UNLICENSED
APPAREL
MIS 5403 – SUMMER 2015
TEAM #1
MATTHEW COHAN | GREG EBBECKE | PAUL JACOBSON |
DANIELLE MARTINEZ | CHRIS MCCOMISKEY
EXECUTIVE SUMMARY
Team loyalty runs deep in the Philadelphia area, but the options for apparel don’t. The
licensed items are highly expensive and everyone is wearing the same thing. The
unlicensed items are creative, but can sometimes be impossible to find. And with so
many counterfeit items on the market, it is difficult to trust the quality of the products.
The T-shirt industry has three key pain points:
• Higher profile increases risk so businesses can’t be scaled
• Major inventory pressures include "dead" inventory for unpopular designs, supply
chain concerns and massive IP/content libraries to manage
• Demand is impulse driven and spontaneous; missed opportunity may not be
recovered, copycats can seize on supply disruption
To address these pain points, we propose the creation of GARB. GARB will combine
two distinct business services; centralized inventory management and inter-vendor
logistic support. It will serve the mid-Atlantic area from Central New Jersey to
Maryland, moving product throughout the region within a days notice. GARB will buy
up “dead” inventory to be used as barter with third-world countries and will digitize
content in order to supplement vendor printing services and have for posterity. As a
regional player, GARB will dis-incentivize broad copycat behavior by leveraging market
trends to drive demand for all partners in the network.
RESEARCH
We conducted 15 interviews with various stakeholders in the apparel industry including
unlicensed vendors, licensed vendors, prospective buyers and law enforcement entities.
We immersed ourselves into the culture to gain an understanding of the motivations of the
players involved. We took 100 photos and 15 videos of our surroundings to get a true
sense of the inner workings of the industry and where there may be untapped opportunities.
Law Enforcement
He dismisses the
novelty T-shirt shops as
a “tourist joke”, but
readily admits he’ll
probably buy 2-3 shirts
by summer’s end... “It’s
a group thing”.
Unlicensed Seller
Licensed Seller
Buyer
With sales
totaling nearly
100 orders per
day, competitors
and rights-holders
began to take
notice.
Going after these people on the
streets takes a tandem effort
between cops, private industry
investigators, and homeland
security investigators.
…(the local vendor) has
near exclusivity on the
inventory she sells, but
the niche nature can
make for supply issues.
cops often overlook
that kind of thing in
large populations as
there are bigger
things to worry
about
If the cops do pick one
of them up, they just
pay a fine and are back
out on the street.
"It is impossible
to stop the flow
of counterfeit
merchandise."
MARKET FORCES
GLOBAL:
LOCAL:
•Labor and material cost – Labor
intensive markets
•Athlete star appeal
•Media exposure
•League/team brand
•Government policy
•Team success
•Social media
•Fan economy/merchandise cost
•Potential for tax free revenue
•Uniqueness & “Cool” factor of clothing
TECHNOLOGY’S ROLE:
STAKEHOLDERS:
•Vendors of unlicensed apparel
•Vendors of licensed apparel
•Holders of intellectual property & official licensees
•Consumers
•Apparel wholesalers
•Athletes
•Law Enforcement & Homeland Security
Current
•Introduction of the Chinese
Wholesaler to individual buyers
•Comparison shopping
•Digital storage design
•Efficient, lean production process
Projected (through GARB)
•Instant communication
•Aggregating of data into trends
•Businesses working together
THE MARKET
YEAR-ROUND
39.7MM Visitors to
Philadelphia Annually
93.2MM
Visitors to
Jersey Shore
Annually
SEASONAL
15.2MM Visitors to
Delaware Beaches/
Ocean City, MD
Annually
148.1MM VISITORS TO REGION ANNUALLY
1% Visitors buy merchandise
from Street/Stadium Lot Vendors
5% Visitors buy merchandise
from Boardwalk/Beach Vendors
$4.0MM in City T-Shirt Revenue
Potential ($10 per shirt)
$71.5MM in Beach T-Shirt
Revenue Potential ($22 per shirt)
Region
Venues
Players
Competition
Risk Profile
City
Flea Markets, Street
Stalls, Stadium Lots,
Limited Storefronts
Independent Sellers,
Some Wholesale
Affiliates
Authentic Sellers,
Internet Wholesellers,
Local Screenprinters
Enforcement highest,
mitigated by lack of
physical presence
Beach
Dedicated
Storefronts, Flea
Markets
Entrepreneurs,
Boardwalk “Empires”
Local Screenprinters
Legal enforcement
minimal, copycat of IP
threat to business
THE MARKET IS HIGHLY LOCALIZED AND SUPPLY IS FRAGMENTED.
ONLINE SALES RAISES LIKELIHOOD OF LEGAL ACTION, UNDERUTILIZED.
OPPORTUNITY
Introduction of a digital B2B peer marketplace and logistics service
- Expand individual seller footprint without risk of exposure via website/digital sales
- Easier transfer of inventory as demand dictates
- Allow Seasonal sellers to offer merchandise inventory year-round
- Aggregated inventory allows for inventory trending and market forecasting
- Minimal direct interaction between competitors as inventory can be ordered/sold entirely
online
- Industry has low fixed costs – Potential to take “service fee” from margin without affecting
pricing structure
Tourism Data via VisitPhilly.com, VisitDelaware.com, OCOcean.com, VisitNJ.org
PERSONAS - SELLERS
“SHIRT DESIGN IS AN ART AND I PROVIDE CUSTOM ART TO THE PUBLIC”
Nate Logan
Independent Screen Printer
Nate owns a custom screen printing shop where
he creates his own designs and styles. He will
not copy existing artwork, but will apply his own
distinct changes to reinvent the brand.
Age: 35
Occupation: Owner
Location: NJ
Marital status: Single
Children: None
Income: $50K -$95K
Education: High School Diploma
Hobbies: Sketching, Bowling, Tattoos
DRIVERS
Goals: Grow Business, Influence Current Trends
Needs: Money, Validation from Customers, Artistic License
Desires: Become An Official Brand
Frustrations: Fickle Customers, Lack of Market Visibility
Pain Points: Unpopular Designs, Increased Input Costs,
Cyclical Revenue Stream
“I MAKE QUALITY PRODUCTS AT A DISCOUNT TO THE CONSUMER”
Lee Smith & Maggie Yeung
Online Wholesaler/Street Vendor
Lee manages a large factory in China where he
produces replica sports apparel. He sells these
replica garments through his online website on
Alibaba and exports them for sale in the US
through vendors such as Maggie.
Age: 56 / 44
Occupation: Manager / Street Vendor
Location: Shanghai / Philadelphia
Marital status: Married / Married
Children: 1 (26 yrs) / 2 (20 yrs, 17 yrs)
Income: $200K / $50K (tax free)
Education: Bachelor’s / Primary School
Hobbies: Gardening / None
DRIVERS
Goals: Legacy, Prestige / Home Ownership
Needs: Respect, Money, Power / Security
Desires: Legitimacy / Financial Stability
Frustrations: Cultural Fads / Language, Inconsistent
Earnings
Pain Points: Customs, Margins / Limited Opportunity
a PHOTO
Add Add
a PHOTO
“I PROVIDE WHAT THE PEOPLE WANT”
Sandy Cohen & Robert Brown
Boardwalk Baron/Flea Market Vendor
Sandy owns a half-dozen storefronts on the
Jersey boardwalk. His stores stock over 6,000
designs which he sells at local flea markets
through Robert during the offseason.
Age: 58 / 38
Occupation: Owner / Contractor
Location: NJ / PA
Marital status: Married / Single
Children: 3 (31, 26, 14 yrs) / 1 (19 yrs)
Income: $250K / $40-80K
Education: Bachelors / HS Dropout
Hobbies: Family, Cars / Hunting, Gambling
DRIVERS
Goals: Empire / Make Money
Needs: Respect, Influence / Shelter, Food
Desires: Generational Legacy / Independence
Frustrations: Taxes, Rent / Government
Pain Points: Seasonality, Inventory / Dependence, Travel
PERSONAS - BUYERS
“I LOVE MY TEAM BUT FIND THE LOGO BORING. I WANT SOMETHING CLEVER AND UNIQUE”
Eric Green
Avid Sports Fan
Eric has loved the Eagles since he was a young
child. As a diehard fan, he owns many jerseys
and shirts. He is always looking for new and
different apparel that shows his team love
Age: 30
Occupation: Cable Company Technician
Location: PA
Marital status: Single
Children: None
Income: $45K
Education: High School Diploma
Hobbies: Cars, Gaming, Softball
DRIVERS
Goals: Buy Apartment, See As Many Games as Possible
Needs: New Ways to Express Fandom, Friends Approval
Desires: Season Tickets
Frustrations: Monotonous Selection, Blending In
Pain Points: Price of Licensed Shirts
“IT’S MY JOB TO PROVIDE THE TYPE OF LIFE MY FAMILY DESERVES”
John Lewis
Knock-Off Buyer
John is buying jerseys of his kids favorite
players from the black market. He knows that
they will outgrow them soon and wants to save
money for when he needs to buy them again in
larger sizes.
Age: 46
Occupation: Mid-Level Manager
Location: PA
Marital status: Married
Children: 2 (7yrs and 9 yrs)
Income: $75K
Education: Bachelor’s Degree
Hobbies: Running, Sports, Little League
Coach
DRIVERS
Goals: Support Family, Run a Marathon, Pay for Kids’ College
Needs: Respect, Money, Friendship, Validation from Family
Desires: Professional Success
Frustrations: Cost of Living
Pain Points: Mortgage, Ungratefulness, Salary
a PHOTO
Add Add
a PHOTO
“WHAT I WEAR IS A STATEMENT OF WHO I AM”
Chester Allen III
College Student
Chester spends his summers renting a shore
house with friends. His lifestyle is sustained by
his parents. T-shirts represent an inexpensive
way to make a statement and align his personal
brand with the latest trends.
Age: 22
Occupation: Unemployed
Location: NJ
Marital status: Single
Children: None
Income: Weekly Stipend
Education: Some College
Hobbies: Music, Drinking, Video Games
DRIVERS
Goals: Have Fun, Make Memories
Needs: Respect, Validation from Opposite Sex, Comraderie
Desires: Infinite Youth
Frustrations: Dependency on Parents
Pain Points: Responsibility, Career Pressure, Social Faux Pas
MARKET SYSTEMS
& OPERATION
AUTHENTIC
Three
Techniques
to Adding
Design
Slower to Market
Easily Scalable
REPRODUCTION
Feedback
Loop
•High Priced
•High Quality
•Not Creative
Designs
Added
Replica
•Low Price
•Low Quality
•Not Creative
For
Influences
Idea/Design
Generation
Custom t-shirt printer/artist
Quick to Market
Not Scalable
•Medium Price
•Unsure Quality
•Creative
Market opportunity increase
speed and/or scalability!
Store Fronts
Online Market
Flea Vendor/Street Seller
Indirect feedback about customer preferences and demand
High Risk
Consumer decides
what market and
product best fits their
needs. Their purchase
provides direct
feedback to producers.
INNOVATION
Distribution
Original
E
x
t
e
r
n
a
l
I
n
f
l
u
e
n
c
e
s
Knockoff apparel is copied
from existing styles.
Originals put a twist on
existing styles. Originals
become mainstream
popular and are then
copied. Each market is
dependent on the other for
idea generation.
Market opportunity
to alleviate risk!
PROBLEMS
BUSINESS CASE
Has great ideas, but
cannot scale his business
without increased risk to
livelihood
Has inventory to move,
but limited distribution
beyond Internet
Has infrastructure to scale,
but footprint is
limited/seasonal
INSPIRATION
CREATE A VENDOR “AMAZON” SERVICE FOR PA/NJ/DE/MD
International Wholesalers manage relationships
between producers and market, but may only
indirectly control inventory
•
•
•
•
•
Manage relationships between vendors, leave customer relationships for vendors
Need credentials to access – Only given to vetted vendors
Act as middleman for the distribution of inventory between city and beach sellers
Analyze inventory movement, pop culture to create market insight products
Purchase “dead” inventory and sell to third-world, discount chains, etc.
Benefit
Nate
Lee/Maggie
Sandy/Robert
Online B2B Marketplace
Sell Designs & Inventory to
Sandy/Robert
Sell Inventory to Nate,
Sandy/Robert
Buy additional inventory as
demand dictates
Regional Inventory
Transit
Reach beach customers
Consolidated distribution
Can transport inventory between
beaches easily
Centralized Storage
Quicker distribution
Centralized import
More “active” shelf space
Ability to scale
Reduces legal risk without own
dedicated website
Vendors deal with a “local”
Sell inventory in city during
offseason
Market Insight
Inspiration for new ideas
Inventory management
Inspiration/Inventory management
FINANCIAL DATA
Income
Apparel Transit Revenue
Apparel Storage Revenue
Distressed Inventory Revenue
Market Research Revenue
• Operational radius of ~100 miles from Vineland, NJ base
• 41 miles to Philadelphia
• 97/154 miles to Ocean City, MD
• 43 miles to Wildwood, NJ
• 106 miles to Asbury Park, NJ
• Transit Fee is 2.27% on Beach Shirts ($22), 5% on City Shirts ($10)
• Storage Fee is 0.45% on Beach Shirts, 1% on City Shirts
• Distressed inventory can be acquired from vendors at $1 per shirt
(sold $2 per shirt retail clearance) and resold for $2 per shirt
• Storage unit used for storing shirts, servers
• Mitigate legal risk as we are not selling inventory
• Risk due to interstate transportation of counterfeit goods
• Risk of non-payment by “partner” vendors
• Risk of vendor copycat rather than collaborative behavior
• Risk due to low barriers to entry
• Risk of violating storage lease by using unit as place of business
Expenses
8x12x8 Storage Unit
Ford Connect Van Transit
Employee Labor (30 hrs/week)
Gas (25 mpg)
Tolls/Ferry
Website Hosting
Qty
145,960 shirts
18,245 shirts
36,490 shirts
10 clients
Qty
12 months
12 months
52 weeks
30,000 miles
12 months
12 months
$
$
$
$
Rate
0.50 /shirt
0.10 /shirt
1.00 /shirt
600.00 /client
Total Income
Amount
$ 72,980
$
1,825
$ 36,490
$
6,000
$ 117,295
$
$
$
$
$
$
Rate
120.00 /month
400.00 /month
900.00 /week
3.00 /gallon
150.00 /month
8.00 /month
Total Expense
Amount
$
1,440
$
4,800
$ 46,800
$
3,600
$
1,800
$
96
$ 58,536
Income
BUSINESS ASSUMPTIONS
•
•
•
•
•
Given high variability of product demand and market seasonality, monthly projections are difficult
Business is able to achieve 4% of total potential shirts sold for transit, 0.5% in storage and 1.0% as distressed inventory
Service Fee percentages assume 30-50% margin on shirts, from which service fee is deducted
Calculations do not take into account potential growth of market by expanding seller footprint
Wage compensation based on $15/hour off-the-books
T-Shirt Margin Data via UnitedPixelWorkers.com
$
58,759
CONCLUSION
While big, licensed players enjoy freedoms of scale, small and unlicensed sellers do not have this luxury due to
market inconsistency, fads, and risks of law enforcement intervention. By taking on a share of these risks and
building a connection between individual sellers in the region, the small sellers will be able to achieve scale.
This is where GARB comes into play by storing, logging, and transporting merchandise, connecting sellers,
and providing market research that can lead to longer lasting trends instead of short lived fads. GARB will also
provide a buyback service where “dead” merchandise will be recovered and turned for a small profit, allowing
for further safety and confidence by sellers in the trends suggested.
Vendors will be charged per shirt sold and a small research fee per month, but stand to increase scale and
revenues dramatically. The artist gains distribution and salesmen (essentially). The flea vendor gains
consistent and fashionable product offerings. The foreign wholesaler gains a greater relationship through
mitigated risks of ordering (GARB to use many different names and addresses now available in the network of
participants). The buyer will enjoy better offerings and product availability. Each player stands to gain from
unification. Further, while the sale of some of the merchandise involved is illegal, owning/transporting it is not
necessarily a crime. GARB will operate in a “grey area” between laws.
As shown on the Financial Data slide, the company stands to make $58,759 in EBITDA or about 50%
operating margin. Early success will rely on top notch market research that will lead others to seek
involvement into the cooperative effort. By working together, scale can be achieved and risks alleviated.
SOURCES
"Bottom of the Glass: A T-Shirt Economy." A T-Shirt Economy. Bottom of the Glass, 10 Mar. 2010. Web. Retrieved from http://bottom-of-the-glass.blogspot.com/2010/03/t-shirteconomy.html on June 16, 2015.
"So You Want to Make a Whole Bunch of T-Shirts." Dispatches from the Union. N.p., 20 Feb. 2013. Web. Retrieved from http://blog.unitedpixelworkers.com/2013/02/20/so-you-want-tomake-a-whole-bunch-of-t-shirts on June 16, 2015.
Jay. "So You Want To Make T-Shirts?" Full Disclosure Atom. Full Stop Interactive, 13 Dec. 2010. Web. Retrieved from http://www.fullstopinteractive.com/blog/2010/12/so-you-want-tomake-t-shirts/ on June 16, 2015.
McQuade, Dan. "What's Hot on Wildwood Boardwalk T-Shirts, 2015."Philadelphia Magazine. N.p., 24 May 2015. Web. Retrieved from
http://www.phillymag.com/news/2015/05/24/wildwood-boardwalk-t-shirts-2015/ on June 16, 2015.
Genovese | NJ Advance Media for NJ.com, Peter. "King of Boardwalk T-shirts: Wildwood Shop Owner Has 6,480 for Sale." NJ.com. N.p., 30 July 2014. Web. Retrieved from
http://www.nj.com/entertainment/index.ssf/2014/07/king_of_boardwalk_tshirts_wildwood_shop_owner_has_6480_for_sale.html on June 16, 2015.
"Virginia Man Sentenced for Trafficking in Counterfeit Sports Apparel." US Immigration and Customs Enforcement. Department of Homeland Security, 12 May 2014. Web. Retrieved from
http://www.ice.gov/news/releases/virginia-man-sentenced-trafficking-counterfeit-sports-apparel on June 16, 2015.
Wigglesworth, Alex. "Feds: Father, Son Ran Counterfeit Sports Jersey Ring."Philly.com. N.p., 4 Sept. 2014. Web. Retrieved from
http://www.philly.com/philly/news/Feds_Father_son_ran_counterfeit_sports_jersey_ring.html on June 16, 2015.
"News Media Contact." Media. Ocean City, Maryland, Convention and Visitors Bureau and Department of Tourism, 2015. Web. Retrieved from http://ococean.com/media
on June 16, 2015.
"The Economic Impact of Tourism in New Jersey." Economics of Tourism Destinations (2005): 169-208. VisitNJ.org. Tourism Economics, 2014. Web. Retrieved from
http://www.visitnj.org/sites/default/master/files/2014-nj-economic-impact.pdf on June 16, 2015.
"Domestic Visits to Greater Philadelphia by Market Segment." Choice Reviews Online 51.01 (2013): n. pag. Visit Philly. 2015. Web. Retrieved from
http://files.visitphilly.com/visitor-volume-1997-2014.pdf on June 16, 2015.
"Delaware Tourism Statistics." Visit Delaware. N.p., n.d. Web. Retrieved from http://www.visitdelaware.com/about-us/tourism-statistics on June 16, 2015.