Looptworks case analysis
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Looptworks is an upcycling clothing company founded in 2009 in Portland, Oregon. It is co-owned by Scott Hamlin and Gary Peck. The company employs a sales manager, marketing head, sales reps, and interns. It uses an upcycling process to convert waste materials into higher quality products. The company plans to expand its product distribution to university bookstores over 5 years in Oregon, Washington, and California to target the green consumer market. Financial projections show increasing sales and profits as the company grows.
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Looptworks case analysis
- 1. Looptworks Jeremy Berres-Paul, Taylor Hinshaw Augie Rittenberg, Ye Wu
- 2. Background •Founded September 2009 • Co-owned by Scott Hamlin & Gary Peck •“Solution to a problem” •Based in Portland, Or Scott Hamlin in Entrepreneur Magazine
- 3. Human Resources Scott & Gary Owners Barry R. Maia P. S. Group Kiana N. Sales Head Employees Marketing Manager Designer Beth T. 12 Sales Interns Asst. Reps Designer
- 4. Upcycling The process of converting waste materials or useless products into new materials or products of better quality or a higher environmental value.
- 5. PEST Analysis Political - intellectual property - labor laws - environmental law Economic - recession - outsourcing
- 6. PEST Analysis Sociocultural &Demographic - fashion swings and trends - brands Technological - high competition - low cost solutions
- 7. Key Success Factors Key Success Factors In Clothing Industry Global Sourcing to Lower Costs Recognition of the Company and Brands Multi-Channel Retailing Price policy Sales Promotion Marketing Strategy
- 9. Risk Assessment Risks that Could Impact Looptworks’ Performance Profit Risk: limited number of products, markets, and delivery channels result in net income risks. Financing Risk: funds are difficult to obtain. Operation Risks: • Undercapitalization: poor planning • Break-Even: low price
- 10. Risk Assessment Contingency Plan for Risks Profit Risk: creates to the company’s income statement is profit risk measurement and management Financing Risk: • Debt Financing: Banks, Credit Unions, Local Government • Equity Financing: Venture Capitalists and Angel Investors Operation Risks: • Undercapitalization: enough cash hold • Break-Even: better cost controls and price increases
- 11. Opportunities in the Industry •Apparel Industry is overcrowded with competitors • SOLUTION: Differentiate yourself through innovation •But how do you innovate basic, non- performance clothing items? •Think process innovation rather than product innovation
- 12. Opportunities in the Industry •More importantly- think “Green” •Opportunity to be ahead of the pack •Position yourself in an uncluttered space, less competition •More Importantly, capitalize on the emergence of the “Green Consumer”
- 13. Opportunities in the Industry •Who is this new “Green Consumer”? •The fact that 18-24 year olds see themselves as green is important to marketers seeking to connect with this important consumer group* •Younger people are substantially more likely to be avid green consumers** •One of the biggest opportunities is capitalizing on this emergent group *”Green Marketing – US – April 2010.” Mintel Group LTD. April 2010 **”Green Living – US.” Mintel Group LTD. February 2011
- 14. Recommendation •Looptworks has already capitalized on the opportunity of going green •Recommendation: •Shift focus towards the college-aged green consumer by introducing their “Upcycled” products in university bookstores •Inadvertently attract the non-mainstream, alternative consumer
- 15. Implementation •Over 5 years, Looptworks will stagger the introduction of products into 9 total university bookstores • Entering Oregon 1st, Washington 2nd, and California 3rd •Product lines to be introduced •Basic T-shirt •Basic Sweatshirt •Long Sleeve T-shirt •Alternative Design T-shirt •Basic Jacket •All product lines will be tailored to the individual school’s color •Ambush marketing
- 16. Implementation: Oregon Schools targeted in Oregon: Product Distribution by year in each bookstore: 2011- 1,000 (basic tees) 500 (sweatshirts) 2012- 1,100 (basic tees) 550 (sweatshirts) 500 (long sleeve) 2013- 1,200 (basic tees) 625 (sweatshirts) 600 (long sleeve) 750 (alt tees) 2014- 1,300 (basic tees) 700 (sweatshirts) 700 (long sleeve) 800 (alt tees) 300 (jackets) 2015- 1,400 (basic tees) 800 (sweatshirts) 800 (long sleeve) 850 (alt tees) 400 (jackets)
- 17. Implementation: Washington Schools targeted in Washington: Product Distribution by year in each bookstore: 2012- 1,000 (basic tees) 500 (sweatshirts) 2013- 1,100 (basic tees) 600 (sweatshirts) 525 (long sleeve) 2014- 1,200 (basic tees) 700 (sweatshirts) 600 (long sleeve) 800 (alt tees) 2015- 1,300 (basic tees) 800 (sweatshirts) 700 (long sleeve) 850 (alt tees) 400 (jackets)
- 18. Implementation: California Schools targeted in California: Product Distribution by year in each bookstore: 2013- 1,000 (basic tees) 600 (sweatshirts) 2014- 1,100 (basic tees) 700 (sweatshirts) 600 (long sleeve) 2015- 1,200 (basic tees) 800 (sweatshirts) 700 (long sleeve) 850 (alt tees)
- 19. Financials 2011 2012 2013 2014 2015 Total Sales UO $ 23,950.00 $ 37,023.00 $ 49,085.75 $ 69,558.18 $ 83,262.59 OSU $ 23,950.00 $ 37,023.00 $ 49,085.75 $ 69,558.18 $ 83,262.59 PSU $ 23,950.00 $ 37,023.00 $ 49,085.75 $ 69,558.18 $ 83,262.59 UW $ - $ 23,436.95 $ 40,415.50 $ 53,534.00 $ 75,688.50 WSU $ - $ 23,436.95 $ 40,415.50 $ 53,534.00 $ 75,688.50 WWU $ - $ 23,436.95 $ 40,415.50 $ 53,534.00 $ 75,688.50 UC-Santa Clara $ - $ - $ 27,537.16 $ 46,901.00 $ 61,831.50 Cal $ - $ - $ 27,537.16 $ 46,901.00 $ 61,831.50 Stanford $ - $ - $ 27,537.16 $ 46,901.00 $ 61,831.50 Total Sales $ 71,850.00 $ 181,379.85 $ 351,115.23 $509,979.54 $ 662,347.77 COGS $ 38,080.50 $ 88,876.13 $ 165,024.16 $234,590.59 $ 298,056.50 Gross Profit $ 33,769.50 $ 92,503.72 $ 186,091.07 $275,388.95 $ 364,291.27 Operation Expenese Travel $ 1,000.00 $ 2,000.00 $ 3,000.00 $ 3,500.00 $ 4,000.00 Marketing $ 4,311.00 $ 14,510.39 $ 28,089.22 $ 40,798.36 $ 52,987.82 Logistics $ 2,155.50 $ 5,441.40 $ 8,075.65 $ 11,729.53 $ 15,234.00 Commision $ 6,107.25 $ 13,603.49 $ 22,822.49 $ 33,148.67 $ 43,052.61 EBIT $ 20,195.75 $ 56,948.45 $ 124,103.71 $186,212.39 $ 249,016.85 Taxes: 15% $ 3,029.36 $ 8,542.27 $ 18,615.56 $ 27,931.86 $ 37,352.53 Net Income $ 17,166.39 $ 48,406.18 $ 105,488.16 $158,280.53 $ 211,664.32 INPUTS: Manufacturing Costs 53% 49% 47% 46% 45% Sales Commissions 8.5% 7.5% 6.5% 6.5% 6.5% Retail build up 6.0% 5.0% 5.0% Marketing as % of Sales 6.0% 8.0% 8.0% 8.0% 8.0% Logistics as % of sales 3.0% 3.0% 2.3% 2.3% 2.3% Operation Margin 0.28108212 0.313973417 0.353455796 0.36513698 0.375960876
- 20. Looptworks Thanks You • unique markets for unique products • rewards over risks • Upcycle Your Life
- 21. Looptworks Q&A
Editor's Notes
- Must know and follow patent and trademark law so as not to infringe on other companies intellectual property. Wage and labor laws dealing with minimum wage, minimum age requirements for employees, and safety and health regulations environmental laws-involve waste disposal and sustainability. Outsourcing and off-shoring have had negative in the US. Import price competition is expected to keep margins down. . Consumer’s disposable incomes are down which has put profits below historical levels.Consumer demand has been low and is not expected to increase much in the near future which is resulting in many players exiting the industry.
- Fashion swings and trends can result in unprofitable production runs by manufacturers,demand for certain clothing styles changes quickly and often. Fashion swings can also create profitable production runs if a manufacturer can supply in-demand clothing at a favorable price. Brands play a major role is consumer’s perceptions of quality and what is popular. The demographics for apparel manufacturing are very broad. The largest segment is for work clothes which is generally male and female members of the workforce. The most important factors demographically in the manufacturing industry are male versus female and young versus old. There are have not been many technological advancements in the manufacturing industry in the recent future. But the high levels of competition arecausing companies to find new ways to stay competitive and differentiate themselves. Companies need to cut costs and are looking for new technologies that offer low cost solutions except many companies are unwilling to invest in developing new technologies because of the large capital investments required.
- The best way for Looptworks to continue to have success and be successful in the future is to enter the collegiate apparel market in university bookstores. This is the most attractive market for Looptworks to target with “green” and alternative consumers having readily available money to spend on apparel after purchasing schools supplies. University bookstores offer unique markets that allow Looptworks to create unique products for each school and continue to have that limited edition look and feel. There are risks with any young company attempting to expand, however, we feel that the rewards out way the risks. Not only will this recommendation result in a significant increase in profits but it will also help Looptworks continue to meet its mission of reducing the worlds waste and inspiring a generation to reduce their impact on the environment.
- The best way for Looptworks to continue to have success and be successful in the future is to enter the collegiate apparel market in university bookstores. This is the most attractive market for Looptworks to target with “green” and alternative consumers having readily available money to spend on apparel after purchasing schools supplies. University bookstores offer unique markets that allow Looptworks to create unique products for each school and continue to have that limited edition look and feel. There are risks with any young company attempting to expand, however, we feel that the rewards out way the risks. Not only will this recommendation result in a significant increase in profits but it will also help Looptworks continue to meet its mission of reducing the worlds waste and inspiring a generation to reduce their impact on the environment.