G-RO INVESTOR NEWSLETTER DECEMBER 2018

Happy holidays G-RO Investors!

I hope this finds you all well and enjoying the holiday season. Our inventory of G-RO Hero Carry-Ons and Check-Ins arrived just in time for Black Friday. Our team here at G-RO HQ has been busy ever since, spreading holiday cheer one G-RO at a time. In this issue of the Investor Newsletter, I’ll share some of our recent results with you, as well as other G-RO news and our plans to start 2019. As always, I welcome your candid feedback and appreciate any ideas for how you can help support us. Please feel free to contact me anytime.

From the entire team at G-RO, we wish you all the best for the holidays and a healthy, peaceful, and prosperous 2019.

Jerry Gross
CEO
Jerry@G-RO.com
310-567-5787

SUCCESSES

GAME OF THRONES CAST GIFTS

We should all take our victories, both big and small. This one is just plain fun! Like many of you, most of our G-RO team is deep into HBO’s Game of Thrones. So when a Senior Vice President at HBO approached us about making customized GOT G-ROs as cast gifts, we were giddy with excitement. The bags feature artwork of the Iron Throne on G-RO’s signature GravityRoll ™ wheels, and were delivered after the wrap party in early September. Keep an eye out for Khaleesi rocking her G-RO at an airport near you!
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SPEAKING OF CUSTOMIZED WHEELS

Our ability to easily customize the highly visible G-RO wheel cover is a major asset. It’s a unique piece of real estate and a unique opportunity. Using a process called In-Mold Decoration, the same process used to make phone and tablet skins, we can permanently embed virtually any graphics directly in to the wheel cover. During 2018, Director of Sales, Shaina Fast began testing the market for customized corporate gifts, and successfully sold G-RO beta programs to Ticketmaster and Soft Serve Inc. In 2019, we will focus more resources on this initiative. Our goal is to accept orders with a minimum 120 day lead time, and to ship the orders directly from the factory. If any of you are interested in exploring corporate gifts for your company or clients, please contact me directly.
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CHINA TARIFF UPDATE

Also in the spirit of small victories, on December 1st, 2018 the Trump administration announced a 90-day truce in the current trade war with China. For G-RO, this means that our current duty rate of 17.6% plus the 10% punitive tariff will remain in place through at least March 1, 2019. The punitive tariff was originally scheduled to increase from 10% to 25% on January 1, 2019. Our product development and sourcing team remains committed to adding non-Chinese manufacturing options as soon as possible.

CHALLENGES

BLACK FRIDAY/CYBER MONDAY RESULTS

Our year-over-year BFCM results require a bit of an explanation. Our run up to the peak holiday selling season in 2018 was dramatically different from 2017. Last year, our inventory arrived in July and we began our paid social media advertising and scaling in August. By the time the BFCM promotion rolled around, our target audience was fully seasoned and primed to purchase. By early December, we had sold out of inventory. This year, we were effectively out of inventory in the run up to the holidays. We began advertising in early November and our first day of shipping was November 13th. We learned a hard but valuable lesson about the necessity of warming up your audience prior to a major promotional event. 2018 BFCM sales were approximately 16% below sales for the same period in 2017. However, we are forecasting to catch up in December and post a modest increase for the entire holiday period. In addition, despite the BFCM sales drop, there were several bright spots that we see as harbingers for the future:

RETURN ON AD SPEND (ROAS) efficiency improved 34% from 2.59x in 2017 to 3.49x in 2018. So although sales for the period declined 16%, there was a corresponding decline in ad spending of 38%.

AVERAGE ORDER VALUE (AOV) increased 30% from $391 to $509. This is a direct result of having multiple products for sale in 2018. In 2017, only the Hero Carry-On was available. This year, the Carry-On, Check-In and Lite backpack were available. The Backpack XV, our fastest selling new product, is unfortunately out-of-stock until late January 2019.

COST PER ACQUISITION (CPA) dropped slightly to $146. This is an area where we will seek improvement in 2018 from the use of better branding and collateral assets.

CONVERSION and ADD-TO-CART (ATC) metrics both improved dramatically. ATC transactions increased 88% from 2.3% to 4.3%. Conversion increased 46% to 1.4% from 0.9%.

DECEMBER 2018 SALES will be far more robust than December 2017. In somewhat of a reversal from 2017, we have inventory available this year for Christmas. Total sales in December 2017 were only $250k, due to being out of stock by early in the month. December 2018 sales are now forecast at $550-$600k.

OPPORTUNITIES

A ROUND ADVISORS

G-RO has retained CALABASSAS CAPITAL as their exclusive financial advisor for an A Round equity raise in 2019. Calabassas Capital is a boutique investment banking firm serving privately held companies in the middle market, with an industry focus in consumer products. Managing Director David Bonrouhi and his team will bring their extensive experience and relationships to bear in locating potential investors and structuring a transaction. The process will begin in early 2019. Please do not hesitate to contact me directly with any leads for potential investors.

TRADE SHOW CALENDAR

G-RO will be expanding our trade show presence in early 2019 as we explore new audiences and opportunities. If you find yourself in Las Vegas during one of these shows, please do not hesitate to contact us. We will gladly help with credentials.

The Consumer Electronics Show (CES) will be the first show where we will be exhibiting directly to consumers, rather than to the luggage trade. It is an extension of our Direct-to-Consumer marketing strategy. At CES we will be targeting tech-savvy business travellers from around the globe who made the trip to Las Vegas.
CES – Las Vegas Convention Center (Smart Cities) Booth #2311. January 8-11.

Promotional Products Association International (PPAI) is focused on the corporate promotions and gift market.
PPAI - Las Vegas, Mandalay Bay Convention Center Booth #760. January 13-17.

Travel Goods Association (TGA) is the main industry trade show for the travel goods/luggage industry.
TGA - Las Vegas Convention Center Booth #TBD. March 26-28.

TEAM MEMBERS

Our growth plans for 2019 are ambitious and we are excited to announce one promotion and the addition of two new key members to our management team.

Effective January 1st, Controller Jim Scharpf will be promoted to Vice President of Finance. Jim was the first team member we hired in 2017 and wears many hats. He handles all day-to-day accounting, banking, and financial management functions, manages our audits, oversees all HR and payroll functions, and has been instrumental in the launch of our Netsuite ERP. Please join me in congratulating Jim on his new position.
Segundo Broggi joins us as Director of Brand Marketing. Segundo has held various leadership roles globally at companies such as Unilever, L’Oreal, and Desigual where he focused on strengthening brand recognition and executing effective growth strategies. Segundo holds a Bachelor in International Business Administration from United States International University, San Diego and a Masters in Leadership Development from IESE, Navarra University, New York.
Behrad Karbassi joins us as Director of Logistics. Behrad is an accomplished professional with 25+ years of cross-industry experience in domestic and international purchasing, logistics, systems, and supply chain management for importers and national distributors. He brings his enthusiasm and demonstrated success in driving significant cost reductions and process improvements. Behrad holds a BS and an MBA from California State University, Fresno.
Please join me in welcoming Segundo and Behrad to the G-RO team.