Marketing Plan: Returns Service for Online Retailers

Executive Summary
NoHassleReturns.com, an e-commerce firm, would offer services to ecommerce companies and consumers to return goods purchased on Internet. The firm is being established by ASOS, UKs leading online fashion brand. ASOS has always felt the need of a good returns system and after research has planned to develop the same and float it as a separate firm. The firm allows ecommerce companies to outsource their reverse logistics process of moving the goods from customers to companies. Lack of ability to feel and see a good is one of the greatest deterrents to online shopping and if customers are convinced of the convenient returns procedure, the online shopping industry is expected to grow much faster. The firm consolidates handling of the product returns, thus allowing ecommerce companies to provide outstanding customer service. This will help in generating repeat sales along with positive word of mouth. Customers would have a centralized location from where they can claim returns. All processes related to claims and returns will be responsibility of

NoHassleReturns.com. No company provides such a system and the company will enjoy first movers advantage. This would allow the firm to generate network of customers and companies, making this the biggest entry barrier for any new entrant. ASOS.com is the UKs biggest online fashion retailer. The company offers more than 50,000 branded and own label fashion products. The company generated revenues of 340 million in the fiscal year ending 31st March 2011.

Mission and Objectives

With the growth of ecommerce industry, existing companies will become bigger and the number of new ones in this sector will rise. With this growth, reverse logistics process involving customer returns will grow as well. Right now, there is no firm that has expertise in this process. NoHassleReturns.com will fill this gap with its service of entire consumer returns process. This will allow ecommerce companies to concentrate on their core services and startups will not have to establish this process that isnt a part of their core business. This is also going to help in reduction of entry barriers as well as market expansion. The firm is going to help in increase of customer satisfaction for ecommerce companies with its assurance hassle free returns. Early adopters of our product will create competitive advantage for themselves and this will become competitive parity as more ecommerce companies partner with us. The business is expected to be highly profitable with the company achieving 31% PBT margin in 3 years time.

PESTEL Analysis
PESTLE analysis refers to political, economic, social, technological, environmental and legal factors (Henry, 2008). This framework allows a company to assess macro economic environment. Following is the PESTEL analysis for NoHassleReturns.com Political factors: Political situation in the UK is favorable for establishing online businesses and the UKs ecommerce market is one of the most mature in the world. The government is very stable and the entire business system and the ecommerce ecosystem are fairly well developed. Since the UK has free market economy and there isnt too much intervention by the government, a new business or product can become successful if it has merit. Economic factors: Economic environment in UK is not very conducive to business right now. Growth has been slow and lenders are more cautious about giving out loans. However, interest rates are low and with ASOSs name, it would not be very difficult getting loans. At the same time, businesses are looking to cut costs and going online is

one of the best ways to do this. Online industry is projected to grow at a higher pace than GDP and this environment is good for our new product. Social factors: More people in the UK are becoming comfortable shopping online and this is evident from the growth in the ecommerce industry. Young adults entering the economy are more savvy and this is going to help our business. Technological factors: Technologically, the UK is one of the most advanced. In terms of internet penetration and broadband, the country is well connected and internet is available at high speeds. Apart from desktops and laptops Internet can easily be accessed with tablets and smartphones that have good penetration across the country.

SWOT Analysis
SWOT Analysis refers to strength, weakness, opportunities and threats associated with an industry and the company in question (Kotler, 1991) Strengths: ASOS enjoys following strengths that is going to come in handy during this business: o ASOS enjoys very good brand recall amongst customers. Knowing that the returns are handled by a division of ASOS is going to provide peace of mind to customers who shop online. Ecommerce companies promoting their customer friendly business can show their seriousness by associating with

NoHassleReturns.com. o ASOS has good understanding of the ecommerce business in UK and is well aware of the supply chain of the business. o ASOS has technical know how to build the technological platform required for an online returns company. o ASOS ha good distribution system established that is going to come in handy while developing the business. Weaknesses: No player has tried this sort of business before and hence there are no learning or best practices to take. The business till now has focused on delivery to the customer and the focus has never been on the returns.

Opportunities: Along with ASOS, other ecommerce players are also grappling with the returns part of the business and an there is a big growth opportunity for a specialized player in this field. Many customers do not shop online because of the hassles with returns. NoHassleReturns.com will provide a seamless service to both end users and businesses. There is an opportunity to expand to other countries if the service becomes successful in the UK.

Threats: ASOSs success can also prove to be a threat since some ecommerce companies might be reluctant to share their customer and inventory data with NoHassleReturns.com. For the business to be successful, there is a need to create a network of ecommerce businesses as well as end users. The company needs to establish brand amongst end users as well as strike partnerships with other ecommerce companies. Failure to do any one of these is going to lead to failure.

Competition
There is no firm providing outsourced returns and refund service for online shopping. Therefore, there isnt any direct competitor for NoHassleReturns.com. This is going to give us first-movers advantage and we will be able to create entry barriers for other players. However, competition exists in indirect forms from reverse logistics division of firms themselves as well as shipping firms. Reverse logistics divisions of ecommerce companies are competitors for NoHassleReturns.com since they currently handle the returns service. Partnership with NoHassleReturns.com would mean shutting down this function for the companies. Ecommerce companies might be content with their current returns and refund process and may not see value in affiliating with NoHassleReturns.com. However, our expertise and research is going to highlight and convince them regarding the need for outsourcing the returns service to a specialized firm. Shipping firms can partner with ecommerce companies to provide returns service. Companies from these domains can partner to designate a shipper as preferred channel for returns. However, maintenance of such a partnership will be cumbersome for these firms since they dont have the

required software and process capabilities offered by NoHassleReturns.com. Also, the UI provided by them to the customers will not be user friendly.

Revenue generation and pricing

The firm plans to offer options to online retailers for the payment type they want to implement. Charges will consist of a flat annual, half yearly or quarterly fees and a percentage fee based on the value and number of items processed through NoHassleReturns.com. NoHassleReturns.com is going to charge ecommerce companies flat fee of 0.25% of the total revenue. Per transaction charge related to returns will be 10% of price of the returned items. Percentages mentioned can vary a bit based on the level of relationship. NoHassleReturns.com believes that the overall increase in sales for ecommerce companies in medium term because of enhanced customer satisfaction is will be 10%. This is much more than the cost of partnering with NoHassleReturns.com that is going to be in the range of 2% of the revenue. The firm can earn money by advertising on its website. Since we are going to be frequented by customers doing online shopping, various ecommerce companies would be willing to advertise on our website. This revenue channel is excluded from the financial analysis, however it can offer substantial revenues in future.

Sales and Marketing

The service of returns and refund provided by NoHassleReturns.com will be promoted using Above the line as well as Below the line methods. Targeted marketing and sales force will be used in to contact ecommerce companies. Also, pull from the end customers will be created with advertising campaigns. This would incentivize ecommerce companies to associate with NoHassleReturns.com.

Marketing and direct sales

Major part of the service is B2B and therefore initially it will be promoted by communicating with the ecommerce companies and highlighting benefits of such a service. Top management of

every major ecommerce company will be approached. Partnership with a few big ecommerce companies will establish the reliability of NoHassleReturns.com and this will come in handy while pitching to additional firms. We are also going to approach auction sites such as Ebay with various offers to service goods sold by merchants and manufacturers on their portal. For other players, B2B marketing methods will be employed. Fairs and trade magazines will be a will be used to attract smaller companies. Existing clients are going to be leveraged by using a referral program. We will create a separate section on the website for potential clients where highlights of the system and process details will be explained.

Above the Line marketing strategy

A good number of clients are needed to be on board before mass marketing campaign can be effective. An advertising campaign will be launched after creating awareness among major market players and promoting the firm amongst selected potential clients. This process is expected to begin from Year 3. The campaign will lay emphasis on the credibility of NoHassleReturns.com and highlight how partnering with the company is a stamp of credibility and reliability for any other internet firm. We want to create a perception that any company that is serious about customer service and good buying experience has to partner with NoHassleReturns.com. Association with NoHassleReturns.com will be projected as a move to ensure returns without any hassles for customers. This will increase the pull for NoHassleReturns.com as customers demand the service from the merchants and start preferring merchants who are associated with the firm. The intent is to make sure that being associated with NoHassleReturns.com is considered as a sign for being customer oriented. The amount of investment in this TV campaign will depend on how successful the targeted B2B marketing has been.

Financial Plan and Requirements

Investment Requirement
NoHassleReturns.com is going to raise funding to develop the system and set up the processes. We are going to raise 0.26 mil during the first year and 0.14 million for requirement of

working capital. The capital of 0.26 million is going to be raised in two phases. These funds are going to be used for development of the software systems, designing website, hiring staff and workers. The funds are also going to be used to launch the service as well as sales and marketing and also to set up an office.

Pro forma profit and loss

Pro forma profit and loss statement for first three years is shown in the table below. Year 1 Revenue Cost Sold of Goods 110,000 ( Gross Margin Gross Margin % Expenditure Labor cost Sales & Marketing cost Depreciation Research Development Operating Expenses 290,730 ( PBIT EBITDA 400,730) ( 250,437 259,919 3,030,434 3,043,524 1,359,193 2,462,900 and 22,110 104,786 196,240
Operating expenses = Labor cost + sales & marketing + Dep + R&D

Year 2 2,093,630

Year 3 6,538,334

Remarks

484,000

1,045,000

110,000)

1,609,630 76.9%

5,493,334 84.0%

Gross Margin = Revenue - COGS Gross Margin % = Gross Margin / Revenue

22,110

215,710

451,660

238,810 7,700

1,029,215 9,482

1,801,910
This amount adds up to

13,090

accumulated depcreciation in BS

PBIT = gross margin - operating expenses EBITDA = PBIT + Depreciation

393,030) Interest Paid Taxes 0 0 ( PAT PAT margin PBIT margin 400,730) 74,713 3.6%
12%

0 175,725

0 1,018,820
This amount goes to the earning

2,011,614 30.8%
46%

line of Balance Sheet PAT = PBIT - interest - taxes

Projected Balance Sheet

Projected balance sheet for the business for first 3 years in given below: Year 1 Current Assets Cash Accounts Receivable 20,519 10,259 138,688 69,344 1,836,128 918,064 Total Current Assets Long term Assets Assets Accumulated Depreciation Total Assets Long-term 75,349 153,153 166,243 Total Assets 106,128 361,185 2,920,434 7,700 17,182 30,272 Total Long term assets = assets accumulated dep Total assets = total current assets + total long term assets 83,049 170,335 196,515 30,778 208,032 2,754,192 A part of revenue goes here Total current assets = cash + accounts rec Year 2 Year 3 Remarks

Liabilities Current Liabilities Accounts Payable Total Liabilities Long term Liabilities Total Liabilities Paid in Capital Retained Earnings Current 91,190 0 91,190 415,998 ( 330) 137,665 0 137,665 415,998 281,050 0 281,050 416,020 11,110 80,080 37,400 100,265 50,600 230,450 A part of expenditure goes here Total current liabilities = current liab + accounts payable

( 267,190) 211,750

Earnings

( 400,730) 74,713

2,011,614 Total capital = paid in capital + earnings + retained earnings Total capital & liabilities = total capital + total liabilities

Total Capital Total Capital &

14,938

223,520

2,639,384

Liabilities

106,128

361,185

2,920,433

References
BBC News. 2011. Asos sales boosted by International Growth. <online> Available at: < http://www.bbc.co.uk/news/business-13625073> [Accessed on 21st February, 2012] Henry, A., 2008. Understanding Strategic Management. New York: Oxford university press Kotler, P., 1991. Marketing Management. 7th edition. Englewood Cliffs: Prentice-Hall