E-COMMERCEINDUSTRY

The Disruptive potential of Virtual Reality within the

BUSINESSDOCUMENT

2 3

TABLE OF CONTENTS

1. Abstract 4

2. Pain 6

3. Solution 8

4. Market research 10

5. Competitive analisys 12

5.1. Trillenium 13

5.2. Vretail 14

5.3. eBay 15

6. Minimum viable product 18

7. Landing page 20

8. Business Model 24

9. Bibliography 30

10.. Figure list 31

4 5

ABSTRACT

Within Turn2VR there is a bounded mission to bring virtual reality to online shops to en-gage the audience in a more immersive shopping experience. Since the apparition of the internet, an important use was the selling of different products online. With time, there were endless improvements made, in order to accommodate the increasingly demanding customers. This way, features like reviews, suggested products, online payment and such were introduced. However, one major area has not really seen a significant change since its introduction.

That is the way of displaying the products and the interaction possibilities a user has be-fore receiving the online shopped product. Due to the way the products are showcased online, a significant amount of problems occurs. Some of the problems identified by the team are low customer engagement and retention and higher product return rates. Re-gardless of the small touches, like the ability to zoom, or to see multiple pictures of a product, there has not been a significant improvement on the way consumers can visu-alize their preferred products online. That is about to change, as the advances in tech-nology can now offer customers an entirely new way of visualizing the products they are about to buy. The emergence of Virtual Reality is going to pay a vital role in the following years, as it will become increasingly accessible to the consumer market. The application of virtual reality systems in e-commerce has an enormous potential for transforming and disrupting the online shopping experience into a real-world equivalent. An important

6 7

PAIN

Within Turn2VR there is a bounded mission to bring virtual reality to online shops to engage the audience in a more immersive shopping experience. Since the apparition of the internet, an important use was the selling of different products online. With time, there were endless improvements made, in order to accommodate the increas-ingly demanding customers.

This way, features like reviews, suggested products, online payment and such were introduced. However, one major area has not really seen a significant change since its introduction.

That is the way of displaying the products and the interaction possibilities a user has before receiving the online shopped product. Due to the way the products are show-cased online, a significant amount of problems occurs. Some of the problems iden-tified by the team are low customer engagement and retention and higher product return rates. Regardless of the small touches, like the ability to zoom, or to see mul-tiple pictures of a product, there has not been a significant improvement on the way consumers can visualize their preferred products online.

That is about to change, as the advances in technology can now offer customers an entirely new way of visualizing the products they are about to buy. The emergence of Virtual Reality is going to pay a vital role in the following years, as it will become increasingly accessible to the consumer market.

The application of virtual reality systems in e-commerce has a great potential for transforming and disrupting the online shopping experience into a real-world equiv-alent. An important amount of research efforts has proposed virtual reality environ-ments for e-commerce platforms (Lee and Chung 2005, Mass and Herzberg 1999). Moreover, forecasts show that the number of users of such technology will be in-creasing in the following years.

For example, a forecast developed by a consulting company based in UK, KZero shows that the number of people which will own a Head-Mounted Display Unit (ranging from Google cardboard to Oculus Rift) will increase 5 times in 2016 alone.

By 2018, the number of consumers will increase 14 times, reaching 38.8 million users.

PAIN

8 9

SOLUTION

Turn2VR was born as a concept out of curiosity when one of the founders had his first interac-tion with a virtual reality Head Mounted Display, namely Samsung Gear VR (Virtual Reality). At that moment, he knew that virtual reality is an enormous breakthrough in virtual technology and the potential of it is huge.

After digging into it and learning about the history of virtual reality and how it failed in the past just because the technology did not reach its peak and it is full potential, one of the first steps taken was to work on discovering a niche market in which virtual and augmented reality would make a significant impact.

By making use of tools such as Design Thinking and Lean Methodology the team brainstormed several potential solutions meant to satisfy the customers’ needs and to alleviate the identified pain. The criteria for coming up with a viable solution was that the developed virtual reality application would solve all the aforementioned problems, namely low customer acquisition and retention and high product return rates among e-commerce and retailers.

Moreover, in order to develop the solution with the user in mind the team has organized two co-creation workshops, meant at identifying both the features and design trends among young individuals that are more inclined in experiencing innovative technologies.

Turn2VR is a virtual reality e-commerce application that uses top of the art 3D technologies, aiming to provide existing e-commerce platforms the possibility to merge their existing 2D web-shops with 3D content in a customizable virtual environment. The innovative software solution developed by Turn2VR is meant for existing online shops, conveniently providing their customers with a unique immersive shopping experience in a close to real world aesthetics.

Turn2VR is making use of innovative tools and techniques, developed by a thriving Danish company, namely Unity3D, aiming to provide e-commerce platforms the possibility to merge their existing 2D web-shops with 3D customizable content, to increase both customer reten-tion, satisfaction, engagement and to lower the product return rate

Turn2VR helps improving critical retail metrics, such as customer acquisition & retention, in-creasing customer engagement and reducing the product return rate, due to the ability to view the products in a close to real world aesthetics. Moreover, the immediate value provided by Turn2VR is the marketing potential and brand loyalty. By adopting such a new technology, web shops will be able to position themselves as innovative, in line with trends and custom-er-centric. Finally, because Turn2VR’s app tracks position and orientation data for the user’s head at all times, Turn2VR can provide valuable analytics & metrics for retailers to understand how consumers interact with products and to ultimately deliver a better more effective buying experience.

SOLUTION

10 11

The project targets a considerable amount of online businesses respectively, online web shops. The number of online web stores exceeds 12 million worldwide, with 650,000 selling products that exceed 1000$/year in the US alone (internetretailer.com). The e-commerce market is the only trillion-dollar market with $1.3 trillion in 2014 and a projected increase up to $2.5 trillion by 2018 (emarketer.com)

As online shops represent Turn2VR’s market, according to the national e-commerce associations, the e-commerce in Europe is estimated as having an increase of around 15-18% in the number of B2C websites by the end of 2016. That accounts for 715,000 e-commerce shops, growing at a pace of 10%-15% per year [European B2C E-commerce report - 2015]. According to a report on the Nordics e-commerce market done by PostNord, the average number of Nordic region cus-tomers, per quarter, that shop online in 2014 account for more than 12 million people.

MARKET RESEARCH

MARKET ANALYSIS

In particular, the research sought to characterize trends that are relevant to Turn2VR’s e-com-merce application, as well as those that relate to associated subsectors. The research focused on the primary identified markets for Turn2VR in the Northern Region with emphasis on Denmark and the Danish online shopping behavior. The reason why Turn2VR is looking at Nordic countries as a starting market is mainly that the technology adoption and e-commerce usage and ratings are at its peak and raising. Moreover, the mobile usage in the Nordic countries is steadily growing. From 2014, the people that have finalized a purchase via a mobile device has doubled.

Upon this research, Turn2VR compiled and analyzed the relevant market and technology applica-tion information from a broad range of data sources that are known to be of interest to the task objectives. These sources include numerous market research and industry specific databases and thorough commercial gateways. For this process, Turn2VR expects to gather and process per-tinent information extracted from different published reports, but also from the desk research

performed by Turn2VR’s team.

The Northern region is highly evolved, both geographically and as an economy. Given the large geographical area, Nordics have a history in distance selling, which is also the main reason why the e-commerce industry triumphed in the transition from physical store to ‘click and mortar’. According to Håkan Ericsson, President, and CEO of Post-Nord, during 2014 the Nordic population shopped online for a total of 15.4 billion EUR (PostNord, 2014). Moreover, the e-commerce related B2C consignments increased 15 percent on the Nordic market in the same year.

Because the Nordic countries have a higher Internet penetration than the average European Countries, the consumers often look online before buying in-store and vice versa. Additional to the internet penetration is a significant number of consumers that are using smartphones or tablets on a daily basis to purchase and surf online. The trend has resulted in consumers demanding more from their suppliers, regarding how lengthy is the shipping process, the terms of shipping and package tracking pos-sibilities.

As online shops represent Turn2VR’s market, according to the national e-commerce associations, the e-commerce in Europe is estimated as having an increase of around 15-18% in the number of B2C websites by the end of 2016. That accounts for 715,000 e-commerce shops, growing at a pace of 10%-15% per year [European B2C E-com-merce report - 2015]. According to a report on the Nordics e-commerce market done by PostNord, the average number of Nordic region customers, per quarter, that shop online in 2014 account for more than 12 million people.

As previously mentioned, the target market was narrowed down to online shops that sell high-end products within the Nordic region. The reason why the team decided to start with the Nordic countries is because both of the founders are based in the Northern Region of Europe and the conditions are also favorable, as an exponential growth in online shops and mobile purchases has been identified.

12 13

The competitive analysis is being executed by the team behind Turn2VR to understand the existent competitors and to describe the factors that influence their success, which would eventually drive the revenue generation mechanism. Moreover, the goal of developing a competitive analysis is to get insights on the competitors by placing them in differential groups and establish what attributes makes Turn2VR unique in order to emphasize them when addressing the target market.

The e-commerce industry has been growing rapidly, especially in the Nordic countries. Moreover, the trend of mobile purchases continues to develop, as the process of complet-ing a mobile purchase becomes more easy and handy. With Turn2VR developing virtual reality applications for existing online shops, the team has mapped out the competitors that target the same market as Turn2VR, namely online shops, which sell a wide variety of prod-ucts. When assessing the competition, several factors with high relevance for the industry have been considered and mapped out.

All the reviewed companies are targeting the online shopping industry, with differentiation points within specific product categories.

COMPETITIVE ANALYSIS

TRILLENIUM

Trillenium is among the main competitors of Turn2VR as they have an established posi-tion within the market. Trillenium are currently developing their application for Samsung GEAR VR, with working prototypes on both Android and iOS application store. Trille-nium is developing a proprietary platform where they act as a key enabler of the next phase of online fashion retailing (Seeders, 2015). When it comes to experience within the field of e-commerce, Trillenium has an advantage in terms of having the founder, Hrvoje Prpic, as one of Europe’s most successful retail entrepreneurs (Seeders, 2015). His previous exit was one of the biggest domestic IPOs in Croatia and the Central Europe region (Seeders, 2015). In order to get knowledge and expertise in e-commerce market, Turn2VR is aiming at putting together an advisory board that would allow the team to understand the e-commerce tactics that apply to the majority of the stores and, on the other hand, learn from the challenges present among the industry.

On the contrary, even though Trilleniums’ platform connects with existing online retail-ers, a system that is similar to Turn2VRs’ approach, they are focusing on creating mirror worlds. The concept of ‘Mirror Worlds’ has as an output the creation of a physical store in an online environment, which brings back both advantages and disadvantages for Tril-lenium. One of the challenges big businesses face when relying on customer carryover is the habitual breaking effort, which Turn2VR removes when keeping the existing online shop and only adding a virtual extension.

Another advantage that Trillenium has is that they could support all devices but their focus at the moment is to make the application available for mobile devices, targeting both Android and iOS app stores. In other terms, Trillenium is at the moment available for mobile only virtual reality equipment, which resembles Turn2VRs’ approach. In Turn-2VR, the aim is to expand to high-end virtual reality devices like Oculus Rift, HTC vive and the Sony Morpheus Project while building on top of the existing version of Turn2VR’s application that would become available on Android, iOS, and Windows phones alike.

The approach Trillenium is currently using is to dig into and declare ‘ambassadors for the brand,’ which would act as ‘early-adopters’ or influencers and publicly expose them-selves as ‘proud-users.’ In Turn2VRs’ case, the aim would be to partner up with a globally known brand, which would act as a ‘business ambassador.’ In this way, Turn2VR would benefit from both, the partners exposure and the hype that the use of innovative tech-nologies brings with it.

Trillenium has recently secured the backing of ASOS, a successful online global retailers. The impact of this exciting technology resulted in ASOS becoming a 10% shareholder of Trillenium (Seeders, 2015).

Following the development of the new Trillenium adventure, ASOS is planning to con-duct a fuller public launch (Seeders, 2015). Alongside this, and with ASOS approval and encouragement, Trillenium is actively seeking a portfolio of online retail customers

14 15

(Seeders, 2015).

Trillenium has access to c. GBP 1m in intellectual property in 3D scanning, inventory and design modules from earlier prototypes (Seeders, 2015).

During the first months of 2016 they have secured backing from ASOS Ventures Ltd, a wholly owned subsidiary of ASOS plc (Seeders, 2015). Given the fact that Trillenium has more asstets and it is valuated at $3,600,000 mil according to Seedrs.com, a 10% equity stake from ASOS is low considering the capital that ASOS has available.

In terms of revenue strategies,Turn2VR differs from Trillenium by offering subscription based models rather then relying on transactions fees from successful conversion of visitors to purchasers (Seeders, 2015).

Trillenium’s revenues would also come from technology licensing plus a revenue share with online retail partners and from brands paying to be part of innovative adventures in a 3D VR shop (Seeders, 2015).

Trilleniums’ target market is the expanding circle of ambitious, quality and competitive online fashion retailers in the developed world (Seeders, 2015).

Trillenium’s customers would be online retail distribution businesses. We intend to build platforms as a service for them. Our targeted customers need to diversify from pure retail (Seeders, 2015).

They offer 3D and VR scanning and expertise services to ASOS on a preferred bidder ba-sis (Seeders, 2015). In return, ASOS provides them with office space, knowledge transfer and their expertise with fashion and design (Seeders, 2015).

Another differentiation point from Turn2 to Trillenium is their target market. Trillenium is focusing at the moment on the UK online fashion market. They argue that the target market of online fashion is expected to be worth GBP 10bn in 2016, according to new research from Mintel (Seeders, 2015).

Sixense has “recognized that the full potential of a 3D experience would only be achieved by a system that could recognize the user’s every movement” (Crunchbase, 2016). With this in mind, Sixense has developed technologies and products to enable the ideal control platform for consumers to interact intuitively with digital media (Sixense, 2016).

According to their website, Sixense has developed a stand-alone virtual reality application that connects with existing online platforms. Their “new vRetail™ platform represents a merging of entertainment with shopping to bring the best aspects of brick and mortar to e-commerce through VR” (Sixense, 2016).

To start with, “vRetail is using the toy segment as an example, where a consumer can enter a branded store in VR to engage in a fully immersive and interactive energy sword training ses-sion” (Sixense, 2016) Comparing with Turn2VRs approach, vRetail is not looking on entering the same market as Turn2VR , making them indirect competitors. Their approach is meant at effectively “reinventing retail by allowing customers to experience products in a way that is not possible through any other medium and can segue into a retail shopping experience in which the consumer is in the mood to buy (Sixense, 2016).

In addition, vRetail argues that by implementing their solution, e-commerce and retailers would improve retail metrics (e.g., by driving customer acquisition and retention and by reducing re-turns) (Sixense, 2016). In comparison with Turn2VR, vRetail market themselves as social, mean-ing that customers can shop with friends, colleagues or family in any store across the world (Sixense, 2016). That comes in contradiction with the latest virtual reality advancements, as to be able to socialize in a virtual environment, a platform would require the possibility to render a 3D model of individuals, in real time. The process of rendering and transmitting information across the internet of a person in real time requires high capabilities within computational power, and that is only possible if the end user has access to those resources. Finally, Sixense’s argues that their “platform tracks position and orientation data for the user’s head and hands at all times, while being able to provide valuable analytics & metrics for retailers to understand how consumers interact with products and to ultimately deliver a better more efficient buying experience” (Sixense, 2016). Turn2VR is also researching the possibility of adding users hands in the virtual environment by making the application available for high-end devices but before going into the high-end market, the team is focusing on mobile devices, as the market is twice bigger than desktop devices.

XVV

VRETAIL

According to Venturebeat, vRetails’ mission is to bring the ideal interface for consumer interaction with digital media to the market.

Sixense was founded in 2007 and has been in the market for more than 9 years. In 2016 they have announceed a partnership with SapientNitro and the availability of a VR shop-ping platform they call vRetail.

16 17

The closest resemblance to Turn2VRs’ application comes from a newly established part-nership between eBay Inc. the “American multinational corporation and e-commerce company, providing consumer-to-consumer and business-to-consumer sales services via the internet and Myer, a mid-to-up market Australian department store chain” (Influx, 2009). Their application consists of a virtual only department store that allows users to check products in a virtual environment. Moreover, they argue that the application learns from the customers purchasing behavior, giving, in time, personalized products suggestions. The processes of learning from the customers purchasing behavior is called data mining and it is an already existing feature that most of the e-commerce shop al-ready have available.

On top of having the closest resemblance to Turn2VRs’ application, Myer and eBay are using the same go-to-market strategy as Turn2VR. For customers to be able to benefit from the virtual department, eBay is giving away for free 20.000 HMD (Head Mounted Displays) as personalized Google cardboards, while calling the devices, “shopticals.”

Both the companies have made the application available on both iOS and Android while having it deployed only in Australia.

The fact that they have only launched in Australia can have an impact on the market adoption. If eBay’s approach is increasing exponentially in the Australian market, then Europe and the Nordic countries are still open markets for Turn2VR’s application. As both markets are growing, they are both attractive for Turn2VR to be in, but Turn2VRs current operational setup means that the team is more able to compete in the niche market that is developing for customers seeking entertain-ment and immersiveness while shopping online.

EBAY

Figure 1 eBAY screenshots

18 19

In order to have a more reliable validation of the different hypotheses from Turn2VR’s busi-ness model, a Minimum Viable Product (MVP) had to be developed. The MVP is a more dy-namic tool and it is a closer representation of how Turn2VR will work on improving the online shopping experience by implementing the official SaaS application. Together with the development of a new MVP, Turn2VR also went through a process of rebranding, switch-ing from naming the application Turn2VR to E-merse.

Moreover, the idea of having an “umbrella” company that would develop virtual, aug-mented and mixed reality solutions occurred, as there are already suggestions coming from partners to develop products that are not e-commerce related.

The process of building an MVP is among the most critical activities that need to be under-taken by startup companies, as it brings back insightful information, benefits and advantag-es. To mention some of the benefits and advan-tages the team put together a list with relevant activities.

1. Release earlier a working version of the E-merse prototype.

2. Gather insights and valuable feedback to design the application according to customer feedback.

3. Maximize Product-Market fit potential.

4. Test and validate gathered assumptions.

MINIMUM VIABLE PRODUCT

At the current stage, the team is working on ag-ile iterations of designing as many prototypes as possible to be able to test different func-tionalities, performance, usability issues and fix bugs in short periods of time.

According to a survey launched by Ambysoft in 2013, the success rate of Agile vs Waterfall are exponentially higher. Consequently, the agile methodology allows startup companies to minimize risk while optimizing the develop-ment time and launching a working prototype as early as possible.

The last MVP build by the team has numerous advantages when it comes to the online shop-ping industry. Design wise, the team centered the product for a better glance and interaction possibility. Moreover, additional information has been added in the form of text description and price tags.

The current interaction is limited, only con-sisting of the possibility of changing the color, adding content, opening/closing the menu and returning home. Interaction principles for virtu-al reality have been used, in terms of rotation and zooming in the products, in order for the end user to have a more realistic and immer-sive shopping experience.

Again, the input method is limited to crosshair and gyroscope, as the application developed at the moment is only for mobile devices and doesn’t have the function of adding addition-al input methods, as for example, the users’ hands. Again, the MVP is designed using a Dan-ish game engine, namely Unity 3D using Google VR SDK for Cardboard.

Since the last update, the application also re-ceived additional backgrounds, namely: min-imal solid color, gradient and a detailed level of panoramic views. The icons have also ex-perienced an extreme makeover, having them designed more user friendly and according to virtual reality design guidelines.

Figure 2 IT process success rate

Figure 3 Turn2VR MVP

20 21

LANDING PAGE

A landing page is a nothing more than a web page that allows a startup to capture a visitor’s information through a lead form (Trail, 2011). A good landing page will target a particular au-dience, such as traffic from an email campaign promoting a particular ebook, or visitors who click on a pay-per-click ad promoting a webinar (Trail, 2011). Therefore, it’s important to build a unique landing page for each of the offers a startup is creating (Trail, 2011). A startup can build landing pages that allow visitors to download the content that is offered as for example e-books, whitepapers, webinars, or sign up for offers like free trials or demos of a startup’s product (Trail, 2011). In Turn2VR, the landing page is designed to allow the team to target a respective audience by offering them something of value, in this case, a trial of the application and convert a higher percentage of the visitors into leads (Trail, 2011).

A good technique that would conduct to improving the marketing efforts of Turn2VR and the re-turn of investment would be to have landing pages for all the actions a startup requires the user do to when reaching its website.

Again, the majority of companies use communication forms, such as e-mail, social media, and search traffic to their existing web pages (Trail, 2011). The particular strategy has its flaws, as the majority of the leads are basically thrown away. In order to capture those leads at a much higher rate, a startup needs to direct the user to a targeted landing page.

Turn2VR has adopted the approach named as KIS (Keep it Simple) for making the user take the call to action, which in Turn2VR’s case would be either to try the application demo, refer a friend or sign up for a 10 days trial. Consistently, by having the user experience and call to action com-prehensible, the user needs to understand the concept and call to action in the first 30 seconds after reaching Turn2VR’s landing page.

“There are several key components that make a landing page effective for converting a higher percentage of visitors into leads” (Trail, 2011). The major areas of importance are: “the headline, the content of the page, Meta descriptions and keywords, share links, hidden navigation, the form, and the thank-you page” and email responder (Trail, 2011).

Headline

To start with, the three different versions of the landing page are meant for testing and evaluat-ing according to the exposure and data tracked from them, which of the landing page performs better. The process of testing two or more versions of the same landing page is called A/B testing.

Moreover, the team makes use of the successfully acquired partnerships, and displays them on the Partner section, as a form of “Authority Endorsement”.

Figure 4 Turn2VR landing page

Figure 5 Turn2VR Partners

The mentioned strategy allows for people to experience a visual proof that an established entity is recognizing the value of Oflou’s application.

Currently, people’s attention spans are consistently shorter, especially while browsing online. That means that the message a startup is trying to transmit has to be understood from the first seconds they arrive on the landing page. Oflou’s techniques were to display content as a value proposition enhancer, where the team exposed the benefit reinforcement as a concise message: “Enhance your brand in virtual reality”. To test if the message is well received, the team made use a well-known rule of thumb, where they have sent a user to the landing page for the first time. After 5 seconds, they’ve asked him, what is that Oflou is doing. If the user can respond to the question after 5 seconds, then the landing page achieved its purpose. The technique is called the “blink test”.

Content

The body of a startups landing page should clearly explain what it is that it offers and why should the users stay, sign up or download the content from it (Trail, 2011). With Oflou, the team make it clear what is the aim of the startup, in order to incentivize conversion by adding content that is self-explanatory. “Offer your customer a more immersive experience” is the Meta Description that conveys what Oflou is all about. The team also took into consideration the format, font and size of the text, which allows user to easily read and understand the impact intended with the message.

Another important aspect that catches the user’s attention almost immediately is a good image. Images have the role to reinforce the benefits that a landing page offers and also to put the user into a specific mood. As a next step the team is considering to make an explainer video that would convey the essentials of Oflou’s application, E-merse.

Meta Descriptions & Keywords

The Meta Description is described succinctly in the previous paragraph and it presents the aim of the landing page. Usually, Meta Descriptions make use of keywords, such as “immersive” or “virtual-reality” in E-merse’s case.

The use of keywords is highly relevant as Google’s ranking algorithm is designed to only make use of the short description provided by the landing page. If there is no Meta Description, the search engine will pick random content and display it underneath the link of the page.

Share links

In order to engage with the audience, Oflou makes use of social media sharing links, which pro-vide the leaded visitors into potential referral leads. Once visitors are converted, they will be guid-ed to share the landing page on their social media channel, being that either Twitter, Facebook or LinkedIn.

Registration formsIn Oflou’s case, the registration form is the middle point of the landing page as it’s the main point through which the visitors of the landing page could be taken through the funnel and eventually get accounted as leads.

Most critical point the team considered when designing the registration form is the accessibil-ity and visibility. Moreover, the fields of the form allow Oflou to get qualified information to be able to follow up on the lead and qualify it and eventually put them into the sales funnel. Again, Oflou’s strategy when designing the form was to acquire little but valuable information. The fields included are: “company, website, role at company, number of employees and a follow up question” that allows E-merse to verify the likelihood that the lead could turn into a potential customer (Trail, 2011). The questions refer to the biggest challenge e-commerce face in particular fields of their business. An example can be: “The biggest challenge in customer acquisition and retention?” or “How do you ensure lower product return rate?”.

”Thank you!” page

When someone has finished filling out the form on Oflou’s landing page, they will be sent to a thank you page, which could eventually transform the user into a potential customer. After this step, Oflou would bring back the navigation and direct them to the other sections of the landing page, which could be either: “Download the pitch deck”, “Follow us on Facebook, Twitter or LinkedIn”.

22 23

Business Model Canvas has been used by Turn2VR team even from the early stages of concept development, the version presented in the current document being only the latest one. The tool was preferred thanks to its simplicity and clarity, as it help mapping out all the ajor areas of a business.

By bootstrapping for the initial period of development, TUrn2VR can reach the break-even point in a few months after the development of the full solution.

The earnings from subscriptions repreent the main revenue sorce for Turn2VR,. More-over, the subscription model allow for an easier to implement sollution, which is also suitable for the customers.

In the initiall period, the focus was put on gathering a team of capable individuals that could cover most of the areas of the business, in order to be able to bootstrap. Partner-shis were also an area of concern, as well as finding a partner with whom to run a pilot test.

The concept, business model, infrastructure behind it, as well as the interactions be-tween them make Turn2VR a startup with a considerable scalability posibility, which has the potential to grow fast.

24 25

BUSINESS MODEL

Figure 6 Turn2VR Business Model Canvas

26 27

Start-up costs

In order to launch the business Turn2VR will register for the EU trademark. The trade-mark has a maturity of 10 years, and it is depreciated on a straight line basis. In order to avoid re-registration the team will seek legal help of BDO experts.

To ensure satisfactorily performance of the Turn2VR employees, the company will pur-chase 10 laptops and a multi-functioning printer. The useful life of hardware is consid-ered 3 years and it is depreciated on a straight line basis. These acquisitions are to be made in February 2017, after an initial customer database is acquired and a constant cash flow is available. Thanks to the partnerships that Turn2VR has secured, the compa-ny can run its daily operations without significant investment for an initial period of time.

In order to set up the product for testing, the company will incur such direct IT costs as purchase of domain and hosting expenses.

Revenue

The Turn2VR team conducted informal interviews with 5 company representatives, sit-uated in Aalborg and surroundings, as well as with different advisers. The respondents were asked only about the basic subscription package that allows upgrading up to 10 products with the VR technology. The arithmetic mean of the responses was DKK 300 per product. The Turn2VR team expects to raise the willingness to pay by investing in marketing activities, such as PR, Social Media and business network establishment. Therefore, the team has come up with DKK 400 per product, which means that if the basic subscription package is fully utilized, it would cost DKK 4000 per 10 products per

Growth of customer base

The Turn2VR team assumes that after the testing phase which is June – August 2016, the sales team will be able to attract one customer per month until December. It is assumed that from here on the Turn2VR brand will have made a critical mass (companies involved in testing phase plus the three existing clients), which will result in word-of-mouth mar-keting nurturing increased growth levels for the following months.

Direct IT costs

In order to be able to run the service it is providing, Turn2VR is setting up an infrastruc-ture that allows customers to upload and host the 3D models of their products. More-over, the functionality of the solution provided implies the use of the online library to access the products, which involves connecting to the server and downloading the mod-el every time an online shopper is using Turn2VR’s app. Moreover, this has also technical implications, as the 3D models have to be as light as possible (in terms of size in MB), in order for the app to run fast and without problems.

The total direct costs of operating the app are driven by the following services:

• Storage of the 3D models

• Network traffic

• Download costs

• WebApps/ machine

Therefore, the team has come up with DKK 400 per product, which means that if the basic subscription package is fully utilized, it would cost DKK 4000 per 10 products per month.

FINANCIALS

28 29

Moreover, the total direct IT costs are calculated according to the scalability targets set:

Request /machine /seconds 1

Daily requests /maching 86400

Monthly requests per machine 2592000

Average model size 10.00 MB

Screenshots of the Costs file can be found in Appendix XX

Salaries - Accountant & Lawyer

Consultancy company BDO will assist Turn2VR with legal and accountancy matters. The estimated hourly rate is DKK 1000 without VAT.

According to the shareholder’s agreement, salaries for the Turn2VR team will not be paid during the first accountancy year, all the income being reinvested in the company. After the first financial year, salaries payment of salaries will occur.

Marketing expenses

Turn2VR has signed a partnership with Nordjyske media, which start in August, and one of the ben-efits of the partnership is the access to public relations services. Moreover, one of the main tools will be the implementation of different LinkedIn features. Other cost drivers will be explainer and presentation videos, fees for attending networking events, creation of banners, posters and flyers.

Rent, Office supplies, internet connection

The Turn2VR team has a partnership with Nordjyske and with the International House, which allows them to avoid rent payments. Office supplies will be purchased at Kontor Supermarked.

products with the VR technology. The arithmetic mean of the responses was DKK 300 per product. The Turn2VR team expects to raise the willingness to pay by investing in marketing activities, such as PR, Social Media and business network establishment. Therefore, the team has come up with DKK 400 per product, which means that if the basic subscription package is fully utilized, it would cost DKK 4000 per 10 products per month.

To award customers for their interest, Turn2VR offers the moderate subscription package and premi-um subscription package, where price per product per month is DKK 340 and DKK 270 respectively.

During the first 3 months of the business the company will undergo testing of its application, thus no revenue inflow is expected. For a limited amount of time Turn2VR will launch a freemium subscrip-tion package where companies will be able to upgrade up to 10 products with VR free of charge. The company also will offer a consultancy service, which is not considered in the financial statements.

Additional costs

Additional costs are assigned for such instances as hardware equipment repairs, unexpected trans-portation expenses and unexpected rent payments.

Owners` equity

The owners of Turn2VR have agreed to reinvest in the company if any available cash is on hand in-stead of paying out dividends during the first accounting period. In order to sustain the firm during the starting phase and avoid zero cash on hand, the company`s owners have jointly invested DKK 25 000, distributed among the founders according to the share percentage of each.

Conclusions after the first accounting year

Turn2VR is set to make use of the available resources in the best way possible, having the goal to bootstrap for the initial period of time. By avoiding to seek investment (except for soft funds, com-petitions, etc.), Turn2VR will be able to keep the control of the company and the majority of shares. Investment will be sought at a later stage of development, when Turn2VR will have enough traction and have proven the efficiency of the business, allowing for a better financial deal with a potential investor.

In order to be able to bootstrap, Turn2VR has reduced the costs as much as possible, by using the available resources, such as partnerships acquired, soft grants (e.g.: Microsoft BizzPark), by avoiding to pay salaries to the founders in the initial period and by gathering a team of early employees that share the same vision as the founding team.

According to the forecasted budget, the break-even point can be reached after 5 month from the acquisition of the first customer, at the end of the first financial year the closing balance being dkk 533 250.

Key Performance Indicators

The Turn2VR team acknowledges the importance of recording Key Performance Indicators (KPIs) that are relevant for a software-as-a-service business (SAAS). When the Turn2VRs application will be implemented and available on the market, the main metric recorded will be Customer Lifetime Value to Customer Acquisition Ratio that will interpret the ratio between how much is a customer worth and how much did it cost to acquire the customer. The ideal ratio is 3:1, or in other words, the customer has to be 3 times more worth than it costed to acquire him.

In order, to calculate the customer lifetime value Turn2VR will need to record the length of customer lifetime, retention rate, gross margin revenue of each customer (after support service expenses) and apply a discount rate. The applied discount rate will be 14.13% which is annualized rate of return of the OMX Copenhagen Index during the period of 6.06.1995 and 25.05.2016 (alternative investment option). The acquisition cost will be calculated by considering the marketing expenses that were in-curred in the month when the customer was acquired. Furthermore, Turn2VR will also pay attention to such KPI metrics as viral growth coefficient, number of new application visitors versus previous visitors. Qualitative KPIs such as overall satisfaction with the service also will be recorded.

30 31

BIBLIOGRAPHY

Crunchbase, 2016. Crunchbase. [Online]

Available at: https://www.crunchbase.com/orga-nization/sixense

[Accessed 22 May 2016].

Influx, 2009. Influxdata.com. [Online]

Available at: https://influxdata.com/testimonials/

[Accessed 23 4 2016].

PostNord, 2014. E-commerce in The Nordics, s.l.: PostNord.

Seeders, 2015. www.seeders.com. [Online]

Available at: https://www.seedrs.com/trillenium

[Accessed 2 5 2016].

Sixense, 2016. Sixense. [Online]

Available at: http://sixense.com/vretail

[Accessed 22 May 2016].

Trail, M., 2011. www.bullseyeinteractivegroup.com. [Online]

Available at: http://www.bullseyeinteractivegroup.com/forms/Landing-Pages-Best-Practices-2011.pdf

[Accessed 16 4 2016].

Zawadzinski, M., 2015. www.clearcode.cc. [Online]

Available at: http://clearcode.cc/2015/10/bene-fits-saas-software-vendors/

[Accessed 31 5 2016].

FIGURE LIST

Figure 1 eBay screenshots 17

Figure 2 IT process success rate 18

Figure 3 Turn2VR MVP 19

Figure 4 Turn2VR landing page 20

Figure 5 Turn2VR Partners 21

Figure 6 Turn2VR Business Model Canvas 25

32 33

APENDIX

34 35

Income statement 1st year

36 37

Cash

flow

1st

yea

r

Bala

nce

shee

t

38 39