At almost every college and university in America there are stores that sell every product imaginable labeled with the school name or mascot. Beau Davis recognized this fact but as a student at Texas Christian University {TCU), he also recognized that the products for sale with the TCU emblem did not match the nature and desires of the student body. Beau has a strong family history with TCU. The school is like many in the southern United States that were started after the Civil War, a time at which a large number of private schools were started in the South by churches. Most of these church affiliations today are more historical than representative of a strong control of the school by a given denomination.

Beau knew that the student population at the private university (where annual expenses exceed $50,000 a year to go to school) wanted high-quality clothes, but the local bookstores and other retailers were selling low-quality and cheap school-related clothing. The stores were simply following a time-tested model that worked well at the big state schools where the student body is more representative of a broad range of society, and often with much lower incomes. The existing retailers were pursuing a strategy that was not tailored to the local market they were trying to serve.

Beau used this inconsistency in desire and offering to establish the Varsity, a store that sells higher-end clothing items. The brands offered are typically some of the higher-end clothing brands any store might offer such as Polo, Ralph Lauren, Columbia, and Ping Golf. The result of this higher quality is that the average price for a shirt is $60 in the Varsity while shirts would be $30 and of lower quality in other local stores. All things in the Varsity relate to TCU. The store is approximately 1,000 square feet in size, and has been open for four years. The key selling season for the store is during the football season.

To fund the store, Beau brought in eight investors who committed $300,000. The investors included some family and friends but more broadly were people associated with the university in some manner. Beau and his partner committed their intellectual and physical efforts to the business as they had no significant capital at that point in their lives. The two partners provided the investors with a seven-page business plan and a twenty-page offering describing the business. The base for the business plan came from talking to other retailers. Beau discovered that if the other retailers did not see him as a direct competitor, then they would be very helpful overall. The Varsity typically maintains about $180,000 to $200,000 of merchandise in inventory.

Beau sought to save as much money as he could when starting the business by doing such things as living in an apartment behind the store location and using his extra bedroom in the apartment for business storage. However, while seeking to save money, Beau also made some key mistakes. One mistake was rather than investing in a solid point-of-sale system that would allow him to better use the Internet, he went with a cheaper system. The cheaper system was unable to support all of the activities he wanted to do with e-commerce. Today he has largely had to shut down his e-commerce efforts and seek to rebuild them in a whole new manner. He is currently seeking to use Square to establish a presence on the Web; this product is used by many small businesses to gain a place on the Web. Beau wishes he had raised $400,000 rather than $300,000 to have been able to obtain a better point-of-sale support system. The idea for the business is so attractive and reasonable that he now believes he could have raised that much money with relative ease. Underestimating his ability to obtain the initial funds at the time led him to target too low, which then set in motion problems such as not being able to aggressively pursue e-commerce options for the firm.

An interesting aspect that Beau highlights for a firm like his that targets a differentiated product is that most typical advertising methods do not work. Even advertising in specialty outlets such as the campus newspaper largely leads to very limited results. Instead, the best forms of advertising are through social media including Facebook and working with a blog specifically around TCU athletics. The social media connect specifically to individuals who are interested in the products and understand the positioning of the firm.

Epilogue

In the summer of 2014, the Varsity shut down as the lull in the summer was too great-the cash flow simply could not cover the existing costs. This situation was aggravated in part because the owners anticipated that the fall football season for TCU would be one of its best and had laid in extensive inventory. In hindsight, the owners also began to realize that many retailers such as the campus bookstore had learned from the Varsity and were now also handling high-end retail goods, which competed directly with the Varsity. At its closing, the Varsity was able to get out of its lease at no cost since there was another tenant who wanted the space. The inventory was sold for 30 cents on the dollar.

QUESTIONS

1.The Varsity's largest number of sales occur from September to December, because of football season. The sales then drop dramatically. What would be your advice to the firm about how to build up sales other times of the year without losing their TCU focus?

2.Think of private schools in your area or state. Would a business like this work in those areas?

3.What other niche businesses can you think of that serve a higher-end market, but which big national firms are not now serving?