LoGoo Company’s Business Model

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Table of Contents

Intro
Value Proposition
Revenue Model
Market Opportunity
Competitive Environment
Market Strategy
References

Intro

E-commerce is becoming more and more popular. According to the latest surveys, average European spends around 1200 euros a year purchasing items and goods from the Internet. For Americans, that amount equals to circa 1810 dollars a year (How much online shoppers around the world are spending? 2015). As paper money slowly gives way to plastic and e-money, commercial products that are available online will become even more prevalent. The Web offers many advantages when compared to standard convenience stores – the buyers are able to purchase almost anything for the comfort of their homes and apartments. Despite the great number of products already available, there is still plenty of room for many potential entrepreneurs to start their businesses.

Subscription boxes are considered to be a new trend in modern e-commerce, generating impressive revenues and providing customers and subscribers around the world with various tools, goods, and trinkets. The model proved to be efficient at distributing cosmetics, foods, clothes, and even jewelry and electronics. Several startups have already implemented it with much success. A few notable examples are Birchbox, Brobox, Ipsy, and the Carnivore Club (Shandrow, 2015). Seeing their success, we decided to come up with our own project, called LoGoo, and introduce subscription boxes in Ottawa.

Value Proposition

LoGoo is going to be the first company to introduce subscription boxes in Ottawa. For a nominal monthly subscription fee, our customers will receive supplies of their choosing, delivered to their doorstep at least once a month. Our merchandise will satisfy many customers, as the amount of money paid for procuring our boxes will be less than if they bought the same items from a convenience store. In addition to affordability, our potential customers will appreciate the ever-changing palette and variety of our products, as LoGoo will make sure to keep up with the latest products and samples coming to the market. Aside from that, our company will keep in touch with our suppliers, who would be interested in promoting their products through our medium. Our boxes will include leaflets and advertisements printed on their surface, thus attracting new customers to our partners and assisting them in making their brands known.

One of the reasons subscription boxes are so attractive to the customers is the element of surprise. Most people enjoy opening gifts, not knowing what is inside. Subscription boxes offer that thrill since the customers will never know what is inside, besides the general theme of the box they are purchasing. This concept has proven itself viable in many other enterprises that deal with packs and “mystery bundles,” which are highly popular in various online and tabletop card games like Yugioh and MTG (Yugioh! Booster packs, 2016).

Revenue Model

Our revenues will be largely generated through selling subscription packages monthly, bi-monthly, and quarterly. They will provide a recurring cash flow, rather than a continuous one like in most shops. The subscription-based nature of our business will also allow projecting revenues with greater degrees of accuracy, based on the numbers of clients and types of purchases. Three rates will be available:

$25 box – sample sized goods (acquisition cost $20)
$50 box – standard sized goods (acquisition cost §40)
$75 box – superior goods (acquisition cost $65)

The shipping fee for the delivery will be 5 dollars. In order to generate more revenue, LoGoo will purchase goods from the producer in larger quantities, and make use of the discounts they provide. In addition, we will offer advertising services by putting coupons and leaflets to promote allied businesses. Lastly, the business has room for expanding into other cities throughout the region, which will offer a greater pool of potential customers and more potential revenue.

Market Opportunity

Ottawa is a big city, with a population of around 880,000 people (Population, 2016), which is a sizeable starting market for the enterprise. Being the capital of Canada, it is considered one of its richest cities, with money fluxes coming through it from all over the country. The population is relatively wealthy, with poverty levels being low and unemployment rates below 6%. This means that the majority of Ottawa’s citizens are our potential customers. We have many products to offer, suitable for nearly every age and gender group out there. As it stands, our current planned assortment of boxes will offer beauty products for men and women, cooking ingredients, healthy foods and fitness gadgets, and videogame-related merchandise for all gamers out there. The number of themes available for our boxes is a subject to change, as we will add more products to cater to as many potential clients as possible.

The city has a well-developed delivery and transportation system, which will ensure that our goods will reach their destination in time. Lastly, the city houses plenty of small businesses, which could use additional advertising and clientele to expand. They could become our partners, providing goods and services at a discount, in exchange for publicity. Thus, not only will our enterprise indulge the needs of our customers, but also invest in development and promotion of the local economy.

Once a successful business is established in Ottawa, there is a possibility to expand to the markets of Montreal and Toronto. These cities are important economic centers, with Montreal being the second most populous city in Canada (Montreal population 2016, 2016), and Toronto being the administrative center of Ontario province and one of the wealthiest cities in the country (Welcome to the city of Toronto, 2015). This raises the entire number of potential customers in all three cities to about 5 million people. In short, there are plenty of economic opportunities for LoGoo, and plenty of room to grow.

Competitive Environment

Right now LoGoo has an excellent opportunity to launch its business in Ottawa. The subscription box trend is getting popular in North America, meaning our company has an opportunity to ride the wave. The city has no subscription box companies at the moment, which means there is no competition. This gives us an opportunity to be the first-comers to the empty market and establish dominance long before our potential competitors would have a chance to do so. This safe environment will ensure our company will grow in peace, rather than be subjugated to cutthroat competition with others.

When considering the idea for our business, we used the Blue Ocean strategy and looked for something that Ottawa has never seen before (What is Blue Ocean strategy? 2016). Although we did not invent the concept of subscription boxes, the idea is new and fresh, which will entice and attract potential customers. Studies show that younger generations are more eager and open to embrace new services and products, even if out of curiosity. By offering advertising services and partnerships to other businesses and enterprises, we will contribute towards our good reputation and have a decisive advantage over any competitors that might try to oppose us. Time is of the essence, however, and we must act quickly, in order to use these advantages to promote our business.

Here is the list of products we will offer our customers:

Birchbox – beauty box. It is a sample box, which would give our clients a taste of what our company can provide. The merchandise in this box would be good and useful, but basic. Its purpose is to tempt the clients into purchasing advanced boxes.
Glossy Box – beauty box. It is an advanced version of the Birchbox. It will contain exquisite and intriguing beauty merchandise made for women. To get our hands on such goods, we will likely seek partnership with companies that have a name in the market, such as Avon.
Bespoke Post – manly box. This box will contain items and trinkets that men could like and find useful. They will range from shaving creams and razors to lighters and car appliances.
Blue Apron – ingredients box. Will contain interesting and unusual food ingredients. This concept is aimed at homemakers and customers that enjoy cooking.
FabFitFun – exercise box. This product aims for young men and women who like to stay healthy and fit. It will contain healthy carbon-free foods, the latest information brochures about fitness, and small sports items like headbands, armbands, etc.
Lootcrate – “nerdy” box. For all the gamers out there. This product will not be limited to computer gamers, as it will feature trinkets and items related to popular franchises such as Star Wars and Warhammer.

Market Strategy

Our business will make full use of social media available to us in order to advance our brand and our products. There are plenty of possible opportunities for that. Facebook, Twitter, Instagram, and other massive social media platforms offer various advertising services for an affordable price (Hayes, 2016). The main advantage of using these platforms to promote products is the relative accuracy of adverts – personal data is used to display appropriate banners based on gender, age group, and location (Helping local businesses, 2014). This means that our promotional information has the potential to reach every computer in Ottawa and spread the word about our enterprise. In addition, we will create dedicated groups on Facebook and Instagram, providing information about our services, featuring photos of satisfied clients and giving snapshots about the products and samples that future boxes will contain.

However, we will not forgo other forms of advertising. We will spread leaflets to drivers and pedestrians, glue advertisements on posts and provide them by mail. If the enterprise is successful, we might even include the local TV and radio stations into our advertising program. We will encourage our partners to place our posters in their shops.

Lastly, we will make full use of online enterprise management applications such as Odoo in order to manage our business. These programs would be useful for accounting, billing, warehouse managing and tracking all business transactions and deliveries performed by LoGoo (Odoo tour, 2016). To ensure the success of our business, we will have to be sure our deliveries and payments are always on time.