The "Omni-Channel" E-commerce Challenge The first item on Montes' agenda was to determine whether to sell online. Through Zappos and other companies, direct sales of women's shoes in the United States and Europe were growing rapidly. Ecommerce was also growing quickly in Asia and South America. Yoshida argued, MC's retail partners will suffer from lost sales, and the MC brand will be degraded. Some retailers may lose more than 20% of their sales and would need to find other sources of revenue to survive. If MC sells online, it should be only for weaker items, like last year's styles. In contrast, Santos stressed, MC's key customers are increasingly heavy online shoppers. They are fashion loyal, not brand loyal. MC can reverse the erosion of sales through this channel. Online firms could carry all MC's line and promote fashionable new items faster than traditional retailers. Montes had open purchase orders from Zappos and other online retailers for the United States. She felt that these accounts could sell more than $5 million in the United States alone in 2018. She guessed that U.S. retailers would lose 10% to 20% of their sales, depending on how many products MC put online. She wondered how to manage this opportunity, which MC would implement globally if it succeeded. She wondered if retailers could partner with MC in this channel. Montes Calados 20142017 Financial Results Income Statement in Millions of Reals (1 Real = U.S. $.32 as of July 2017) 2014 383 2017 E 406 Total Revenues Cost of Goods Sold Gross Profit Selling General & Admin Operating Income 2015 399 179 220 172 211 2016 412 168 244 140 168 238 Converted to US Dollars 2014 2015 2016 2017 E $ 122,560,000.00 $ 127,680,000.00 $ 131,840,000.00 $ 129,920,000.00 $ 55,040,000.00 $ 57,280,000.00 $ 53,760,000.00 $ 53,760,000.00 $ 67,520,000.00 $ 70,400,000.00 $ 78,080,000.00 $ 76,160,000.00 $ 43,520,000.00 $ 43,520,000.00 $ 44,800,000.00 $ 46,080,000.00 $ 24,000,000.00 $ 26,880,000.00 $ 33,280,000.00 $ 30,080,000.00 136 144 136 75 84 104 94 Number of Shoe Pairs Sold Millions of Pairs 3.68 3.73 4.04 4.24 Average Selling Price / Pair Reals U.S. Dollars 104 107 102 96 33.30 34.23 32.63 30.64 Pairs Sold by Major Regions (millions) Revenue By Region Brazil North America Europe Asia Other 0.82 0.96 0.84 0.62 0.44 3.68 0.84 0.92 0.81 0.65 0.51 3.73 0.89 0.93 0.88 0.73 0.61 4.04 0.92 0.86 0.92 0.82 0.72 4.24 $ 27,309,565.22 $ 28,753,672.92 $ 29,043,960.40 $ 28,190,188.68 $ 31,972,173.91 $ 31,492,117.96 $ 30,349,306.93 $ 26,351,698.11 $ 27,975,652.17 $ 27,726,756.03 $ 28,717,623.76 $ 28,190,188.68 $ 20,648,695.65 $ 22,249,865.95 $ 23,822,574.26 $ 25,126,037.74 $ 14,653,913.04 $ 17,457,587.13 $ 19,906,534.65 $ 22,061,886.79 $ 122,560,000.00 $ 127,680,000.00 $ 131,840,000.00 $ 129,920,000.00 Total The "Omni-Channel" E-commerce Challenge The first item on Montes' agenda was to determine whether to sell online. Through Zappos and other companies, direct sales of women's shoes in the United States and Europe were growing rapidly. Ecommerce was also growing quickly in Asia and South America. Yoshida argued, MC's retail partners will suffer from lost sales, and the MC brand will be degraded. Some retailers may lose more than 20% of their sales and would need to find other sources of revenue to survive. If MC sells online, it should be only for weaker items, like last year's styles. In contrast, Santos stressed, MC's key customers are increasingly heavy online shoppers. They are fashion loyal, not brand loyal. MC can reverse the erosion of sales through this channel. Online firms could carry all MC's line and promote fashionable new items faster than traditional retailers. Montes had open purchase orders from Zappos and other online retailers for the United States. She felt that these accounts could sell more than $5 million in the United States alone in 2018. She guessed that U.S. retailers would lose 10% to 20% of their sales, depending on how many products MC put online. She wondered how to manage this opportunity, which MC would implement globally if it succeeded. She wondered if retailers could partner with MC in this channel. Montes Calados 20142017 Financial Results Income Statement in Millions of Reals (1 Real = U.S. $.32 as of July 2017) 2014 383 2017 E 406 Total Revenues Cost of Goods Sold Gross Profit Selling General & Admin Operating Income 2015 399 179 220 172 211 2016 412 168 244 140 168 238 Converted to US Dollars 2014 2015 2016 2017 E $ 122,560,000.00 $ 127,680,000.00 $ 131,840,000.00 $ 129,920,000.00 $ 55,040,000.00 $ 57,280,000.00 $ 53,760,000.00 $ 53,760,000.00 $ 67,520,000.00 $ 70,400,000.00 $ 78,080,000.00 $ 76,160,000.00 $ 43,520,000.00 $ 43,520,000.00 $ 44,800,000.00 $ 46,080,000.00 $ 24,000,000.00 $ 26,880,000.00 $ 33,280,000.00 $ 30,080,000.00 136 144 136 75 84 104 94 Number of Shoe Pairs Sold Millions of Pairs 3.68 3.73 4.04 4.24 Average Selling Price / Pair Reals U.S. Dollars 104 107 102 96 33.30 34.23 32.63 30.64 Pairs Sold by Major Regions (millions) Revenue By Region Brazil North America Europe Asia Other 0.82 0.96 0.84 0.62 0.44 3.68 0.84 0.92 0.81 0.65 0.51 3.73 0.89 0.93 0.88 0.73 0.61 4.04 0.92 0.86 0.92 0.82 0.72 4.24 $ 27,309,565.22 $ 28,753,672.92 $ 29,043,960.40 $ 28,190,188.68 $ 31,972,173.91 $ 31,492,117.96 $ 30,349,306.93 $ 26,351,698.11 $ 27,975,652.17 $ 27,726,756.03 $ 28,717,623.76 $ 28,190,188.68 $ 20,648,695.65 $ 22,249,865.95 $ 23,822,574.26 $ 25,126,037.74 $ 14,653,913.04 $ 17,457,587.13 $ 19,906,534.65 $ 22,061,886.79 $ 122,560,000.00 $ 127,680,000.00 $ 131,840,000.00 $ 129,920,000.00 Total