ANEW Business Plan by chrissycharlton

LOVE YOUR CLOTHES AGAIN.

ANEW Business Plan

Alex Rosandick

Allison Cooper

MBA in Design Strategy

Chrissy Charlton

California College of the Arts

Emil Alex

Lucy Sweeney

Venture Studio 2018

TABLE OF CONTENTS

executive summary

business concept

the problem

executive summary

business concept

problem

strategy

industry research

the solution

the customers

the competition

customer journey

persona

competition & substitutes

solution

markets

porterâ&#x20AC;&#x2122;s five forces

how it works

CAGR

SWOT

the execution

the operations

sales & marketing

strategic vision

operations

pricing strategy

full use case

equipment & materials

marketing strategy

business model

labor

customer acquisition

financials

metrics & milestones

sales & marketing

1 0 3 financial plan

115

110

1 1 6 phases

funding model

metrics

1 2 1 team 1 2 5 team bios 1 2 7 ownership

KEY DEFINITIONS

Conscious Consumer

A consumer who takes into account the public consequences of his or her private consumption or who attempts to use his or her purchasing power to bring about social change.

Fast Fashion

A company’s ability to turn over new designs and produce garments rapidly (i.e. every two weeks) and utilizes their operations and systems to capture economies of scale. Customers are therefore able to purchase garments at relatively low prices. Fast fashion disrupted the garment industry in the early 2000’s and shifted consumer behavior to buy more.

Retail Therapy

Shopping in order to make oneself feel happier or using the activity of shopping as a coping mechanism.

Impulse Purchase

The action of making an unplanned purchase. It is based on irrational thinking, but is stimulating in that one experiences a “high” when one shops. These purchases are often regretted later.

Existential Guilt

A free-floating, non-specific internal sense, which does not arise from personal failures or misbehavior. Existential guilt can be thought of as referring to when one lives inauthentically, or fails to seek out achieving our potential.

Back-of-Closet Clothing

Garments that are kept stowed away in the back of one’s closet and rarely seen or thought about again until absolutely necessary (i.e. moving). These items often go unworn but not discarded due to some sort of emotional attachment.

EXECUTIVE SUMMARY

Introduction

This document covers the business model and major factors influencing the launch and operations of ANEW. An early-stage startup based in San Francisco, ANEW uses a online platform to connect designers and customers to rework any garment a customer owns.

The Problem

The real pain comes into focus when individuals have to decide what to do with all of that excess clothing. This pain is ambient when a closet full of clothing you don’t feel excited to wear greets you every day, but becomes acute when preparing to move to a new home. What will one choose to do with all of this stuff?

It is time for customers to fall in love with their clothes again. ANEW is solving the question: how can we make the clothes we love but never wear into something wearable — and exciting?

Vision

To build a holistic clothing service that ignites the joy of having a wardrobe customers love to wear.

Mission

Bringing together craft and technology to build the future of wardrobes, connecting closets to designers.

Values

The intersection of technology and craft to do good. Authenticity in how we choose to live. Sustainability without compromising style and identity.

80% of clothing in the average North American’s closet goes unworn on a regular basis.

Digging into what this 80% of clothing is comprised of and the reason why people hold onto these items, the team discovered that people hold onto clothing for emotional reasons. They may have sentimental connections these garments; or they bought an item on sale even though it doesn’t quite ‘look’ right; they are hoping for a way to fix their favorite pieces that they damaged which doesn’t involve the hassle of going to a tailor; they are waiting for the ‘right’ occasion to wear a statement piece. The team realized that even though people are holding onto a lot of underutilized clothing, it is difficult for them to alter, fix, or get rid of garments not because they lack options but because there is no effortless solution to revitalize their wardrobe that allows them to feel good about what they have and their purchase decisions. Short of buying new clothing, there no exciting options to get that “brand new jeans” feeling from one’s existing wardrobe.

The Solution

ANEW answers the question “what can I do with this piece of clothing that I can’t bear to throw away, but can’t wear?” A garment redesign platform, ANEW serves up a variety of options to refresh and rework dated or damaged clothes. Customers can love wearing their clothes again and experience delight in the process of reviving their closest.

The Business

ANEW Business Plan

Business Concept

ANEW connects customers with designers and seamstresses to make their unwearable garments wearable. Through an easy to use online platform, customers have the agency to collaborate in the creative process of reworking their garments. Clothing items are mailed from the customer to ANEWâ&#x20AC;&#x2122;s facility where it is reworked and returned within a few weeks. ANEWâ&#x20AC;&#x2122;s app maintains a low-touch connection with the customer throughout the process while reinforcing a customized experience. This, in turn, allows ANEW to collect customer data and build a digital inventory of both personalized and systematized garment designs. ANEW will build towards capturing other revenue streams through insights from data - forecasting trends - and white labeling its technology. The culmination of creating designs that resonate with a larger audience and the effort to leverage artificial intelligence to build a robust library will inform a process that other businesses will want to use.

The Problem

ANEW Business Plan

The Problem

The average North American has a lot of ‘stuff’ in their closet. This problem is really an emotional one. It lies not so much in sense of guilt that people have about owning so much ‘stuff’, but rather in their irrational reasons for not doing anything with it.

The opportunities ANEW sees is in addressing the internal conflict consumers face when jumping on the ‘conscious lifestyle’ movement bandwagon. Conscious consumerism as a ‘lifestyle’ is tied one’s identity of ‘doing good’ for both themselves and the environment, but it doesn’t mean one will sacrifice personal style or change shopping behavior. North American’s will continue to buy clothing because the act of shopping makes them feel good.

For Millennials, a generation with wasteful consumption habits yet a strong disdain for waste, solving for this problem means addressing that ambient sense of guilt - the existential guilt of not living up to one’s identity - by transforming the experience of reviving their existing wardrobe.

Transformative services like ANEW will influence the future of apparel ownership. The team envisions a future where people own less but use more - the wardrobe of the future could manifest itself as a combination of key staples, environmentally friendly disposable clothing items, rental items for special occasions - or any occasion - and AI tools that take the guesswork of shopping, renting, and maintaining out the equation. This culmination of shifting consumer behavior, textile innovation, technology advancement, and delivery of seamless experiences has created an opportunity space that is yet to be fully realized. Solutions that make it effortless for consumers to achieve a more ‘conscious’ lifestyle will have a competitive edge.

The Problem

ANEW Business Plan

Strategy

ANEW is a garment redesign system that enables customers to make the clothes they love but never wear into something wearable again. Unlike going to a tailor or buying a new outfit, the platform offers customers an engaging way to interact with a designer to source style options without having to do the work of coming up with ideas themselves. ANEW’s strategy is to refine this service offering and grow its customer base during its first three years before evolving the service offering into a broader, online-based wardrobe solution.

The go to market strategy for ANEW’s service is founded on driving customers to the app through social media influencers on Pinterest and Instagram. The connection between customers and designers is forged through the app and reinforced throughout touch points along the customer journey - from the prompt to tag ANEW and the designer in an Instagram post when showing off their ‘new’ garment, to the personalized note and reusable branded bag that reworked garments are returned in.

The First Three Years The first six months are devoted to building the app for launch, including the system for the design library, and an algorithm for analyzing customer style preferences. The algorithm will support designers in their effort to provide personalized design ideas that resonate with customers. Although the service is provided on an app-based platform, designers and seamstresses work together onsite at ANEW’s facility to ensure quality control of the garment rework process. Learning through this process will allow ANEW to quickly iterate and improve upon the design creation and hand-off communication channel; in turn this will allow ANEW to scale operations through a distributed network of seamstresses and tailors, moving the alteration work closer to customers as ANEW scales to users in other urban areas. Using the data collected during this period, the garment redesign service can evolve to provide a holistic wardrobe solution. The opportunity to use this information on customer preferences to curate their wardrobe decisions including things like which new purchases to invest in, trendy items to rent, clothing to recycle, garments to rework, and even style advice on how to pair items together

ANEW Business Plan

INDUSTRY RESEARCH

Overview

Major influences relevant to the garment rework industry include the behaviors created by the prevalence of fast fashion, the human nature behind purchase decisions, trends in shopping behaviors, and environmental impacts.

Fast Fashion Influence

Psychology of Purchase Decisions

The $350B US apparel industry has short product life cycles, vast product differentiation, and is characterized by the rapid pace of demand change couple with long and inflexible supply processes. Rival companies in the fast fashion segment are meeting demand and perpetuating the cycle of garment waste impacting the environment and reinforcing consumer purchase habits.

Most consumer behavior lives in our unconscious mind.

Purchase decisions are emotional and retailers understand this. Customers’ desire to ‘do good’ in terms of creating less waste and making environmentally friendly choices is up against a massive industry dependent on increased consumption.

The spontaneous urge to spend our hardearned money is ingrained in our DNA. We’ve been conditioned at a young age to derive joy from receiving new things. We actually get a true “high” when we shop. An intriguing dictotomy exists for the millennial generation - a group that prefers to buy from eco-friendly companies. According to research led by thedUP, this generation represents the most wasteful and impulsive of shoppers, with impulse purchases representing 49% of their total spending.

The Problem

OF MILLENNIALS PREFER TO BUY FROM ENVIRONMENTALLY CONSCIOUS BRANDS, YET THEY ARE THE MOST WASTEFUL.

ANEW Business Plan

85%

of used textiles go into landfills

Trends in Millennial Shoppping Behaviors

Environmental Impacts

Millennials spend $600B each year (on everything, not just clothing) and this figure is projected to grow to $1.4T by 2020.

Spreading out the amount of finished clothing that is thrown out annually in the US across the entire population translates to approximately 80 pounds of used clothing per person. That is about eight trash bags full, or anywhere from 80-140 items.

Millennials spent an average of $1,753 per person on clothing and clothing related services in 2016 alone. They spend 8% more on apparel than any other generation. From an experience standpoint, where millennials are shopping is important to understand. Even though they don’t always ‘buy’, this generation shops as a form of entertainment, and they are doing so predominantly online.

Nearly 100% of textiles and clothing are recyclable. Some clothing makes its way to the second hand apparel industry, but a problem that isn’t being addressed is the clothing that sits in the back of our closets, unworn, and eventually destined for the landfill or donation bin. Statistics demonstrate that the Millennial and Gen X generations are most concerned about the environmental impacts of their purchasing decisions, however, their behaviors do not currently reflect this. The opportunity to create garment services and products that deliver on sustainability and satisfy the desire to ‘shop’ will ease the existential guilt of not living up to one’s standards.

95%

of purchases are emotional

$600B total spent in 2016 by Millennials

45%

of Millennials spend more than an hour each day looking at retail sites.

70%

Millennial women consider online shopping a form of entertainment.

The Problem

ANEW Business Plan

Micropilot

The ANEW micropilot revealed the back-of-closet problem faced by many. The ANEW team requested photos of clothing items that people are holding on to but haven’t worn in a long time along with a description of why they haven’t let them go. The vast majority of responses were from female millenials, and they were curious what could be done with the clothes in the back of their closets that they find unwearable. We refer to this as “back of closet guilt” because the users often acknowledge the irrational reasons they have for holding onto these items. Even the most devote, self-proclaimed ‘closet purgers’ have items they have been holding onto that they don’t wear. Psychologists weigh in on why we hold onto these items for so long. Consumer psychologist Miriam Tatzel in Nauet, New York talked about how shoppers rationalize their purchase decisions in the moment: “generally you like it, but it’s a little tight or a little baggy. And you think ‘Ph well, it’s a minor flaw. It won’t bother me in the long run.’ Then, that turns out to be the very thing that keeps you from wearing it.” Other times, “You think you might have a use for it in the future, but that day never comes.”

Right: Anita taking us through her “back-of-closet” stash. Below: Quotes from subjects of the micropilot as well as example pieces of “unwearable” clothing sent in.

“...there has to be something that can be done to this, I just don’t know what!”

“It’s nice and cashmere, so I don’t want to toss it. However, it’s no longer my style. I would love to have it designed because the materials are great and I love the idea of sustainability and not buying new things.”

“It’s a bit boxy, color is hard to wear with most jeans I own. It’s kind of boring. I’m kind of over it.”

- Daniella

- Maria

- Brody 25

The Problem

OF CLOTHES GO UNWORN BY THE AVERAGE AMERICAN.

The Problem

ANEW Business Plan

CUSTOMER JOURNEY PROBLEM | FALLING OUT OF LOVE WITH CLOTHES SHOPPING

CUSTOMER JOURNEY STAGES

CUSTOMER JOURNEY ACTIONS

shopping because desire of a retail therapy experience

there’s a sale at my favorite store!

try it on - it’s almost perfect! this minor flaw won’t bother me

point of purchase of statement piece (impulse buy)

DECIDING WHAT TO WEAR

DORMANT CLOSET

take it home and put it in the closet

put it back in the closet

opportunity to wear “new” item

doesn’t look quite right

idle closet time

CUSTOMER JOURNEY CURRENT SOLUTION | TAILOR ALTERNATE SOLUTIONS throw away donate

DISCOVERY begin searching for tailor

• Google • ask friends and family

T IMING finding time to go to tailor

• lunch break • before or after work • weekends

replace

SERVICE possible solutions offered: • Fit • Alter

put on garment

garment gets pinned or/and measured

do nothing

WAITING tailor writes up cost on a written receipt (need when picking up for later)

wait...

find time to pick up (remember where you put that receipt?

FULLFILLMENT pay and receive altered garment

return garment to closet until opportunity to wear

tailor / alter positive

“I must have this!”

“I have a date!” High-End Tailor Service Experience

“This one looks promising.” CUSTOMER JOURNEY EXPERIENCE

“When can squeeze this in my schedule?”

“Where did I put that receipt again?” Low-End Seamstress Service Experience

negative

“Maybe I’ll wear this some other time...”

“Why did I buy this?”

“This is such a Hassle!”

“How long is this going to take?”

The Problem

Challenge Statement

HOW MIGHT WE SHAPE THE FUTURE OF OUR CLOSETS TO BETTER REFLECT OUR VALUES AND IDENTITIES AS WE MOVE TOWARDS AND CONTRIBUTE TO CONSCIOUS CONSUMERISM?

The Solution

ANEW Business Plan

CUSTOMER JOURNEY ANEW DISCOVERY

CUSTOMER JOURNEY STAGES

CUSTOMER JOURNEY ACTIONS

begin search: • Google • ask friends and family

sees work of before and after clothes on social media: • Pinterest • Instagram

PRE-SERVICE

checks out website for more info: • ratings • examples • images

“I like all of thes before and after examples!”

uses app and provides a picture of garment

describe and select preferences: • stats • fit • style

COMMUNICATION

print label and ship garment to ANEW

dialog with designer begins

selects which design to move forward with

confirms design direction with payment

SERVICE

progress updates of the garment are set as notifications

notifications include: • garment progress • delivery details

FULLFILLMENT

receives ANEW garment with personal note

prompted to rate design and share photo

“Thanks Jess! This looks great.” “I didn’t even think of that!”

“I can see Jess is almost done working on it.”

CUSTOMER JOURNEY EXPERIENCE

The Solution

ANEW Business Plan

The Solution

The ANEW platform is the first step in providing solutions for making unworn clothing wearable again. The ANEW platform enables customers to upload images of their garments for a redesign diagnosis by a designer. The easy to use interface allows customers to select one of the designers prescribed options, removing the pain of figuring out what to do with their once-loved garment. Customers mail in their garment to ANEW to be reworked and returned to them within a few weeks. The operations model and marketing strategy evolves in year two to capture the cost benefits of a distributed network of contractors to match a growing customer base. ANEWâ&#x20AC;&#x2122;s go to market strategy is based on a phased approach, focused first on building out a customer base and retaining an in-house fashion design and alterations team, and technology experts. The proximity of designers, operations, and the tech team will enable ANEW to build out the service offering and platform more rapidly than creating a distribution network of contractors immediately. The in-house approach allows ANEW to quickly refine the flow of information between designers and seamstresses, as well as between customers and designers through the app.

The first phase targets the female, urban Millennial market segment as this was identified as a segment of early adopters for premium app-based garment services comparable to Rent the Runway (clothing rental), Stitch Fix (personal stylist), and Rinse (laundry). ANEW will lead with an influencer based social media marketing strategy to raise awareness for the service and learn what resonates with the target audience before investing more heavily in marketing campaigns. ANEW will use a platform like Whalar to source an influencer to collaborate with and evaluate potential product market fit within their following. Metrics in the platform assist in tracking conversion rates from social media. The mobile app makes it easy to upload photos of clothing to the platform. Adding a short description of why they donâ&#x20AC;&#x2122;t wear the garment and answering a few quick prompts, customers become involved in the creative process of redesigning their garments without the challenge of coming up with the ideas themselves. In the app, fashion designers provide a few ideas for redesigning the garment, sharing visual mock ups and the price for each option. Refer to the pricing strategy section for a breakdown on the tiered pricing model.

OUR SOLUTION WILL CHANGE THE WAY WE THINK ABOUT, SHOP FOR, AND INTERACT WITH OUR CLOTHES.

STEP 1 Create an account and make a work request

STEP 2 Receive options and ideas from designer

STEP 3 Print label to mail in garment

The Solution

ANEW Business Plan

Example Pinterest Account How it Works

The ANEW app offers a convenient way to use the service, interact with designers, and track orders. In order to use the service, customers must use ANEW’s app or online platform. The application acts as the company’s storefront, enabling communication between the design and the customer. Customers mail in a piece of clothing that they’d like to get reworked and pay a small fee for a quote, which is later deducted as a deposit toward their chosen design work. Once ANEW receives a garment, the in-house designers provide three ideas for how it could be revived, which are presented as proposals for the customer to choose from.

Social Media Connection

Users can connect their Pinterest and Instagram accounts to build an aesthetic profile. Users browse Pinterest for entertainment, a platform that reached 200 millions monthly active users in 2017. Repinning target customers’ pins on Pinterest will help build a community and dialogue around the brand, reinforced by the exposure of ‘influencers’ that promote ANEW on their boards.

The Customers

Persona

Meet Sophie. Sophis is a single, 30-year-old San Francisco resident. She has a “work hard, play hard” mentality. Because of this, Sophie needs a wardrobe that can suit her office job, coffee dates, the long list of weddings she’s invited to over the summer, hiking in the Sierra’s, and sipping pina coladas in Sayulita (or in her living room on a Tuesday night when she feels like it). She rents an apartment in the hip neighborhood of Hayes Valley with two other roommates. Sophie considers herself to be semi-fashion conscious — she has a Pinterest board dedicated specifically for style inspiration and clothes she aspires to wear. During the work week, she often ends up putting together outfits in a rush, running to the office with wet hair and an outfit she feels less mediocre about. On other occasions, such as dates, dinner parties, and special occasions, she finds herself spending at least twenty minutes standing in front of her fully stocked closet with “nothing to wear”. When she does have time to shop, she goes to Madewell and Everlane for basics, Rag & Bone for jeans, and sometimes — especially if she just got paid — Acne Studios for their oh-so-soft sweaters. Living life, she needs clothes that will last and has a hard time throwing away clothes she has invested in. Sophie is ANEW’s first customer.

The Customers

ANEW Business Plan

Total Addressable Market (TAM)

Our approach to estimating the total addressable market (TAM) involved narrowing in on the early adopters of a customer segment. Specifically, these early adopters are open to emerging online options for fashion and lifestyle brand options. Since research revealed women to be the most responsive to early adoption, market sizing starts with the female millennial population in the US. We considered the relevance of urban living to the frequency of moving because of the effect this has on needing to find a solution for beloved, yet unworn clothing. The under 35 age group moves most often, and female millennials are moving more often for job-related reasons.

Beachhead Market

The beachhead market is defined as female millennials in the Bay Area. In order to estimate the beach head for this market, the team conducted user testing to validate assumptions that younger female professionals have clothing that they do not wear yet cannot get rid of and would be interested in having those items reworked. The estimated total beachhead is 25% of the 900,000 female millennials in the Bay Area. This is a conservative estimate that captures young female professionals that have unworn items and would be willing to try a new online garment service, have discretionary income.

22.2M

Females age 25 - 34

12.2M

92M Millenials in the US

Millenials living in urban areas

3.6M

Total female population in Bay Area

900K

Female Millenials in Bay Area

$15.75M

Total Beachhead Market

The Customers

ANEW Business Plan

Follow-On Market

The follow-on market was identified Generation X females living in the Bay Area. Generation X is roughly 35 to 50 years of age and makes up 60M people in the US, or 19% of the American population. Defined as a small but financially powerful generation, Generation X has more spending power than any other generation, with 29% of estimated net worth dollars and 31% of total income dollars. A different marketing approach is required to reach this group; having proven that the ANEW works with another market will support marketing initiatives to build trust for the brand within this segment.

GENERATION

Gen - Y

The total population of SF Bay population is 7M, Gen X are 23% of this population (or 1.6M), of which 54% are female, totally 864,000 female Gen X in the Bay Area. Assuming 25% of this 864,000 comprise the beachhead market segment, totalling $15M. However, this demographic spends 44% more than Millennials on clothing, factoring this in the follow-on beachhead market is $21.7M.

Gen - X

Millennials

Bay Area Los Angeles Females

Total Bay Area Population

New York City Chicago

GENDER

M es Males

1.6M

Gen-Xers age 35-50 living in Bay Area

LOCATION

864K

Female Gen-Xers in Bay Area

Above: Visual of follow-on market growth as ANEW expands focus on generations, locations, and genders.

Gen-Xers spend 44% more in clothing and clothing services than Millennials

$21.7M

Follow on Beachhead Market

The Customers

ANEW Business Plan

Compound Annual Growth (CAGR)

ANEW’s projected compound annual growth rate year over year is 400% from year 1 to year 2. This rate declines to 200% in year 2 to year 3.

Apparell Industry

Garment Services

The CAGR of the US apparel industry is low in comparison, at 2% based on market projections across 2013-2025.

To compare to a growing segment within the garment services industry, the online on-demand laundry service market offers a premium service. This market is expected to grow at a CAGR of close to 37% from 2017-2021 globally.

The global women’s apparel market predicts a CAGR of around 4% during the period 2018-2022. Some premium garment/apparel markets are growing. The global premium denim jeans market, for example, is forecasted to grow at a CAGR of 8.40% during the period 2017-2021.

Clothing subscription ‘box’ services, like Stitch Fix and Trunk Club, however, have been on the decline. From 2013-2016 the CAGR was -66.4%. Whereas online clothing rental services market is expected to increase globally at a CAGR of 10.6% from 2017 to 2023.

Right: Aunt Mae discussing possible redesign solutions for an unworn garment during a visit to her tailoring workshop.

The Competition

ANEW Business Plan

Competition

Competitors were determined based on customers’ needs. Customers analyzing ANEW’s offering will most likely compare the service to alternatives that allow them to buy new clothes, donate, tailor garments, or do nothing. Comparisons are made across a range of competitors and alternative solutions.

Goodwill and other secondhand/consignment stores. Direct competition from donation-based services, recipients of most “back of closet” items.

Nordstrom. Accept almost all returns, do repairs on previous purchases, offer alteration services, and have logistical capabilities which equals a strong position for additional services.

Alteration Services Industry. Direct competition from mom and pop tailoring businesses, dry cleaners, and other places that offer seamstres services and garment care.

Remade apparel services (UO Urban Renewal, Eileen Fisher Renew and Reformation). Rework/redesign certain donated items of their brand or brands they carry and sell them.

Fast Fashion (H&M, Zara, Forever21). Direct competition from fast fashion big retail that provide “cheap replacements for damaged, outdated apparel.

Air Tailor. Current offering could evolve through their network of retailers and tailors to offer a similar service making them an indirect competitor that is likely to compete.

Stitch Fix. Indirect competition with a large customer base that offers a new way to purchase clothing through a subscription service. Their likelihood of growth and diversification of offereings make them likely to compete.

High-end cleaners (Rinse, Mulberry). Large-scale/appempowered laundry/cleaning services that may do are potential indirect competitors/ future direct competitors that could easily scale with their existing network.

The competitive dynamics of the garment service industry was assessed using the Porter’s Five Forces framework, a strategic management tool used to determine competitive intensity.

Substitutes

The substitutes for ANEW are perhaps their greatest threat. The most prominent substitute for ANEW is doing choosing to do nothing to revive or restore the clothing that goes unworn or lays idle in the back of closets. Rather than using the services that ANEW offers, these items get donated or thrown away. Purchasing new garments to replace damaged or outdated garments is also a major substitute. For damaged or ill-fitting clothes, customers could substitute ANEW’s services by either going to a tailoring shop or altering garments themselves.

Technology Forces

Influential technology forces within the industry include ease of use in online retail and automation in the logistics chain. These factors enable on-demand garment services like wardrobe curation (populat subscription ‘box’ services), and laundry delivery services to make errands like shopping and dry cleaning painless. Rivalry in the premium garment and services industry are relatively friendly to the broader apparel industry. Retailors like Nordstrom and Neiman Marcus are acquiring and partnering with premium garment services like Trunk Club (subscription box service) and Rent the Runway (on demand clothing rental service). Retailers and technology-enabled services are both competitive and complementary.

Conscious apparel companies (Everlane, Black Crane). Offer transparency in their manufacturing and materials sourcing as well as their pricing structure. Appeal to similar market as ANEW.

The Competition

ANEW Business Plan

Competitive Positioning

For urban dwellers that have an attachment to their “back of closet” items, ANEW brings new life to treasured clothes. Unlike amassing unworn garments that haunt you everyday as you rummage through your closet to get dressed, our clothing rework service delivers a revived and refreshed look to your existing wardrobe that you can love and wear again.

Competitive Advantage

ANEW’s competitive advantage is derived from a combination of three areas: service, operations, and data. ANEW has the ability to customize fashion trends through a unique service offering. The small, in-house operation allows it to operate nimbly because of the absence of inventory and garments — instead, customers supply the “inventory”. ANEW does not require the same complex supply chain and distribution networks like their competitors in the retail garment brand space. The online platform maintains reach and scalelability without necessitating in-person interactions like traditional alteration services. The model for using customer insights to build a robust design library and track customer trends will generate additional revenue streams. This is an advantage because the customer insights are unique and will popularize styles that are n ot mainstream. This allows ANEW to generate revenue by selling insights from customer trend data in the format of forecast resorts to fashion brands. Data collection and analysis also opens ANEW up to the option to produce fsahion line based on trending designs.

The Competition

ANEW Business Plan

PORTER’S FIVE FORCES The Porter’s Five Forces framework assesses the competitive dynamics through the lens of the competitive dynamics through the lens of barriers to entry, attractiveness of substitutes, the power of suppliers and customers, and the overall nature of industry rivalry.

Threat of New Entrants

Threat of Substitutes

Bargaining Power of Suppliers

Bargaining Power of Customers

Industry Rivalry

High

Medium

High

Low

Barriers to enter both the apparel and garment services industry are relatively low. The apparel market is saturated, however, the on-demand, premium garment services is a growing market dominated by those who were first to market. For examples, Stitch Fix has 84% of the garment subscription service market.

Convenience of purchasing new garments or simply doing nothing are the strongest forces. Services that feel easy, engaging, and personalized will compete best against the status quo.

ANEW’s workforce is a major ‘supplier’ power. Demand for tailoring, alterations, and seamstress services in the US is on the decline and therefore, easy to acquire. From a materials stance, garment suppliers are the customers of the business, not the traditional supply chain of materials and garment production.

Market transparency is highly visible and leads to price sensitivity. Low switching costs creates high customer churn. High expectations for user friendly apps are driving the necessity for seamless customer experience. Subscription rates are on the rise, but cencellation and drop off rates are also high. Recommendations often trigger subscription/new service uptake, but customers cancel subscriptions and memberships that don’t deliver superior experiences. Studies of subscription box services showed that the trigger for female consumers to initiate a curation subscription (like Stitch Fix) was 25% to ‘try something new’, and 24% because it was ‘recommended to them’.

Direct competition from tailoring and seamstress services is low because inconvenience is the customer pain point that these ‘mom and pop’ operations are not solving for. The competitive rivalry is friendly where premium products and services can be complementary. There is no direct competition for ANEW at scale. However, large retailers like Nordstrom are positioned to partner or acquire premium garment services that complement the brands they sell.

Given the ease for customers to switch to the latest new entrant in the market, ANEW must maintain its differentiation through personalized garment rework services while building retention. Insights from a recent Mckinsey report highlights that customers do not inherently love subscription models, but instead desire great end-to-end experiences. Customers “are willing to subscribe only where automated purchasing gives them tangible benefits, such as lower costs or increased personalization.” ANEW is an end-to-end experience focusing on providing personalized garment solutions. The membership program — as opposed to a recurring subscription program — is the first method ANEW will use to increase desirability bor customers to stay on the platform.

The Competition

ANEW Business Plan

SWOT

Key Drivers

Key drivers are evaluated from a customer perspective in terms of conducting an environmental analysis of customer needs and the decision drivers evident in purchase behavior.

Consumers compare competitive offerings and alternative solutions based on the following key drivers: Utility (satisfaction and wearability of garment) Convenience (ease of access; time to acquire) Affordability (relative to premium garment replacement) Trust (peer-to-peer rating, pricing transparency) Personalization (of service and design) Accessibility (online platforms for alterations, order fulfillment, and payment) Other drivers included curation (based on prescribed aesthetic) and rage or availability of selection.

Strengths

Weaknesses

Opportunities

Threats

In-app interaction with customers builds trust

Lack of operational scale and retail networks

Wider audience appeal beyond our core target group

Membership program drives customer retention

High equipment and maintenance costs for inhouse model

Consumers are becoming more conscious about what they buy and are concerned with social responsibility and sustainability

Customers opting for quicker and cheaper fastfashion alternatives

Convenience of online customization platform Additional revenue streams through monetization of the platform and designs library Effectiveness of social media use as a feedback loop to track trends and reach a broad audience quickly to share unique solutions that can be recreated for others

Longer turnaround time compared to competitors Variability in time and resources for each garment

Technological advancements in artificial intelligence applied to the fashion industry can increase production

Low barrier for entry for other possible solutions that could compete Risk of poor customer retention if first use results are unsatisfactory

Unaffected by rapid changes in trends Mapping out the performance of ANEW against competitors and alternative solutions based on key drivers revealed that ANEW has strengths in convenience, utility, and accessibility. This means that ANEW must align its execution strategy with its strengths. This positions ANEW as a solution for wardrobe â&#x20AC;&#x2DC;woesâ&#x20AC;&#x2122; in the realm of prodviding design ideas, garment rework service, personalized wardrobe consultation, and trusted style advice through an online platform that prioritizes the customer experience.

The Execution

ANEW Business Plan

Strategic Vision

ANEWâ&#x20AC;&#x2122;s strategic vision not only outlines the future growth but also the impact the service will have on the industry. Within the next three years, ANEW will grow into a $6M technology-driven, designas-service company, providing garment design diagnosis, clothing rework services, and holistic wardrobe consultation through a digital platform to reach urban, transient, selfidentified â&#x20AC;&#x2DC;conscious consumersâ&#x20AC;&#x2122; nationwide.

The Execution

FULL USE CASE CONTEXT

COMMUNICATION

PRE-SERVICE

SERVICE

FULFILLMENT

PARTY!

CUSTOMER

back of closet clothes need updating

opens app/site and provides a photo of garment

describes and selects aesthetic preferences

print label and ship garment to ANEW

receives options and prices on app

selects design to move forward with

confirms design direction with payment

app notification

acquire data (images of garments)

acquire data (style preferences)

designer receives request

assesses and comes up with 3 tiered options

acquire data (style solutions)

designer does quality control on garment

hand off to seamstress with instructions

app notification

receives ANEW garment with personal note

prompted to leave feedback and share a photo

opportunity to wear ANEW item

ANEW

seamstress works on garment

hand off to distribution

distribution ships garment to customer

acquire data (ratings and feedback)

DATA COLLECTION TOUCH POINTS mobile app website email designer communication social media pamphlet / postcard hanger bag

Key Partners Year 1

Year 1

Shipping services

Assess items, provide quotes (designers)

Bags/shipping container supplier

Business Model Canvas This section describes how ANEW creatses, delivers, and captures value. Strategyzer’s Business Model Canvas was used as a tool to describe the nine basic building blocks of ANEW’s business model.

Key Activities

Maintain app

Sewing Equipment providers and servicers

Year 2

Techshop (as needed)

Build out and share portfolio

Year 2

Year 3

Pinterest, Instagram tastemakers/influencers

Automate pattern creation

Fabric sourcing

Value Proposition

Customer Relationships

Year 1

Seamstresses do alterations

Shipping & receiving

Utility: making unworn clothes wearable again

Trustworthy service to save back-of-closet items

Hire and contract

Marketing, advertising

Year 2

Removing guilt/anxiety of “hanger hoarding”

Trustworthy partner in owning clothes

Forecast trends

Customer relationships

Year 3

Clothes for a lifetime

Trustworthy source of style thought leadership

Develope AI for style updates

Customer Segments Please see customer segments on page for overview and detailed breakdown.

Brand partners for retail experiences

Hiring relationships: Design schools for students/ internships/part-time work

This includes the following sections:

Key Resources

Channels Year 1

Year 1

1. Value Propositions 2. Customer Segments 3. Customer Relationships 4. Channels 5. Key Resources 6. Key Activities 7. Key Partners 8. Cost Structure 9. Revenue Streams

Designers and stylists

Part-time/ contract seamstress army

Social media, Adwords

App development team

Website & app Year 2

Year 2

Customer support expertise

Thought leadership (i.e. look books, blog posts)

Biz dev & brand relationships

Year 3

In-person experiences

Year 3

AI engineers

Cost Structure Please see cost structure on page for overview and detailed breakdown.

Revenue Streams Please see revenue streams on page for overview and detailed breakdown.

The Execution

ANEW Business Plan

Millennials + Gen X-ers. These consumers spend more time shopping online and are more likely to try and online service.

Customer Segments

ANEW customers are characterized by key demographic traits such as spending and shopping habits, that will make it easy for us to reach them. Urban dwelling, busy professionals are key to the segmentation. ANEWâ&#x20AC;&#x2122;s customers are more likely to buy premium than fast fashion items. Given this target demographic, customers are most likely using online laundry services like Rinse or washio, and shopping premium, conscious lifestyle brands such as Cuyana.

Although ANEW is optimizing for the aforementioned segments, the company also sees vintage enthusiasts and customers motivated by environmental sustainability as potential users of the service.

Urban dwellers. City residents are more space-constrained and have more immediate needs to maintain high-quality, capsule wardrobes.

Conscious Consumers. Consumers who are willing to pay more if it alignes with their values. They not only care about what they buy but also how and why they buy it.

Busy proffesionals and financially stable consumers. Our initial customer base can afford the expense to maintain their clothing and already own premium quality garments. The need for a convenient, ship-from-home service is appealing to those who feel pressed for time.

Apartment renters. Unlink home owners, apartment renters in urban cities move more frequently and therefore asses their wardrobe more often.

The Execution

ANEW Business Plan

anew anew love your clothes again. anew.com/

Channels

The channels where customers will engage with the brand will evolve as the company grows. Regardless, channels will be centered around engagement through social media, the mobile app and online platform, and the physical shipping bag that makes it convenient, affordable, and sustainable to for customerâ&#x20AC;&#x2122;s to ship their items. In the first year, customers will initially hear about and engage with ANEW through social media channels including ads and curated content on Pinterest and Instagram. This is where target customers currently go to learn about new fashion-related trends and services. This will evolve into a channel grounded in authentic thought leadership, including blog posts by relevant influencers, upscale lookbooks, and other forms of style advice. The intention is to position ANEW as a trusted source for holistic wardrobe consultation and curation as the company develops new services and products.

The shipping bag is an important part of how the customer experiences brand touchpoints during distribution. The branded bag is reusable so that customers can send and receive garments. Personalized notes from the designer are an added touch that echos the bespoke nature the service conveys.

ANEW perceives potential for moving-related channels as appropriate touchpoints for the service. This is because the process of packing and settling into a new living space is a key trigger for people to question their back-of-closet clothing stashes. Partnerships with companies like Casper/Tuft & Needle, Wayfair, IKEA, and other home furnishing companies that service our customer segment could spark awareness for ANEWâ&#x20AC;&#x2122;s service.

The Execution

ANEW Business Plan

Customer Relationships

Customer relationships are established through ANEWâ&#x20AC;&#x2122;s channels. These relationships are developed through the personal assistance and co-creation opportunities within the app, reinforcing the brand as a trustworthy, premium service with consistent results. The second phase of automation service layer assists the relationship development through well-curated, stylish, and personalized design options.

Other touchpoints that support customer relationship building include the designer rating system. This feeback touchpoint also provides further efforts in building a trusted community of designers similar to the Airbnb model of reviewing host profiles.

ANEW provides customers with a degree of co-creation through the agency they have in the app to share their hopes for the garment and in the design option selection process.

In the second and third phase, ANEW will expand further into environmental experiences. These brand engagements will support the initiatives of community offline and into the physical realm. This include expanding the pop-up shop concept with value-aligned partnerships in major urban centers and having a presence at fashion week events.

ANEW Business Plan

Key Resources

The Execution

Key resources include the physical assets, intellectual resources, and the human capital necessary to deliver ANEWâ&#x20AC;&#x2122;s value proposition. Since ANEW does not require a network of stores or logistical infrastructure, the companyâ&#x20AC;&#x2122;s physical assets are not capital intensive. Physical assets involve the sewing and production equipment necessary for the design and IT work. Intellectual resources include customer data, the design library, intellectual property (algorithms and service platform), and human capital (creative and technical resources).

Human capital centers around core staffing resources: Designers (small team of in-house stylists that grow relative to fixed costs). Part-time/contract seamstresses (paid on per hour job basis). App development team (engineers and UX designers; data scientists and automation/AI engineers in later phase). Business development expertise (from advisory level to start; in second phase, hiring a paid role to drive relationships with various brands). Core management team (scrappy team to do design and IT work in addition to strategy especially during start up phase).

The Execution

KEY ACTIVITIES

CONTEXT

COMMUNICATION

PRE-SERVICE

SERVICE

FULFILLMENT

ANEW

acquire data (images of garments)

acquire data (style preferences)

designer receives request

assesses and comes up with 3 tiered options

acquire data (style solutions)

designer does quality control on garment

hand off to seamstress with instructions

seamstress works on garment

hand off to distribution

distribution ships garment to customer

acquire data (ratings and feedback)

DATA COLLECTION TOUCH POINTS mobile app website email designer communication social media pamphlet / postcard hanger bag

The Execution

ANEW Business Plan

Key Partners

Key partners are identified as companies and individual roles necessary to build the service offering. For ANEW, this includes buyer-supplier partnerships and strategic alliances.

Buyer-Supplier Partnerships

Strategic Alliances

Shipping services: Fedex, UPS, and USPS

Fashion design schools: California College of the Arts, School of the Art Institute of Chicago, Parsonâ&#x20AC;&#x2122;s

Fabric/materials suppliers Manufacturer/supplier for signature branded shipping bags Sewing equipment suppliers and urgent servicnig technicians to maintain and repair (as need be) said equipment

Tastemakers + influencers: targeting influencers prevalent on Pinterest and Instagram who share ANEWâ&#x20AC;&#x2122;s values and have a style that aligns with the brand.

Techshop access for additional tools such as laser cutter, CNC machine, etc. as needed.

The Execution

ANEW Business Plan

Cost Structure

ANEW has a value-driven cost structure given the degree of personalized service.

Revenue Streams

During the first 2 years of operations, revenue will be primarily derived from transactions. Recurring revenues will be generated in year 3 with the launch of licensing programs.

Costs are primarily fixed costs, as categorized below.* Staff salaries and contractors paid hourly. Start up costs+ equipment includes legal and incorporation costs, supplemental fabric, thread, various types of sewing machines, needles, irons and steamers, computers, and other office equipment. Tech services that will support our app and other technical maintenance services such as web hosting, servers, design software, etc.

Marketing and advertising costs which include content creation and influencer fees and incentives. Shipping is paid by the company and absorbed in the price customers pay through an initial $15 charge at point of design consultation.

Sales revenue will primarily come from margins based on the quotes given (pre-paid) to customers and the services they select (point of sale). Membership options created in year 2 will create an additional revenue stream from recurring membership fees. In-house techical products will create additional revenue streams as we build out offerings, systems, and data analytics. Products will include licensing a white-labeled version of our in-house online operations platform, AI-based style and trend watching tools, and automated pattern creation technology.

Packaging including signature shipping containers and other packaging/print materials. *See cost breakdown in appendix

The Operations

ANEW Business Plan

Operations

ANEWâ&#x20AC;&#x2122;s production operations are centralized and conducted at the Bay Area facility during the first two years in order to refine operational systems. This will mitigate risks in launching a decentralized model before testing and developing solid quality assurance procedures and vetting program for seamstress onboarding. Utilizing a decentralized operations model in year three and beyond will allowing ANEW to capture value and scale from contracting seamstresses and tailors across the nation. Those employed as seamstresses/tailors are experiencing job insecurity as the projected growth of this job market is - 9%. This decline is attributed to the rise of fast fashion alternatives to garment alteration; however, it creates an opportunity for ANEW to to utilize the excess capacity of the alterations job market.

Management

The labor model for ANEW starts with three co-founders. Each founder leads a major function of the business with their respective specializations: technology, fashion design and creative, and marketing/sales. See the Labor section for details about seamstress employee contractors.

FASHION & CREATIVE LEAD

TECHNOLOGY

SALES & MARKETING

The Operations

ANEW Business Plan

EQUIPMENT & MATERIALS

Analysis: Ousourcing vs. setting up in-house production was the first area of analysis to determine equipment and material requirements to begin operations at a meaningful initial scale. Our in-house fashion industry expert conducted this analysis. Decision: Own equipment in-house to make logistical operations significantly simpler, reducing the amount of travel - and time - required to deliver garments back to customers. This is possible by keeping in-house design expertise in close proximity to seamstresses for in-person handoff of garments. This will also allow increase quality control over the creative process, production, and materials. Result: ability to scale this more quickly as we invest in and grow our automation technology platform with what we learn through operating the core service.

Left: Sewing machines and equipment in Aunt Maeâ&#x20AC;&#x2122;s tailoring workshop in South San Francisco.

ANEW Business Plan

Labor

The Operations

ANEW’s labor strategy is designed to maximize communication, harmony, and efficiency between designers and seamstresses. ANEW will grow the core team with a focus on hiring in-house designers to support the growing production and to build a strong brand through quality assurance and unique design ideas. Onboarding software engineers will support the build out of service automation necessary to scale operations. Seamstress work is handled entirely by hourly contractors, working on site at the Bay Area facility. They will bring the designers’ visions to life. The rationale of having seamstresses and designers work in the facility allows ANEW to de-risk potential production capacity issues caused by fluctuation in daily/weekly numbers of garments received; paying instead on a per job basis as opposed to incurring expenses for full-time seamstresses. This will lend agility to the operations model. Based on the team’s research and validation with experts, the averaged garment will require on average 2 hours of seamstress time.

Right: Studio visit Aunt Mae while she tailors a customer’s garment.

Sales & Marketing Strategy

ANEW Business Plan

Pricing Strategy

In the first year, ANEW’s offering is limited to B2C garment redesign services through the online platform. The process starts with a $15 quote fee; this covers shipping expenses and initial design time spent on providing design proposals to the customer. The quote fee serves as a credit toward the chosen design, estimated as $70 per garment on average. As a marketing promotion tactic, ANEW will waive the quote to build trust with new customers during specific marketing campaigns. The team’s user testing confirmed customer’s willingness to pay and revealed that the quote pricing was attractive because it is less than the average garment subscription service of $25. ANEW’s membership program will launch in year 2. This VIP program provides a 10% discount for a $50 annual subscription fee. Prompting membership customers to send in a piece a month takes pressure off the decision making process of which garment to send in for the first few submissions; this allows customers to start with a garment that is less precious to them and builds trust in the brand’s ability to deliver as promised.

Customer Alternatives

Price for Value

Alternatives affect the sales strategy. The main alternatives include traditional tailoring, which ranges from $10 for a quick hem/fix to $100 for a more complex job, and replacing the garment with a new item. Analysis revealed that the target customer segment spends an average of $50-$250 on a newly purchased garment.

ANEW’s services offer more complex garment treatments than traditional tailor/ seamstress options. ANEW provides a solution within the middle of this proven, willing-to-pay range. Research revealed that the average price the target segment would pay per garment ranges between $30-$100. The estimated average price point of $70 per item covers the costs of overhead, labor, and shipping

Sales & Marketing Strategy

ANEW Business Plan

MARKETING STRATEGY

Overview

Creating brand awareness through social media with paid influencers is key to the marketing strategy. This results in an experience perceived to be more authentic than traditional advertising techniques. Executing a series of pop up events will create opportunities to engage with potential new customers in strategic locations that will align with digital marketing campaign efforts.

To execute the marketing strategy ANEW has approached the marketing budget with an eye to how create awareness, acquire customers, and retain relationships through the following opportunities:

Determining they have a need to move away from their status quo. Movement to own less/have less. High frequency of moving within urban areas.

Business to Consumer (B2C) Campaigns

Business to Business (B2B) Marketing

In the first year, ANEW will attribute 25% of their total expenses to its marketing efforts. The main expenditures for year one are paid influencers, mailers for 20,000 customers (banded promotional postcards providing a coupon for new customers), and PR services for brand exposure across various digital and print media channels. The strategy for pop up events ramps up in year two and grows as a marketing effort and expense in year three and beyond as this is an import touchpoint to expand into new customer categories.

The data collection and algorithm development will have matured in year three and ANEW will begin its B2B campaign, leading to additional revenue streams for forecast reports and a white labeled of ANEWâ&#x20AC;&#x2122;s platform.

Discovering ANEW. Social media, namely Pinterest and Instagram as well as pop-up events and Google Adwords.

Analyzing the service. Comparing the service to alternatives includes buying new garments, donating, and taking garments to a tailor. Comparisons made based on cost, ease of drop off/pick up, customization.

Acquiring the service (platform). When customers access the online platform on their desktop or mobile device, submit a photo of garment, and engage the service of the designer.

Activating the service. Garments are mailed to ANEW, reworked, then mailed back to customer in a branded, reusable bag.

Paying for service. On the platform after accepting a design recommendation, prior to ANEW executing the job. Time to close a deal is estimated as three weeks.

Sales & Marketing Strategy

ANEW Business Plan

CUSTOMERS DISCOVER ANEW THROUGH SOCIAL MEDIA, EVENTS, AND SEARCH QUERY RESULTS.

CUSTOMER ACQUISITION

Social Media Influencers

Pop-Up Events

Google Adwords

Even though Millennials don’t always ‘buy’, this generation shops as a form of entertainment, and they are doing so predominantly online. “They are researching products, comparing prices, envisioning how clothing or accessories would look on them, or responding to flash sales or coupon offers,” explains the Urban Land Institute in their report Generation Y: Shopping and Entertainment in the Digital Age.

Pop-up events create brand awareness and demonstrate the use case of the service. ANEW will host pop-up events, leveraging high foot traffic locations popular with shoppers, adding more events in subsequent years. Locations of events align with the marketing strategy of creating awareness in specific urban centers, starting with LA, New York, and Chicago. Events will be linked to fashion and lifestyle brand partners that share the same values as ANEW. Events featuring a “surprise” designer will be used as opportunities to build anticipation and brand exposure through social media campaigns.

Using Google Adwords will help drive additional traffic to our site when customers are searchiung for style inspiration, options to fix garments, and help declutter their closets.

ANEW’s acquisition strategy in the first year is to use social media influencers to create awareness for the brand and drive traffic to ANEW’s website. Our target customer base can be found searching for wardrobe inspiration and following lifestyle influencers through Pinterest and Instagram. Users browse Pinterest for entertainment, a platform that reached 200 millions monthly active users in 2017. Repinning target customers’ pins on Pinterest will help build a community and dialogue around the brand, reinforced by the exposure of ‘influencers’ that promote ANEW on their boards

In person events like these will support marketing efforts targeting the Generation X beachhead; it is critical to acknowledge that gaining this segment’s trust will require a different marketing approach than with the Millennial approach. Building off the proof of concept with the Millennial market, capturing and broadcasting the demonstration of quality of design and treatment of garments through pop-up events will achieve this in years two and three

Development

Another driver contributing to the behavior of owning less is the trend of movement within urban areas; the high frequency of moving to new accomodations contributes to customers’ needs to do something with the clothing that they are not wearing frequently. The choices they have include donating, fixing, throwing away, replacing, or altering. The under 35 age group moves most often, and female Millennials are moving move often for job-related reasons. In the next phase of operations, ANEW will test a strategy to explore how to acquire customers when they are in the process of moving - a trigger for deciding what to do with “back of closet” items. This may take the form of partnering with moving-related services and user Google AdWords to target moving-related search queries. The estimated monthly expense for Google AdWords for a small business like ANEW is $10,000. To create awareness of the service, Google AdWord campaigns will be aligned with key times of the year when potential customers are most likely to move. In year one, four months of Google AdWord costs are accounted for.

The Financials

ANEW Business Plan

FINANCIAL PLAN

Overview

Key insights into ANEW’s financials are discussed on the following pages within this section. For full details, refer to the preliminary financial plans in the appendix.

To validate the financial plan, the team worked with experts in the fashion industry as well as entry-level fashion designers and seamstresses to better understand the time spent per job, associated hourly rates, and overall feasibility of the work required for ANEW’s operations.

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The team’s effort to validate the financials built upon earlier customer research in the field. Based upon services identified during competitive positioning research, the team conducted a micropilot with potential customers to collect an inventory of garments that aligned with ANEW’s services and customers were willing to send to ANEW. Working with designers to gather ideas for the items receivedt, design options were presented back to the customer test group for feedback on the options and proposed rates.

103

The Financials

ANEW Business Plan

Marketing and Advertising Costs

Creating brand awareness through social media and paid influencers is key to the marketing strategy. This is seen as a more authentic than traditional advertising technique to our target customers. In the first year, ANEW will contract five paid influencers at the standard rate of $1,000. In the second year of operation, the number of paid influencers will increase to 20, and 25 in year three. Engaging a PR firm in the first year will support the marketing and advertising efforts. The standard cost for PR for a small business is approximately $5,000 monthly. Anew will lead with paid influencers and do a soft launch through a PR firm in the second quarter of year one.

The estimated monthly expense for Google AdWords for a small business is $10,000. To create awareness of the service, Google AdWord campaigns will be aligned with key times of the year when potential customers are most likely to move. In year one, four months of Google AdWord costs are accounted for.

The estimated cost for a popup event is $5,000. As a part of brand awareness and community building with its target customer base, Anew will host one popup in year one in San Francisco. Building off of the experience of the first pop-up, ANEW will host 4 events in year two and in year four.

Details (fuxed cost)

Marketing & Advertising Google AdWords

$10,000

PR Campaign Cost (Monthly Retainer)

$15,000

Pop-Up Events

$5,000

Social Media Ads

$5,000

Coupon Mailers (for change-of-address)

$27,000

Paid Influencers

$12,500

$74,500

$54,500

Total Marketing Expenses

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$15,000

$129,000

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The Financials

ANEW Business Plan

Operating Costs

General & Admin

General and Admin Rent

$6,500

Utitilies

$9,000

Insurance

$1,250

Legal Fees

$375

Accountant Fees

$375

Management (Founder) Salaries

$52,500

App Maintenance/Setup Costs (?)

$200

ANEWâ&#x20AC;&#x2122;s general and admin budget reflects the necessity to provide equitable compensation for the founding team, given that living expenses in San Francisco are high, and to ensure that ANEW retains design talent. Separating out the sewing expertise from the design expertise, ANEW is able to keep overall costs low per garment while maintaining a high quality end product and remaining flexible as we scale to the incoming garment workload. Physical space is also important to operating our business, so rent is another significant expense in this domain (estimated based on other similar businesses we have worked with). We intend to keep overall costs low by outsourcing accounting, legal and other functions, and paying the founding management team relatively low salaries (plus equity).

Note: See COGS for Designer Salaries

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Developer/IT Salaries

Website Expenses

$500

$2,000

Office Supplies

$250

250

Technical Equipment Expenses

$1,960

Travel Expenses

$250

Total Cap Ex

$4,960

$3,000

$71,000

Creating brand awareness through social media and paid influencers is key to the marketing strategy.

In years 2 and 3, we will focus our spending on automating our processes and building out the tech platform capabilities by aggressively growing our technical product team.

$150,160

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The Financials

ANEW Business Plan

START UP COSTS

App Development

The initial app development will be handled by the technical co-founder, a full-stack developer with experience designing web and iOS apps. The MVP functionality will be simple enough to start that this CTO will be able to complete development in the 6 months before launch, based on the initial designs and product roadmap done by this strategy team.

Office & Equip.

With the first six months (June-November 2018) focused on field testing and pilot experiments, the ANEW team will only need to rent space starting with the launch of the full service in December as garments start coming in and seamstress contractors are brought in to fulfill orders. This will be funded with the initial seed round as part of the initial operational costs, along with the equipment needed for the anticipated necessary number of seamstress hours (flexible week by week depending on number of garments that come in). ANEWâ&#x20AC;&#x2122;s in-house fashion industry expert conducted research leading to the following estimates for equipment that will be required for us to begin operations at meaningful initial scale. Industrial Sewing Machine: $1,000 Industrial Serger Machine: $1,500 Heavy-duty Lockstitch Machine: $1,100 Professional Gravity Iron (2): $150 Jiffy Brand Steamer: $250 Buttonhole Machine: $950 Industrial Coverstitch Sewing Machine: $3,000 The decision to own equipment and operate a facility will make logistical operations simple, and collaboration among management, designers, and seamstresses will improve efficiency and align the brand.

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Equipment (cap expenditures) Industrial Sewing Machine(s)

$2,000

Industrial Serger Machine(s)

$1,500

Heavy-duty Lockstitch Machine(s)

$1,100

Professional Gravity Irons

$300

$3,00 $0

Jiffy Btand Steamer(s)

$250

Buttonhole Machine(s)

$950

Industrial Coverstitch Sewing Machine(s)

$3,000

Total Cap Ex

$9,100

$2,000

$11,100

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The Problem

ANEW Business Plan

Funding Model

Though initial bootstrapped by the founders and friends/family, ANEW will close an initial seed round before the December launch. After the first milestone of the first 5,000 garments in 6 months after launch, ANEW will prepare for a Series A raise to fund further expansion into new urban areas, as well as further automation development. Many of these continued costs will be offset by revenue received, with revenue from the core services soon supplemented by membership subscription fees (recurring revenue) as well as B2B tech customers paying to use the ANEW automation platform/algorithm by Year 3.

Burn Rate

The initial burn rate will be kept low in the first year by using the expertise of the ANEW founding team before needing to scale headcount in year 2. For the first six months of operation after launching the service, our burn rate is $85,000/ month, with almost half of that on COGS (cost of seamstresses, shipping and designers), and much of the rest on launch-related marketing efforts.

Dead-End Quotes

ANEW allows customers to request to get their unaltered garments back if they are not excited about any of the proposals for the garment presented by ANEW’s designers. This is a customer happiness-related cost, important for building customer trust. This cost totals the amount of shipping for the total estimated number of returned garments — estimated to decrease in proportion to overall garments processed over time. The designer’s time is captured in COGS and not reflected in dead-end quotes.

Cost of Dead-End Quotes (COGS)

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Shipping per * # of quotes anticipated

$6,000

Total COGS

$6,000

$12,000

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Metrics & Milestones

Metrics

Key Performance Indicators

ANEW based its key performance indicators on customer satisfaction as reflected in number garments received, customer-generated ratings, and revenue. Number of beta users giving 5 star rating required to begin marketing/launch: 5,000 Amount of annual revenue to prove business model: $5M in year three Adding additional resources to core team when quarterly revenue target is reached: $100,000

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Metrics & Milestones

ANEW Business Plan

Year 1

Year 2

Q1 to Q2

Q3 to Q4

ANEW’s first year of operations is delineated into two distinct phases, both oriented around the initial launch of the core online-mediated clothing rework service. The first six months involves further testing of key assumptions of the business model to expand upon initial customer and market research. Additional is required in order to reach key milestones to be ready for launch at the beginning of Q3.

Upon launch, the second half of year one will be focused on operating the core clothing rework service, and marketing initiatives to promote the service offering to beachhead customers (Bay Area Millennial women). ANEW’s lean, scrappy operations during this period will set the stage for keeping operations efficient at scale, as technology automation software is planned and built by the CTO.

The CEO and CDO (Chief Design officer) will run small beta tests to see what marketing channels, design solutions and price points are most effective for customer acquisition and retention. The CTO will start building out the mobile/web app for launch.

The key focus of company spending in year two will be to streamline operations and the core service offering, followed by marketing expenses to expand the customer base and. Operations streamlining involves building out technology to help automate the process, resulting in a reduction of time required for designer to address incoming item. Streamlining the process will enable ANEW to scale from processing 5,000 garments in the second half of year one up to a total of 25,000 garments year two. In terms of the marketing expenditures for year two, the goal is to launch campaigns that will lead to increased retention and reduce the cost of customer acquisition. Launching a membership subscription program in Year 2 is the core activity tied to this goal. The membership program provides an additional revenue stream, improves revenue predictability, and creates habits in loyal customers to use the service more often.

Year 3 In year three, ANEW anticipates to scale exponentially — from 25,000 total garments in year two to 75,000 garments reworked by the end of year 3. The investment in year two to automate aspects of the process result in per-unit COGS reduction in year three because less designer time is required per item. Further investment is put into automation in year three. During this phase, the CEO will focus on getting the first B2B customers for the platform software. This involves targeting other companies processing apparel for rework, like Eileen Fisher’s (for their Renew line), ThredUp, etc. The estimated revenue stream from licensing the platform software is $250,000. This is based on estimates of B2B customers as 100-person teams at $200 per user per month; this estimate is comparable to other platform license/subscription prices, like Salesforce.

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The Team

Team Overview

This section highlights the work of the strategist team behind the ANEW concept. This includes the ethos behind the business idea and why the team chose to take this direction. There are five team members, yet only three co-founders included in the business model design. The reasoning for this is that ANEW was created as a new venture concept with the awareness that we could design and test the concept, but would need to hire the right talent to make ANEW a success.

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The Team

ANEW Business Plan

Ethos

The strategists behind ANEW have a passion for finding new ways to extend the life cycle of garments. These are the garments that go unworn due to damage, deteriation, or, for many of us, our always evolving lives and surroundings that in turn evolve our wardrobes. We understand that customers want to ‘do good’ while looking good, but need companies like ANEW to make sustainability effortless. We are honoring what came before us - craft, tradition, sustainable practices - and applying technology to inspire tomorrow’s conscious consumer.

Values and Beliefs

Craft: The future of craft can coexist with technology in a way that will reach a broader audience to do good. Authenticity: There is beauty in craft and people truly appreciate the tradition behind it when her or she can understand and connect to the story authentically. Sustainability: Environmental and social sustainability is important to people, but they need easy solutions for their day-to-day solutions.

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ANEW Business Plan

Company Ownership

In this stage, the company is owned wholly by the three founding team members, who each own 30% of the company with the CEO owning the majority at 40%. Each founder/owner has contributed initial seed capital into the venture, with the first round of family/friend investors seeking no ownership of the company (see full financial statements for details). The founders anticipate that the Series A investors will share in the success of ANEW by getting a share of the company for their investment.

To launch the business, ANEW is seeking $500,000 from an investor with passion for and connections in the fashion space. The investment will be used to take the business from beta to market and spent on operating the core service and strategic marketing efforts.

How We Will Raise Funds

The founders will contribute their own â&#x20AC;&#x2DC;friends and familyâ&#x20AC;&#x2122; capital for the initial startup costs. This bootstrapped funding is enough to enable the continuation of beta testing and pilot experiments under a very lean founding team. Preparing for launch in month six, ANEW will need $500,000 in seed funding. The funding is for targeted marketing campaigns for the launch of the product to the Bay Area beachhead market, and for operating costs. Operating costs are primarily comprised of rent for ANEWâ&#x20AC;&#x2122;s facility, seamstress contractor costs, and equipment. These funds will be raised through a seed funding round in exchange for equity in the company. The ideal seed investor will also have expertise, passion and connections in the fashion domain. The ideal investor will help ANEW build partnerships with well-known fashion designers who can promote the brand through promotional partnerships .

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