olivia heo capstone: the business plan may 13 th, 2014 h u m a n e humane lifestyle for humane...

Olivia HeoCapstone: The Business Plan

May 13th, 2014

H U M A N EHUMANE LIFESTYLE FOR HUMANE PEOPLE

Olivia Heo|Capstone: The Business Plan|New York University 2

Why Recycled Leather?

Olivia Heo | Capstone: The Business Plan | New York University

3

Less killing animals

Every year, the global leather industry

slaughters more than a billion animals and tans their skins and

hides.-People for the Ethical Treatment

of Animals (PETA)

”

“

Helps protect the

environment

Defoamers

Butadiene resinsbiocidesSurfactants

Degreasers

Lime

Sodium sulphide

Soda ashSyntansSalt

Fungicide

Formic acidResins

DyesOver 35

chemicals are used

Reduces landfills

Global leather waste

1,402,429 tons/year

83,734 tons/year in North & Central America

Wastes Generated in the Leather Products Industry by united nations industrial development organization

High water consumption

+

During traditional manufacturing processes:

Index

BrandIndustry & CompetitionTarget ConsumerManagement & OperationMarketing PlanFinancial PlanAppendix

Business Overview

• Creates bags and small accessories using recycled leather that is collected from contracted suppliers, partnerships with a second-hand store company and customer donations

• Uses only materials treated in an environmentally friendly way

• Operates via a website and national vendors

• Donates percentage of April sales to Goodwill


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Olivia Heo|Capstone: The Business Plan|New York University

Mission Statement

Humane is devoted to making simple and

stylish lifestyle accessories using upcycled

leather in order to reduce animal slaughter and

pollution caused by the leather production

process. Ethical business practices across all

stakeholders will infuse our values into our

products, and a team of experienced leather

professionals will ensure each product is of the

highest quality. We take the extra step by

giving back to society, so our customers can

be sure they are ultimately participating in

responsible consumption.

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Mood Board


8


Brand Identity

9

Emotional Functional

Sustainable

Simple

Warm

Responsible

Urban

Everyday

Durable

Design

Stylish

Well-made

Humane wishes that consumers embrace recycle without feeling disparate

Unique


Humane’s Product Range

10

Items Average cost

Handbags $550

Briefcases $400

Wallets $300

Card cases & coin purses $200

Accessories $150

Tech cases $80

Key chains $50• The average handbag price of competitors:

$535.52 • Humane handbag price: a 5% premium is added


Customization

11

• Fun• Favorable impression on upcycled leather products• Affection towards their custom-built totes

Consumers will have

Humane Custom-built Tote

SIZE Small (10.5”H x 9.5”W x

5”D) Medium (12”H x 13”W x

6”D) Large (14”H x 16”W x

7.5”D)

HANDLE LENGTH Handheld Over-the shoulder

NUMBER OF INNER POCKETS 1 2 3

COLOR Black Beige Tan

INITIAL ENGRAVING

Corporate Social Responsibility

Second chance for people in need


12

• Humane will be related to green living and sustainability

• Stronger partnership with Goodwill can be built

10% of sales of April,

Earth MonthStronger

partnership


SWOT Analysis

13

Strengths• Competitive advantage –

upcycle leather• Positive brand image yielded

by corporate social responsibility

• Handmade• Design

Weaknesses• Brand awareness• Management – small team• Price• Small number of vendor

Opportunities• International opportunity• Customers’ changed

attitude toward responsible companies

• Increasing demand on green products

• Rebounding economy

Threats• Recession• High competition• Policies regarding the

leather industry

Humane


Points of Difference

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Green1Limited edition & serial number2Custom built tote3Corporate social responsibility4Low production cost5

Industry & Competition

Industry Size


16

Boots, shoes cuts and nonathletic footwear

28.9%

Luggage9.9%

Hats, caps and headwear

8.8%

Personal leather goods8.3%

Neckwear4.3%

Leather belts2.3%

Other leather goods28.1%

Industry Sales $4.1

billion

Handbags and purses

9.4%

• In 2013, leather good & luggage manufacturing yield $4.1 billion sales.

• Handbags and purses were a part of the sale segments at 9.4%.

(=$385.4M sales)

Source: IBIS World Industry Report 31691 Leather Good & Luggage Manufacturing in the US December 2013

Leather good & luggage manufacturing in 2013

Industry Performance

- Declined consumer demand during recession

- High price of leather

- Moving production to low-cost countries

+ Spending on handbags rather than clothes

+ High international demands: Exports made up

40% of total industry revenue in 2013


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Current Performance


Competitor Landscape

18

Luxury

Mass

Recycled material

Conventional material

Niche Market Players


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• Operated by a husband and a wife in Philadelphia

• Vintage design• Interior items and small

furniture for garden and kitchen, jewelry & bags

• 4881 Facebook page likes

• Founded in Seattle in 2010• Modern design• Female handbags• Use recycled leather for design

challenge – most products rely on conventional materials

• 910 Facebook page likes

• Founded in Switzerland in 1993• Vintage and casual design• Uses truck tarps every bag

has different look• 87,413 Facebook page likes

• Founded in Portland• Casual design• Reuse the world’s pre-

consumer excess and transform into apparel, bags and tech cases

• 5,806 Facebook page likes


Competitive Strength Grid

Material type

Product type*

Price range**Distribution

****Finance

Brand awareness***

Only recycled leather

Standard Standard

Website, 2 national

vendors (1st year)

Establishing Establishing

Anything recycled

+ <

Website, 170 domestic vendors, including

Anthropology

unknown Strongest

A M P E R S A N D A S A P O S T R O P H E Some recycled = =

Website, 28 domestic and international

vendors

unknown N/A

Freitag Recycled tarpaulin

= <

Website, 3 domestic and

596 international

flagship stores and vendors

Strong Mid-strong

LOOPTWORKS Anything recycled

+ < Website,

Amazon storeGrowing Strong

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*Product type: having Humane’s products offerings as a standard, ‘+’ indicates more items like apparel and interior decoration are available, and ‘=’ indicates similar offerings. **Price range: having Humane’s price range as a standard, ‘<’ indicates lower price range, ‘=’ indicates similar level of price range.***Brand awareness: Brand awareness is estimated based on Google Trend in the United States between January 2013 and December 2013.**** Distribution: Compared the size of the US distribution


Target Consumer

Target Consumer


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• Age: millennials (18-35)• Gender: both males and females• Income: Mid- and upper-income ($50k-99k)• Residence: Urban dwellers• Education level: bachelor degree +

Aspirational consumers

Jennifer

Jason

• Actively seek out ways to being green• Green to be seen• Green WOM on social media• Guilt-free status

Mintel Report: marketing to the green consumer report March 2013

Demographics

Psychographics

Target Consumer


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GUILT-FREE STATUS

http://trendwatching.com/trends/7trends2014/

Tesla Nudie Liberty United

Guilt-free status mean that more people care about responsibility, sustainability and ethic when it comes to consumption.


Target Consumer

24

900M aspirational consumers in USA

Target: 900M X 20.5%*

=1,845,000

Empowered shoppers (78%)

Responsible consumers (92%)

Seek Style and Status (73%)

BBMG, GlobeScan and SustainAbility, October 2013*20.5% was calculated based on the ratio of people aged between 20 and 34 according to 2012 population by age and sex, census.gov

• More and more consumers notice good companies. • They want to be a part of good deeds by consuming those

good brands.• Humane – aspirational consumers’ brand of choice.

Management & Operation

Advisory Board


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San Lee

Co-founder of SanShoe&Co.

Operation advisor

Shelly Murphy

Marketing Communications

Consultant

Communication advisor

EJ Hur

Consumer Market Analyst

Marketing research advisor

Advisors specialize in startup management, marketing communication, and consumer market research.

Organization Chart


27

Marketing • Strategy• Customized marketing

Operation management• Quality control• Inventory checkup

• Accounting• Financial• Human resource

Business Administration

• Product design• Material buying & management• Photo-shoot & photo editing

Design & Art

IT • Website management• Technical support

PrimarySeconda

ry


Operating Plan

28

Design

Material purchase

Product craftProduct

packaging

Order receive on

website

Storage

Inventory checkup

Packaging for shipping

Order confirm &

cancellation

Returns

ShippingVendor

management


Material Source

29

Recycled leather supplier

Leather scraps from leather

factory

Partnership with second-hand store

company

Customer donation

Supply source proportion:30% 30% 30%

• There are leather manufacturers that create recycled leather. Materials are based on used leathers and reprocessed.

• NY is the big states• Reduce transportation

fee

• Goodwill Industries International Inc.

• Humane collects unusable yet quality leather goods from second-hand store

• Restore

• Customers’ donations to Humane

• Discount coupons

• Restore

10%


Leather Restoration

30

Donated leather goods

Leather restoration by professionals

• Humane’s material buying team collect donated

leather goods

• Send to the leather restoration craftsmen

• Deconstruct, sterilize and restore with natural dye and

eco-friendly cleaners

Strategic Partnership

Manufacturing partnershipProduct crafters,

material suppliers and restoration craftsmen


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Sales partnership

Established fashion brands and small

boutiquesex. Madewell, J.Crew, Anthropology Creatures of Comfort in SoHo, etc.

Creatures of Comfort in SoHo, New York


www.humane.com

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• Shopify

• Responsive design

• Geo-location

• Social media

• KPIs & analysis

• Conversion rate

• Visit duration

• Internal search box

analysis

• Cart abandonment

analysis

• Market basket

analysis


Customer Relationship Management

33

• Good for small companies• Specialized in

retail/consumer product

• Features• Sales cloud

• Accounts & contacts

• Task & event tracking

• Outlook, Gmail integration

• Content library

• Customizable report

• Target email

• Customer database analysis to

identify best customers for

future events

Marketing Plan

Marketing Plan

Customer acquisition


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Customer retention

• Two customer acquisition campaigns and one customer retention

• The first year marketing target: 7 metropolitan areas (Boston, Philadelphia, Washington DC, Chicago, NY, SF and LA)

• Promote earth month – AprilCampaign I

Humane for humane people Campaign II

Second life

Social media display ad

Company blog

SEM

Referral program

Email marketing All year round

6 months 6 months

All year round6 months 6 months

6 months 6 months

Social media 6 months 6 months All year round

Public relations 6 months

6 months 6 months

Marketing Plan – Customer Acquisition


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Campaign I: Humane for Humane people

Communication objective: to increase Humane’s brand awarenessStrategies• Relate Humane’s brand name to humane activities –

sustainability and good deeds• Explain what and how Humane upcycles leather • Share how humane participates in corporate social

responsibility Campaign duration• 6 months

Marketing Plan – Customer Acquisition


37

Campaign II: Second life

Communication objective: To increase Humane’s brand awarenessStrategies• Tell a story how and why Humane creates second life for

leather • Deliver a message that consumers’ purchase will become a

part of Humane’s donation to Goodwill Campaign duration• 6 months

Marketing Plan – Customer Retention


38

Communication objective: To engage with customers for future purchase

Strategies• Let customers know behind-the-scenes of Humane’s

production• Share Humane’s corporate social responsibility efforts how

and when it is done• Provide exclusive sales and pre-sale access codes• Share customer reviews and picturesCampaign duration• All year round


Marketing Plan – Social Media

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Platform Strategy Measurement• To engage with

customers through timely updates

• 1-3 times a day• Content:

• New products• Benefits of recycled

leather• The behind-scenes• Design sketch• CSR• Lucky draw

• Encourage share & retweet

• # of share• # of likes• # of favorites• # of retweet• Sentiment

analysis• Bags of words

& keyword spotting

for Customer Acquisition & Retention


Marketing Plan – Facebook Mockup

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Marketing Plan – Social Media Display Ad

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Promoted account

Promoted tweet

To increase brand awareness by increasing followers

To drive traffic to the website by increasing CTR

Measurement: # of followers, # of retweets, # of favorites, click-thru-rate (to the website), conversion rate

for Customer Acquisition

Sponsored pageTo increase likes of page of Humane

To encourage people to visit Humane’s website and purchase

Sponsored ad

Measurement: # of likes, # of shares, click-thru-rate (to the website), conversion rate


Marketing Plan – Company blog

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for Customer Acquisition & Retention


• Owned media: website-embedded blog

• Expected effects:

• Increase traffic to its website

• Increase brand awareness by organic search.

• Will be leveraged to support public relations effort as it holds extensive information

• Content: behind scene, CSR program, new product

Timing: 2-3 times a week

Tracking and measurement: number of unique visitor, visit duration, page view per visit


Marketing Plan – SEM with Display Ad

Estimated traffic summary • Based on max CPC: $1.50 and

budget: $50.00/day• Total budget: $9,000 per

campaign• Avg. CPC: $0.48 - $0.59

($0.25*)• Clicks/day: 88-107• Cost/day: $47.51-$58.07*Q2 2012 average CPC of shopping category

leather bagman's bagman's leather bagmen's bagmen's leather bag

woman's bagwoman's leather bagwomen's bagwomen's leather bagrecycled bag

Upcycled bagEco freindly bagstote baghobo bagmessenger bagHumane

Estimated reach 158,100,000

Keywords

Ad sample – Side Ad

Measurement• Impression• Cost per click• Click through rate• Conversion rate• Keyword performance• A/B testing

Humane bag for humane peopleShop an eco-friendly and stylish messenger bag nowwww.humane.com


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Los Angeles CA, California, United States 30,600,000

San Francisco-Oakland-San Jose CA, California, United States 18,800,000

New York NY, United States 41,100,000

Chicago IL, United States 20,600,000

Washington DC (Hagerstown MD), United States 17,500,000

Philadelphia PA, United States 15,500,000

Boston MA-Manchester NH, United States 14,000,000

All based on Nielsen® DMA® region


Marketing Plan – Referral Program

44


$25

Referrer Referee

The both will receive $25 codes when a referee

purchases

• Expected outcomes:

• Increase sales

• Increase brand awareness

• acquire prospective customer database

• Platform: email, Facebook and Twitter

• Tracking and measurement: click through rate, conversion rate, code redemption rate


Marketing Plan – Referral Program

45


Stylish and sustainable – it’s so you

HumaneTo: Jon Doe <[email protected]>Stylish and sustainable – it’s so you

Hello Jon

It is so nice to meet you. Your friend Jane Smith thought you would like Humane. Did you know that your green life can wear more sustainability, like us?

We strive to create best bags using upcycled leather.

SUSTAINABILITY MEETS STYLE

Follow us

A little bit about us: we are founded in 2015 in NYC. We were inspired by the fact that there are so many leather goes to landfills,

and leather tanning process invovles with high chemical

usage. Our concern about the environment met our leather

craftsmen. Now, we are a stylish and sustainable option for you.

Shop now and

get $25 off on your first purchase


Marketing Plan – Email Marketing

46

To retain profitable customers based on Humane’s in-house database.

Strategy

• Use Salesforce• Analyze profitable

customers• Send out email

• New product• Humane’s upcycling• Product sale• SCR

• A/B testing• Measurement: e-mail

sent/delivered, open rate, click through rate, churn rate

for Customer Retention


Marketing Plan – Publicity

47

• Hire a PR agency to increase brand awareness

• Will work with FACTORY PR, specializing in fashion and lifestyle public relations

• Expect to reach to a high number of customers through various outlets like magazines, online press and celebrity dressing


Marketing Budget Allocation

48

Socail media20.0%

Google Ad-

Words22.7%

Referral pro-gram0.7%

PR agency56.6%

Total: $79,55030.3% of year 1 sales


Marketing Schedule

49

YR 2014 YR 201510 11 12 1 2 3 4 5 6 7 8 9

Marketing Acquisition: Campaign I

Social Media Social media display ad Company blog SEM Referral program Public relations

Marketing Acquisition: Campaign II

Social Media Social media display ad Company blog SEM Referral program Public relations

Marketing Retention Email marketing

Marketing efforts tied to earth month

Financial Plan

Financial Plan


51

Year 1 Year 2 Year 3 Year 4 Year 5

Sales 100.0% 262,112 100.0% 301,429 100.0% 361,715 100.0% 452,144 100.0% 587,787

LESS COGS 50.0% 131,056 50.0% 150,715 50.0% 180,858 50.0% 226,072 50.0% 293,894

Gross margin 50.0% 131,056 50.0% 150,715 50.0% 180,858 50.0% 226,072 50.0% 293,894

LESS Promotion/ad cost 30.3% 79,550 21.4% 64,633 15.7% 56,759 14.6% 65,949 12.8% 75,233

LESS Variable operating cost 5.6% 14,600 5.5% 16,491 5.4% 19,389 5.1% 23,247 5.0% 29,621

LESS CSR donation 0.9% 2,400 0.8% 2,512 0.8% 3,014 0.8% 3,768 0.8% 4,898

Contribution to overhead 13.2% 34,506 22.3% 67,080 28.1% 101,696 29.4% 133,108 31.3% 184,141

LESS Fixed overhead 80.0% 112,094 35.1% 105,816 29.3% 106,094 25.9% 117,132 20.0% 117,410

Earnings before sales tax -66.8% (77,589) -12.9% (38,736) -1.2% (4,399) 3.5% 15,976 11.4% 66,731

• Compound annual growth rate (CAGR): 17.53%• Growth rates of US apparel & accessories retail ecommerce

sales were 16.9% in 2012 and 17.6% in 2013 • 5th year earnings before sales tax is 11.4% of the sales

Variable breakeven: $223,808.63


Milestones

52

Time Department Details

June 2014 Look for material suppliers, Supplier confirm, Craftsmen contact and confirm

July 2014

Design & artBus. admin

Designer hire process, confirm design direction, product range confirm, Office rental and setup

August 2014 Design & art

1st design decision, 2nd design decision, final design decision, design brief with craftsmen

September 2014

Bus. adminMarketing

Production start, website building, vendor finding and contract, marketing with social media, company blog and PR

October 2014Bus. AdminMarketing

Product launching, vendor finding and contract continues, customer acquisition campaign I kick-off

*1st week of October: product launching


Future Plan

1 Increase customer touch point: set up the flagship stores in NYC and LA

2Get more leather donations from second-hand stores and customers

3Contract with 30 national vendors in year 5

53

Thank you

Appendix


Financial Plan

What is included

56

COGS Total cost of purchasing, vendor cost, packaging, inbound freight

Promotion/ad cost

Facebook display ads, Twitter display ads, Google AdWords, public relations

Variable operating cost

Direct cost of processing/shipping, outbound freight, packaging material, pick/pack, bank fees, bad debit

Fixed overhead Rent, utilities, travel expense, salaries, fridge benefits


Financial Plan

57

Sales Year 1Web 35 12 $550 234,062Vendor 5 12 $468 (85%) 28,050

262,112

Ad cost Year 1 Year 2 Year 3 Year 4 Year 5Twitter campaign $2000 2 mo 2 cam 8,000 2 mo 2 cam 8,000 1 mo 2 cam 4,000 1 mo 2 cam 4,000 1 mo 2 cam 4,000Facebook campaign $2000 2 mo 2 cam 8,000 2 mo 2 cam 8,000 1 mo 2 cam 4,000 1 mo 2 cam 4,000 1 mo 2 cam 4,000

Google adwords $750 6 mo 2 cam 9,000 6 mo 2 cam 9,000 6 mo 2 cam 18,000 6 mo 3 cam 27,000 6 mo 4 cam36,00

0Referral program $50 11 ref 5,050 13 ref 690 15 ref 759 19 ref 9,489 25 ref 1,233

PR agency $5000 9 mo 45,000 6 mo 30,000 6 mo 30,000 6 mo 30,000 6 mo30,00

0

Total 79,550 64,533 56,759 65949 75,23

3Cost per customer acquisition

Year 1 Year 2 Year 3 Year 4 Year 5 $1,965.9 $1,388.9 $1,016.5 $944.8 $829.1

(Cam is an abbreviate of campaign. Mo is an abbreviate of month. Ref is an abbreviate of

reference)

Variable breakeven=promotion cost/(gross margin%-variable overhead%)/(1-returns and cancels%)• Suitable for startups• Customer acquisition campaign

Variable breakeven analysis


Financial Plan

58

Variable cost Year 1 Year 2 Year 3 Year 4 Year 5Shopify transaction fee 6798 7818 9382 11239 14610

Shipping $8 600 orders 4800 690 orders 5520 828 orders 6624 1035 orders 8280 1346 orders 10764Packaging $1.67 600 orders 1002 690 orders 1152 828 orders 1383 1035 orders 1728 1346 orders 2247Outboud freight 2000 2000 2000 2000 2000Total 14,600 16,491 19,389 23,247 29,621

Fixed overhead year 1 year 2 year 3 year 4 year 5Salary 4000 0 12 mth - 0 12 mth - 0 12 mth 0 12 mth 0 12 mth

3500 2 ppl 12 mth 84,000 2 ppl 12 mth 84,000 2 ppl 12 mth 84,000 2 ppl 12 mth 84,000 2 ppl 12 mth 84,0003000 1 ppl 3 mth 9,000 1 ppl 3 mth 9,000

Rent 1250 12 mth 15,000 12 mth 15,000 12 mth 15,000 12 mnt 15,000 12 mth 15000CRM email program 125 12 mth 1,500 12 mth 1,500 12 mth 1,500 12 mth 1,500 12 mth 1,500Shopify 29 80% 12 mth 278 12 mth 278.4 80% 12 mth 278.4Utilities 250 12 mth 3,000 12 mth 3,000 12 mth 30,00 12 mth 3,000 12 mth 30,00Equipment 6,000 Storage 193 12 2,316 12 2,316 12 2,316 2 12 4,632 2 12 4,632Total 112,094 105,816 106,094 117,132 117,410


Competitor Brand Awareness

59

Peg and Awl Freitag LooptworksJan-13 60 45 57Feb-13 55 37 97Mar-13 56 39 52Apr-13 44 53 52May-13 30 38 43Jun-13 45 36 42Jul-13 30 45 42

Aug-13 49 39 42Sep-13 36 34 42Oct-13 58 33 42Nov-13 61 35 48Dec-13 90 39 0

Average 51.2 39.4 46.6median 52 38.5 42.5


Packaging

60

EcoEnclose 100% Recycled

Boxes:

• 100% post-consumer and

post-industrial content

• Choose from our stock sizes

or custom options below

• Fully recyclable and

biodegradable

• Boxes ship flat, stacked, and

boxed for protection

• Absolutely NO virgin fiber

content

• Made in the USA!

• Humane’s logo


Vendor ListALABAMAETC.

CALIFORNIABleuDariE.G. PaigeIvy BlueLa BellaTherapy Creatures of Comfort

CONNECTICUTAtelier 360

GEORGIAW. Port

FLORIDAHint Miami

61

MASSACHUSETTSFrench + ItalianGatsby’sStash

NEW YORK3 x 1ChurchillsKatherine TessPachuteCreatures of Comfort

NEVADAThe Box

OREGONE.G. Paige

TENNESSEEH.AudreyEmerson Grace

Goal : 30 vendors in year 5


Milestones

62

MilestonesJune, 2014 July, 2014 August, 2014 September,

2014 October, 2014

W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4

Material and Manufacture

Look for material suppliers

Supplier confirm

Craftsmen contact and confirm

Design

Designer hire process

Confirm design direction

Product range confirm

1st design decision

2nd design decision

Final design decision

Design brief with craftsmen

Operation

Production start

Website

Product launching

SalesVendor finding and contract

Vendor confirm

ManagementOffice rental

Office set-up (internet, phone, furniture)

Marketing Acquisition: Campaign I

Social Media

Social media display ad

Company blog

SEM

Referral program

Public relations

olivia heo capstone: the business plan may 13 th, 2014 h u m a n e humane lifestyle for humane...

Documents

brand slide

business overview

goodwill olivia heocapstone

recycled leather

leather products industry

mood board olivia heocapstone

disparate unique slide

ethical business practices