Apparel Retail Market Facts

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  • Apparel Retail Market Facts

    1. 1. Stanislav Rost Justin Ashton Sherife Abdel Messih
    2. 2. Apparel Retail Market Facts <ul><li>Average US consumer spends ~$250/year online on apparel (30% annual growth) </li></ul><ul><li>Apparel retailers / designers spend >$1.2B annually on market research </li></ul><ul><li>US Retailers spend tens of millions more on excess inventory / management costs </li></ul>Stylus narrows the gap between apparel retailers and consumers
    3. 3. Vision <ul><li>Bridge the gap between fashion retailers, designers, manufacturers and consumers </li></ul><ul><li>Convert fashion-aware to fashionable customers </li></ul><ul><li>Provide fashion democracy, direct feedback to the industry </li></ul><ul><li>Channel the power of a fashion social network towards online purchases, quality market research </li></ul>
    4. 4. Stylus For End-Users <ul><li>Fashion-oriented social network </li></ul><ul><li>Upload your own photos, label your apparel </li></ul><ul><li>Get peer and expert review of your style, suggestions for new clothes </li></ul><ul><li>Any suggestion is annotated with photos, links to buy </li></ul><ul><li>Photomagazine of attractive new fashions </li></ul><ul><li>Earn authority, capabilities, and priority in giveaways with participation and friend invites </li></ul>
    5. 5. Stylus For the Industry <ul><li>Integrate your clothing database into discussions, one click away from impulse purchase </li></ul><ul><li>Targeted advertisements based on user profiles </li></ul><ul><li>Worldwide exposure and word-of-mouth advertisement </li></ul><ul><li>High-quality market research and pricing estimation </li></ul><ul><ul><li>Demographics, geographic coverage, confidence </li></ul></ul>
    6. 6. Competition Online Fashion Retailers Fashion Magazines Discussion Forums Style Advice Websites Social Networks Marketing Research Firms Stylus Focused on Fashion        Fashion Ads        Purchase Merchandise        Fashion Articles, Art and Photos        Offers Style Advice  General General / Personal (no tech. support) General   Personal (with technology support) Intelligent Clothing Search  (classes)       (classes + similarity-based) Collecting Market Research  (history of purch.)      (expensive labor + small sample sets)  (large sample size + demogr. diversity) IP Potential       
    7. 7. Projected Revenue Streams <ul><li>Ads Affiliate Apparel Sales </li></ul><ul><li>- Banner - Large, brand-name retailers </li></ul><ul><li>- Featured content - 3.5% avg. commission </li></ul><ul><li>- Fashion Integrator Tool </li></ul><ul><li>Market Research Direct Apparel Sales </li></ul><ul><li>Automated report delivery - Featured small designers </li></ul><ul><li>$1K/per item minimum - 10% fee commission </li></ul>Stylus’ model includes no inventory costs * Commission is the cut taken from partner apparel distributors/retailers
    8. 8. Market Social Network (SN) Users Fashion Conscious Consumers <ul><li>Pew Research (US) </li></ul><ul><li>75% teens are SN users </li></ul><ul><li>30% 20-35 yr old SN users* </li></ul><ul><li>50% SN users check once/day </li></ul><ul><li>Woods and Poole (US) </li></ul><ul><li>26% of all in the target demographic are fashion-conscious </li></ul>US Fashion Conscious/SN users = 26% * 30M SN users = 8M users * Very conservative estimate, no exact data available for entire age range Target Demographic: 15-35 year olds, fashion conscious, social network users
    9. 9. Market cont. <ul><li>2008 Online Apparel sales to hit $12B (Jupiter) </li></ul><ul><ul><li>As of Jan 2006, people spent $243/year on clothing purchases online. </li></ul></ul><ul><ul><li>Fastest growing online segment (25-30% CAGR) </li></ul></ul><ul><li>Our total apparel market </li></ul><ul><ul><li>8M consumers (5% commission) spending $243/year </li></ul></ul><ul><ul><li>$97M annual market for apparel sales on Stylus </li></ul></ul><ul><li>In 2004, $1.2B was spent on apparel market research </li></ul><ul><ul><li>Goal is to capture >2.5% by year 5, earning >$30M/year </li></ul></ul>
    10. 10. Assumptions on growth <ul><li>Took middle of the road growth projection </li></ul><ul><ul><li>Bounded at 5M users </li></ul></ul><ul><ul><li>$1K/item under market research </li></ul></ul><ul><ul><li>Average apparel sale of $80/year/user </li></ul></ul>
    11. 11. Revenue Projections
    12. 12. Operating Expenses
    13. 13. Cash Flow Cash flow positive in Year 3 rd Qtr, FY3 <ul><li>Average quarterly cash burn rate: </li></ul><ul><ul><li>Year 1: $145K </li></ul></ul><ul><ul><li>Year 2: $390K </li></ul></ul><ul><ul><li>Year 3: $277K </li></ul></ul>
    14. 14. Pro Forma Income Statement (FY2008)           (financial numbers in thousands)             FY1 FY2 FY3 FY4 FY5 Staffing Headcount 23 39 51 63 65             Revenues           Ad Sales - $34 $1,203 $10,646 $21,370 Market Research Analysis - $25 $742 $8,767 $18,640 Affiliate Partner Apparel Sales - $21 $1,167 $10,110 $13,888 Direct Partner Apparel Sales - - - $5,777 $7,936 Subtotal   $80 $3,111 $35,300 $61,834             Operating Expenses           Salaries & Benefits (inclusive) $1,362 $3,081 $4,374 $5,935 $6,717 Creative Content $60 $96 $192 $192 $192 Travel/Trade Shows/Marketing $178 $294 $424 $538 $588 Software / Hardware / Server Hosting $39 $51 $62 $76 $78 G & A (including rent / utilities / legal) $131 $205 $236 $318 $316 Subtotal $1,770 $3,727 $5,289 $7,059 $7,892             Gains (Losses) from Operations ($1,770) ($3,647) ($2,178) $28,241 $53,942 Operating Margin - - - 80% 87% Cumulative Gains (Losses) from Op ($1,770) ($5,417) ($7,595) $20,646 $74,588 Tax Rate (35%)   Taxes - - - $9,884 $18,880 EBIAT $18,356 $35,063 Quarterly Cash Burn Rate (Approximated) $145 $390 $277 - -
    15. 15. Marketing <ul><li>Primary goal in first 3 years is to grow the SN user base </li></ul><ul><ul><li>Target demographic is 15-35 fashion conscious, SN users </li></ul></ul><ul><ul><li>Create online buzz through ads in SNs, fashion forums, groups </li></ul></ul><ul><ul><li>Beta launch parties in key cities </li></ul></ul><ul><ul><li>Target college campuses heavily in first 2 years </li></ul></ul><ul><li>Industry trade shows </li></ul><ul><ul><li>Demonstrate power of showcasing new designs on Stylus </li></ul></ul><ul><ul><li>Create excitment among up and coming designers </li></ul></ul><ul><li>Market Research </li></ul><ul><ul><li>Start by letting select partner retailers (Guess, Gap) use our functionality for free </li></ul></ul><ul><ul><li>First target retailers / designers with huge research budgets </li></ul></ul>Goal: Highest quality website / easy interface that will attract users
    16. 16. Competitive Advantages <ul><li>Lower cost market research </li></ul><ul><li>Unique domain-specific search, review tools </li></ul><ul><li>Inherent switching costs of SN users </li></ul><ul><li>Involved and committed user base </li></ul><ul><li>Deep integration with the fashion industry </li></ul>
    17. 17. Team <ul><li>Justin Ashton, Acting CEO MBA Candidate, MIT Sloan School of Management Air Force Intelligence, 6 years Electrical Engineering Background </li></ul><ul><li>Stan Rost, CTO PhD Candidate, MIT CSAIL Computer Networks & Systems </li></ul><ul><li>Sherife Abdel Messih, VP Business Dev Bachelor Degree Candidate, MIT Mechanical Engineering/International Development </li></ul>
    18. 18. The Offering <ul><li>$600 thousand seed round </li></ul><ul><li>Series A: $9 million </li></ul><ul><ul><li>$7 million: operating expenses </li></ul></ul><ul><ul><li>$1 million: marketing / Biz Dev expenses </li></ul></ul><ul><ul><li>$600 thousand: legal and patent expenses </li></ul></ul><ul><ul><li>$1 million: unforeseen expenses </li></ul></ul>
    19. 19. Summary <ul><li>Goal: </li></ul><ul><ul><li>Provide quantum leap into Web 2.0 for designers </li></ul></ul><ul><ul><li>Become technological cornerstone of the industry </li></ul></ul><ul><ul><li>Offer one-stop-shop for fashion / apparel consumers </li></ul></ul>
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