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DOGS & CATS SHOPPING NETWORK
Ritu Raj, ritu@ritu.us, (415) 876 7000
SUMMARY
Abstract Components
Business
D&C is not embarking on anything that has not been done before,
but has been done in ...
MARKETPLACEFORDOGSANDCATS
Abstract Cottage industry market strategy now
D&C Marketplace model
•Pet Products
Cottage
Manufa...
MARKETPLACEFORDOGSANDCATS-DETAILS
Customer Experience Revenue
Expenses (Rough)
Main issue with large number of SKU’s is cu...
DOGS&CATSSHOPPINGNETWORK
Abstract Home Shopping Network (with a difference)
D&C growth plan
Start with 1
hour on paid
prog...
Major cost & driversSub Drivers Notes Cost Annualized
Distribution Channel On dedicated Paid Programming Channels at say 1...
QVC
Facts about QVC Financials
• QVC, Inc., one of the largest multimedia retailers in the world, broadcasts live 24 hours...
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Pitch and Concept pitch for Dogs & Cats Network

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Pitch and Concept pitch for Dogs & Cats Network

  1. 1. DOGS & CATS SHOPPING NETWORK Ritu Raj, ritu@ritu.us, (415) 876 7000
  2. 2. SUMMARY Abstract Components Business D&C is not embarking on anything that has not been done before, but has been done in different pieces, no one has put together all the parts in a very branded, detailed oriented and focusing on creating completely a new customer experience. Dogs & Cats Shopping Network will have the following components: • Key would be creating a Home Shopping Network exclusively for Dogs and Cats. • In the beginning using the paid programming slots (infomercial time) on select tier-2 channels • Creating a D&C shopping marketplace – like Amazon.com marketplace, invite product reviews, highlight products, becoming the “publisher” and “store” for the huge cottage industry which produces the pet toys. Eventually to produce infomercials for products for the website and do product launches. Home Shopping Network (HSN) Infomer- cials Amazon Market- place “Dogs and Cats Shopping Network” agenda is to bring a very media rich and high-end shopping experience to the owners of dogs and cats to their homes. D&C aims to establish really fast a premium brand for shopping for pets, and that brand could be easily expanded to bricks and mortars store, other media & entertainment ventures and also D&C branded merchandise. Market • 72 million people own a pet, which is 63% of all households • Number of Dogs & Cats in the US are 163.1 million • Average amount spent for common pet products for Dogs is $530 and Cats is $272 and this does not include food or medical expenses annually • Currently there are 44.8 million dog-owning households in the US, of those 78% bought a gift for average $10 which translates to an astounding 39.4 million gifts or 394 million spent on gifts every year. Dogs & Cats Shopping Network (C) Confidential 2008 2
  3. 3. MARKETPLACEFORDOGSANDCATS Abstract Cottage industry market strategy now D&C Marketplace model •Pet Products Cottage Manufacturing •List their products for no fee, revenue share D&C Marketplace •Search Engine Optimization •Advertising campaigns •Branding Pet Owners Cottage Manufacturing Marketing •Web •Retail •Advertising Pet Owners This is the first building block of D&C. The marketplace addresses the issue of a highly fragmented, and primarily cottage industry manufacturing pet toys. Most small manufacturers (most of them out of their) homes have no resources to market their products, they create websites think the traffic would come, or if they are bigger they try to get their products in to pet boutiques. D&C Marketplace is an e-commerce website which does not carry any inventory. Pet toys manufacturers put their toys on themselves for a 25% share of the revenue. The model is the same as Amazon.com. D&C Marketplace will market to the consumers through print ads, SEO and through relationships with non-profits etc. D&C Marketplace would also seek consumer rating of vendors, and also products (some of the product reviews will be pre- populated). Once D&C Marketplace has got some traction, would also create small 2 min paid infomercials for the vendors and put them on the site. This would also attract more consumers as its more emotive and they can see how it would fit into their lifestyle. Producing infomercials' (low quality) for the web is not costly, costs approximately $500 per edited min if done in-house. D&C Marketplace will become the model for reaching the consumers for the cottage industry. Dogs & Cats Shopping Network (C) Confidential 2008 3
  4. 4. MARKETPLACEFORDOGSANDCATS-DETAILS Customer Experience Revenue Expenses (Rough) Main issue with large number of SKU’s is customer getting overloaded with information, and most of it is not relevant to them. D&C Marketplace main goal for the customers would be to have “relevance” as the main focus. Some of the areas of relevance that we would focus on: • Breed of Dog • Lifestyle – urban or suburban • Price range • Sending them reviews of new products if its relevant to them. • Registery for dogs • At some point also we would start creating products generated from what the consumers want. • Become the place for vendors to launch their products • Develop a configuration tool based on the profile of the consumer Dogs & Cats Shopping Network (C) Confidential 2008 4 Major cost & drivers Sub Drivers Notes Annual Development & running D&C Marketplace This includes development, maintenance, customer service, merchandising $ 1,745,000 Marketing Marketing would include print advertising in dog magazines, banner ads in high traffic dog related websites, relationships and revenue share with non-profits like the SPCA, and finally through short infomercials $ 600,000 Management Including President, finance and marketing support $ 400,000 Miscellaneous including leases etc $ 200,000 Total expense for a year $ 2,945,000 There are 3 components for projecting the revenue • Price point – preliminary research and experience shows that the cart size average $30 • Traffic – through marketing we are confident to reach a minimum of 1 million hits, this is very conservative. • Conversion – We would have a higher conversion rate as we want to have the maximum number of sku’s available to the consumers looking at a 5% conversion rate • Projected revenue $1.5 million a month and a revenue share of 25% would net for D&C $375K or $4.5M a year • The growth of this on annual basis is directly proportional to the traffic and conversion, and they are based on the consumer experience. We think could increase traffic substantially every year. • This does not include the revenue from creating a short infomercial business for small pet manufacturers. . This would enhance the customer experience on D&C.
  5. 5. DOGS&CATSSHOPPINGNETWORK Abstract Home Shopping Network (with a difference) D&C growth plan Start with 1 hour on paid programming time (late night) Move to better slots, late evening, or middle of the afternoon Eventually increase time and have a D&C channel! Shoot live and have instant analytics available Like Home Shopping Network Exclusive Products High End Production Celebrity Talent Few guests with their Pets Create the first ever shopping network exclusively for dogs and cats. It would be similar to QVC or Home Shopping Network (Direct Response) with exclusive pet products. However as there is a very high emotive factor we would have for sure dogs/ cats on the sets, maybe shoot b-roll of products with the pets etc. The Show • The show will be a hosted show initially for an hour • The show will air on all week nights • As a start would air in the late night paid programming slots • Every week have a celebrity talent (like Paris Hilton) for a short duration • Have 3-4 people representing different psychographics with their pets on the show, where the pets are the expert testers The Production • Shoot one day a week. • 8-12 products • Edit every week day the show, based on what sold the day before. Introducing a new product every day. The Direct Response • Have a direct response company deal with all the logistics of shipping and taking the calls 24/7 • Also have 24/7 customer service and web orders The Merchandising • Merchandising the right products and the other side is getting the vendors to agree to give “large” numbers on a consignment basis Dogs & Cats Shopping Network (C) Confidential 2008 5
  6. 6. Major cost & driversSub Drivers Notes Cost Annualized Distribution Channel On dedicated Paid Programming Channels at say 10pm, with sufficient buy in advance both on cable and satellite $10,000 per hour $ 2,600,000 Length of show 1 hr show Frequency 5 days a week at 10pm Production Real time/ off line To start with recording for 5 days/ 8-10 products in 1 day and editing the content for 5 days. Once there is a certain viewership established going to the live model with online analytics support $12,780 per hour $ 3,322,800 Celebrity talent This would bring in the viewership, everyone wants to know what Paris Hilton gets her dog stuff Direct Response & Fulfillment To start with outsource DR & fulfillment. Normally it costs 2% of revenue, and is built into the S&H costs Nil Analytics Offline analytics, change the show everyday based on the product responses Nil Merchandising At least 2 merchandiser, and a person they report to who is the business guy $150,000/ year $ 150,000 Marketing This would be a mixture of "cross channel promotion", print and PR $600,000/ year $ 600,000 Management Corporate Management, Finance and Marketing $400,000/ year $ 400,000 Miscellaneous Including legal + office + etc $200,000/ year $ 200,000 Total expense for a year $ 7,272,800 DOGS&CATSSHOPPINGNETWORK-DETAILS Strategic Assumptions Revenue D&C growth plan Dogs & Cats Shopping Network (C) Confidential 2008 6 The revenue is based on 2-3 components and having an extremely well produced show • Number of viewers (primary) – we think given the quality of the show and marketing done prior to launch we could start with 5 million viewers a show • Price points – most infomercials peg the price to be shy of $30, we think with the celebrity talent the average could be higher • Conversion – we think that the conversion would be 0.1% • Merchandising -- the merchandising would be generated more from the celebrity talent and making sure that its hitting different price points. • Revenue per day $150,000
  7. 7. QVC Facts about QVC Financials • QVC, Inc., one of the largest multimedia retailers in the world, broadcasts live 24 hours a day, 364 days a year. Founded in 1986 by Joseph Segel, QVC is a wholly owned subsidiary of Liberty Media Corporation attributed to the Liberty Interactive Group (Nasdaq: LINTA). Mike George currently serves as the company’s president and CEO. • QVC employs approximately 17,279 people worldwide. • QVC has international broadcast operations in the United Kingdom, Germany, and Japan. • QVC reaches approximately 96% of all U.S. cable homes and nearly 25.3 million satellite homes, totaling more than 166 million homes worldwide. • QVC’s buying staff of more than 168 people searches the world for quality merchandise. Product categories include: Home, Electronics, Cooking and Dining, Collectibles, Health and Fitness, Beauty; Jewelry, and Fashion. • QVC introduces more than 1,600 products each week (250 of them, new) to our customers • QVC.com achieved sales of over $1 billion in 2006. • QVC.com (U.S. site only) attracts an average of 5 million unique visitors each month and receives between 1,500 to 2,100 product reviews and customer ratings daily. This traffic is the largest daily review volume of any Bazaarvoice client to date. • In 2006, QVC received close to 179 million phone calls in the United States alone. The record for the most calls handled in a 24-hour period is 1,246,387, set on April 8, 2006. • To date, more than 45 million people worldwide have shopped with QVC. • Over the last 21 years, QVC has shipped more than one billion packages in the United States. In 2006, QVC shipped more than 165 million packages worldwide. • On November 12, 2006, QVC set records both in number of shipments (600,682) and number of items shipped (678,078) during a 24-hour period. • QVC’s U.S. distribution centers can pack up to 300,000 packages daily. • QVC achieved its best sales day on December 2, 2001 with more than $80 million in orders taken; the Dell Intel Pentium IV personal computer was the most popular item sold on that day. VALUATION MEASURES Market Cap (intraday)5: 9.62B Enterprise Value (19-Feb-08)3: 15.77B Trailing P/E (ttm, intraday): 15.26 Forward P/E (fye 31-Dec-08) 1: 20.55 PEG Ratio (5 yr expected): 1.09 Price/Sales (ttm): 1.23 Price/Book (mrq): 1.20 Enterprise Value/Revenue (ttm)3: 2.07 Enterprise Value/EBITDA (ttm)3: 8.139 FINANCIAL HIGHLIGHTS Fiscal Year Fiscal Year Ends: 31-Dec Most Recent Quarter (mrq): 30-Sep-07 Profitability Profit Margin (ttm): 8.40% Operating Margin (ttm): 14.89% Management Effectiveness Return on Assets (ttm): 3.70% Return on Equity (ttm): 6.91% Dogs & Cats Shopping Network (C) Confidential 2008 7

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