Luxeyard, Inc. (LUXR) owns and operates www.luxeyard.com, a members-only "flash-sale" e-commerce site for luxury home furnishings, decor and fashion that offers access to unique products at sub-retail prices. LuxeYard is the pioneer of Concierge Buying, which gives members the power to determine what items will be sold on the site, and Group Buy, which allows them to lower the price by sharing sale items with friends. LuxeYard partners with celebrity Trendsetters and design and fashion industry insiders to deliver a curated buying experience and point of view to its members.
'Flash Sales' Market Opportunity
The term 'flash sale' may not be a familiar one to some investors, but the concept is universally known at this point. A flash sale is a deeply-discounted sale on goods intended to liquidate a lot of overstocked inventory in a very short period of time. In many regards it's akin to the Groupon business model, which sells deeply-discounted goods too, via limited-time coupons or vouchers.
Manufacturers and wholesalers love flash sales because they can clear out a huge amount nagging inventory in relatively little time. The weak profit margin associated with the low sale price isn't even a worry with flash sales - the goods just have to be moved.
Consumers love flash sales too, for the obvious reason - they're getting a great deal.
The challenge is connecting the sellers who want to dump a massive amount of merchandise at any cost to consumers who are willing to buy those goods at the right price. Groupon isn't the answer, because it tends to deal with food and service offers. It simply isn't equipped to sell large-but-finite quantities of retail merchandise. Overstock.com isn't quite the answer either, as it's designed to be more of an online store with a constant variety of goods for sale. Overstock's prices aren't always all the competitive either, as the company has gotten away from its 'overstock' roots.
A company like Luxeyard, Inc. is the solution, however, as it provides the e-commerce marketplace where shoppers can buy what manufacturers are willing to sell at rock-bottom prices, at least for a limited time (usually while quantities last).
And make no mistake... flash sales are a full-fledged industry right here, right now, just like social networking and online daily deal coupons.� In fact, it's following in the same development footsteps as social networking and daily deals, and within a year could be as high-profile as both of those other two industries are now. It's been estimated that the flash sales industry quietly generated $1.5 billion in sales last year, which was double 2010's total flash sales revenue. That growth streak is expected to continue into 2015, when the flash sales market is estimated by some to be worth $6 billion.
LUXR Overview & Business Model
Luxeyard, Inc. hosts its flash sales through its free-membership website www.luxeyard.com. The e-commerce portal presently offers two venues at the site - fashion apparel, and furniture, with a bias for the higher-end luxury names within those two categories. Further category breakdowns have been planned, including home accessories, bedding, travel, and even consumables like wine or chocolate. �
The operation is a very new one, with the website only becoming operational in late January. Yet, the site has already amassed more than 400,000 members, and the company expected 1 million members to be in the fold by the end of 2012's second quarter. That membership roster is critical too, since 'members' tend to be regular and recurring spenders.
The operation is simple on the surface, though brilliant under the hood. Luxeyard.com offers retailers something of a self-service platform, where each of them can add and edit their special offer for what's usually about a day, or sometimes more. The discounts from, retail prices are generally 60% to 70%.
On that note, it's important to understand that Luxeyard, Inc. stores little to no inventory. It doesn't need to. The vendors and manufacturers themselves simply drop ship the items to buyers; Luxeyard simply collects a commission. As such, the business is a high-margin one, with no need for accounts receivable arm.
As for marketing, the sales-promotion effort is equally simple, and equally brilliant, consisting of two key components. �
One of those components is the involvement of high-profile 'trendsetters' that can suggest particular items. Celebrities like Nicky Hilton and Bobby Berk have been featured as a couple of the site's trendsetters.
The other key marketing component is a concept called 'Group Buy', which Luxeyard is pioneering in the flash sale space. Simply put, the more people that buy a particular product, the lower the price gets for each customer buying that item. The price-break structure encourages each buyer to forward the deal on to his or her friends and family, potentially lowering the price for everyone.
Of course, deep discounts alone are also a powerful marketing tool. The more Luxeyard can offer, the more visitors it can attract, which means it can go out and add even more vendors to its list of suppliers.
In sum, Luxeyard, Inc. is positioned to become a leading name and leading investment opportunity within the flash sales segment of the online-retailing market because it offers low prices for luxury goods, utilizes consumer driven (social network) marketing, has a low-cost operating model, and ffers real value to vendors
Luxeyard Management Team
As is so often the case with a young startup, the likely success of www.luxeyard.com has as much to do with its leadership as it does the business idea itself. To that end, Luxeyard's management team is nothing less than top-notch.
Braden Richter, CEO
Braden Richter has been a successful entrepreneur and CEO for over 19 years. He was CEO of Archetype Design Development, where he developed designs and sales strategy for some top US retailers such as Pottery Barn, West Elm, Williams Sonoma and American Signature.
As the founder and President of Richter Designs, Braden started the company with a $2,000 investment, and grew the company to over $70,000,000 a year in annual sales and 450 employees. During this time he worked directly with CEO's of Restoration Hardware, Crate & Barrel and Pottery Barn with efforts to improve store aesthetics and design.
He opened 6 manufacturing plants and 5 wholesale showrooms. Prior to that he was employee number 3 at Shabby Chic, Development Supervisor/Head purchasing agent all at the age of 21, and assisted in growing the company from start up to a $25,000,000 retail and wholesale chain.
Steve Beauregard, COO
Prior to LuxeYard Steve Beauregard was President and Founder of REGARD Solutions Corp, a successful mobile, social and eCommerce development firm for multi-channel retailers and venture-backed startups.
Steve was the driving force behind bringing on key accounts such as Sony Pictures, Coffee Bean & Tea Leaf, J Hilburn, Ray-Ban, Wells Fargo, Harbor Freight Tools, DIRECTV, and Burlington Coat Factory.
Steve was featured in Entrepreneur Magazine (9/07), is often quoted in trade mags, has spoken at international mobility conferences and is a frequent guest speaker on entrepreneurship at numerous southern California universities including USC, UCLA and Pepperdine.
Margot Ritcher, CFO
In January of 2012, Margot Ritcher joined LuxeYard from Arcadian Management Company where she served as interim controller, helping the company prepare for an IPO. Prior to Arcadian, Ms. Ritcher ran an executive management consulting practice for companies including USA Broadband, CBRE Richard Ellis, People Support, Paycom, SpotRunner, and Nextwave Telecommunications.
Earlier in her career, Ms. Richter was employed as Controller of DirecTV domestic. From there she worked her way up to Vice President of Business for DirecTV International. During her nine-year tenure, she helped take DirecTV from 20 employees and no revenue to over 2,000 employees and $9 billion in revenues.
Kate Richter, VP of Brand Sales
Kate Richter was the President of Birdie Joe, a high-end fashion sportswear line. Kate successfully grew the company from infancy to a nationally recognized brand carried in major department stores internationally.
Due to her background in furniture (Calvin Klein home collection lead developer), fashion and marketing Kate was an easy fit for the upstart later to be known as HauteLook. She developed the business with tremendous success in its first year doubling the company's projections and exceeding $30 million by the end of 16 months. Hautelook sold out to Nordstroms last year for $270 million.
Eula Smith, VP of Apparel
Eula Smith is a highly experienced 20+ year Nordstrom senior apparel buyer and retail-merchandising expert. For the past decade, Eula has run a consulting firm specializing in new store openings, product development and product mix and placement. In addition to
Nordstrom, her clients include Paige Denium, Belk, Dillard's, and Winter Kate to name a few.
David Shor, VP of Marketing
As a seasoned digital marketing strategist, advertising executive and technology entrepreneur Mr. Shor has launched four successful media companies. As a data-driven analytics and search engine marketing expert, Mr. Shor served a wide variety of companies such as Procter & Gamble, Disney, GE, Chase Bank, and WalMart.
LUXR Valuation and Analysis
With most startups in a budding industry - particularly one that hasn't even posted any quarterly numbers yet - it's more than a little difficult to piece together a valuation model or establish a reasonable price target. In the case of LUXR, there are actually some industry metrics we can apply to make a pretty meaningful guess as to what the stock and company should be worth.
That metric is the monetary value per member, as witnessed through acquisitions of and fund-raising for competing flash sales sites.
Take One Kings Lane for instance. With approximately 2 million members in its fold, it reached an inferred $440 million valuation with its latest round of fund-raising. That's $220 per member. Similarly, Zulily was estimated to be worth $750 million after its recent $43 million fund-raiser. That works out to be a value of $187.50 per member Vente Privee's 13,000,000 members make the company worth an estimated $3 billion, or $230.77 per member.
All told, the average value-per-member for the flash sales' industry's companies works out to be $197 each. That number multiplied by Luxeyard's current 425,000 members translates into a reasonable company valuation of $83 million. If the company reached that 1 million-member target by the end of Q2 (and it looks like it will), that same valuation math works to make the company worth $197 million.
And what's LUXR worth right now? A mere $47 million. Point being, no matter how one slices it, the stock is undervalued in its current situation, and will be even more undervalued at the end of this quarter if investors don't start recognizing the metrics.
That said, it's unlikely these metrics will go unnoticed for that long. The story's starting to spread, and a growing number of traders are already accumulating positions, knowing what's apt to be in store. And why not? It's the only publicly-traded flash sale opportunity out there. The rest are privately-held or owned by venture capital companies. �
Even without the comparison metrics though, LUXR looks like a solid speculative opportunity.
Simply put, Luxeyard is a well-planned organization with powerful differentiators that should allow it easily break into the flash sales space and quickly win market share.
Along with the previously-mentioned Group Buy, with which consumers can lower the price tag on any flash sale item by encouraging more people to buy the item, www.luxeyard.com is also developing a Concierge Service that will allow the site's members to request certain goods be brought to the site to sell. That type of customized proposition will keep the crowd interested, while celebrity 'Trendsetter' endorsements will funnel newcomers to the marketplace.
And, the flash sale space is proven. Companies already in the industry have shown historical revenue growth up to as much as 30% per month.
More than any of that though, LUXR is a compelling opportunity because it's a low-risk, high-margin business model. All Luxeyard needs to do to pump up the top and bottom line is attract a crowd, and bring more vendors into the fold (the two fuel each other). There's no retail store overhead, no accounts receivable, and no inventory to store. That allows the organization to continue differentiating itself from its competition - which it is - while simultaneously riding the bigger flash sales growth wave.
Based on the per-member model, some analysts are pegging a current value for LUXR shares at $1.32 - a number we don't disagree with. Based on the membership growth though, that price target is pushed up to above $3.00 by the end of the quarter. Again, it's not a number we disagree with. It also represents a quadrupling of the current value... a move most anybody would be happy with. Micro cap speculators should consider a position now.
Wednesday, August 22, 2012
Luxeyard, Inc. (LUXR.OB) Ready to Take the Flash Sales Industry by Storm
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment