ShopBop & East Dane Magic Mirror Initiative Partnered with Aloft Hotels Madison White & Missy Miller March 2014 FASM 415 Professor Meeta Roy
Executive Summary New technologies are emerging faster than ever before and retailers are constantly searching for new ways to stay ahead, stay relevant and keep customers interested and coming back for more. In today’s day and age the only way for retailers to make that happen is by looking forward to the latest technology and finding ways to integrate it into the customers shopping expereince. Retailers of all kinds, but specifically fashion are looking for ways to integrate technology into their platforms and create an overall aesthetic and level of ease and service that shoppers so desperately seek. Retailers need to deliver needs to the customers before they realize they need them. Our strategic initiative idea has been to create a physical presence for an online fashion retailer in an environment outside of a brick and mortar store, where shoppers interact, relax, and gather. When looking at moving an online retailer into a physical space it is important to know just what the customer is looking for and the overall experience expected. For our initiative we have taken well-known boutique, online shopping platform ShopBop, as well as their newly launched menswear webiste, EastDane, and have created a physical presence for them, incorporating cutting edge technology and placing it outside of the customers usual shopping location. This presence will be integrated with the technology savvy Aloft Hotels and inventory will be programmed into the new Magic Mirrors. By placing the Magic Mirrors, programmed with women’s ShopBop inventory and men’s EastDane inventory, in five Aloft Hotels within major cities across the country, travelers and shoppers will be able to browse items, virtually “try on” the clothing, connect with social media, and make purchases, all from the fun and easy to use Magic Mirror. These strategically placed Magic Mirrors will bring about an entirely new way of shopping and stay ahead of the incredibly competitive fashion market.
Table Of Contents PAGE 5-13
Strategic Initiative Objectives Porter’s 5 Forces Analysis Rationale & Justification Execution Plan Long Term Benefits Future Plans
• • • • • •
Travel & Tourism Key Players Direct & Indirect Competition PESTEL Analysis
Company Overviews Company HIstory SWOT Analysis Current Market Positioning Perceptual Map Product Assortment Current Distribution Promotional Activities Social Media Activity
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PAGE 31-34
PAGE 26-30
Market Analysis
PAGE 14-25
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Target Consumer Demographic & Psychographic Consumer Profile
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PAGE 35-36
Communication & Promotional Plan Marketing & Promotional Timeline Omni-Channel Marketing Plan
PAGE 37-41
Financial Plan
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Conclusion Bibliography Appendix*
Sales Forecast
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Execution Budget
•
Strategic Initiative
"The secret of change is to focus all of your energy not on fighting the old, but on building the new." -Socrates
Strategic Initiative | 05
Strategic Initiative
ShopBop is a very succesful online retailer, but the channel limitations of ecommerce can often leave buyers hesitant in purchasing such high priced items with no ability to touch, feel, and try on the garmentst. In searching for ways to broaden the reach to ShopBop and EastDane’s consumer base there was a discovery of a new technology known as “The Magic Mirror ”. The idea of placing these mirrors, programmed with ShopBops inventory, in physical locations for customers to “try on” the clothing and make immediate purchases seemed perfect for the ShopBop customer. The modern, sleek and technologically savvy, Aloft Hotels seemed like the perfect fit for such a innovative relationship. The Magic Mirror is a digital mirror that allows customers to browse inventory, try on clothes virtually, interact through social media and shop the product from one simple and easy to use medium. So far these mirrors have been limited to being placed in already existing storefronts where the clothing already exists. (Magic Mirror) ShopBop and EastDane would not benefit from this approach as they have limited, to no brick and mortar presence. By placing the Magic Mirrors in a place where ShopBop’s demographic interacts, plays, and gathers would reach new clients, create a physical presence for the stores, as well as allow them to try on clothes from the online retailer. This is something that never before would have been possible without purchasing a garment online and waiting for delivery to try it on in person.
06 | Strategic Initiative
Strategic Initiative The Magic Mirror has been described by its manufacturer as an in-store kiosk, which was designed specifically for fashion and apparel retailers. It was created as a multi-channel solution that would allow retailers to further fulfill customer satisfaction, create brand awareness and loyalty, as well as increase revenue. It was awarded the “Gartner ’s Cool Vendor for Retail Industry ” because of the Magic Mirror ’s ability to allow shoppers to take quality photographs of themselves trying on clothes virtually and immediately being able to e-mail them or share these photos on social media, such as Facebook or Twitter. The Magic Mirror merges the e-commerce in a physical space and draws on consumers interest, engaging them on several levels as well as satisfying needs of instant gratification and rewarding users with surpirses such as in-store specials and shoppers rewards. (Magic Mirror).
Aloft Hotels is a technologically savvy boutique hotel chain launched in 2005 and owned by Starwood Hotels. They currently operate 79 hotels with locations in North America, Asia, Europe, Africa, The Middle East, and Latin America. They are branding themselves as a technologically driven, interactive hotel with several digital lounges that encourage guests to interact through social media and other digital platforms. (starwoodhotels) The Magic Mirror, sponsored by ShopBop wouild be a wonderful, collaborative of two very different companies that share similar goals, aesthetics, and target consumers. (More detail about this in Target Consumer Section, Pg. 19-24)
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O bjec t iv e s The objective of Magic Mirrors, pre-programmed with ShopBop and EastDane inventory would be to satisfy and excite existing customers while also reaching new customers in an interactive and relaxed setting, outside of the traditional shopping experience. Most consumers are willing to spend more money on items while traveling as they are often more relaxed and are spending “vacation money ” (See Travel and Tourism, Pg 11-18). With the magic mirrors being conveniently placed in the Aloft Hotel technology lounges, this would offer customers who are already interested in technology a new, fun, interactive way to shop without ever having to leave the comforts of your hotel. This could be great also for travelers that may need a last minute outfit for changed plans, or are experiencing the hassle of lost luggage, replacing their feelings of frustration with a excitement and entertainment. The magic mirrors will be placed in five cities of high tourism, including: San Francisco, California, New York City, Las Vegas, Nevada, Miami, Florida, and Chicago, Illinois. These five cites are capable of quick delivery from ShopBop and EastDane, straight to the customers hotel room, or there will be the option of shipping to one’s home address. The objective of the Magic ShopBop & East Dane Mirrors being placed in the trendy Aloft Hotels would grab new and existing ShopBop customer interest by the large format display that will act as interactive signage when not in use. Once a customer is engaged, the digital dressing room will help retain attention by encouraging immediate “try and buy ” behavior. This will be done as the digital try on abilities of the mirror minimizes the hassle of physically trying on clothes in a retail store. The ability to immediately buy the products after virtually trying on clothes will provide a unique and effective multichannel integration from a popular e-commerce retailer into a physical space. (Magic Mirror) Through the interactive nature of the Magic Mirror, ShopBop & East Danes’ social media marketing will flourish, as will Aloft Hotels. With the studio quality photographs available and video capability, users will have the ability to personalize with filters, words, and each photo will also provide watermarked logos of each company. By bringing a fun experience to consumers the excitement will encourage and enable them to share the fun on social media, which will increase brand exposure and visibility, as well as enhancing the engagement. Once customers share their photos and engage on social media through the mirrors they will immediately be directed to “like” the companies pages and can be rewarded with coupons and personalized rewards which will assist in the impulse buying and stimulated sales. (Magic Mirror)
08 | Strategic Initiative
Porters 5 Forces Analysis
For the ShopBop/East Dane and Magic Mirror initiative within Aloft Hotels there were several factors taken into consideration when assessing the possibility and risk of an online retailer moving into a physical space. The competitive rivalry is presumably low as the market is new and unexplored with some of the other few retailers having achieved success in moving from e-commerce to physical in innovative ways are Net-A-Porter, Bonobos, and Warby Parker. The threat of new entrants is low in the fact that moving from e-commerce can prove to be an expensive endeavor, but high due to the saturated market of online apparel retailers. With their being only a single supplier of the Magic Mirrors for our initiative the bargaining power of the
supplier is very high. Substitutes for consumer spending are also high in the area of Aloft hotels as hotel guests may prefer to spend there money at the hotel bar, gift shops, local restaruants and other local brick and mortar stores. This leaves the bargaining power of the buyers also at a high level as there are plenty of other apparel stores, online and physical, that the customer could shop at opposed to using the Magic Mirrors. Overall the analysis for risks is moderate to high due to a large apparel market online and brick and mortar, but it is strongly believed that the possible impact on the retail industry and potential for growth is even larger than the possible risk.
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Rationale & Justification For a business to stay relevant in today’s quickly evolving retail industry there must be an emphasis on customer engagement and satisfaction. For an online retailer this can be a difficult task that requires creativity, as the face-to-face interaction is not a possibility. A business that has access to constant customer interaction and customer service are hotels, many of which are constantly raising the bar. Trendy hotels in major cities do more than just provide a place for travelers to sleep, they encourage social interaction and provide a place for people to unwind, network and discover. The relaxed and interactive atmosphere that Aloft Hotels provide would encourage customers to engage with the magic mirror technology. Understanding the growth of e-commerce and M-commerce through tablets and smartphones is a key component in success in the new, omnichannel world of retail. In the United States alone e-commerce and m-commerce sales of apparel and accessories is the leading product for online sales and is only expected to grow. (fittingreality.com) Not only is e-commerce changing the way in which consumers shop, it is also heightening expectations. Customers want to be able to shop and purchase instantly and receive their items very shortly thereafter, the largest leader in this growth is online retailer, Amazon, which owns ShopBop and East Dane under their fashion and apparel branches. E-commerce and M-commerce will continue to grow and in turn, customers will continue to want and expect more from online retailers. (Forbes) One of the constantly recurring complaints of online retailing from customers is the inability to try on clothes before buying. By placing magic mirrors in hotels we are meeting consumers social interaction needs, their desire to interact through technology and also enables them to try on clothes from a top online retailer before making their purchase. This will introduce a new, more social and interactive way to shop on an e-commerce platform. Through launching the initiative in the U.S we will be able to keep up with shipping demands with our Wisconsin based Shopbop warehouse and meet the needs of the customers in a timely fashion.
10 | Strategic Initiativepter
Execution Plan To begin developing the implementation of the ShopBop & Magic Mirror initiative the primary focus will initially be to research every aspect of the necessary technology, select locations based on proper brand research, as well as closely monitoring the ShopBop & East Dane customer habits outside of retail. Although research will be constant throughout implementation and while the initiative is in practice the bulk of research necessary for execution is planned to be completed by June of 2014 in order for the next stages of partnership agreements, hotel selections, integration and budgeting. The planned integration and distribution will not begin until the design for display of mirrors within Aloft Hotel lobbies is completed in October of 2014 in the five selected hotel locations. Throughout distribution hotel employees will be educated simultaneously with the installation and final testing of the mirrors, all in preparations for a Black Friday, November 27, 2014 launch. This launch will initiate in time for the busy holiday travel season as well as Black Friday and Cyber Monday shopping. The Aloft Hotel’s were chosen due to their location in high tourism areas and cities with reputations for trendy, boutique hotels. Our advertisements will be developed with each location in mind, as well as the chosen publications and platforms on which they will be displayed. As well our promotions are carefully planned around our launch dates and formed in order to form a relationship with each chosen city, this will be further discussed in the promotional plan(pg. 25-30).
Chapter NStrategic Initiative | 11e |
Long-Term Benefits
"...It's like the marriage of technology geeks and fashion at the same time." -Jeff Yurcisin President of ShopBop
•Create a lasting impact on fashion and technology •Exposure to potential customers in an unexpected setting •Create a physical presence for ShopBop and EastDane without investing in brick and mortar space. •Build lasting relationships with other, likeminded companies. (Aloft Hotels)
12 | Strategic Initiative
•Stay ahead of competition in fun and innovative ways. •Deliver new technology to customers to improve their shopping experience. •Enforce brand loyalty among customers. •Establish ShopBop and EastDane as strong innovaters for the merging of fashion and technology.
Future Plans
Magic Mirrors, simulated in Aloft Hotel, WXYZ Bar, Chicago.
The ShopBop, Magic Mirror and Aloft Hotels strategic initiative has great potential and ability to flourish, grow and expand into the future. Further expansion into other countries, specifically Asian and European markets is something that Aloft Hotels is looking greatly into. If succesful in the initial placements in the U.S then the initiative will be expanded to ShopBops largest concentration of top consumers, in the country of Japan (freewebsitereport.org.). As the initiative grows there will be research into new warehouse openings in the United States, such as closer to the Miamia area to enable same day delivery to all locations. This will ensure the best possible shipping times for each location in the United States, yet another way to ensure customer satisfaction in every stage of the ShopBop and Magic Mirror brand experience. Upon succesful imiplementation of the original five locations there will be plans to launch Magic MIrrors in one new Aloft Hotel space each year as the hotels are built and completed. The desired future locations include Atlanta, Georgia, New Orleans, Louisiana, San Diego, California, Dallas, Texas, and another hotel in New York City. These will begin to open in January of 2015, April 2015, July 2016 and will continue to open as construction is completed. ShopBop and Aloft Hotels will both benefit from the new innovative form or retailing to offer their technologically advanced customers.
Strategic Initiative | 13
Company Overview
14 | Company Overview
Company Overview ShopBop was founded in 1999 and opened as a single brick and mortar store in Madison Wisconsin called Bop. Their prime goal was to specialize in high-end, hard to find lines of denim. In 2000 Shopbop, was launched as an online boutique that once again specialized in high-end and luxury lines of denim as well as over 10,000 different products from a variety of leading designers. ShopBop saw such success as one of the early online retailers that they were acquired by Amazon.com Inc. in 2006, although they still operate out of Madison, Wisconsin with their own operations branch. Since then, the company has grown to become one of the top online high-end fashion and accessory retailers in the world. (shopbop) This curated collection of designer clothing and accessories for all occasions’ tailors to modern and chic men and women. Shopbop is committed to stay ahead of the rest by constantly looking at creative ideas for innovations as well as new ways to give their customers the best service available. The Team behind the ShopBop magic is a group of 20-30 year olds who are able to best determine exactly what their specific target customer and customer wants from the site. (shopbop) Shopbop’s target consumers are a mix of wealthy young professionals and undergraduate students interested in fashion. They are educated men and women who have the time and money to spend on themselves. In 2013, Shopbop, along with the help of their owner, Amazon, opened East Dane: The Men’s Shop. The company is highly respected by designers and is frequently mentioned in style magazines such as Vogue, Harper ’s Bazaar and Elle. Shopbop makes it their mission to curate authentic, quality designer merchandise while maintaining a strong trust between customer ’s, designers and the Shopbop team. (shopbop) With a sharp, sleek and simple to use site, impeccable customer service and specifically curated pieces, it is no wonder that Shopbop as become “the powerhouse of contemporary fashion” as stated by the New York Times. (NYT)
•1999: Bop opens as a single-store boutique in Madison, Wisconsin.
•2000: ShopBop.com was developed as an online, specialty boutique.
•2006: Bop LLC is acquired by Amazon .com Inc. but continues to operate as a stand alone site.
•2011: ShopBop launches the company’s first print campaign.
•2013: EastDane is launched as the males boutique e-commerce site in partnership with ShopBop and Amazon
•2014: The much anticipated ShopBop app is finally launched in January of 2014.
Company Overview | 15
Company Overview
Strengths • Well Designed Website • Free International Shopping and Returns • Multi-Brand Company • Wide Range of Styles • Owned By Amazon • Online Look Books • Personalized Accounts • Well Curated Collections • Strong Customer Service • Ability to Grow With Amazon • Ability to Advertise With Amazon • Giving Shopbop a Physical Presence • E-Commerce and M-Commerce Rapidly Growing
Opportunities
Weaknesses • Only One Brick and Mortar Store • High Price Points • Product Reviews Not In Depth • Little Advertising Outside of Social Media • Channel Limitations
• High Competition • High Cost of Implementation • Possibilities of Entering Another Recession and Losing Shoppers • Continuing Technological Advances May be Too Fast to Keep Up With • Keeping Up to Date with Products and Assorments
Threats
Shop Well. Shop Happy. ShopBop.
16 | Company Overview
Current Market Position ShopBop was purchased my Amazon. com Inc. in 2006 and since the acquisition has been able to remain in their original location of Madison, Wisconsin and operates still as a standalone site, complementing Amazon’s existing apparel and accessories sector. The customer experience and ShopBop brand has stayed true to their original founding idea and has only been strengthened by their ties to Amazon. (Amazon Press Release) Jeff Yurcisin, ShopBop President, stated that it took many years for the ShopBop team to merge with Amazon in order for the ShopBop customer and shopper experience not to be harmed or interrupted through the transition. (NYT) Since the ShopBop.com inception in 2000 the company has focused on creating opportunites for hard to find or new fashoin brands in cultivating a global customer base. By being focused on the next best thing in all aspects from products to service, ShopBop is always looking for new ways to engage customers directly and also serve as a launching pad for up and coming designers. The wonderful translation of fashion to the customer through daily, onlnie editorial features, a large brand selection, fast & free shipping, active social media, and several designer collaborations proves ShopBops commitment and understanding in merging the online fashion editorial desires of their customer as well as a boutique e-commerce experience. (newswire.ca)
The ShopBop.com site has an estimated net worth of just over $1 million as of January 2014. (websitereport) Females make up the majority of visitors to the site and it is most poular in Japan, as the Japanese customer represents over 47% of shoppers. Individuals that do visit the ShopBop site spend about five minutes daily looking at products, and continue to make regular visits to the site about seven times in a span of three months. Each month, about 700,000 individuals visit the ShopBop website and roughly 500,000 are new and unique shoppers. (websitereport) The company is continuing to grow and expand each year. Expansion into new countries around the world, creating a strong global presence is high priority. In August of 2013 the company entered into Russia and has seen great success. The Russian language is also the thrid language for the company to develope a dedicated website for, behind English and Mandarin. (en.ria.ru) ShopBop also grew their company in September of 2013 with the launch of EastDane.com in partnership with ShopBop, as an answer to the desire for an equally trendy mens boutique e-commerce site. They offer the same services, blogs and lookbooks that can be found on ShopBop as well as shared shopping bags for both sites. Continuously seeking new customers and new countries to make an impact in is imperative for growing a business and competing with harsh competition. (en.ria.ru)
Comapny Overview| 17
18 | Company Overview
Perceptual Map $$$
High Low
$ This perceptual map plots the price points and accessibility of nine fashion companies and stores comparable with Shopbop. Firstly, Shopbop fits into the matrix in the upper right hand quadrant with a higher price point and a much high accessibility point than other luxury fashion retailers. Shopbops’ prices range from $20 to $8000 and the company ships to 165 countries across the world and operates one brick and mortar location. Situated in the same quadrant as Shopbop are Net-a-Porter, with a much higher price point and a similar accessibility point, and Luisavuiroma, which shows similarities with Shopbop in both categories. In the lower right hand quadrant Asos has been plotted with the highest accessibility, shipping to over 200 countries, and a very low price point. Moving into the lower left quadrant, four of the comparable companies are placed. FarFetch, Yoox, Otte and Revolve each have varying price points, but all with a very low accessibility, some shipping to only 30 countries. Finally, the upper left quadrant where Matches Fashion and My Theresa are plotted with low accessibility and higher price points. Company Overview | 19
Product Assortment Shopbop offers a large range of products with a wide spanning prices, ranging from $20 to $8000, depending on the designer and the piece. Their product mix includes clothing, accessories and shoes for both men and women. Their curated pieces have a wide variety of style and range from casual everyday wear and athletic wear, to red carpet pieces. They also offer maternity, basics, bridal and special collaborations with designers. (shopbop) ShopBop prides themselves on being the go-to e-commerce site for hard-tofind designer pieces as well as offering the latest, up and coming trends from talented, new designers. ShopBop has high end designer brands such as J. Mendel, Herve Leger, and Temperly London as well as everyday essential brands including 7 For All Mankind (denim) and Free People. The ability to filter your shopping by brand, price, trend, boutique, look book and product category not only showcases ShopBop’s wide array of products but also their understanding of the consumers ever chaning desires in terms of an e-commerce site.
20 | Company Overview
Current Distribution Shopbop.com is an online shopping platform that is 100% owned by Amazon Inc. They operate one store named Bop in Madison, Wisconsin that contributes to 1% of the overall Shopbop sales. The store operates a 165,000 square foot warehouse space in their hometown of Madison, WI where stock is monitored and orders and shipments are taken care of. (thedailypage) The company currently ships to 165 countries on all major continents across the world with plans to expand each year. (en.ria.ru) Currently, Japan represents the largest percentage of ShopBop.com visitors and customers at 47.2%. (freewebsitereport.com) The company also operates an app, launched January of 2014, that maintains much the same feeling and aesthetic for customers to shop while on the go. (WWD) The app and
website offer several features such as the “My Hearts” program as well as “My Wish List” and options to shop by designer, by boutiques, product categories or directly from the curated look books. With the my hearts and wish list ability on the app a customer is able to add items to these lists and save them in their size and desired color. Once an item is added to the customer’s hearts they will receive updates on their phone if the piece goes on sale or begins to run low in stock. The wish list option has many of the same capabilities but is also searchable by friends and family, simply by entering an e-mail, they are able to shop ones most coveted looks. Look books are developed throughout the year and daily ‘shopping guides’ during the holidays help to keep customers interested and coming back for more.
Company Overview | 21
Promotional Activities ShopBop’s current advertising is done primarily through social media sites such as Facebook, Pinterest, Twitter, Instagram and their personal “shoptalk” blog. The company has determined through their demographic and target consumer that the best use of their advertising dollar should go towards popular social media sites. They have over 1.1 million Facebook followers, 82,000 Pinterest followers, 196,000 Twitter followers and 154,000 Instagram followers. Because the social sites are their main form of advertising, they are updated multiple times a week. They also create traditional print advertisements that run for limited times in magazines such as Vogue, InStyle and Elle. (prnewswire) Along with the print advertisements, the company is constantly mentioned in editorials in many different fashion magazines across the world. The ‘ShopTalk’ blog gives customers a fun place to read articles, fashion news, and editorials based entirely around the Shopbop website and approach to being the “magazine-meetsboutique” style of e-commerce. Shopbop takes part in website retargeting where ads appear on the top and side of the users internet screen with images of items just searched or items related to ones just purchased. It is the perfect way to draw people back into the website to solidify a purchase when almost 98% of shoppers are leaving websites without making a purchase. It has been shown that shoppers need multiple different ‘touch points’ with a website to make a purchase and that is why website retargeting is the perfect solution. (tifftaff) The company also operates an app, launched January of 2014 that maintains much the same feeling and aesthetic for customers to shop while on the go. (WWD) The app and website offer several features such as the “My Hearts” program as well as “My Wish List” and options to shop by designer, by boutiques, product categories or directly from the curated look books. With the my hearts and wish list ability on the app a customer is able to add items to these lists and save them in their size and desired color. Once an item is added to the customer’s hearts they will receive updates on their phone if the piece goes on sale or begins to run low in stock. The wish list option has many of the same capabilities but is also searchable by friends and family, simply by entering an e-mail, they are able to shop ones most coveted looks. Look books are developed throughout the year and daily ‘shopping guides’ during the holidays help to keep customers interested and coming back for more. (Continued on next page...)
22 | Company Overview
Promotional Activities ... Collaborations are a very important part of the company and keeping the shopbop customers interested. Shopbop launches multiple different collaborations with unique designers each year in order maintain their status as a launching pad for talented, new designers. Their most recent collaboration has been with trendy, New York City based, Soul Cycle, creating distinct and fun active wear. Other collaborations have been with designers and companies such as Madewell, Sephora, Club Monaco, NCLA Nail Wraps and even the popular blog, College Fashionista. A unique promotional activity launched by ShopBop was a response to the ever-popular Angry Birds game. Instead of a bird users could launch fashion blogger avatars at ShopBop bags in locations sucha s runway shows, closets and city streets, aiming them to hit ShopBop packages. Shopbop also offers incentives and promotions for frequent and first time shoppers. The website is constantly running a sale with items marked up to 70% off. To gain loyal customers and shoppers, Shopbop offers flash sales and rewards, such as 25% off, for referring friends. The company is constantly creating new ways to bring customers in as well as satisfy their existing, loyal shoppers. (budgetfashionista)By becoming a registered shopper through ShopBop and EastDane customers can enjoy specially crafted e-mails with information regarding the latest trends and look-books, sales, special promotions and suggestions based on wishlist and my hearts items as well as past purchases. Another service ShopBop and EastDane are able to offer is free shipping to Amazon Prime members for all ShopBop and EastDane purchases due to being owned by Amazon.com LLC.
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Social Media Activity With social media sharing being one of the key interactive functions on the Magic Mirrors it is important to analyze the practices already in place by the Aloft Hotel chain as well as ShopBop and EastDane. The social media platforms important for sharing and influencing through the Magic Mirror technology include Facebook, Twitter, Instagram, and Pinterest, all of which are used by all three companies. Today it is estimated that 94% of businesses use some type of social media in order to promote their brand image and connect with customers, which includes 84% of business to consumer companies. (GoodData) While Facebook is arguably the most popular and widely used, other forms can be equally beneficial, depending on the companies desired demographic. For this strategic initiative we will focus on the image-driven forms of social media that include Facebook, Twitter, Instagram, and Pinterest. Facebook has around 1 Billion users worldwide, while twitter estimates that 5,700 tweets are sent every minute. Pinterest and Instagram are a couple years younger in the social media age group but have become very popular with 70 million and 150 million users, respectively. (Mediabistro.com) All of these social sites encourage interaction with customers in a welcoming way, allowing a deeper understanding of the desired target market than ever before.
150,000
100,000
Number of Likes/Followers
5000
2000
1200
500
24 | Company Overview
Social Media Activity As apparent in the graph on the previous page, ShopBop is the most dominant of the involved companies in terms of social media. They have a total of 1,151,454 Facebook likes, 197 thousand Twitter followers, 161 thousand Instagram followers, and 84,460 followers on Pinterest. The ShopBop Facebook page acts as a direct link to their new products as well as the latest lookbooks and ShopTalk blog posts, with each post generating a couple one hundred likes each, but very few comments. All of their social media outlets are strictly posts regarding to fashion and very few lifestyle posts. They seem to limit themselves to only one to three Facebook posts a day, while their Instagram and Twitter accounts seem to follow the same rule for amount of posts per day. The ShopBop Twitter seems to have the least amount of customer interaction with very few “retweets” or “favoirtes”, the instagram though receives almost 1,000 likes per post as well as several comments. The ShopBop pinterest account is filled with pictures of ShopBops latest trends, styling tips, inspiration, collaborations, cooking recipes, hair & beauty, and several other lifestyle boards. There are also boards for EastDane as they do not currently have a pinterst account, probably due to Pinterest being a highly female dominated social media platform. (mediabistro.com) The ShopBop sibling company, EastDane, is still relatively new in every aspect and it is extremely relevant when looking at their social media presence. With 2,936 Facebook likes, 590 Twitter followers and 1,729 Instagram followers, their social media posts and trends follow very closely with that of ShopBop. Although the amount of interaction is significantly lower, the customer interaction on Facebook is similar in relativity with minimal likes and comments on Facebook but the interaction nearly doubling for each Instagram post. All of EastDane’s three social media outlets seem to be used for sharing new inventory, outfit suggestions and informing customers of special sales and promotions. One difference noted between the ShopBop and EastDane Facebook pages was the amount of celebrity posts on Shopbop and little to no well-known faces on the EastDane page. The EastDane Facebook account also had asnwered to several Facebook users commens about their posts. The Aloft Hotel social media was the most surprising with over 101,000 Facebook likes, 6,717 twitter followers and several Instagram and Pinterest accounts for seperate hotels in different locations. The Aloft social media engages their target market with varying posts that range from fashion trends, pop-culture movies, new musicians, technology, and of course traveling. Although the Aloft Hotels social media receives significantly less interaction than ShopBop and EastDane it is noteworthy that they have several posts regarding the latest fashion trends as well as cutting edge technology. This further proves that the ShopBop/EastDane customer is one in the same with the Aloft Hotel guest, making the partnership for this initiative very exciting.
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Market Analysis The clothing and accessories market in the United States makes up a significant percentage of consumers spending each year and average Americans across the country spend about 2.72% of their paycheck on clothing, shoes and related fashion items. (creditloan) Of course in larger, more fashion conscious cities this percentage is significantly increased and when moving towards the middle of the country where fashion is not as high of a concern, the percentage decreases. Overall, clothing and accessories are leading the market in terms of e-commerce sales in regions such as North America, Western Europe and some of the more develped Asian countries. (fittingreality.com) As the technological capabilities continue to develop in apparel e-commerce, customers buying confidence will grow, further pushing the e-commerce market forward, even more. We have chosen to launch our initiative with ShopBop, Magic Mirror and Aloft Hotels in five major cities across the country; San Francisco, Las Vegas, Chicago, Miami and New York City. Because these cities are very large and some of them are considered fashion hubs of the country, consumer spending is some of the highest. The yearly spending in these five urban cities ranges from $1,700 to $4,000 on average, with the highest numbers being in New York, San Francisco and Miami. (bls.gov) We feel that it is imperative for the Magic Mirror, Aloft and Shopbop strategic initiative to be present in each of these large cities to make the maximum impact on shoppers, travelers and tech savvy fashionista’s. With such a strong movement towards E-commerce as well as M-commerce we feel that shopping through the Magic Mirror may be the next step in the tech savvy shoppers world. Throughout the country E-commerce has made up a total of 6% of all retail sales in this past year and that number will only continue to grow. (bls.gov) Consumers are looking for a quick, hassle free and convenient shopping experience and that is just what they will get with the Magic Mirror. With our locations being spread out across the country and three out of five of them set quite far from the warehouse in Madison, Wisconsin, shipping and delivery times may vary. Overnight delivery will be a standard in each state, and due to the proximately to the warehouse, the Aloft Hotels in New York and Chicago will receive same day shipping when the occasions permit. There will also be the option for shoppers to have purchases deliverd to their home addresses, instead of shipping to the hotels in case luggage size is an issue. With the expansion of the mirrors into hotels across the country at a rapid pace, one of our main goals is to open at least two more warehouses on the west coast and in the south east to make same day shipping a possibility at each and every one of the Aloft and Magic Mirror hotels across the country.
26 | Market Analysis
Travel & Tourism The Shopbop, Magic Mirror and Aloft Hotel initiative will be launched in five large, urban cities with high travel rates and tourism revenues, currently operating Aloft Hotels. San Francisco, California, with a population of 825,111 people and an average household income of $87,329 has an incredibly high grossing tourism market. In 2012 16.5 million individuals visited and tourist spending was at 8.93 billion. During an average day in San Francisco, 131,128 visitors are spending $24.46M dollars and $562 million in tax and fee revenues flowed into San Francisco’s economy from tourists. A typical hotel guest profile consists of visitors with annual household incomes is $118,000 and staying an average of 3.5 nights. Tourists on average, per person spend $240, per day in San Francisco. (San Francisco Travel Research) The average household income in Miami is $37,651 and only 6% of the population are making $75,000 or higher. However, with that being said, the tourism and travel industry in Miami is quite significant and profitable. In 2012, the city saw 13.9 million overnight visitors who all together spent $21.8 billion. (Miami Herald) (City Data Miami) In Las Vegas, the average household income is $54,083. Again, the tourism market in Las Vegas is quite high with 39.7 million visitors in 2013 with over $40 billion generated for the Las Vegas economy. (lvcva) (census.gov) The average household income in New York City is $75,629. And as we all know, New York is one of the main tourist and fashion hubs in the country. In 2012 New York City saw about 52.7 million tourists and gained $36.9 billion from those visitors. (nycgo) Chicago, with an average household income of $43,638 is a large tourist hub for businessmen and women. The city saw 46.2 million visitors in 2012 and brought in 300,000 new jobs. (city data Chicago) (choosechicago) (city of Chicago)
Market Analysis | 27
Key Players
The essential component and driving force behind this new ShopBop and EastDane initiative is the new technology of The Magic Mirror. Magic Mirror has currently only been used in retail stores as an interactive kiosk that encourages customers to play and interact on social media while virtually browsing a stores inventory, allowing them to also try the clothes on digitally, without ever stepping foot in a dressing room. The mirrors are described by current suppliers as a canvas where retailers can pick and choose the product mix to fit their business. Along with acting as a virtual dressing room the mirrors also have the capability to capture studio quality photography, share products and images on social media, and online browsing within a physical space, allowing for multichannel integration. A retailer can also program the mirror to award customers with personalized coupons if they interact on social media, and lastly it also will act as digital signage when not being used, displaying the latest marketing campaign or advertisement. The virtual dressing room aspect of the magic mirrors is the most exciting factor for ShopBop and EastDane. By placing these mirrors in Aloft Hotels, it will provide breakthrough integration for a previously, strictly e-commerce retailer to occupy a physical space without actually investing in a storefront. Guests at Aloft Hotels will have the ability to browse ShopBop and EastDane online inventory and try on the clothes virtually, simply by selecting the items. The mirrors are integrated with a motion sensing device, making selection as easy as waving your hand, then the clothing will be virtually projected onto the shoppers reflected image on the Mirrors screen. On the same screen, as a shopper is seeing themeselves in the clothes there are options to take pictures and share them online or to immediately buy the clothing and complete the transaction right there. The Magic Mirror is currently operated in six fashion retail stores across Europe and in Asia. These stores include Adidas in Germany, White Stuff and Simply Be in the UK, Brown Thomas in Dublin and The Fashion Gallery and So Chocolate in Singapore. The Magic Mirrors are located in physical store spaces and have yet to branch out past the original six locations. Our Initiative will place these mirrors in community areas, such as bars and lounges in five of the major locations of the Aloft hotels. (Magic Mirror) The suppliers for the magic mirror initiative are the wholesale vendors shopbop purchases goods through as well as the suppliers of the Magic Mirrors.. Shopbop for women and East Dane for men provide hundreds of brand name articles of clothing with over 10,000 items available at any given time on the site. The technology needed for this Shopbop and Magic Mirror initiative has already been implemented and downloaded into each Magic Mirror, making set up in the aloft hotels and keeping up with ShopBop inventory fast and convenient. (Magic Mirror) Aloft Hotels was chosen as a perfect fit for ShopBop’s new e-commerce technology due to their similar aesthetic and technologically driven business. Launched by Starwood Hotels in 2008 to address a new focus of global lifestyle trends, Aloft focuses on offering selective services to guests, meaning they seek to provide what the hotel guest may find important, such as complementary wi-fi, without being superfluous. The Aloft Hotel chain is quickly growing since its inception and continues to stay true to the original focus of clean, minimalistic design as well as providing the best possible customer service through cutting edge technology. Each hotel is designed with the idea to encourage social interaction in the aptly named “WXYZ Bars”, where computers are available for guest usage as well as free Wi-Fi. With the mission statement from Aloft Hotels claiming that there hotels are “...open in design and open to possibilities. A place where energy flows, personalities mingle, and opportunities abound. A place wehre anything can happen.” it seems to be a perfect fit, not only with ShopBop, but for the exciting new Magic Mirror technology. (AloftHotels: About) Aloft Hotels has already been ahead of the consumer technology trends by implementing RFID enabled key cards that are given to Starwood Preferred guests. This program is called “Smart Check-In” and allows hotel guests to go straight to their room, completely bypassing the lobby check-in. These RFID room keys are recognizable by all Aloft Hotels and allow hotel guests to receive the check-in confirmation by text message. Currently Aloft is the only hotel chain in the United States employing this practice. (skift.com)By pairing two companies that have branded themselves as being stylish, unique and up-to-date on the latest technology both will see enforced brand identity by offering a new way to satisfy customer needs in an exciting and innovative way. 28 | Market Analysis
Direct & Indirect Competition Due to this opening up an entirely new channel of retail shopping there will be no direct competitors that do exactly what our initiative will do. However, there will be direct competitors online and brick-and-mortar retailers selling similar products at similar price points. Some of these include Net-a-Porter, Yoox, Gilt Groupe and La Perla as similar online competition selling comparable products to Shopbop. Brick and Mortar competition include Lululemon, Neiman Marcus and Saks Fifth Avenue. Other retailers that have succesfully ventured into a physical space through innovative and exciting ways include Net-A-Porter, Bonobos, and Warby Parker. Indirect Competition is something that we feel will be very specific as our target customer is incredibly tech savvy and chic. Places the target customer would shop occasionally or regularly and indirect retailers that will compete with the possible Shopbop dollar would be Crate and Barrel, Pottery Barn, Wholefoods, Fresh Market, Kleinfelds, Tiffany’s and Apple. It is imperative that our strategic initiative is compelling and fun for shoppers to use as to best position ourselves and compete in the market with direct and indirect competitors. Other avenues the customer may spend there money also include hotel bars, room service and hotel gift shops.
Direct Competition: • Net-A-Porter • Yoox • La Perla • Neiman Marcus • Saks Fifth Avenue • Nordstrom • RevolveClothing.com • Bluefly.com (Alexa.com)
Indirect Competition:
•Apple •Crate and Barrel •Pottery Barn •Whole Foods •Kleinfelds •Tiffany’s Market Analysis | 29
PESTEL Analysis
Political - Stable Democratic Government - Laws in place to regulate fair business practices that apply to retail, none that will negatively affect the magic mirror initiative - Global Influence - Threat of Terrorism - Illegal Immigration to Increase Threatening Jobs Economic - The US is still recovering from a recession although consumers have been growing more relaxed in there spending habits - Spending Cuts from Government - Rising Unemployment Rate - Rising Economic Debt - Drive Towards Free Market/ Free Trade - Inflation Rate of 3% yearly Social - Aging Population - More Than half of workers have no college degree - Increase in Labor Productivity - Increasing Jobless Benefits - Consumers Looking for Convenience Above All 30 | Market Analysis
Technological - E-commerce and M-commerce shopping has grown drastically - Significant development of other emerging technologies - Declining level of competencies in math and science - High competition from other nations - Strong innovative global players Legal - Federal Legal System in Place - Policies in place to promote foreign business and trade - Employing personal from other nations - Comprehensive legal frame work for businesses - Difficulty Reviving Economy Since Economic Slowdown – Protectionist Measures Currently in Place Environmental - Measures to cut greenhouse gas emissions - Strong environmental framework initiative in place - Poor environmental performance measures - Ineffective enforcement of environmental laws - Increased operations with China and Overseas markets (Business Source Premier U.S. Country Profile)
Target Consumer Our Target Consumers fall under the category of Vals Innovator and Prizm Young Digerati. She/ he seeks new and innovative products and experiences that provide she/he with rewarding experiences. This person is well-traveled and well read, sophisticated, and exudes a take-charge attitude in the work place. They are constantly up to date on news and media happenings around the world and pride themselves on their high education and upstanding social status. Innovators are succesful, motivated and goal oriented individuals with high self-esteem. They are highly receptive to new technologies adn new ideas and are incredibly active consumers. Their purchases indicate levels of upscale tastes, products and services. Image is important to innovators and they enjoy showing off their style and luxurious tastes. The innovator segment includes members and leaders of businesses and government motivated by power and overcoming challenges. (Vals) The Young Digerti are tech savvy individuals living in large urban areas across the country. They are highly educated and wealthy, and are motivated to succeed and fulfill their goals. They are part of communities filled with trendy apartments, boutiques and local shops. The Young Digerti enjoys world travel, eating well, and shopping for niche, high end products. (Prizm) ShopBop has aimed their product towards the trend-setting, young professional female since their launch in 1999, as their e-commerce expanded they realized how tech savvy that customer was. The ShopBop customer is educated in fashion and other aspects of the world around her, making her desire a sophisticated experience while shopping. As ShopBop extended into menswear with the launch of EastDane in September of 2013 they began reaching out to the contemporary male consumers as well. Although ShopBop and EastDane are run in the same manner of glossy magazine editorials and a wide range of products on one e-commerce site, they both have a distinctive sort of shopper. (happycustomer.stellaservice.com) The ShopBop customer is willing to pay the more expensive prices of the clothing offered but may still find some of the higher end designer items too over-the-top for daily wear. She wants trendy, desirable clothing that can merge with her already existing day-to-day wardrobe. ShopBops female customer prefers shopping online and the educational value of the website that keeps her updated on the latest trends while also allowing her to comparison shop. She is looking to disconnect herself from the mass-market brands that occupy the malls and wants a more unique look with a no-fuss shopping experience. The ShopBop customer may normally shop in local, high end boutiques but enjoys the vast merchandise, accessibility and service that ShopBop provides. (erinman90.shopbop) In terms of Demographic, the ShopBop female consumer is part of the middle and upper class society who is between the ages of 19 and 45, either having a college education or actively pursuing one. Her annual income is anywhere upwards of $65,000, providing her with disposable income to spend on herself for specialty pieces. She is trendy but stays true to her own identity, not buying into every market trend that pops up. The ShopBop woman is single or a newlywed with a young family, she has a busy social life and enjoys looking good and feeling good, which fits with ShopBops promise of “Shop well. Shop happy. Shopbop.� ...
Target Consumer | 31
Target Consumer ...ShopBop also claims to merge the technology geek with the fashionista, meaning the customer would also shop at other stores such as Apple for electronics, pottery barn for basic home goods and Trader Joes, Fresh Market or Whole Foods for groceries. These other retailers were chosen for there trendy aesthetic and ability to satisfy a customers needs in a simple manner as well as marketing to the young, up and coming professionals with expendable income. (New York Times) The EastDane shopper will share many of the same demographic information as ShopBop but will be a completely different type of consumer in the ways in which he shops. The EastDane male wants the same seamless interaction online while shopping that is streamlined and easy to navigate but also educates him on the latest trends. In general, male shoppers are much less fuss than their female counterparts, and online they are even more so. EastDane wishes to service their customers lifestyle needs through a cohesive branding and styling service in a user-friendly format. The EastDane male customer does not enjoy the process of discovery through online shopping as much as the ShopBop woman, instead he enjoys EastDane’s ability to quickly and automatically filter searches by category, brand, fit, price, and style. The male customer may spend significantly less time searching the site but will spend just as much if not more than the female shopper. (happycustomer.stellaservice.com) Aloft Hotel chain was chosen for this initiative due to their similar target demographic. Launched by their parent company, Starwood Hotels in 2008 in order to address a new focus of global lifestyle trends that they felt none of their other hotel chains catered to. The hotel chain was built with the middle-upper class, highly connected hotel guest in mind, with a design that unofficially aims to answer and impress the millenial and Gen Y travelers. Aloft realizes that although their target customer enjoys staying highly connective through an over-active social media presence, they also desire the opportunity for purely social opportunities. The hotel chain has addressed this with signature brand initiatives, such as collaborations with the music industry. One prime example is the Aloft Hotel sponsorship of the Live in the Vineyard music festival in California wine country. (skift.com) Senior Vice President of Starwood Hotels, Brian McGuinness, stated that Aloft Hotels are for the “next generation traveler... an early adopter adound tech, self expressors, and highly connected.� Aloft was built for a generation that has high expectations in terms of design, although their fashion sense and individual style may be unique and simple, it is none the less highly developed. The importance of authenticity was a strong factor in establishing Aloft as a reputable brand to their desired target market. (skift.com)
32 | Target Consumer
Consumer Profile Our target customer is a college educated, professional who is ambitious, tech savvy, and always on the go. Their age is anywhere from 26-45, they are outgoing and very knowledgeable about the world around them; yet desire to leave a legacy behind. Our target customer can rarely be found without their phone in hand to keep track of a busy social calendar and sophisticated lifestyle. Annual income is anywhere from $65,000 a year and upwards. They follow the news on a tablet, most likely an Ipad, through sources such as The New York Times, Wall Street Journal, L2 Think Tank, Refinery 29, Vogue, Nylon Magazine and Wired Magazine. This female customer would follow fashion bloggers on Instagram and Twitter but the also like the male consumer who uses those sites for social and business purposes. Her top following blogs are Atlantic-Pacific, Habitually Chic, and Man Repeller. Our consumers are well traveled and enjoys experiencing the world around them, making for a well-spoken conversationalist. Go-to stores for things other than apparel are Whole Foods for groceries, Pottery Barn for home furnishings, Sephora for beauty care and make up essentials, and they primarily use Apple products for technology. Because of an extremely busy schedule they often catch up on favorite shows through Hulu Plus, these shows include Scandal, Master Chef, and Shark Tank. Their musical taste is as eclectic as the rest of their lives, ranging from Drake to Mumford & Sons and everything in between. Our ideal consumer most likely lives in a highly populated city or within an hour of one, enjoying access to the quick paced lifestyle and convenience of everything being right at their fingertips. They wish for shopping to be a quick and enjoyable experience, although there is plenty of online research before any major purchases. Due to their research habits and love for travel one thing our consumer will spend money on, along with apparel and technology, is their vehicle. Most likely they drive a car that has a good reputation for performance but also acts as a status symbol, such as a BMW or Audi. During our target consumers free time they host several parties socially and for business and also enjoy going to museums, indulging in a spa day and enjoying trendy restaurants with a good wine selection or locally crafted beer. Although they may not be partial to a specific political party they tend to be more liberal and stay educated on current political affairs. This certain consumers technology is up to date and in constant use for everything from business e-mails on the phone, reading favorite publications on a tablet and shopping on their home computer. They prefers to shop online versus wasting time in a store, which is why the convenience of the Magic Mirror in the Aloft Hotel greatly appeals to them. Target Consumer | 33
34 | Target Consumer
Communication & Promotional Plan First
Year
Promotional
Advertising
Calendar
Nylon Wired Harpers Bazaar Conde Naste Traveler Elle Sky Magazine (Delta) Airport Billboards Direct Mailers LookBooks Online Advertising Aloft Hotel Site ShopBop.com Hulu Ads Refinery 29 New York Times Social Media Marketing ShopTalk Blog Facebook Continuos Share looks Instagram Continuous share looks Twitter Continuous share looks Valentines Dress your date Halloween Dress Up Spring Break Travel Style Summer Music Fest Best Look New Years Party Share your look New York Blogger lookbook Chicago Blogger Lookbook Vegas Blogger Lookbook Miami Blogger Lookbook San Francisco Blogger Lookbook Television Promotions ABC Special Events Black Friday Launch New Years Launch Party
Pre-Launch
Launch
Aug. Sept. Oct.
Nov.
With the shared demographic customer base of Aloft Hotels and Shopbop/EastDane the channels of marketing available are unlimited. While researching the target customer one of the key factors was discovering what publications the customer reads but also how they read, whether it be on tablet, a smartphone, online, or traditional print. These publications allowed us to see what the customer ’s relative interests are and how each customer socializes and relaxes in today ’s fast paced world. This research also helped develop where and how to advertise and connect with our target customer base in an effective manner. The target customer is on the go, primarily catching up with news on his or her tablet or smartphone, but he or she manages to stay connected and on top of the latest news. This
&
Post
Launch
Dec. Jan. Feb.
March April
May Jun. Jul.
has been the key factor in the decision to run print ads in Nylon Magazine, Wired, Harpers Bazaar, Conde Naste Traveler, Elle and Sky Magazine for Delta. These will be full page ads and will rotate being published for alternate months, such as Harpers Bazaar, Conde Naste Traveler and Elle for pre-launch and then Nylon, Wired, and Sky Magazine for the month of launch (November). The magazines were chosen, not only for their connection to our desired target market, but also in their relations to the initiative. Sky Magazine and Conde Naste Traveler were selected because the placement of the mirrors is going to be in hotels, and we will hope to influence regular travelers to begin choosing Aloft Hotels by showcasing the collaborative and cutting edge technology. ... Communication & Promotional Plan | 35
Communication & Promotional Plan ...
Other forms of print advertisement will include direct mailers to Starwood Hotel preferred guests, informing them of the new mirror technology as well as inviting them to the launch parties in November and January, and printed standing ads in airports. For the first time ever there will also be printed ShopBop look books that will be placed in each hotel room, for hotel guests to browse and become familiar with the ShopBop product and wide range of quality pieces. For the first 5 months after the January official launch we will choose a local fashion blogger from each city to put together a look-book that will be printed and placed in hotel rooms as well as featured online, expressing each cities unique style with ShopBop and EastDane products. These look books will help in familiarizing guests with the ShopBop and East Dane variety of products, boost social media by using popular bloggers in each city, and help develop a connection with each city where the Magic Mirrors are placed. With technology being the forefront of this innovative idea a dedicated website will be developed, that will be linked directly from the ShopBop, EastDane and Aloft Hotel website. This website will be used to explain the technology and usage, connect the users who have interacted through social media on the mirrors as well as share new mirror locations and share new promotions. Other promotional opportunities for the first year will revolve around sharing the looks developed through the mirror on social media and acquiring “likes” or comments. Some of these promotions will be a Valentines themed “Dress Your Date” where users will be encouraged to select outfits for each other and share them, a Halloween “dream dress up”, spring break travel style, and a summer time music fest look. For the launch party we will also encourage users to share their favorite New Years looks as well as see other users styles. Social media sharing will be encouraged by offering opportunities for users with the most social media reaction to their shares to assist in styling the following months look books or dedicating blog posts to them on ShopTalk. Other forms of online advertising will include banner ads on websites including The New York Times and Refinery 29. There will be commercials developed that will run on Hulu for selected shows such as Shark Tank, Scandal, and Master Chef. The commercials will also run periodicaly on ABC during expected times of low shopping activity such as post-holiday season and summertime. The official launch of the Magic Mirror initiative will happen on Black Friday, the busiest shopping day of the year. Opening on black Friday outside of a store environment will get people excited about shopping, while keeping them away from the notorious madness surrounding the day. Our Launch party will happen on New Years Eve in all five of the locations, Chicago, Miami, San Francisco, New York and Las Vegas. It will be an invitation only, luxurious event revolved completely around the Magic Mirrors and the initiative. The catered event will be hosted by many local celebrities, bloggers, as well as fashion and technology icons in and around each city. Attendants will be given a chance to browse ShopBop and EastDane’s inventory, shop and make purchases, and share their ‘Best New Years’ looks to the Shopbop social media sites. (The New Yorker.) 36 | Communication & Promotional Plan
Financial Plan By The Numbers...
74,901
Total Units Sold
2,496,680 $30,769,313
Total Estimated Footfall
Average Yearly Revenue (2015-2018)
$61,407,279
Overall Gross Earnings
Financial Analysis | 37
Financial Plan Sales By Units 2014
2015
2016
2017
2018
Weekly footfall
11,070
11,273
11,476
11,679
11,882
Annual footfall
88,560
586,196
596,752
607,308
617,864
Conversion rate Number of purchases (1 per)
NOTES Based on 70% occupancy S-Th, 95%, F-Sa
3%
3%
3%
3%
3%
2,657
17,586
17,903
18,219
18,536
3,517
3,581
3,644
3,707
Estimate, see notes below
Insdustry standard for e-commerce conversion
Shoes
20%
531
Formalwear
10%
266
1,759
1,790
1,822
1,854
Estimate, see notes below
Outerwear
15%
399
2,638
2,685
2,733
2,780
Estimate, see notes below
Dresses
15%
399
2,638
2,685
2,733
2,780
Estimate, see notes below
Tops
25%
664
4,396
4,476
4,555
4,634
Estimate, see notes below Estimate, see notes below
Bottoms
15%
399
2,638
2,685
2,733
2,780
100ďż˝
2,657
17,586
17,903
18,219
18,536
74,900
In order 1025 to rooms estimate the total revenue for the Shopbop and Magic Mirror initiative inside total at 70% we occupancy the Aloft3587.5 Hotels, firstm-th had1947.5 to weekends determine the weekly estimated footfall as well as the annual 7175 3895 footfall for the following five years (2014-2018). By calling each hotel location we anticipate installing the magic mirrors in we were able to discover the number of rooms in each hotel to help better estimate foot traffic. With 252 rooms in San Francisco, 142 rooms in Miami, 272 in Chicago, 156 in New York City and 203 rooms in Las Vegas, we have estimated approximately 70% occupancy Sunday through Thursday and 95% occupancy Friday and Saturday. With an average of two individuals per room our yearly annual footfall for the first full year at 586,000 and growing each year. As well, the average number of rooms in these hotels is 203 which is what was used to estimate for future years as new hotels are added to the initiative. The industry standard for e-commerce conversion rates is 3% (InternetReailer) and this number leads us to conservatively estimate our total purchases for the five years at just under 75,000 total units sold. Our umbers for 2014 are much lower due to the fact that we are not officially launching until November, giving us only eight weeks of sale time. The product categories we have chosen to analyze in terms of sales percentage, broken down in order from highest to lowest are: tops, shoes, outerwear, dresses, bottoms and formalwear. Tops will make up 25% of our sales, shoes will be 20%, while outwear, dresses and bottoms all make up 15% respectively and finally, formal wear makes up for the remaining 10%. ...
38 | FinancialAnalysis
Financial Plan ... These percentages were estimated by researching e-commerce & apparel sales by category, as well as apparel sales categories purchased when traveling. Shoes have proven to be the top purchased apparel item for e-commerce. (Pando) We also are expecting the novelty of virtually tying on clothes through the magic mirror to boost sales of other items, namely tops. With outerwear, dresses and bottoms all representing 15% of our sales break down we again expect the novelty of virtually trying garments on to foster impulse buying of these items. On occasions where travelers have extended their stay and have new events to attend, we feel that the formal wear category will make up a firm 10% of our overall sales. Combining our estimated sales units with the average price of each product category at Shopbop, we have projected our sales for the first eight weeks to exceed $4 million and total gross sales for the five years of $127,276,059. This also accounts for a yearly inflation rate of 3 percent. (The Economist) ...
Gross Revenues 2014
2015
2016
2017
2018
Total Units
3,517
3,581
3,644
3,707
14,980
NOTES
UNIT SALES Shoes
531
Formalwear
266
1,759
1,790
1,822
1,854
7,490
Outerwear
399
2,638
2,685
2,733
2,780
11,235
Dresses
399
2,638
2,685
2,733
2,780
11,235
Tops
664
4,396
4,476
4,555
4,634
18,725
Bottoms
399
2,638
2,685
2,733
2,780
11,235
UNIT PRICE Shoes
$
1,260
$
1,298
$
1,337
$
1,377
$
1,418
Formalwear
$
4,547
$
4,683
$
4,824
$
4,969
$
5,118
Outerwear
$
2,620
$
2,699
$
2,780
$
2,863
$
2,949
Dresses
$
675
$
695
$
716
$
738
$
760
Tops
$
1,210
$
1,246
$
1,284
$
1,322
$
1,362
Bottoms
$
513
$
528
$
544
$
561
$
577
Shoes
$
669,514
$ 4,564,591
$ 4,786,192
$ 5,016,981
$ 5,257,310
Formalwear
$ 1,208,047
$ 8,236,189
$ 8,636,038
$ 9,052,466
$ 9,486,107
Outerwear
$ 1,044,122
$ 7,118,588
$ 7,464,181
$ 7,824,102
$ 8,198,900
Prices will increase with yearly inflation of 3%
REVENUE BY CATEGORY
Dresses
$ 269,001
$ 1,833,987
$ 1,923,024
$ 2,015,751
$ 2,112,312
Tops
$ 803,682
$ 5,479,321
$ 5,745,330
$ 6,022,368
$ 6,310,858
Bottoms
$ 204,441
$ 1,393,830
$ 1,461,498
$
$ 1,605,357
TOTAL PROJECTED REVENUE
4,198,807 28,626,506 30,016,262
1,531,971
31,463,639
32,970,844 $127,276,059
Financial Analysis | 39
Financial Plan ... The expenses we have budgeted and prepared for include cost of goods sold, research and development, employee training, hotel design, advertising, marketing & promotion, Aloft Hotel royalties, cost of the Magic Mirrors, technology maintenance, additional electrical bills and liability insurance. The cost of goods sold were estimated based on a 70% gross margin in the apparel industry. (Forbes) Minimal funds have been set-aside for employee training as the Mirrors are very user friendly. We plan on educating two Aloft Hotel employees in each of the five locations to assist customers if and when needed. To maintain the sleek, modern design associated with Shopbop and Aloft Hotels, there will be an initial interior designer hired to reconfigure and develop the space for the Magic Mirrors which will be implemented in all five of the hotels. Since the initiative will not only help Shopbop reach more customers but it will also heighten the experience for Aloft Hotel guests, we are expecting shared advertising as well as marketing & promotions costs with Starwood Hotel Group. Aloft Hotels will also be receiving a 5% royalty on all sales from the Magic Mirrors. Besides cost of goods sold, the largest expense will be the Magic Mirrors, at $8,000 each and totaling at $120,000 for the first year for three mirrors in five hotels. There has been negotiation with the supplier that once 20 mirrors have been purchased a 10% discount will be applied to all future mirror purchases. The discount will not apply to the initiative until the third year, when the total purchase of mirrors will reach 21 units. The maintenance of the mirrors is covered under warranty for the first year, after which a yearly maintenance fee of $5,000 covering all mirrors will be budgeted for. Upon research of utility bills per state, an increase of $300 per month, per hotel is to be expected. Liability insurance is not expected to exceed a premium of $3,000 each year. After factoring in expenses and an industry average of 25% percent return rate on e- commerce sales (internetretailer.com) our total earnings in the first full year will be $13,858,322.00 and will continue to grow each year, making this a highly profitability business after the first five years with total net earnings reaching $61,407,279.00. These expenses are estimated and subject to fluctuation with changes in economy and negotiations with respected parties. The numbers have been generously estimated in order to provide a safe and realistic plan.
40 | Financial Analysis
$
$
$ 157,455
$ 120,000
Advertising
Marketing & Promotion
Aloft Royalty
Cost of Mirrors
$ 15,972,787
$ 1,794,918 $ 13,858,322
$
3,000
$ 14,539,628 $ 15,241,624
3,000
$
3,000 See notes.
$61,407,279
32,400 Estimated at $300 per month in each location
EARNINGS
$
$
$ 8,755,347
3,000
28,800
5,000 One-year warranty
Based on quotes from the supplier and a 21,600 10� bulk order discount once 20 mirrors have been purchased.
$ 1,354,187 $ 7,611,558 $ 7,972,569 $ 8,356,105
$
$
$
$
Total Expenses
3,000
25,200
5,000
21,600
$
$
$
$
1,236,407 5� royalty on all magic mirror sales
10,000
20,000 Shared advertising costs with Aloft.
Insurance
21,600
5,000
21,600
$
$
$
$
$
$
10,000
20,000
$ 1,179,886
$
$
Interior designer will be hired to design three options.
Two employees per location will be educated 500 to assist customers.
8,000
Based on a 70� gross margin estimate 7,418,440 based on industry research. (Forbes)
$
5,000
24,000
1,125,610
10,000
20,000
$
500 $
8,000
NOTES
Based on industry average of 25� return 8,242,711 rate. (internetretailer.com)
$ 24,728,133
$
Additional Electricity Bill
$
$
$
$
$
500 $
8,000
2018 $ 32,970,844
6,753,659 $ 7,079,319 $
$ 23,597,729
$ 7,865,910
$ 31,463,639
2017
$
18,000
10,000
20,000
3,000
$ 1,073,494
$
$
$
$
500 $
10,000
7,504,066
$ 22,512,197
$
$ 30,016,262
2016
Technology Maintenance
30,000
45,000
15,000
$
Hotel Design
1,000 $
$
Employee Training
Research and development $ 20,000 $
Cost of goods sold
7,156,627
$ 21,469,880
$
$ 28,626,506
2015
944,732 $ 6,440,964 $
$ 3,149,105
Total Revenue
$
$1,049,702
Minus goods returned
EXPENSES
$4,198,807
Sales
REVENUE
2014
Financial Plan
Total Net Revenue and Expenses
Financial Analysis | 41
Conclusion In such a fast paced and quickly evolving world it is imperative to keep up to date and ahead of competition, especially in the fashion world. Through much research and development into the Shopbop, Magic Mirror and Aloft Hotel strategic initiative we have determined that by placing three Magic Mirrors in five carefully selected Aloft Hotels, we will stay ahead of competition and create a new, enjoyable and interesting way for travelers to shop. The cities chosen include Chicago, San Francisco, New York City, Miami and Las Vegas, and will be added onto in following years to include Dallas, San Diego, New Orleans, and a second location in New York City. This initiative has great potential to grow and expand into multiple new hotels across the United States and out of the country into Europe and Asia. Partnering with a technology that is fully developed and incredibly user friendly, like the Magic Mirror, will cut down on launch times dramatically and free up as much time as needed to research new markets and consumers, launch the initiative and ultimately generate revenues.
42 | Market Analysis
Bibliography
Bibliography | 43
Bibliography The New Strategic Initiative: “Aloft.” Aloft. 2014. Web. 05 Mar. 2014. “B. Digitized: Shopbop.com - Branding E-Commerce.” B. Digitized: Shopbop.com – Branding E-Commerce. N.p., 14 June 2011. Web. 08 Mar. 2014. BBC “Virtual Dressing+Social Engagement”. Magic Mirror 28 Feb 2013. Film Chaffey, Dave. “Ecommerce Conversion Rates.” Smart Insights. N.p., 10 June 2013. Web. 08 Mar. 2014. Cheng, Jasmine. “Re: Magic Mirror” Message to the Business Development Executive. 19 Feb. 2014. Email. “Clothing and Apparel Overtaking Other Product Categories in Terms of E-commerce Growth.” Free Press Release Distribution Service. N.p., 8 Aug. 2013. Web. 08 Mar. 2014. Oates, Greg. “Skift.” Skift. N.p., 20 Jan. 2014. Web. 08 Mar. 2014. Harilela, Diva. “Navigation.” BoF The Business of Fashion. N.p., 18 Jan. 2011. Web. 08 Mar. 2014. Iredale, Jessica. “Shopbop Launches Russian Site.” WWD. N.p., 7 Aug. 2013. Web. 08 Mar. 2014. “Overview of the Aloft Brand Hotels.” Milepoint. N.p., n.d. Web. 08 Mar. 2014. “Shopbop Presentation - Home.” Shopbop Presentation. N.p., n.d. Web. 08 Mar. 2014. “Shopbop.com.” Shopbop.com Site Info. N.p., n.d. Web. 08 Mar. 2014. “Why Shoes Have Dominated This Generation of Ecommerce.” PandoDaily Why Shoes Have Dominated This Generation of Ecommerce Comments. N.p., n.d. Web. 08 Mar. 2014. Wilson, Eric. “An Online Retailer Gets Its Own Makeover.” The New York Times. The New York Times, 29 Aug. 2012. Web. 08 Mar. 2014. “With East Dane, Amazon.com Targets the Contemporary Male Shopper.” Happy Customer. N.p., 12 Aug. 2013. Web. 08 Mar. 2014. Nakache, Patricia. “Why E-Commerce Is Flourishing.” Forbes. Forbes Magazine, 8 Mar. 2010. Web. 05 Mar. 2014. Company Overview Shopbop. “Shopbop Customer Service 1-877-746-7267.” Shopbop Customer Service – About Us. Shopbop, 2014. Web. 05 Mar. 2014. Wilson, Eric. “An Online Retailer Gets Its Own Makeover.” The New York Times. The New York Times, 29 Aug. 2012. Web. 05 Mar. 2014. Current Status and Growth Plans: Free Website Report. “Shopbop.com Facts” Freewebsitereport.com. 2014. Web March 5 2014 “US Online Fashion Boutique Shopbop Launches Russian Site.” RIA Novosti. N.p., n.d. Web. 05 Mar. 2014. Wilson, Eric. “An Online Retailer Gets Its Own Makeover.” The New York Times. The New York Times, 29 Aug. 2012. Web. 05 Mar.
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Bibliography Market Positioning: Shopbop. “Top Navigation.” Shopbop.com Designer Women’s Fashion Brands. N.p., n.d. Web. 05 Mar. 2014. Current Distribution: Evans, Katie. “Amazon’s Shopbop Launches a Russian-language Site.” Top 500 European E-Retailers. N.p., 9 Aug. 2013. Web. 08 Mar. 2014. Nabilcy, Kyle. “Fashion Conscious: Context and Shopbop are Nationally Successful Retailers with Strong Ties to the Community”. The Daily Page. 8 March, 2012. Web. 5 March, 2014. “US Online Fashion Boutique Shopbop Launches Russian Site.” RIA Novosti. N.p., n.d. Web. 05 Mar. 2014. Communication and Promotional Activities: Horton, Stephanie. “Shopbop Reveals It’s Fall 2012 Advertising Campaign”. Prnewswire.com. 10 Aug, 2012. Web. 5 March, 2014 “How to Shop Shopbop.” Women, Fashion Advice, Beauty Tips, and More. N.p., n.d. Web. 05 Mar. 2014. TiffTaff “The Business of Shopbop.” TiffTaff. N.p., n.d. Web. 05 Mar. 2014. “CNW Group.” SHOPBOP.COM. N.p., 31 Aug. 2012. Web. 08 Mar. 2014. Gavel, Mackenzie. “CITYist.” CITYist Shopbop Launches First Print Ad Campaign Comments. CITYist, 8 Feb. 2011. Web. 08 Mar. 2014. “Shopbop Debuts Men’s Shopping Site, East Dane.” -- NEW YORK, Sept. 3, 2013 /PRNewswire/ --. N.p., 3 Sept. 2013. Web. 08 Mar. 2014. “Amazon.com Investor Relations: Press Release.” Amazon.com Investor Relations: Press Release. N.p., 27 Feb. 2006. Web. 08 Mar. 2014. “Match Your Mani to Your Makeup Bag with This NCLA and Shopbop Collab.” Stylish 365. N.p., 27 June 2013. Web. 08 Mar. 2014. Social Media Activity “Pinterest, Twitter, Facebook, Instagram, Google+, LinkedIn – Social Media Stats 2014 [INFOGRAPHIC].” - AllTwitter. She Bennet, n.d. http://www.mediabistro.com/alltwitter/files/2014/01/social-media-networks. png. March 6, 2009 Hernandez, Jesus. “How Scoop.it Works.” Scoop.it. N.p., n.d. http://www.scoop.it/t/ jhdez/p/4011477885/2013/11/22/social-media-analytics-infographic. March 7, 2009 Market Analysis Market Size: Bureau Labor of Statistics. “Consumer Exepdetures for the Los Angeles Area: 2011-2012”. U.S Department of Labor. 8 Jan, 2014 Web. 5 March, 2014. Wesley, Daniel. “How The Average U.S. Consumer Spends Their Paycheck.” How The Average U.S. Consumer Spends Their Paycheck. Credit Loan, n.d. Web. 05 Mar. 2014. Tourism and Travel: “Chicago, Illinois.” (IL) Profile: Population, Maps, Real Estate, Averages, Homes, Statistics, Relocation, Travel, Jobs, Hospitals, Schools, Crime, Moving, Houses, News. N.p., n.d. Web. 05 Mar. 2014.
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Bibliography City of Chicago. “Facts and Statistics.” 2014. Web. 5 March, 2014. “Las Vegas (city) QuickFacts from the US Census Bureau.” Las Vegas (city) QuickFacts from the US Census Bureau. N.p., n.d. Web. 05 Mar. 2014. “Las Vegas Sets Record for Visitation in 2012 Welcoming Nearly 40 Million Visitors.” 2014. Web. 5 March, 2014. “Mayor Emanuel and Choose Chicago Announce Near Record Tourism Numbers in May.” Tourism Numbers in May 2013. N.p., 2014. Web. 05 Mar. 2014. “Miami, Florida (FL) Income Map, Earnings Map, and Wages Data.” Miami, Florida (FL) Income Map, Earnings Map, and Wages Data. N.p., n.d. Web. 05 Mar. 2014. “NYC Statistics.” Nycgo.com. 2014. Web. 03 Mar. 2014. “San Francisco Travel.” Research. 2014. Web. 05 March, 2014 Sampson, Hannah. “Breaking News.” The Miami Herald. N.p., 3 May 13. Web. 05 Mar. 2014. Key Players: Cheng, Jasmine. “Re: Magic Mirror” Message to the Business Development Executive. 19 Feb. 2014. Email. PESTEL Analysis: Data Monitor “Country Analysis Report: United States In-Depth Pestle Insights”. Business Source Premier. May 2011 Web. 5 March, 2014 Target Consumer “Segment Explorer.” PRIZM Market Segmentation Research, Tools, Market Segment Research,. N.p., 2014. Web. 03 Mar. 2014. “VALS™ | VALS™ Types | Innovators | SBI.” VALS™ | VALS™ Types | Innovators | SBI. N.p., 2014. Web. 04 Mar. 2014. “With East Dane, Amazon.com Targets the Contemporary Male Shopper.” Happy Customer. N.p., 12 Aug. 2013. Web. 08 Mar. 2014. Cheng, Jasmine. “Re: Magic Mirror” Message to the Business Development Executive. 19 Feb. 2014. Email. Promotional Planning Merrick, Amy. “Everything You Know About Black Friday Is Wrong.” The New Yorker. The New Yorker, 28 Nov. 2013. Web. 09 Mar. 2014. Financial Plan Brohan, Mark. “Reducing the Rate of Returns.” Top 500 U.S. E-Retailers. N.p., 29 May 2013. Web. 06 Mar. 2014. Carroll, Matthew. “How Fashion Brands Set Prices.” Forbes. Forbes Magazine, 22 Feb. 2012. Web. 08 Mar. 2014. TechInsurance. “What is the Cost of General Liability Insurance for a Small Business.” Insureon Company. N.p. 2014. Web. 8 Mar, 2014. “The Price of Age.” The Economist. The Economist Newspaper, 23 Dec. 2000. Web. 08 Mar. 2014. “Top Selling Internet Items.” Statistic Brain RSS. N.p., n.d. Web. 08 Mar. 2014. 46 | Bibliography
Appendix
47 | Appendix
Appendix From: “Magic Mirror Sales” <sales@magicmirror.me> Date: March 6, 2014 at 2:52:11 AM EST To: “’Missy Miller’” <melissarebeccamiller@gmail.com> Subject: RE: Magic Mirror - Savannah College of Art and Design Hi Missy Miller, Many thanks for your interest in Magic Mirror. For an order of 20 units and above, we are happy to offer a 10% discount for you. And should you be ordering in smaller quantity, then when it reached the 20th unit, we would offer the 10% discount for the 21st unit onwards, regardless of the quantity per order. Unfortunately, we don’t have the return policy for oversea. However, all the equipment stored inside the mirror cabinet will have the warranty last for 1 year. We would need around 2 – 3 days to input the stores merchandise of clothing to the mirror as soon as we received the clothes images from you. For the very first time, Magic Mirror will pre-upload the clothes images for you. We would provide a control panel for you so that you could upload/update the assets (e.g. garments images, product info, photo frames, logo, etc.) anytime you want. Please find attached the screenshots of our Magic Mirror control panel. Hope you find the information above helps. If you require any further info or if there is anything we can help, please do not hesitate to contact us. Best regards, Jasmine Cheng Business Development Executive From: Missy Miller [mailto:melissarebeccamiller@gmail.com] Sent: Thursday, March 06, 2014 9:39 AM To: Magic Mirror Sales Subject: Re: Magic Mirror - Savannah College of Art and Design Hello Jasmine! Thank you so so much for that information! It has been hugely influential in developing our research and project initiative. We are very excited and I will definitely send you the finished product! We were just hoping you could answer a couple more questions for us! Since the Magic Mirrors are quite expensive and our plan is to install them in hotels, pre-programmed with a specific on line retailers merchandise, would there be an opportunity for a bulk costs of several mirrors (25 mirrors) would that b open for discussion for the cost to come down from $8,000/mirror? Also, if the initiative is not as successful as hoped, what is the return/consignment guarantee? Is there the possibility of renting the mirrors or must a company purchase them? Also, for the technology, how long does it take to input a stores merchandise of clothing and how intensive is it? Is this something that your company must constantly assist a retailer with or once the mirrors are bought is it fairly easy to do from a companies computer system? Thanks so much! Missy Miller
48 | Appendix
Appendix On Feb 19, 2014, at 1:18 AM, Magic Mirror Sales <sales@magicmirror.me> wrote: Hi Missy Miller, Thank you very much for your interest in Magic Mirror. Magic Mirror can interface with the retail inventory database and display the product info such as product images, price, stock availability, etc. Most retailers prefer a QR code to be displayed next to the product, which may allow the users to scan and complete the transaction via their mobile phones. We can work together to see how we can improve them for your retail project. At the meantime, I’ve attached a power point slides of the user flow here for your kind perusal. To know more about our Magic Mirror, please kindly have a look at the video below: 1) Magic Mirror at Retail Week Conference at Londonhttp://www.magicmirror.me/mmv7.htm 2) Magic Mirror at World Duty Free Gatwick, http://www.magicmirror.me/mmv9.html Magic Mirror is an in-store kiosk designed specifically for fashion stores. It has the following optional functions: 1) Virtual Dressing Room – entice shoppers with latest collection, allow them to virtually try on tens of items without going to the fitting room 2) Studio quality photography and video 3) Facebook Share and Email – extend retailer’s social media effort and make your customers ‘work’ to promote your brand 4) Personalized Coupon or Lucky Draw – sweet surprise to shoppers 5) Digital signage - when in idle mode, displaying latest marketing message 6) Browsing online catalog inside the store – multichannel integration All of them are off-the-shelf software modules which could be turn on and off at any time. It is really a canvas where retailer can pick and choose the mix that would fit your retailing business. The price for one unit is USD$8,000 + freight charge. This is an all-inclusive price, including all hardware, software and all the added service for modifications. Hope you find this information help. If you have any questions, please do not hesitate to contact us at anytime. Many thanks. Best regards, Jasmine Cheng BSc (Hons) Business Development Executive
Appendix | 49
Appendix
Perceptual Map Numbers
50 | Appendix
Appendix Why E-Commerce Is Flourishing Recent headlines that retail sales shrank in June for the second straight month were a grim reminder of how the Great Recession has torpedoed traditional retailers. Thousands of stores closed last year, and chains ranging from Circuit City to Filene’s Basement declared bankruptcy. But shopping is flourishing someplace else: the Internet. Over the last decade, e-commerce sales have grown on average 19% per year, far faster than offline retail. Even during the dark days of 2009 when retail sales shrank 2%, e-commerce vendors grew sales 1.4%, capitalizing on price-sensitive and increasingly Web-savvy consumers to continue to gain market share. So while traditional retailers have been struggling to survive, forward-thinking online merchants have unleashed a wave of innovation that is improving the economics of e-commerce. Until recently, when it came to landing new shoppers, e-tailers had fallen into a rut. They relied heavily on search engine marketing. It’s popular because it delivers customers reliably, but there is a marginal cost associated with each new customer. That cost can grow at periods of peak demand. Online merchants, emulating their online media counterparts, have gradually recognized the value of search engine optimization to drive free users to their sites through natural search. Amazon.com and shopping search sites like TheFind.com and ShopStyle have led the way. TheFind.com now has 16 million visitors each month, almost entirely from search engine optimization. In an Internet Retailer survey, 73% of e-commerce vendors cited better search engine optimization as a website design priority in 2009. Meanwhile, social media has burst on the scene with the promise of more free (aka viral) traffic. Facebook now boasts 500 million active worldwide users (150 million in the U.S.), and 56% of online shoppers use Facebook. Social marketing alternatives are emerging, including allowing customers to post their purchases or their “likes” to their Facebook walls, or encouraging them to invite friends to participate in a discounted group purchase. Groupon presents to its subscribers a deal of the day from a local business, such as a restaurant or spa, but the deal does not “tip” until enough people have signed up for it, creating an incentive for users to tell their friends about the deal. Though many retailers have not yet been able to drive meaningful traffic from social media, 11% of them consider social media to be their most effective acquisition tactic, and that number is likely to grow. Once visitors are browsing the site, the next challenge is to convert them to buyers. Traditionally, online retailers have focused on landing page optimization (ensuring that the messaging and layout of the first page that visitors see entices them to buy), streamlining the checkout process, and deep, relevant content, such as product specifications, photos, and reviews that can help shoppers make decisions. Many online merchants have injected an additional conversion-boosting element into the Web shopping experience: fun. They have begun to adopt techniques that are tried and true drivers of impulse shopping in the bricks and mortar world: limited time or limited quantity offers (think Home Shopping Network or Kmart’s Blue Light Specials), brand or product discovery, and product “story-telling.” Private sale sites such as Gilt.com, RueLaLa and Zulily offer members-only access to limited quantities of deeply discounted designer goods. By creating a perception of scarcity, e-tailers have been able to boost e-mail open rates tenfold or more from 2%-3% historically. Techniques such as game play are unique to the online environment with, for example, Swoopo and BigDeal introducing the concept of penny auctions to e-commerce. Interesting hybrid offline/online models are emerging such as Stella & Dot, which melds multi-level marketing home-based “jewelry parties” with online shopping. Perhaps the most disruptive innovation is occurring on the customer retention front. When e-commerce first emerged, pundits spoke of the 3C’s of successful e-commerce sites: content, community and commerce. The model failed because content was expensive to produce and individual e-commerce sites had a difficult time sustaining true communities. Today, however, 3C’s is emerging as a viable model because sites can rely on free user-generated content and can capitalize on existing social networks to grow viable communities.
Appendix | 51
Appendix Woot!, the trailblazer in the “one deal at a time” space recently acquired by Amazon, has more than 1 million visits each day but employs no e-mail. Instead, Woot! broadcasts through Twitter each daily deal and now has 1.6 million followers, the second most among retailers. Many sites are introducing game-like loyalty programs or “book-of-the-month” subscription models to drive retention. For $39.95 a month, ShoeDazzle delivers its members a pair of shoes, though members can opt out any given month. The generation that grew up with the Internet is now in its first jobs and has spending power. These individuals are comfortable buying online, but they also have high expectations for a compelling online experience. The good news for e-tailers is that the pillars of a great consumer experience–friend referrals and recommendations, a fun shopping environment and a vibrant community–can also translate into superior customer economics. No wonder e-tailing is flourishing. ABOUT SHOPBOP Since its launch in 2000 as a modestly sized online boutique specializing in hard-to-find denim lines, Shopbop has grown to become one of the leading fashion retailers in the world. Curated with a chic, modern woman in mind, Shopbop offers a comprehensive collection of designer apparel and accessories to suit every style and occasion. Called “the editors of what’s cool” by Daily Candy, and recognized by The Wall Street Journal as having “the best customer service,” Shopbop’s commitment to staying ahead of the curve and providing a personalized shopping experience continue to be driving forces behind the company’s success. A champion of new design talent and a pioneer in the magazine-meets-boutique approach to online shopping, Shopbop showcases its fashion-forward point of view in editorial lookbook features and receives frequent mention in Vogue, Harper’s Bazaar, and Elle. Shopbop’s Exclusives section features limited-edition pieces from top designers available only at Shopbop. In 2006, BOP LLC was acquired by Amazon.com, Inc., the world’s largest internet retailer, enabling Shopbop to expand its services to enhance the customer experience. A trusted, globally recognized fashion merchant, Shopbop sells only quality, authentic designer merchandise. Shopbop is part of the Amazon.com Inc. group of companies. An Online Retailer Gets Its Own Makeover New York Times By ERIC WILSON Published: August 29, 2012 SHOPBOP, the online powerhouse of contemporary fashion, has never gone in for bells and whistles. For much of its existence, since the Web site emerged from a store called Bop in Madison, Wis., the presentation was so straightforward that you could have thought you were shopping on Amazon. (Amazon, in fact, acquired Shopbop in 2006.) While everyone in fashion knew that Shopbop moved a lot of merchandise, it was the more polished luxury players, like Net-a-Porter, that seemed to have the online prestige As Shopbop begins to make a bigger play in the designer market, a redesign of the site introduced this week takes a step or two toward dressing up its image — or at least brings it up to the level of its competitors. Net-aPorter looks like a glossy magazine, and Yoox.com is introducing a feature next month called “speak and shop,” with which a customer can shop by voice command: Show me blue! But giving Shopbop a fresher look was not as easy as it might sound, with roughly 10,000 designs on the site at any given time and an obsessive customer base that knows exactly where to click to find what’s new. Every change had to be studied to make sure not to disrupt the shopping experience on a site where just about every decision is made based on practically scientific research. Even the time when new products are released each day (6:18 a.m. Eastern time) is based on when reloading the contents of the site would cause the least disruption for shoppers in its biggest markets around the world. “The idea was really to make the site better for our customers,” said Jeff Yurcisin, the president of Shopbop.com. “It’s like the marriage of technology geeks and fashion at the same time.” 52 | Appendix
Appendix It’s not as serious as all that. To give a sense of Shopbop’s reach in the industry, and playing up the speed of its delivery service, the site recruited some of its top designers (Chris Benz, Rachel Zoe, Thakoon Panichgul) for a video that will appear online next week. They are shown in a waiting room until a customer places an order for their design. Then they are flung from a slingshot from the roof of a skyscraper, over the heads of Web personalities like Hanuk Hanuk and Phil Oh, and into the customer’s home with the package. There’s also a video-game version in the works, which sort of looks like Angry Birds, but instead of flinging a bird at a pig, you fling the avatar of a blogger at a runway model. The average Shopbop customer is probably more interested in getting straight to the products. Show me blue! So there is now more emphasis on larger images and videos that play automatically when you click on a product, as well as recommendations and trends selected by Treena Lombardo, who was hired from Allure magazine to be the site’s fashion director. For now, Shopbop might even have earned some bragging rights. Take a $790 floral-print pencil skirt from Derek Lam. The video of a model taking a turn in the skirt appears to be about twice as big as the one on Net-a-Porter Fashion Conscious in Madison: ShopBop The Daily Page Shopbop on East Washington. Context on King. Two acclaimed fashion retailers founded in Madison, doing major business on a global scale. Both credit Madison as integral to their creation and growth, and both strive to be active members of the business and social community. Though their impact on the runway of Madison’s streets isn’t always easy to gauge, they’ve given the city a fashion credibility that helps draw in local and national talent. Shopbop and Context are, each in their own way, working to make Madison a little cooler. Shopbop is a big deal, whether or not it’s apparent from the street level of its new 165,000-square-foot warehouse and administrative space on East Washington Avenue. It’s a big deal in fashion retail - its straightforward presentation of designer wares and the latest trends prompted its acquisition by retail monster Amazon in 2006 - and it’s a big deal in Madison. The company’s move from scattered spaces on the south side to offices above the Metro Innovation Center in 2011 was a key development in revitalizing this former industrial corridor. The company’s steady rate of job growth has also made it locally significant. The women’s fashion retailer sells contemporary designer clothes that appeal to both undergrads and businesswomen. These can be seen at the company’s original - and only - brick-and-mortar location, known as Bop, at 222 W. Gorham St. When Bop opened in 1999, high-end denim was the star of the show. There was an idea of opening a series of Bops in larger markets like Chicago, but this was shortly after the launch of Amazon and eBay, and the potential of the World Wide Web was in the air. Thus did the shop called Bop, started by Bob Lamey, Martha Michelson and Ray Zemon, blossom into Shopbop. com. It succeeded quickly, as fashion shoppers found they didn’t have to buy from each designer separately any longer. Web sales expanded to include handbags, jewelry and high-end dresses. Today, Shopbop is not really about dressing Madison better. At this point, it’s more of a neighborhood revitalizer and a job producer. And it is endeavoring to become the kind of old-school, pillar-of-the-community business that likes to give back. At the October launch of Shopbop’s new space, Steve Cover, Madison’s director of planning and community and economic development, indicated that a company like this makes Madison a “place to be.” It helps boost the economy and the influx of young professionals into a neighborhood. Helen Boyne, Shopbop’s director of operations, and general manager Jeff Yurcisin both stress the impact the company has on the community. Shopbop employees have contributed significant time and money to Susan G. Komen’s Race for the Cure, Madison Second Harvest and other charitable efforts. A partnership between Shopbop and Saris Cycling Group (another local business done good) rewards bike commuting; Boyne estimates that 50 employees are signed up. “We’ll find a place for you to flex your good-citizen muscle,” says Yurcisin. The company has put heart and soul into renovating the new space. It’s retained original fittings for their character. Everything has been carefully considered, from the traffic flow from room to room to the local handiwork as decoration. Unused spaces are already being eyed for additional desks and expanded hiring. Appendix | 53
Appendix Yurcisin’s office looks out on EVP Coffee - a business that estimates a 15%-20% bump in sales since Shopbop arrived. “Down-to-earth, nice people,” the fellow behind the counter says. Yurcisin credits Madison: “It’s hard to imagine another city in the Midwest where we could have been as successful. Our growth is the result of having tremendous local talent here...and it’s driven by the university.” He wants the company’s new visibility to be a spur to do more. “We’re taking the role of being in this building more seriously.” On “Madison Day” at Shopbop, the entire company of nearly 300 people is gathered inside, preparing for the annual holiday party. It’s also the day before Shopbop rolls out free two-day shipping within the U.S. Big things are happening. Even after the expansion, Shopbop is still almost growing out of its shoes. Right now, Shopbop has some two dozen open positions, Yurcisin says, and plans are to hire close to 100 people in 2012 “and a great majority will be in Madison.” These are usually well-paying and interesting jobs with opportunities for advancement, he notes, in IT, project management, human resources, graphic design, and the photo studio. Yurcisin also relates that Shopbop didn’t lay off one employee when the market tanked in the fall of 2008. In 2010, the company “took out a sign on the Beltline saying ‘We’re hiring developers!’” says Yurcisin. “We are trying almost anything we can think of, because our ability to really serve that customer rests with our ability to hire the right people.” I walked through the new offices and saw copywriters, digital imaging specialists, technical and customer support, and a makeup room where a model (who probably didn’t need any help being beautiful) was being made up for one of the four to six photo shoots that happen each day. One look at the new warehouse and it’s clear that the web business is running the show. There’s a scale and sprawl that dwarf the packed sales floor at the retail shop. Customer services, information technology, photography and modeling operate out of Madison; advertising, fashion buyers and planners (who work with buyers to forecast their buys) are located where fashion usually happens, in New York City. That office opened in 2002. “As companies grow,” Yurcisin says, “it may require having offices across geographies and time zones. We’re doing it because to be the leading fashion boutique worldwide, you have to have buyers in New York. We made that decision prior to Amazon ever being involved.” There is little effort devoted to traditional marketing and advertising. Shopbop’s success has been driven by good press and word-of-mouth. No banner ads, no cardstock magazine inserts, no billboards and very few print ads, until recently. The 2006 acquisition by Amazon.com signified a new level of success, and led to some major changes in the company. Ray Zemon, one of the original founders, retired as soon as Shopbop was acquired. He stayed on as a consultant, but noted to me that there wasn’t much use for the financial guy once Amazon’s capital walked into the room. “Typically when you sell a company, the company wants the key people to stay in place, to run it. And they ask you to do what you used to do. I made capital allocations and did strategy; with Amazon there really wasn’t a role for me.” The other two founders - Bob Lamey, the original CEO, and creative director Martha Michelson - stayed on for a while longer. Yurcisin started when Lamey retired in 2008, and Michelson retired in 2011. “We’re growing so fast that the original leaders’ jobs changed fundamentally,” Yurcisin says, “from doing and building and creating, to now, leading large teams that are doing, building and creating. So [the jobs] turned into leadership roles, which is really exciting and energizing for some, and for others not as right.” Shopbop never publicized the terms of the Amazon acquisition, and doesn’t release sales figures. I asked about a rumor of a recent $5 million sales day - and was told only that, though the rumor was inaccurate, two recent sales days were historic. Growth is strong. That’s it. Despite its huge new footprint on the isthmus, Shopbop is more than just a Madison business. “It’s a big business. It’s not a Madison business; they ship clothes all over the world. We shipped clothes all over the world,” Zemon says, emphasizing that Shopbop shipped globally out of Madison before Amazon was involved. “We built an idea more than we built a business.”
54 | Appendix
Appendix Website report.com/Shopbop
US Online Fashion Boutique Shopbop Launches Russian Site 22:32 09/08/2013 Tags: fashion boutique, Soviet Union, Shopbop, Washington WASHINGTON, August 9 (RIA Novosti) – Shopbop, a leading online US fashion boutique, has launched a Russian language website as part of a drive to expand its customer base in the former Soviet Union, the company announced this week. Madison, Wisconsin-based Shopbop was started in 2000, expanding rapidly until it was acquired by online sales behemoth Amazon in 2006, according to the company’s main English-language website. The new, Russian-language version of the site was announced by the company on Thursday. Indicating the importance of the Russian-speaking consumer, Shopbop said the Russian website was only its third internet portal, following versions in English and Mandarin, although the company says it ships goods to customers in 165 countries. Russian-speakers will also have access to a Russian language customer service phone line, and content created specifically for the region, the press release stated. Fashion Conscious: Context and Shopbop are Nationally Successful Retailers with Strong Ties to the Community – The Daily Page Shopbop on East Washington. Context on King. Two acclaimed fashion retailers founded in Madison, doing major business on a global scale. Both credit Madison as integral to their creation and growth, and both strive to be active members of the business and social community. Though their impact on the runway of Madison’s streets isn’t always easy to gauge, they’ve given the city a fashion credibility that helps draw in local and national talent. Shopbop and Context are, each in their own way, working to make Madison a little cooler.
Appendix | 55
Appendix “You could write a paper on U.S. history based on what was happening that year at Levi’s jeans.” That’s Ryan Huber, creative director and co-owner of Context Clothing, 113 King St. Huber is a denim aficionado, and his passion is infectious. The store’s new studio is an echoing, cavernous space on Madison’s near east side used for photo shoots, shipping and receiving, and apparently interviews with alt weekly journalists. The ceilings are sky high, and the decor is minimalist. I feel more like I’m in a trendy Manhattan loft than a renovated warehouse in a midsize Midwestern city. Huber and his business partner Sam Parker opened Context in December 2005 and have spent the past six years quietly building an internationally recognized brand. Recently heralded by GQ as one of the 10 best independent men’s shops in the country, Context has been lauded on the pages of Chicago magazine and The New York Times. With fans as near as Milwaukee and as far as South Korea, the business has put Madison on the map of men’s fashion. Huber and Parker met while working at the Great Dane Pub & Brewery downtown, where they’d put their heads together after their shifts to brainstorm business ideas. They considered opening a restaurant or a contemporary barbershop, but ultimately decided on denim, a subject close to their hearts. The first American blue jeans, Levi 501s, were designed for the workingman, but in the 1950s jeans became a fashion item. No longer the domain of miners and cowboys, they were the uniform of Marlon Brando, James Dean and even Marilyn Monroe. Huber likens the search for the perfect pair of vintage Levi’s to a record collector’s thrill of the hunt. “If you take a pair of jeans from a vintage store,” he says, lifting his foot above the table to show me, “and turn up the cuff - see this stitching on the outside? This clean edge?” He turns out the cuff of his jeans and I see a clean double seam unlike the lumpy, unruly seam on mine. “That means this is shuttle loom fabric. It means it was made on an old machine.” Jeans were originally made on a machine called a shuttle loom, which was invented in 1733 and was one of the key developments in the Industrial Revolution. The shuttle loom produced what’s known as selvage denim, a pair of jeans so sturdy they could practically stand on their own. But as demand for denim increased in the 1950s, manufacturers needed a way to mass produce jeans quickly and at low cost. “They made different machinery, projectile looms,” Huber explains. “They made giant reams of fabric that weren’t as strong, weren’t as durable. And then, of course, the next step was outsourcing to China. It’s a sad story.” Huber and Parker were active in online communities of denim enthusiasts, men who traveled to New York and Tokyo to find rare selvage jeans. Inspired by the success of their friends at Shopbop, Huber, Parker and Parker’s brother Benjamin decided to open a store in Madison catering to a demographic they weren’t yet sure existed. Context now sells a full line of clothing from $20 T-shirts to $2,000 coats, but when the store opened they sold little other than denim. “There wasn’t another store in the country that was doing what we were doing,” Huber says. “Nobody was focused strictly on selvage and raw denim. Nobody was taking the time to photograph product well and give information. There certainly wasn’t anyone in the Midwest.” When the store opened, customers weren’t sure what to make of it. “The story of Levi’s was told to pretty much every person who walked in the store for two and a half years,” Huber says. They developed such a reputation for holding customers hostage to talk denim that they started keeping quarters on hand to feed parking meters. “We knew that the guys would respond to the jeans,” Huber says. “You just couldn’t get it anywhere. You’d see guys at the bar wearing stuff that you knew they got in Chicago or New York, or they bought them online.” Context’s online store didn’t open for another year, but it didn’t take long for their passion to catch on in Madison. Huber says there’s a misconception that Context does most of its business online; it’s actually split about 50-50. He says that Madison gets a bad rap for being a poorly dressed city but that people here are more fashionconscious than they’re given credit for being. “The perception has always been that it’s a college town that doesn’t care about aesthetics,” he says, “and that’s totally not true. There’s evidence of that because you have places like Thorps and Context and Shopbop that are thriving.” 56 | Appendix
Appendix In the past three years, a flurry of upscale restaurants and bars like Nostrano, Graze and 43 North have opened in downtown Madison. “I think there’s definitely been a shift. The overall cultural landscape of Madison has changed in the past five years,” Huber says. “The type of restaurants that have opened, I think people are starting to realize if you walk in wearing some Tevas and a T-shirt, you’re going to feel a little bit uncomfortable.” Huber says stores like Context and Shopbop are filling a need for young professionals who want to upgrade from the Badgers jerseys and sweatpants they wore in college. “A place like Context, you can come into our store and we can get you a proper-fitting shirt,” he says. “That goes a long way. Every man should have a shirt that fits him properly.” One peek at the Context blog makes it clear that this is first and foremost a Madison store. Breakfast at Sophia’s, drinks at Natt Spil, a close shave at Thorps - the blog paints a portrait of Madison that is at once tirelessly hip and warmly inviting. “We’re all about showing where we are,” Huber says. “Our location to us is the beauty of what we do.” Huber and Parker go on a minimum of two buying trips each season, eschewing most trade shows in favor of visits to small-batch garment makers. Most of the products Context sells are made in the United States, with a small percentage made by artisans in Italy and Japan. “What we sell in our store is heritage manufactured denim,” says Huber. “Everything we sell is made the old way on old machines. That’s why it’s more expensive - it’s more costly to produce.” Context is a relatively small operation. There’s William Howe, the store’s first employee, who now runs shipping and receiving. Joey Tucci is shopkeeper and stylist, and Phill Lee is the company’s photographer, shooting in the studio nearly every day. Web designer Aaron Davis was hired while still a student at West High; now he works from his apartment in Brooklyn. In addition to the store’s main employees, there are also several local models and a few contract workers such as Tess Camacho, who do denim repair in the studio. “Everyone’s kind of specialized,” Huber says. “It’s necessary for a small business. If both [Sam and I] were constantly working on the creative side of things, the bills wouldn’t get paid on time. And if we were both just making sure the numbers were hit, nobody would shop in our store because we’d have the most boring store in the world.” The creative side is definitely not lost at Context. In addition to products from well-known designers like Gitman Brothers Vintage and Canada Goose, they also sell several exclusive collaborations designed by Context with other well-known brands. The store’s most successful collaboration so far has been with Alden Shoes, a company that’s been around for over 100 years. The first product of that collaboration was the Rough Roy boot, which retails for $495 and was recently featured in GQ. The first release of the boot sold out in 12 hours. “The Roy boot was named for my father,” says Huber. “He always taught me to buy American.” Context’s most recent collaboration is the Melzer’s Boxing Club medicine ball, which was produced in collaboration with Leather Head and Horween Leather. It was featured in the December issue of GQ - the third year in a row the store is featured in the magazine’s “Best Stuff ” section. Huber says Context has no plans to leave its King Street location but would love to eventually open a second location in its studio near Shopbop’s new headquarters. They’ve only had the studio since August, but Huber is already abuzz with ideas for the space. “I would love to be paying people to produce garments for us here and have ‘Made in Madison’ on the tag.” The emphasis on craftsmanship and service at Context isn’t happening in a vacuum. It’s part of a larger movement around the country and right here in Madison. Huber points to local businesses like Bradbury’s Coffee, Thorps hair salon, Art & Sons design studio and Underground Food Collective. He says these seemingly disparate businesses share a passion for craftsmanship, customer service,and community. “They don’t take what they’re doing lightly,” he says. “Someone called our little group - technically, we’re not connected but we’re sort of naturally connected - the New Traditionalists. We’re going back to an appreciation for craft in our business.” “We’ve said that our store isn’t for the faint of heart,” Huber says, laughing. “We say that tongue in cheek because after all you’re just selling pants.” Appendix | 57
Appendix
PRNEWSWIRE: NEW YORK, Aug. 10, 2012 /PRNewswire/ -- Shopbop.com reveals its Fall 2012 print advertising campaign featuring model Frida Gustavsson shot by photographer Guy Aroch. Speaking to Shopbop’s versatile approach to dressing, mixing apparel and accessories across all designer categories, the campaign highlights effortless, chic silhouettes with statement jewelry. Taken against the back drop of Paris, the “Fall in the City” campaign features fashion from Robert Rodriguez, McQ - Alexander McQueen, Ellery, Julie Haus, Tibi, and Helmut Lang, amongst others, speaking to Shopbop’s global customer’s interest in looking to Shopbop for introductions to new brands, access to their favorite collections and advice on how to wear them together daily. The campaign will run September through November in issues of Vogue, InStyle, and Elle. TiffTaff: The Business of Shopbop Even if you haven’t heard of retargeting advertising, you’ve probably been subject to it. I know I have. I’d visit Shopbop and browse DVF shoes. Then, I’d be on Techcrunch, reading about the latest start-up planning an IPO and those cute DVF ballet flats would be staring me in the face. Teasing me. Taunting me. Next stop: NYT to keep tabs on the state of the economy. Oh damn, those shoes are there again! How did they know?! This highly effective type of ad serve is called behavioral retargeting, and brand marketers are using it to capture your attention—and keep it. Here’s how it works: 1. When you visit a website, all the data you provide allows the site to create a user profile that links back to your Web browser, e.g., the pages you visit, the amount of time you view each page, the links you click on, the searches you make and the things that you interact with, etc. 2. Website publishers then use this data to create defined audience segments based upon visitors who have similar profiles as yours. 3. Now, when you return to a specific site or a network of sites using the same Web browser, advertisers use those profiles to figure out which online ads are most relevant to you. The idea is you (and others like you) will have a greater level of interest and intent for the products and services being offered, and thus a higher likelihood of conversion. Because brand marketers can fine-tune and target very specific customer segments, they usually have a higher ROI from their ad campaigns and marketing spend. And here’s why marketers deploy retargeting: According to Wikipedia, nearly 98 percent of customers who visit a website leave without making a single purchase. And further, some studies suggest a company needs to have an average of seven different “touch-points” with a customer before that customer makes a purchase. In my case, retargeting allowed Shopbop to continue the marketing conversation with me after I’d left its website. (Hello, DVF ballet flats!) And it works. At this point I can’t even remember how many times I’ve been prompted to make a purchase because whatever it was I was browsing followed me throughout my online experience, staying top-of-mind; Shopbop is great at reminding me of how cute something is, and eventually I’d cave. Maybe it’s because I’m a marketer; I find retargeting fascinating! With highly targeted ads, marketing goes from mere guesswork to pure science. But, retargeting isn’t without its critics. Some argue that it’s a gross violation of privacy. This has prompted the Federal Trade Commission to propose a bill, Do Not Track, that calls for the creation of a small piece of software that you could use to prevent tracking and behaviorally-targeted advertising from taking place on your machine. In a response to the FTC, CNN Money staff writer David Goldman argues the bill “could open a Pandora’s box of unintended consequences” and cripple Web giants such as Google and Facebook, which make money by selling targeted ads aimed at their users.
58 | Appendix
Appendix Despite the debate, retargeting remains big business—and it’s only going to get bigger. Just take a look at some of the retargeting agencies that have emerged in the past few years: • Adroll is a platform for advertising online and retargeting previous website visitors to bring them back to your site. • Criteo enables you to expand your search engine marketing (SEM) campaigns. By leveraging product searches on your website, Criteo claims to generate substantial new leads and transactions. • Fetchback puts messages in front of lost prospects who’ve left your website in order to attract them back and convert–finish the purchase, sign up for the newsletter, or whatever action you’re looking for. • Tapad brings retargeting to mobile devices. “Mobile retargeting is really hard. The browsers on Apple products like the iPhone and iPad blocks third-part cookies by default, creating a huge blind spot for advertisers. Tapad has come up with a method to retarget ads in both mobile browsers and mobile apps, so that if you visit a mobile Website and then open up an app, you might see an ad from that site in the app.” • TellApart helps bring visitors back to your website through the use of dynamic, personalized banner ads which show your products to the right visitors. The company says it “turns lost shoppers into return customers.”
Appendix | 59
60 | Appendix
586,196 3% 17,586
88,560 3% 2,657 531 266 399 399 664 399
2,657
Conversion rate
Number of purchases (1 per)
20%
10%
15%
15%
25%
15%
Annual footfall
100ďż˝
Shoes
Formalwear
Outerwear
Dresses
Tops
Bottoms
7175
3895
3587.5 at 70% occupancy m-th 1947.5 weekends
1025 rooms total
11,273
11,070
Weekly footfall
17,586
2,638
4,396
2,638
2,638
1,759
3,517
2015
2014
17,903
2,685
4,476
2,685
2,685
1,790
3,581
17,903
3%
596,752
11,476
2016
18,219
2,733
4,555
2,733
2,733
1,822
3,644
18,219
3%
607,308
11,679
2017
18,536
2,780
4,634
2,780
2,780
1,854
3,707
18,536
3%
617,864
11,882
2018
74,900
Estimate, see notes below
Estimate, see notes below
Estimate, see notes below
Estimate, see notes below
Estimate, see notes below
Estimate, see notes below
Insdustry standard for e-commerce conversion
Based on 70% occupancy S-Th, 95%, F-Sa
NOTES
7,490 11,235 11,235 18,725 11,235
1,854 2,780 2,780 4,634 2,780
1,822 2,733 2,733 4,555 2,733
1,790 2,685 2,685 4,476 2,685
1,759 2,638 2,638 4,396 2,638
266
399
399
664
399
Formalwear
Outerwear
Dresses
Tops
Bottoms
5,118 2,949 760 1,362 577
$ $ $ $ $
4,969 2,863 738 1,322 561
$ $ $ $ $
4,824 2,780 716 1,284 544
$ $ $ $ $
4,683 2,699 695 1,246 528
$ $ $ $ $
4,547 2,620 675 1,210 513
$
$
$
$
$
Formalwear
Outerwear
Dresses
Tops
Bottoms
28,626,506 30,016,262
31,463,639
32,970,844 $127,276,059
$ 1,605,357 1,531,971
$ 1,461,498
$ 1,393,830
204,441
4,198,807
$ 6,310,858 $ 6,022,368
$ 5,745,330
$ 5,479,321
$ 803,682
Tops
TOTAL PROJECTED REVENUE
$ 2,112,312 $ 2,015,751
$ 1,923,024
$ 1,833,987
$ 269,001
Dresses
$
$ 8,198,900
$ 7,824,102
$ 7,464,181
$ 7,118,588
$ 1,044,122
Outerwear
$
$ 9,486,107
$ 9,052,466
$ 8,636,038
$ 8,236,189
$ 1,208,047
Formalwear
Bottoms
$ 5,257,310
$ 5,016,981
$ 4,786,192
$ 4,564,591
669,514
$
Shoes
REVENUE BY CATEGORY
1,418
$
1,377
$
1,337
$
1,298
$
1,260
$
Shoes
UNIT PRICE
14,980
3,707
Total Units
3,644
2018
3,581
2017
3,517
2016
531
2015
Shoes
UNIT SALES
2014
Prices will increase with yearly inflation of 3%
NOTES
$4,198,807
2014
$
$ 28,626,506
2015
$ 22,512,197
7,504,066
$ 30,016,262
2016
$ 23,597,729
$ 7,865,910
$ 31,463,639
2017
REVENUE Sales $1,049,702 $
7,156,627
Minus goods returned $ 21,469,880
10,000
$
944,732 $ 6,440,964 $ $
8,000
$
8,000
2018
NOTES
$ 32,970,844 Based on industry average of 25� return 8,242,711 rate. (internetretailer.com) $
8,000
Based on a 70� gross margin estimate 7,418,440 based on industry research. (Forbes)
$ 24,728,133
$
6,753,659 $ 7,079,319 $
$ 3,149,105
$
Total Revenue
EXPENSES Cost of goods sold Research and development $ 20,000 $ 15,000
$
$
10,000
20,000
3,000
$
$
1,125,610
10,000
20,000
$
$
10,000
20,000
$
$
10,000
20,000 Shared advertising costs with Aloft.
Two employees per location will be educated 500 to assist customers.
Employee Training $ 45,000
$
$
21,600
500 $
Hotel Design $
30,000
$ 1,073,494
$
500 $
Advertising $
157,455
24,000
500 $
Marketing & Promotion $
$
1,000 $
Aloft Royalty
$ 120,000
$
3,000
18,000
$
$
$
3,000
21,600
5,000
$ 7,972,569
$
$
$
3,000
25,200
5,000
$ 15,241,624
$ 8,356,105
$
$
$
$
3,000
28,800
5,000
21,600
$ 1,179,886
$ 15,972,787
$ 8,755,347
$
$
$
$
$
5,000 One-year warranty
Based on quotes from the supplier and a 21,600 10� bulk order discount once 20 mirrors have been purchased.
1,236,407 5� royalty on all magic mirror sales
Additional Electricity Bill
$
$ 7,611,558
$ 14,539,628
Interior designer will be hired to design three options.
Cost of Mirrors
Insurance
$ 1,354,187
$ 13,858,322
Technology Maintenance
Total Expenses
$ 1,794,918
3,000 See notes.
$61,407,279
32,400 Estimated at $300 per month in each location
EARNINGS
FASM 415 Professor Meeta Roy Missy Miller & Madison White March 2014