The Bear Gets Bullish How Vermont Teddy Bear is adapting its ecommerce strategy for a growing market Tom Funk, ecommerce Manager Vermont Teddy Bear Company Philip Jefferson, VP Client Services Demandware Agenda Vermont Teddy Bear - Business Overview and Web Strategy ecommerce Initiative - Objectives, Vendor Selection & Lessons Learned Deployment Best-Practices Q&A From Push Cart to $75 Million Company Founded in 1981 by John Sortino Sold hand-sewn teddy bears from a push cart in Burlington, Vermont Valentine s Day 1990, our first live read radio spots were aired in New York City the year s sales goals were met in just two days 1993 Vermont Teddy Bear Company went public 2002 launched PajamaGram, the first sister brand 2003 acquired Calyx & Corolla flower company 2005 taken private by Mustang Capital Group 1
VTB s Marketing Strategy Multichannel direct marketing Radio over 2,000 stations Television, Print, Outdoor Search-engine and other Online Advertising & Affiliate Loyalty marketing via email and direct-mail Catalog What makes a Vermont Teddy Bear special? * Exclusive product handmade in Vermont * Personalization and accessories * Holiday delivery promise * Free healthcare for life at the Teddy Bear Hospital Sales Growth Through the Online Channel Organic Growth Migration from Phone to the Web Sister-company Launches and Acquisition 1998: $1.7 million online -10% of the Company s $17.2 million sales 2006: $46 million online - 68% of the Company s $69 million sales $50.0 $45.0 $40.0 $35.0 $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 Revenues Transacted Online ($ Millions) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Peak Season Of our 4.3 million annual website visits, almost 30% of them occur during the Valentine s Day holiday peak Mother s Day and Christmas also increasingly important peaks Sales volumes increase about one-hundredfold during peak, to about 2,000 orders per hour 2
Agenda Vermont Teddy Bear - Business Overview and Web Strategy ecommerce Initiative - Objectives, Vendor Selection & Lessons Learned Deployment Best-Practices Q&A ecommerce Project: Situational Overview In 2005, 60% of revenue from online channel Still, ecommerce viewed as growing revenue channel Ecommerce objectives: Increase revenues by cross-selling and up-selling teddy bear accessories Enhance the overall online customer shopping experience Improve customer satisfaction by ensuring that gifts were delivered on the requested date and to the correct address Offer and support multi-language sites to successfully reach the U.S. Hispanic market Vendor Selection: Points of Evaluation Improved merchandising features to raise average order value Support multiple sites, including multilingual sites aimed at a growing Hispanic audience Improve the customer experience through increased functionality Scale to support traffic surges during peak holidays On-demand pricing model, to reflect our traffic fluctuations 3
Selected Vendor: Why Demandware? Attraction to the on-demand model Capacity when VTB needs it Benefit for multi-site support Component reuse makes it easier to launch new sites Merchant-assessable merchandising tools Built in search functionality Promotions management Site metrics and analytics A/B Testing Make Your Gift Even More Special... Cross-sells are very important to VTB! Average 1.5 items per order Accessory items lift our revenues by 5% Over $1 million per website per brand Original design displayed cross-sells awkwardly Goal: make it easier and more appealing to add Accessories Redesigned product page displays more accessories Checkboxes eliminate clicks Color options clearer to the customer and more fun 4
Reaching Out to the US Hispanic Market US Hispanic population is over 40 million By 2010 it will be 100 million Purchasing power of US Latino households is growing at a 10% clip In 2005, Hispanic website use grew to 14.4 million people DMA Survey: Of online shoppers, 52% prefer English websites, 22% prefer bilingual, and 27% prefer Spanish-only VTB already serving Latino customers who reach us through our general media buys 2002 Valentine s Day, began campaigns on Spanish-language radio 2005 launched Spanish-language products Launching a Bilingual Web Platform One platform, with session-dependent language Translation for launch and ongoing content Support bilingual images, not just text Support both languages throughout checkout process, including error messaging Other Operational Enhancements Arrival Date Calendar Help us keep our Delivery Promises Address Validation Save some of our $100 K of badaddress charges Guided Search Results segmented by products, occasions, and info A/B Testing Validate or disprove our design decisions and marketing hunches 5
Agenda Vermont Teddy Bear - Business Overview and Web Strategy ecommerce Initiative - Objectives, Vendor Selection & Lessons Learned Deployment Best-Practices Q&A Deployment Best Practices: Blueprint for Success A framework for success created to ensure that the design and launch of a customer s online channel will reach their business and revenue objectives. An approach to ensure that our customers, together with their Partners, have the capabilities to launch and operate an on-line store built with Demandware ecommerce. The Demandware Customer Lifecycle The Customer Lifecycle illustrates the overarching agenda for Demandware's relationship with our customers. Know. Solve. Enable. Optimize. Existing online presence, and the opportunity for improvement Current & future expectations for the online channel Desired online constituency; and what they expect Experience required to build loyal, profitable relationships ecommerce best practices, features and functionality that will drive conversion Complete, end-toend, integrated solution Adaptation to existing back-end systems and/or internal processes Project execution using a structured methodology Management of scope, schedule, budget, and risk Best-practices for configuring DWeC and integrating existing systems Models for ongoing merchandising and site maintenance. Continual product enhancements based on ecommerce insights Ongoing dialog with our customers to share product growth Continual site enhancements to address evolving business needs 6
Stage 1: Know. What is the online vision and strategy? During the first stage of the lifecycle, we establish a clear understanding of the state of our customer s online presence; including their current and future online needs, and their market position in relation to their competition. We get to know our customer s online constituency what kind of shopping experience is required to build loyal, profitable customer relationships. We learn the customer s business strategy in terms of quantifiable goals and established key performance indicators (KPIs) they will use to measure their progress and success. The stage culminates with a qualitative assessment of fit with Demandware ecommerce. To move to the next stage, there must be a mutual agreement that there is alignment between the customer s needs and a Demandware ecommerce solution. Stage 2: Solve. What creates a truly effective customer experience? During this stage, we establish which ecommerce best practices, features and functionality should become part of the customer s ecommerce solution. We define the complete end-to-end solution; including complimentary technologies, new integration and adaptation to existing back-end systems and/or processes. We establish the roadmap for enabling the customer s ecommerce solution; mapped directly to the customer s business strategy, target customer experience, and measurements for progress and success. The stage culminates with a quantitative assessment of the effort, schedule, and cost associated with initiatives in the roadmap. To move to the next stage, there must be a mutual agreement that the customer s business and financial requirements can me met. Stage 3: Enable. What is the best approach to build it? During this stage, we execute one or more initiatives by following a structured customerenablement methodology; including project, change and risk management. We combine the best-practices for configuring and/or customizing Demandware ecommerce with optimal solutions for integrating a customer s existing systems and business processes. We consider and incorporate the customers future organizational approach for managing their ecommerce business; including ongoing merchandising and site maintenance. The stage culminates with the relatively rapid deployment of an ecommerce solution that meets the customer s business and financial requirements, is aligned with their on-line strategy, and is flexible enough to address future functionality or integration requirements. 7
Stage 4: Optimize. How do we optimize the solution to meet future needs? This stage is perpetual; involving ongoing dialog to provide continuous product enhancements and a process to share product growth and ecommerce insights. We support our customers in continually optimizing their ecommerce solutions to meet their evolving business needs and customer demands. We help our customers reassess performance against their current business strategy; in terms of specific quantifiable goals established to measure progress and success. During this stage, we continue to help our customers realize maximum long-term value and reach their revenue growth expectations. When conducted effectively, this stage supports a recursive relationship with our customers leading back to Know. Aptitudes for Success Demandware, together with our Partners, will follow an approach that takes into account all of the factors that will impact a customer s success. Know. Solve. Enable. Optimize. Retail ecommerce; inc. online merchandizing Customer Experience Design; inc. drivers of loyalty and conversion Demandware ecommerce; best practices in configuration and customization System Integration: Inventory Mgmt, Customer Mgmt, Fulfillment, Analytics Process Evolution: search, marketing, payments, coupons, shipping Program & Project Governance ecommerce Application Management Training & Ongoing Support Partnering for Success Implementing and optimizing Demandware ecommerce, depending on the customer or project, may require a variety of capabilities for success. Our best-practice approach is to acknowledge required capabilities on a project-by-project basis, and utilize Partners where needed. Project Merchant Partner Demandware Retail ecommerce Customer Experience Design Demandware ecommerce System Integration Process Evolution Program & Project Governance ecommerce Application Mgmt Training & Ongoing Support 8
Agenda Vermont Teddy Bear - Business Overview and Web Strategy ecommerce Initiative - Objectives, Vendor Selection & Lessons Learned Deployment Best-Practices Q&A THANK YOU Tom Funk, Vermont Teddy Bear Ecommerce Manager 802-985-1331 tfunk@vtbear.com Philip Jefferson, Demandware VP, Client Services 781-756-3700 pjefferson@demandware.com 9