Influencer Marketing

Influencer marketing had quickly become one of the most important and cost-effective online marketing channels for businesses in the womenswear retail industry. A study by found that 75% of fashion businesses had dedicated budgets for influencer marketing, with 20% having budgets between $1 million and $3 million. Another study found that 89% of marketers said that IG was critical to their influencer marketing strategy.

35% of people between the ages of 18 and 36 had purchased an item because of an influencers endorsement. More specifically, 86% of women used social media for purchasing advice. The average return on influencer marketing was $6.50 for every dollar spent.

Moving Forward

Given the nature of the economy and the continued closure of store location, the company wondered whether closing the store permanently would be a strategic way to generate additional funds to put toward online advertising. If the store were to close, the company planned to use 15% of the stores annual recurring cash cost to finance partnerships with micro-influencers on IG. Micro influencers have between 1,000 and 100,000 followers.

Using the influencer budget, the company was willing to offer participating micro-influencers $1,500 each to recommend the company to their respective followers. The company would also provide each influencer $150 worth of merchandise to wear when creating their posts. The company planned to offer this partnership opportunity only to influencers with an average of 50,000 followers.

Store Sales 2021 Fiscal Year

The store expected five to 10 customer orders each day the store was open in the fiscal period.

The company had identified two types of shoppers. The first type was a busy professional on lunch break who was looking for a quick purchase. The second was a business professional who visited the store after work hours to take advantage of the stores personal shoppers. For lunchtime shoppers, their average purchase was one shirt and on pair of pants, whereas the after-work shopper purchased, on average, one cashmere set, one dress, and on pair of pants. The company estimated that the store would open for 250 day in the 2021 fiscal period. Of the estimated customer purchases each day, 20% would be for after-work shoppers.

Online Sales

The company grouped online customers into two types: first-time customers and return customers. To entice first-time customers to make an online purchase, a 10% discount was applied at checkout. First-time orders tended to be lower in value, as customers wanted to assess the quality of the clothes before making a bigger purchase. On average, a first-time customer order comprised one shirt on dress, while the average order from a return customer comprised on pair of pants and one non-cashmere lounge set.

The company projected that the online store would generate between $650,000 and $850,000 in revenue for the 2021 fiscal year without any additional marketing. This figure would be split evenly between first-time and return customers. If the IG partnership opportunity was pursued, it was estimated that anywhere between 2% and 4.5% of all followers reached would visit the online store. The company believed 2% of these visitors would make a first-time purchase and 20% of these first-time purchasers would make a second purchase in the 2021 fiscal period.

The company incurred a flat $7.14 fee for every online order shipped out. On orders of $60 or less, the company would charge the customer a $10 delivery fee, down $5 from the previous charge of $15. No shipping charge was passed onto customer on orders over $60.

Conclusion

With the lease renewal date of July 1, 2020, for the store, the company needed to come to a decision quickly. Based on the current economic environment and the unknowns surrounding society, the company hoped that whether they chose to focus on the online store with influencer marketing or maintain the brick and mortar location, the companys decision would result in a profit of at least $300,000.

Company Selling Prices and Wholesale Costs by Product Type

Item Type	Selling Price	Wholesale Cost
Cashmere Lounge Set	$670.00	$255.00
Non-Cashmere Lounge Set	$195.00	$90.00
Pants	$150.00	$70.00
Dress	$140.00	$65.00
Shirt	$90.00	$45.00

Company Annual Projected Costs, 2021 Fiscal Period

Brick and Mortar Store

Store Rent $78,000

Salaries and Wages $122,320

Utilities $1,440

Depreciation $1,615

Internet/Phone $1,140

Insurance $2,210

Other Tenant Fees $1,255

Point-of-Sale System $1,236

Health and Safety $1,400

Online Store

Online Manager $40,000

Website Hosting Fees $13,100

Insurance $2,500

Warehouse Rent $28,0000

Question:

Assess Companys internal strengths and weaknesses.

Calculate the unit contribution margin and contribution margin ratio for the two types of orders made at Thursdays' Exchange Tower location and for the two types of orders made online.