G-RO INVESTOR NEWSLETTER FEBRUARY 2019
Hello G-RO investors and advisors!
We have definitely hit the ground running in 2019….it’s hard to believe that January is already behind us! We have big plans for the year ahead and our teams in El Segundo, Tel Aviv, and China are working aggressively to make things happen. New products, new manufacturing plans, new marketing initiatives, and new fundraising efforts are all part of our plans for 2019. Following is a short recap of 2018 and a few teases of our plans for 2019 and beyond. As always, please do not hesitate to contact me at any time. I am always happy to discuss our plans for G-RO.
2018 YEAR-END RECAP AND HIGHLIGHTS
- 2018 was a challenging year at G-RO but there are numerous positive signs that bode well for the future. Despite only being in-stock for roughly 7 months of 2018, we still managed meaningful increases in total sales, Average Order Value (AOV), and Return On Ad Spend (ROAS.) Our limited launch of the 4 new companion bags was a success and we are looking forward to having all products in stock in early 2019.
SALES: E-Commerce sales, the main driver of our business, grew from $2.4 million in 2017 to $2.8 million in 2018, an increase of 17%. We processed nearly 6,000 e-commerce orders and put approximately 8,000 new G-RO bags into the market. (Not including the approximately 5,000 new companion bags that were delivered in 2018 as part of the 2017 crowdfunding campaign.) There are now over 35,000 G-RO bags in the market.
AOV: In 2017, G-RO was a one-product company. Our average order value and lifetime customer value was exactly equal to the price paid for one G-RO carry-on bag. The introduction of our 4 new companion bags in July 2018, gave customers who love G-RO’s innovative designs, more ways to incorporate our brand into both their travel experiences, and their daily lives. Average Order Value grew from $396 in 2017* to $476 in 2018, an increase of over 20%. For the 2018 November - December holiday period, AOV reached $523. And for the month of January 2019, AOV reached an all-time monthly high of $562!
ROAS: The increase in AOV has helped fuel a corresponding increase in Return On Ad Spend. ROAS improved from 2.88x in 2017* to 3.57x in 2018, an increase of 24%. Continuing to drive efficiency on ad spending will be one of the main focuses of 2019. Holiday 2018 ROAS improved to approximately 3x as we seeded several new customer profiles. These seeds are already beginning to pay off. Despite being out of stock on many key products, January 2019 ROAS rose to an all-time monthly high of 4.40x.
*E-commerce performance metrics for 2017 are only available from September 1-December 31, 2017.
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2019 INVENTORY UPDATE
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- The $4.75 million Convertible Note financing that we closed in September 2018 positions us to have consistent inventory for at least the first half of 2019. This will be the first time in the Company’s history that we will be in stock for more than 2-3 consecutive months. Two containers of Hero Carry-Ons have recently arrived at our distribution center in Rancho Dominguez, CA. Two more containers are in port and several are on the water. Additional production will be completed shortly after Chinese New Year. We will have sufficient inventory of all of our products to meet our plan through June 2019. If you are interested in purchasing any additional G-RO items, now is a great time! We offer a generous discount to all of our investors and advisors.
EXPANSION OF OUR SOCIAL MEDIA COMMUNITIES
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- Growing our social media presence has been a focus of our marketing department since Q4 2018. In January, we reached a major milestone of 10,000 followers on Facebook. In December, we more than doubled our Instagram community from just over 2,500 followers to over 6,400 followers. This was the result of two successful programs. Using the platform ApexDrop we provided a variety of G-RO products to 100 micro influencers. Their 122 posts achieved 2.3 million impressions and generated new assets for future use. We also sponsored a contest with macro influencer Jordan Kimball of The Bachelor fame (430k followers), which yielded 1,000 new followers in the first week. This month, we are sponsoring a new Valentine's Day contest with macro influencer Jason Tartick (660k followers) who will be gifting a G-RO to his girlfriend Kaitlyn Bristowe (1.6 million followers.) Our goal is to reach 10,000 followers by the end of Q1. Please be sure to follow us @GROTravel on both Facebook and Instagram.
COMING IN 2019 – THE G-RO 4 WHEEL COLLECTION
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- By now, most of you have probably heard Netta or I say that ”85% of all carry-on luggage sold worldwide are 4-wheeled bags.” While our current target market of frequent business travelers appreciates the performance of G-RO’s innovative 2-wheel design, we have been shooting at the skinny part of the target. In 2019, G-RO will be launching the most innovative carry-on bag ever produced. It will feature our signature, axel-less Gravity Roll™ wheels in a completely new 4-wheel configuration. While the bag’s unique visual ID will make it an obvious member of the G-RO family, its patented new features will make it the most high-performance 4-wheel bag on the market.
In addition to the carry-on, the new collection will feature several sizes of G-RO hard-sided checked luggage, each designed to be the highest performance bag in its class. As we get our IP filings in place, we will be able to disclose more details. Stay tuned!
COMING IN 2019 – MADE IN THE U.S.
- As G-RO continues to develop innovative new products, we have also tasked ourselves with developing equally innovative new processes. Processes that can save money, shorten lead-time, increase flexibility, and reduce our carbon footprint. All G-RO products are currently manufactured at a Tier 1 luggage factory in China. As we move into the world of hard-sided luggage, we have developed a model to manufacture some of these products in the U.S. Utilizing a hybrid model of domestic high-pressure injection molding, combined with imported, high value-added components (such as our proprietary wheels and handles), our new line is being designed for simple, modular assembly in the U.S. In addition to numerous advantages to G-RO and our customers, this model will set an example for the entire industry on carbon footprint reduction. Once fully developed, it can then be replicated for local manufacturing in other markets such as Europe, South America, and Australia.
COMING IN 2019 – FINANCING: TWO-PRONG APPROACH
FIRST PRONG: INSTITUTIONAL A ROUND RAISE
- As noted in the December 2018 Investor Newsletter, we have engaged investment banker David Bonrouhi at Calabasas Capital to represent G-RO in an institutional A Round raise. The initial target will be to raise $10 million by Q2 of 2019. We are currently working with David to prepare a new deck and investor materials. We expect to begin marketing on March 1st. Our target investors have experience in consumer products and e-commerce, and invest in early growth stage companies. If you can make any introductions to potential investors that meet these criteria, please contact me directly.
SECOND PRONG: REG CF EQUITY CROWDFUNDING RAISE
- With G-RO’s experience in the world of crowd funding, it seems only natural that we pursue an Equity Crowd Funding (ECF) raise. Crowd funding is part of our DNA. For those of you unfamiliar with the details of how an ECF raise works, Reg CF allows companies to raise a total of $1.07 million, from non-accredited investors, every 12 months. The Company sets their own valuation, and investment parameters. We will be targeting individual investments of $500-$1000. We will be working with StartEngine, the largest and most successful ECF platform in the market.
The narrative for the G-RO ECF raise will be focused on the launch of the new 4-wheel carry-on, and the plan to manufacture and assemble it in the U.S. Our management team, and the team at StartEngine, believe this narrative to be both timely and compelling, and a strong basis for a successful Reg CF raise. Once the Reg CF raise is completed, we will have the option of pursuing a crowd funded Reg D raise (using StartEngine’s database of 25,000 accredited investors), or potentially a Reg A+ raise, which allows companies to raise up to $50 million.
We plan to conduct the A Round raise and the ECF raise concurrently.