 2001. We have secured a partnership with a well-respected distributor. Through this partnership we will be able to gain key show positions in the Los Angeles, New York, Atlanta and San Francisco gift shows. In addition we will have a permanent position in their Los Angeles showroom. The wholesale strategy will target select spas, department stores and specialty stores that are recognized trend leaders (i.e. Fred Segal, Bergdorf Goodman, Barney's and Fellisimo). This product positioning will further establish the brand image of Bluespa.


E-commerce:
Unlike current e-commerce models, we do not intend to use the Internet to establish the brand or bring it to market. The e-commerce consumer is brand and convenience conscience. The early ventures have shown that it costs dearly to try and establish a brand via this medium. We will develop our initial Internet capabilities as a combination business-to-business tool and e-catalogue. Our site will be simple and direct with minimal cost. Many of our products are consumable. We will be able to establish a use profile and contact the customer via email when she should be running low, to remind her, at the same time offering her an option to click and replenish. We will establish an EDI capability--directly with the end user. This contact will enable us to suggest add-on items based upon preferences of other users of the same item(s). In addition the e-commerce platform will provide us with a valuable wholesale tool. We will provide client companies with an access code that will allow them to place orders and utilize our product knowledge database as a training tool for their employees. Our e-commerce capability will come online in early 2002.


Catalogue:
The Bluespa catalogue will launch in the fall of 2003. The initial mailing will target opinion leaders in key markets. Our catalogue will have a long in-home life due to the nature of the product and the editorial format. It will be our goal to inform and educate the consumer about the benefits of Bluespa products. We will focus on the ingredients and the benefits. The original Banana Republic catalogue will be used as a model. By utilizing still-life photography we will be able to contain production costs while reinforcing our focus on the product.

2.1 Company Ownership

Bluespa is an Oregon corporation. The company is 100% owned by Ray and Barbara Brunner, the founders. Mr. Brunner is the president and owns 80% of the stock while Mrs. Brunner is the vice president for product development and owns 20% of the shares. The planned future distribution of ownership will allocate a percent of shares for early investors proportionate with their commitment. In addition, 10% of shares will be set aside for employee stock options and awards. Certain suppliers will be awarded warrants for their early contributions to the growth of the company. The specific amount of the warrants is to be determined, but will be proportionate to their level of contribution. Additional share options will be provided to members of the board of directors. The board will consist of seven members: Mr. R.G. Brunner, one additional member of management, three outside directors appointed by Mr. Brunner, and two representatives appointed by the major investor(s).

2.2 Start-up Summary

Start-up costs are shown in three areas. The first is in the start-up table, the second is within the cash flow assumptions and the third is in the P&L.

1. Start-up expenses: legal (incorporation and trademark registration), stationery (business cards and office supplies), etc., brochures, consultants (graphic design for logo and packaging), research and development (architecture fees for store and trade fixture design).
2. Start-up costs expressed in year one cash flow: FF&E for first Bluespa retail store.
3. Start-up costs included within year one P&L: brand marketing, management staff, travel costs to coordinate product development.