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Syndicate Design+Works
- 1. SYNDICATE DESIGN+WORKS Josh Whitney, Sarah Fitzgibbon, Rachael Williams, Eric Frazier, Scott Balderas, James Hathorn, Umang Varma, Tanapong Tawatsupa University of Colorado-Boulder / Leeds School of Business Re-Thinking the Life-cycle of Outdoor Apparel Presented April 16, 2009
- 2. The Problem + + = + +
- 7. Potential Clients Less Focus on Sustainability / Down-cycling More Focus on Sustainability / Down-cycling Performance Lifestyle SD+Works
Hinweis der Redaktion
- , increase revenues and customer loyalty, provide social benefits and build a triple-bottom line brand.
- 1) ADDITIONAL DETAIL: Outdoor products sales for the entire year increased despite a 1% loss in total sales in December 2008 over December 2007. *Internet: 18% growth / Chain: 7% growth / Specialty: 2% decline 2) MARKET TRENDS: - Overall participation in outdoor activities is growing - Inactivity crisis/”nature deficit disorder”/increased national focus on getting active and getting outside - Availability and popularity of green/sustainable materials is increasing Impact of economic downturn: people are really looking for the best product, and are willing to pay for one with all the desired elements: durability, performance, style, and “good feeling.” Will it last a long time? Will it do what I want it to do? Will I look cool wearing it? Will I feel good about wearing it? (brand issue AND sustainability issue – this is our area of focus) KIM COMMENT – PEOPLE ARE DESPERATE FOR THIS. THEY WANT SOMETHING THEY CAN BELIEVE IN. KEY TAKEAWAYS: There’s a market here: the data and trends point to continued growth in the outdoor recreation market
- KEY STATS: 200+ consumers surveyed 80% give away or donate their used apparel Most mentioned convenience as important – in-store or other easily accessible drop off location Three quarters would need a discount of 20% or less to incentivize them to exchange old for new KEY TAKEAWAYS: - These consumers CARE about decreasing their footprint, but not at the expense of price, durability, performance, style, and brand loyalty Consumers are continuing to spend money on outdoor products – but are looking to the internet for convenience, selection, low prices Outdoor products consumers want to FEEL GOOD about the products they buy and wear – whether that’s through brand loyalty, the existence of sustainable practices within the brand, a great return policy, etc. They want to align themselves with brands that give them a “warm, fuzzy” feeling. 80% of respondents donate or give away their used apparel 63% of respondents felt that having an in-store, drop-off location was key to encouraging them to recycle their used apparel 75% of respondents noted it would take a discount of 20% or less on a new product to encourage them to exchange an old apparel piece for a new one Consumers are willing to pay more for a sustainable product – IF all other factors are equal (or almost equal) to the comparable product Price is still king, followed by durability, performance, design/fit, brand, then sustainability/environmental components
- 1) SUBSTITUTES: - Donation partners i.e. Goodwill - Consumers just throwing stuff away 2) NEW ENTRANTS: - Barriers to entry for others trying to do this (whether existing product company or new consultancy): learning curve, economies of scale - We acknowledge the potential lack of credibility due to not running this within the context of an existing, well-respected brand. We will counter this by being the first-to-market, having a client base of key brands and continually growing it to gain critical mass and increasing credibility. 3) CLIENTS: the established players in the outdoor products industry who want to be sharing the sector with Patagonia. (GoLite, Sierra Designs, REI, etc.) 4) SUPPLIERS: - Consumers with 17 old jackets sitting in their closet. We can’t change people’s desire to always have the newest, best thing – but we can change their behaviors and thinking around what to do with their old stuff once they’ve bought the newest best thing. Possibly look at expanding into other industries with mass quantities of fabric/materials that can be made into new jackets: rental tents or Ez-Up tents? Sails? 5) RIVALRY/COMPETITION: - Companies creating their own closed life cycle systems - One clear leader in the “sustainable” sector of the overall outdoor apparel industry: PATAGONIA - Lots of room for additional entrants to fill the gap between Patagonia and all the “others” (Nau, Prana) OUR COMPETITIVE ADVANTAGE: our connections throughout the entire industry and our knowledge of the recycling/downcycling process - we will be able to get the critical mass necessary for an overall industry movement to shift the mindset around the life cycle of outdoor apparel. We want to be an umbrella/clearinghouse for the whole industry, not just one siloed company. KEY TAKEAWAYS The “sustainability” sector of the outdoor products industry has room for new entrants to step up as leaders. HOW DO YOU MOBILIZE/GET CRITICAL MASS BEHIND THE EFFORTS ALREADY HAPPENING? This is where we will operate.
- Quick glance KEY TAKEAWAY: we’re trying to get as many companies as possible on board – consolidate all the one-off efforts currently happening (Pearl Izumi has one jersey, Sierra Designs doing a small take-back program with their tents, etc.) Note: in thinking about this, I actually think we should have the large circle raised higher… the folks who we would really want to first get on-board for this are probably more likely the GoLites and Sierra Designs of the industry who are already trying to do some stuff. But I can just speak generally and quickly about this graphic and then move on.
- As a consultancy, we would: Assess existing product design and life-cycle plans Identify opportunities to create long term value Implement product design, value chain and channel distribution strategies Explore alternative end-of-life product channels Provide marketing and communications customer engagement programs Thus, we would be in the business of selling services, not actual products. We envision that we would have a short-term sustainable advantage over peers and even clients who have thought about this approach to their business. We are already well connected within and beyond the Boulder/Front Range region which comprises a number of small and large outdoor apparel companies whose ear we already have; We would be engaged in a knowledge sharing/ learning capacity as students (in the short-term) and could leverage the broader CU community; and We would be offering our services at a substantially low rate, when compared to management consultant fees or in-house costs In the long run, we see our competitive advantage would be diluted, particularly as companies realize this concept and parallel initiatives come to bear. Further, we see the consulting side of our business to exist only in the short run, and thus are not concerned about developing a long term sustainable advantage in this area. We decided to take this approach because we want to gain experience working with companies before committing to actually launching an apparel company. This enables us, particularly within the next year, to learn and collaborate with industry experts and companies within the local Boulder market, and ideally we would be getting paid to learn. Through this work, we hope to generate interest and awareness of sustainability issues within the outdoor apparel space, both on the customer and company side. Subject to market uptake and relationships that we have built with clients we see 2 potential exit strategies: Having worked with a handful of companies to explore the both the technical and financial opportunities that exist in this area, we could sell this information to a particular company or potentially be brought on in a full time capacity to grow this type of service within an existing firm. Or We could use the knowledge and experience gained through consulting engagements to pinpoint a particular niche or gap that exists within the market, and launch our own apparel business.
- Our revenues would come from charge fees for advisory, consulting and implementation type engagements with clients and we anticipate our costs to be relatively small. We ran some very rough, back of the envelope projections looking at the number and type of clients that we think we could secure in the short run, what fees we could charge and services that could be delivered. These could include some combination of: benchmarking reports, product design, supply chain or end of life management implementation support and branding strategy or marketing support. Potential clients were broken down into segments by their total revenues (less than $500k, up to $1M, up to $10M and beyond). We estimated securing 1 paying client in year 1, 8 in year 2, 12 in year 3 and so on, with costs primarily increasing due to staff increases and linear increases in research & development. As mentioned, we anticipate a liquidity event, buyout, merger or an evolution of our team from consulting to starting a business to occur sometime in the near future.
- I think one of the greatest strengths of this whole process has been that it has allowed us to take a targeted and in depth look at the outdoor apparel industry and evaluate potential gaps and opportunities for how integrate sustainability and triple-bottom-line thinking into product design, the value chain, and customers. There is no doubt that we have learned a lot, but there is also no doubt that we have a lot to learn and believe we not quite at the point we where can make a go-no-go decision, because our concept is still in flux. Some high level take-aways: Trends are driven by the niche retailers and product companies, not by the large firms (which is specific to this industry) Not surprisingly, on the product side, success is determined primarily on design. You can have a sustainably produced 100% socially friendly product, but if its ugly, no one will buy it. Further, those design decisions required a 6-12 month lead. What problem and at what scale are we solving? We had to ask ourselves if our solution is really solving a big or small sustainability issue? Are jackets really ending up in landfills? Perhaps not, are existing systems are already in place, i.e. Goodwill, yes there. But there remains a significant opportunity for companies to do more which can provide them and t heir customers with more value – something that we identified as a potentially strong driver. The costs and risks associated with launching a product manufacturing company may not be all that great, we’re not inventing a truly new business model, so we can look to peers and the past for models that worked and didn’t. Some immediate next steps that we plan to take are: Really dig into the technical and financial feasibility of recycling products, we really need to explore the cost and technical drivers/limitations of this, and also identify the large sustainability indicators/impacts from good and bad products. Explore the cost and pain points that retailers and channel partners may face in participating in a recycling program, would the be open to a drop-box in their store? Its clear from our research incentivizing consumer’s to get on board will be slightly easier than manufacturers. So the consulting aspect to this project is really a placeholder until we can determine how best to take action with this business concept. To that extent, we know there is appetite for these types of services, evidenced by our current engagement with a leading outdoor apparel brand in Boulder to help them develop a sustainability index for their 2010 product that will focus on sustainable product design and end of life management scenarios and the focus that the Outdoor Apparel Industry has given to integrating sustainability criteria into packaging, products and supply chains. Finally, we have identified a number of potential paths that we may take going forward: Rather than focus on making outdoor lifestyle apparel, we may want to focus on a specific material that comprises part of a larger product and identify innovation redesign solutions that integrate sustainability into that product. This could be the something like Eco-Gore-tex, Eco-primaloft, or natural fibers for baselayers/wicking. Perhaps there is a specific component within apparel or gear that is a major pain for companies to produce or potentially could be a road-block in the recycling process. Maybe its button or zippers, how could we provide a solution for this? Repurposing products is clearly the most advantageous for companies and in most cases consumers. We could explore options for managing repurposing programs for outdoor apparel companies, in a similar vein to how Goodwill provides repurposing and clothing donation for lifestyle/ casual clothing. This provides both an environmental and social benefit, and may actually be a significant money generating opportunity.