Posts Tagged "experience"

Unicorn at full speed. Growth by all means.

“TOGETHER WE GO FAR”peloton1-min

 Unicorn – Extreme Growth

PELOTON, belongs to that selective unicorn company league with an innovative business model in the fitness sector, based exclusively on growth expectations, with no track record of profitability and with a valuation of more than $1 billion, in recent IPO process.

It started in the USA in 2014 selling its first connected premium exercise bike and currently provides almost 1,000 different sessions per month online with the best available instructors.

 

Addictive Satisfaction

It provides a rewarding experience to its half a million subscribers who after paying a minimum of 2,000 euros for their connected bike, pay about 39€ per month to be able to enjoy at home this innovative cocktail of Fitness + Media + Technology.

With 8-13 sessions per month and a low churn ratio of 0.65% per month, they have managed to articulate a healthy “addictive” experience.

Its Direct to Customer model mainly online, also has its own retail limited network (75 stores with a wide range of formats such as the 30-sqm micro store or the 150-200sqm Studio where customers can try and experience the products and fitness sessions.

Explosive Income Growth

Total revenue has quadrupled in the past two years, with a strong investment in marketing/sales (35% on total sales) and an R&D effort of 6% of total sales.

Its growth expectations are based on the international expansion (recently it has begun its activities in Canada, Germany and the UK) and the extension to other product areas such as yoga/mindfulness.

In addition to its core revenue from product sales, it is clearly being supplemented by its monthly subscriptions, which already account for 20% of the total with strong growth over the past two years.sales peloton-minSales Evolution Mix Peloton English-min

 

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Strong Losses

The results line reflects heavy losses due to the high cost of acquiring new customers and the main focus on growth at all costs in the hope of achieving a higher volume that balances the current cost structure. There is a big question mark of financial feasibility at midterm horizon.

This financial model is an exclusive privilege as a Unicorn company that does not apply to other conventional companies (which must provide dividends) and that is justified exclusively by their high growth expectations.Peloton Losses-min

 

Digital Transformation

The fitness sector is not being at all oblivious to digital transformation:

  • Digital platforms grouping hundreds of fitness centre of various brands and formats: e.g. Gympass, Andjoy, Fitpal
  • Transformation of the traditional gym business towards specialization/segmentation: e.g. Equinox
  • Brands of connected equipment similar to PELOTON: e.g. SoulCycle, Echelon, Techno Gym …

Try a claass with us Peloton-min

Retail Implications

It is clear that Peloton, disruptive, with its revenue/cost structure and lack of business profitability, to date, can not be applied to the conventional Retail model.

Spite of all this, we can identify a number of elements and features of the new Unicorn businesses that sooner rather than later, will be selectively adopted by Retail and Brands:

  • Direct to the Customer
  • Focus on mix of products and services
  • Use of innovative technology to customize and provide “on demand” the product/customer service
  • Subscription. Recurring income
  • Extreme omnichannel. Online and physical
  • Clear adaptation of physical retail formats based on the different roles they have (e.g. stores from 30 to 200sqm). Limited footprint.
  • Addictive and satisfying experiences in communities

Yoga Peloton-min

 

More info: carlos.dominguez@mheconsumer.com

www.mheconsumer.com

 

NYC Flagship. Reinventing your Third Place: Home, work and Starbucks experience

Temple with more than 2,000 square meters

A new temple for Starbucks lovers opened last December in NYC, in the Chelsea Market area, across Google’s offices in the city. They are more than 2,000 meters distributed over three floors with 5 well differentiated areas including an area for cocktails, Italian pastries and sandwiches (Princi), ice cream and of course, 6 different ways to make a coffee (in addition to the espresso).

Starbucks NYC Flagship

  • 280 employees strive to realise a differentiated experience for customers who are willing to pay 7 to 10 euros for their coffee. The price does not seem to be an impediment to continuing to grow this company that with sales of 22 billion euros (same Inditex and Mercadona league) and annual growth of 10% is making Starbucks that “third place” desired by its customers after home and work.
  • With a local design, copper colour dominates the environment. The central axis of the store is a roasting area that prepares more than 500 tons of coffee to be used in some of the 28,000 outlets that Starbucks has. With a high annual x17 inventory turnover, it is indeed the envy of any other retail business.
  • The plan is to have a total of 6 Flagships with similar globally characteristics. They have already also opened in Seattle, Shanghai, Milan, Tokyo and soon in Chicago.estadatisitcas-min

Declination of formats

Few businesses have declined their format in variants as different as they have, from small kiosks implanted in hotels/office blocks to these 2,000-meter theatre stores maintaining a special aroma and atmosphere.

Starbucks NYC

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Retail Customer Experience Optimisation

Food

Food already accounts for more than 20% of its sales and the alliance, in full execution with Nestlé to distribute its products on supermarket shelves and other distribution channels, will facilitate the transfer of the same experience to theirs home that’s why they will have additional reasons to visit “the third place”.

Strong Competition in China. Luckin Coffee

It is present either directly or through licenses in 80 countries – with varying results – and the strategic points are USA and China. In fact, it is in China where they are encountering a first-timer but strong competing operator: Luckin Coffee. This startup (October 2017) has already opened 2,000 outlets and plans to double them during this year 2019 beating Starbucks in the Chinese market. With -30% lower prices and focused on a queueless service, take away and Home/Office Delivery Luckin Coffee is managing to change habits in their compatriots.

Innovation and size can work together

Innovation and size can work together and Starbucks achieves very high levels in omnichannel, loyalty programs and advanced initiatives in corporate responsibility as support in the secondary and university education of its employees, hiring 22,000 wives of military veterans and a strong commitment to sustainability and the environment. Profit and support local communities live together and feed each other very well.

Beyond the product, beyond the price

Approaching its 50th anniversary, It gets a renewed experience that makes its followers continue to consider it as their third place: Home, Work and … Starbucks. Beyond the product, beyond the price.

More info: carlos.dominguez@mheconsumer.com

www.mheconsumer.com

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