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BarkBox

Australian Export Plan

BY: Ilene Spaink, Micayla Martinez, José Godínez, Ike Okafor, and Suveksha Bhujel

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What is BarkBox?

Est. January 2011

BarkBox is a monthly subscription service providing dog toys and treats. Each BarkBox contains 4-6 items from each month’s themed collection. 2 high quality toys, 2 full-size bags of treats, and a chew each month.

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BarkBox Financials

Private Company

Profitable:

2017 revenue of $150 million

2018 revenue of $250 million

Subscription box accounts for 80% of sales

95% shopper retention

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Why Export To Australia?

Australian Chews
Target Market
Customer Profiles
Economy & Political Risk
Limited competition

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Target Market

62% of households in Australia own a pet, dog being the most common pet
Population (July 2018)

23,470,145 people
41.35% aged 25-34

Young & Platinum (25-34)

Many married but yet to have children

Although age groups 25-34 is the biggest range that would be spending money on this product. Any age group can participate in this subscription since it is not geared towards any certain age

Young and Platinum (Second highest spender)

Age: 25-34

Average entertainment spend: 234 AUD per week

Who they are:

• Many are married – but are yet to have children. And as more people choose to live by themselves with their animals, the growing level of spending has prompted new businesses to enter the market to take advantage of the boom in spending on pets

• Highly educated, ambitious and well-paid

Who uses your product/service in your home country and other foreign markets?

Any pet owner who like to pamper their dogs use our product. BarkBox provides monthly chews, treat, and toys for all types of dogs. This is also convenient for busy pet owners who don’t have time to go out and buy different items. It is all mailed to their home.

Why will they buy your products?

Barkbox doesn’t sell anything that they would not personally give their own pets. The products are high quality, with only one or two ingredients.

Treats are made in AUS as well.

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Australian Customer profiles

2016 Spending

$667 Billion in additional costs
$0.45 Billion yearly on pet pampering

Common culture between United States and Australia

Monochronic
Diverse
Language

Who already uses your product or service?

Our product idea is already used by at least half the population of Australia, since toys, treats, and chews are a big part of any dog owners life

Is your product or service in broad general use or limited to a particular group?

Although limited to having to own a dog it is not too limited because the market is so large for this product

Is your product or service popular with a certain age group?

Although age groups 25-54 is the biggest range that would be spending money on this product. Any age group can participate in this subscription since it is not geared towards any certain age

Young and Platinum (Second highest spender)

Age: 25-34

Average entertainment spend: $234

Who they are:

• Ethnically diverse

• Work hard to let off steam through socializing

• Pet owners are statistically more social so easier to advertise through word of mouth.

Similarities

English Speaking
Monochronic so issues of time restraints wouldn’t be bad since the US and Australia are close on the time scale.

What segment(s) will you be targeting in the country that you will be exporting to?

We are targeting the young and platinum of Australia. Individuals between 25-54 who make a good living and like to live comfortable. They averagely spend $248 a week which can easily be $50 for their pets.

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Economy & Political

Risk

1 USD = 1.40 AUD

GDP per capita PPP (2017): 1.323 Trillion USD
Inflation rate (2018) : 1.8%
Gross National Income: 1.126 trillion PPP Dollars (2017)
Free Trade Agreement

ChAFTA-WP

World Bank ranked Australia 14th out of 190 countries for ease of doing business (2018)
Same corruption color as US
Currency difference

https://www.gov.uk/government/publications/overseas-business-risk-australia/overseas-business-risk-australia

Economic Overview

Australia has been one of the best-performing advanced economies in recent decades, avoiding recession for 26 years. This success reflects many factors, including sound fiscal management, strong population growth, an abundance of natural resources (particularly iron ore, coal, gold and gas) and close ties to fast-growing Asian markets.

Trade and Investment Overview

Australia’s trade is largely directed towards Asia, although investment ties remain centred on the United States and the UK. The country’s biggest two-way trading partner is China, followed by Japan, the United States, the Republic of Korea, India, New Zealand and the UK

Free Trade Agreement: ChAFTA is the chinese and australian free trade agreement that allows us to ship our toys into Australia without tariff fees.

Wholly Produced (WP) – Goods produced entirely in Australia or China.

Goods produced entirely in either China or Australia, or both, from materials classified as ‘wholly obtained’ or ‘originating’ under the Rules of Origin (ROO), will qualify as ‘originating’ under ChAFTA and qualify for preferential tariff treatment.

World bank ranking: https://www.gov.uk/government/publications/overseas-business-risk-australia/overseas-business-risk-australia

This proves that doing business with australia should not a problem and there is very low risk involved

Currency difference: US dollar is stronger, but the inflation rate for both currencies are very similar US being 1.9% and Australia being 1.8%. This is from the last quarter of 2018.

GST: 10% tax needed to be added to all items https://www.ato.gov.au/Business/GST/How-GST-works/

As a company we need to register to be a GST company. After this we need to take out the GST percentage of each purchase we receive and at the end of the month we will calculate how much we need to send to the Australian government after that we take the percentage that we initially put aside and make sure it is the same and then send them the total GST of that month. We will include this in our prices.

Political Overview

Australia has the same color as US for corruption so very low political risk to do business in (Light orange)

We have been importing toys from China to US since 2012 so it has been established that China has been a stable market to use for our manufacturing needs. We think that transitioning our imports to Australia should not be an issue at all because they also have a free trade agreement together.

Australia is a parliamentary democracy and a constitutional monarchy. Its system of government follows the UK model, reflecting a shared cultural heritage

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Limited Competition

Olly’s Box and Waggly Club

Price
Design
Charitable Donations

1 Month	6 Months	12 Months
47 AUD	42 AUD	38 AUD

232 AUD 8%	442 AUD 3%

BarkBox

Our prices Includes the GST and even after that is portioned out of the total we will still be making a slightly higher profit than in America as to compensate for exporting costs

47 AUD for one month [4.7 AUD to GST]
252 AUD for six months (42 AUD per month) [4.2 AUD to GST] or 232 AUD [23.2 AUD to GST] upfront with 8% discount
456 AUD for 12 months (38 AUD per month) [3.8 AUD to GST] or 442 AUD [44.2 AUD to GST] upfront with 3% discount

Olly’s prices

55 AUD for one month
165 AUD for three months (55 AUD per month)
300 AUD for six months (50 AUD per month)

Waggly’s prices

52 AUD for one month
147 AUD for three months (49 AUD per month)
270 AUD for six months (45 AUD per month)

BarkBox has a set theme each month with custom designed toys compared to other boxes only use other products to make their box for example they have Nerf brands in their box and each month is simply a collection of random toys. As well as Olly is the only big company that also offers as many diverse kinds of products in a box as we do.

NYC team designs the toys.

They donate in a total to other rescues in Australia, but BarkBox lists the organizations and allows you to put a code into your final payment and decide which rescue or nonprofit to donate to so you have a choice rather than your payment going to a broad array of organizations. BarkBox pays for the donation not you so the total is not different if you donate. 25$ every time code is used

Barkbox also offers a program online that allows you to meet with rescue dogs to see if you are a good fit for each other
Animal rescue charitable donation for AAPS (Australian Animal Protection Society), RSPCA Lonsdale Shelter, and AWLQ (Animal Welfare League Qld) similar rescues to America Animal Rescue shelter

What will be your basis of competitive advantage and why will customers buy your products and not those of your competitors (Superior quality? Price? Brand equity, Design etc.).

Our competitive advantage includes more than just a cheaper price. It has a bigger variety to offer at a better quality. Buying our product also gives you access to other features like donating to an organization of your choice.

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How To Export To Australia?

Payment
Marketing and Distribution Channels
Transportation

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Marketing & Distribution Channels

Reaching Customers in Australia?

Distribution

Australian postal services

Marketing

Flyers in local pet stores
Online Ads

Internet 88.2% (July 2016)

New customer promotions
Market acceptance

Distribution- We will be using Parcel Post to distribute our product.

Prices can range from $9.23 to 14.20 AUD depending if it is shipped from a major city or a rural area. (6.55 USD to 10.07 USD)

Marketing- Flyers in pet stores and online ads since it is an online company

Also do first time customer promotions.

They have one right now that is double the products in first box if you sign up for at least a 6 month or more subscription

Almost all of the population is online and has reliable internet which is important since our company is based online
Our target area age group are actively on social media. BarkBox ads can pop up while they scroll through their feed.

We will take advantage of cookies and search history to target our specific audience. When analytics picks up that a user searched any pet store or pet related accessory, an ad can pop up.

Shelter support and promotions. We want the customers that we are in it more than just for the money. We will provide donations and support to the shelter of their choice to demonstrate that we truly care about dogs.
Acceptance since there are similar ideas in place already

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Transportation

Ocean Freight

From: Port Qingdao, China To: Port Darwin, Australia
Average 5,000 toys

Average 3000 lbs
LCL 240in x 96in x 96in

Total: 761.16 - 841.28 AUD
Landing Costs: 801.22 Average Monthly
China’s Political and Economic Risk

What is the shelf life of your product? Will this be reduced by time in transit?

Not an issue since our only edible items would be coming from Australia. The toys do not have a shelf life so transit would not be an issue

How easily can your product be transported?

These products are not fragile or unsafe so it would be a very easy product to put in large crates and ship to Australia

Would transportation costs make competitive pricing a problem?

It would not since the American company ships from China and they are much farther away than Australia is from China so shipping costs would be significantly lower going to Australia. The cost of china to US (NY) would be $4969 - $5492.05

How efficiently does the target market process incoming shipments?

Australia and China are on good terms with trading. Australia has no import rules unless it is agriculture or weapons. It is not hard to enter Australia as a ocean freight shipment

Are specialized containers or packaging materials required?

No special packaging required because they are not breakable or effected by temperature.

https://onlineservices.kuehne-nagel.com/fs/quotes/1169302/edit

Shipping cost:

From- Qingdao, China

To- Hedland, Australia

Commodity Value Avg. 5000$ 5000 Toys

LCL 3000lb 240in x 96in x 96in

Total: 761.16 - 841.28 AUD Including Insurance

For a FLC 20’ container it would be 980 - 1358 AUD and take around 2 weeks to get there

Political and Economic Risk:

Australia has close ties to fast-growing Asian markets.

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What Are The Exporting Challenges?

Cultural Differences: Time differences, Travel time, and Power distance
Seasonal differences
Unemployment rate is 5%
Goods and Services Taxes (GST) 10%
Competition
BarkBox Trademark
Other registrations
Domestic relations
Additional costs

Cultural Differences: Very large time difference and the travel time is longer as well both of which will make communication between our domestic and international divisions more difficult. The power distance in the US is greater than Australia which might create tensions within the two divisions because Australia might offend the US division on occasion and create misunderstandings.
Seasonal difference- Make sure that there are no themes that pinpoint a certain season of the US since it would collide with the season in Australia. Ex. If it is summer here it is winter there which means we can’t have a bunch of toys with about the heat in a box and send that to Australia as well. We need to make sure if we have seasonal themes to send them at different times to our different country customers.
Unemployment rate: This is a bad and good thing, since the bad would be it might be harder to find employees for our company. The good would be that this % could correlate to a higher Purchasing Power.
GST(Good and services Tax): 10% tax needed to be added to all items https://www.ato.gov.au/Business/GST/How-GST-works/

As a company we need to register to be a GST company. After this we need to take out the GST percentage of each purchase we receive and at the end of the month we will calculate how much we need to send to the Australian government after that we take the percentage that we initially put aside and make sure it is the same and then send them the total GST of that month. We will include this in our prices.
Need to register BarkBox for GST

Competition: Other subscription boxes but they are more expensive they do not have themes and they do not customize toys themselves so you can buy these same products outside the subscription. Barkbox is exclusively for barkbox incentive to get box.

Olly’s box: helps other organizations in aus donates etc. 55 Aus dollar a month
Waggly club: self made treats Price: 52 Aus dollar a month
BARKBOX: 1 month: $29, 6 month: $25 a month or $135 upfront (save 10%!), 12 month: $22 a month or $239 upfront (save 5%!)

The Olly box also offers different kinds of boxes, which barkbox does as well so once we have established our company we would be able to bring in our different types of boxes like the puppy or super chewer boxes
Obtaining a Trademark in Australia:

application fee: $250 (if applied online)

Other Registration: Register for Australian Business Number, Tax filer number
Domestic relations

We need to make sure we maintain the US and Canada company and that the international and foreign teams stay connected by communicating as much as they can and making sure that not too much of our budget go to Australia

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Additional Costs

International Division

15 New employees

10,790 AUD Weekly

Australian manager

80,000 - 100,000 AUD Yearly

Renting warehouse
Additional Equipment
Advertisement

Facebook
Instagram
Twitter
Youtube
Physical Flyers

International Division

New Employees:

They will be in charge of putting the toys and treats and chews into the box with the flyer and crinkle paper to make the box look appealing and secure box closed and put the shipping labels on the boxes. They will have a month each shipment to complete the boxes.

Minimum wage = 18.93 AUD = 13.41 USD

15 employees

Weekly salary cost (with 38 hrs work week) = 10,790.1 AUD = 7642.8 USD

Employees required to have 4 weeks of paid vacation

Australian Manager:

Communicate operations in Australia to the NYC headquarters in the US to make sure everyone is on the same page and they help the US division understand differences that they may encounter in Australia

Average salary 80,000 - 100,000 AUD Yearly

There is a minimum notice period for employee termination, depending on how long the employee had worked there (nothing crazy though).

1yr or less= 1 week
1-3 yrs= 2 weeks
3-5 yrs= 3 weeks
5yrs or more= 4 weeks
Extra week for employees over 45, who have been with the company at least 2 years

Renting Warehouse:

Rent Prices in United States are 9.68% higher than in Australia: https://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=Australia&country2=United+States

Warehouse rent/month = Around $3,500 AUD

Utilities = Around 500 AUD

Additional Equipment: 5,000 avg for a month

1 month supply because each month different theme

5,000 flyers will cost 129.09 AUD including GST and delivery.

5 months on average supply

5,000 boxes will cost 4,700 AUD including GST and delivery

Custom tissue paper

1,000 papers will cost 499 AUD including GST and delivery

Crinkle paper

20 kg of light blue crinkle paper will cost 400 AUD including GST and delivery

Advertising

Twitter: $1,000-$2,500 per month

Facebook: $2,500-$5,000 per month

Or

TCF media: $4,000 per month to manage 3 social media sites

https://www.contentfac.com/how-much-does-social-media-marketing-cost/

(CPC 0.20 cents to 50 cents in avg for advertising in social media)

If you’re measuring cost per click (CPC) Facebook advertising costs on average about $0.25 per click. If you’re measuring cost per thousand impressions (CPM), Facebook advertising costs about $5.21.

You can expect that you will have to pay somewhere between 20 cents and $2 per click CPC on an Instagram campaign. If you prefer to run your ads on a CPM basis, focusing on impressions, then you are likely to pay around $5 per 1,000 visitors on average.

Your bid and budget come into play when controlling the spending in your campaign. Twitter Ads are an auction based system, so your budget and bid determine the price of your campaign. Twitter offers three types of advertising options – promoted tweets, promoted accounts and promoted trends. To promote our account or promote our tweets would be about $.50 – $4.00 per engagement,

Youtube ads on a CPC basis, will charge for $3

Physical Flyers would cost around 200$ for 10,000 Flyers to give to local pet stores to attract customers

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Goals for next 5 years

4 Years

Begin preparing Export Plan to New Zealand

3 Years Introduce New boxes

5 Years

Initiate operations in New Zealand

2 Years Achieve 65% customer retention rate

1 Year Achieve profit export plan

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Conclusion

Benefits of Australia

Transportation
Large Market

Modifications to BarkBox to fit Australia better

Origin of country

Chews and Treats

Price

Expected Revenue without Costs: 2,820,000 AUD
Average Total Costs: 350,218.28 AUD Average Yearly
Average Expected Profit: 2,469,781.72 AUD

Modifications

Make chews solely from Australia and New Zealand rather than America or Canada as well. Change the treats to Australia as well instead of the US
Increase price slightly in order to compensate for exporting to new country as well as the GST.

Won’t be an issue since

Benefits

Australia is closer to China which makes the shipping costs way less than when they usually ship from china to US about 4 times more expensive china to us as mentioned earlier
Australians are in high demand for dog products and are willing and able to spend a lot for their pets

Total costs:

Employees, Manager, Warehouse rent and utilities, Packaging, Advertising, Postal costs, Toys, Ocean Freight Costs = 323,218.28 AUD Average Yearly

Landing Costs: This includes our insurance and transportation shipping costs from China to Australia