CafePress Report 2014

CafePress

Analysis of the Personalized Shopping Industry

Table of Contents Introduction ................................................................................................................................................................ 3

Summary ........................................................................................................................................................................... 3 Demand for customized products is strong ........................................................................................................ 3 Maintaining Market Share ...................................................................................................................................... 3 International play ......................................................................................................................................................... 3 Partnerships with Marvel + Lionsgate ................................................................................................................ 3 Operating Metrics......................................................................................................................................................... 4 Designers .......................................................................................................................................................................... 4 Public Perception ......................................................................................................................................................... 4

Competitive Analysis ............................................................................................................................................... 7 Summary ........................................................................................................................................................................... 7

Threadless ................................................................................................................................................................... 7 Business Summary ........................................................................................................................................................ 7 Public Perception ......................................................................................................................................................... 9

Zazzle .......................................................................................................................................................................... 10 Business Summary ...................................................................................................................................................... 10 Revenue Model ............................................................................................................................................................. 10 Competitive Advantage ............................................................................................................................................. 10 Public Perception ....................................................................................................................................................... 10

Spreadshirt ............................................................................................................................................................... 12 Business Summary ...................................................................................................................................................... 12 Revenue Model ............................................................................................................................................................. 12 Public Perception ....................................................................................................................................................... 12

Shutterfly................................................................................................................................................................... 13 Business Summary ...................................................................................................................................................... 13 Revenue Model ............................................................................................................................................................. 13 Competitive Advantage ............................................................................................................................................. 13 Public Perception ....................................................................................................................................................... 13

Vistaprint .................................................................................................................................................................. 15 Business Summary ...................................................................................................................................................... 15 Public Perception ....................................................................................................................................................... 15

Conclusion ................................................................................................................................................................ 16 Personalized Shopping is Expected to Grow .................................................................................................. 16 CafePress is in a Highly Contested Space ....................................................................................................... 16 Negative Reviews May Hurt CafePress ............................................................................................................. 16

Introduction Summary CafePress, Inc. is an online retailer of stock and user-customized, on-demand products. Despite increase in net revenue and strong strategic partnerships, CafePress is faced with direct competition from many emerging personalized shopping companies that may be nimble enough to capture its market share. Consumers are becoming savvier as product and shopping review sites, like TrustPilot, make the personalized shopping experience more transparent. CafePress may face challenges if customers believe it cannot consistently deliver high quality products. In this report, we provide competitive analysis and identify some of the key challenges facing CafePress as it attempts to maintain its position as a market leader in the personalized shopping industry.

Demand for customized products is strong In 3Q 2013, CafePress reported a 16% increase in net revenues, to $50.4 million, compared to $43.6 million in the third quarter of 2012. It said the revenue growth was fueled by strong demand for customized products across its e-commerce properties. The company reported $-0.06 EPS for the quarter, but this was above analyst estimates. In its earnings call, it said international revenue was up 21% year-over-year.

Maintaining Market Share While many marketers tout the powers of crowdsourcing as a new way to activate creativity, businesses that rely on crowdsourcing risk losing market share to new entrants. CafePress relies on a network of consumers who share designs and promote their personalized products. Many other crowdsourcing product companies are incentivizing customers to switch platforms. For instance, Threadless Inc., a popular crowdsourcing design company that competes with CafePress, recently changed its revenue model to share more of its profits with designers. Low barriers to entry in the personalized shopping space may benefit consumers at the expense of CafePress.

International play The focus on investment it made internationally has reversed the weakness it saw last year and resulted in a strong growth rate for international orders driven by categories including apparel and art. Its home and art categories are showing encouraging results, and  they’ve  helped  propel  3Q  growth  in  the  marketplace.  The  company  expects  further  growth in these categories.

Partnerships with Marvel + Lionsgate CafePress reported that its large corporate partnerships with leading brands including Lionsgate Entertainment and Marvel Entertainment (MVL) were popular with shoppers and key merchandise categories, including apparel, home, and electronics, along with new categories like footwear that contributed to solid growth.

Operating Metrics In  terms  of  operating  metrics,  the  company’s  orders  totaled  1,315,414—a 58% year-over-year increase, including the consolidation of EZ Prints, Inc., into CafePress’s business. Average order size (or AOS) was $38, including the consolidation of EZ Prints—a 30% decrease year-over-year, reflecting the smaller order size of the EZ Prints B2B business. AOS excluding the impact of EZ Prints was $53, a 2% decrease year-over-year. The company said that, as most of its services orders are transacted through partners, they have a substantially lower acquisition cost per order. With CafePress services included, the 3Q cost per order was $7—a decrease of approximately $3 from a year ago and up $1 from 2Q. Without CafePress services, 3Q acquisition cost per order was $11, up $1 year-over-year and from 2Q. The increase in acquisition cost was from investment in the art product line, and from groups that have strong repeat and higher growth rates as well as higher AOS.

Designers Designers are creating 100,000 new designs per week on average. Those products remain on the site, and can be searched for and discovered by other customers. This allows for “long  tail  marketing.”  If  a  customer  buys  a  designer’s  product,  that  designer  gets  10%  of  the revenues. This has created an industry for a number of talented designers. In fact, there’s  a  small  number  of  designers  who  work  from  home  to  design  products  and  earn  6  figure incomes. This has also created a huge library of proprietary products for CafePress, as the company owns the designs. CafePress’s library is increasing by over 130,000 new images a week. Today, the company has a catalog of over 400 million unique products.

Public Perception In the public perception section, we survey customer feedback from TrustPilot’s  review  driven platform and from social media. Additionally, we observe how the employees rate the company and leadership on Glassdoor.com.

TrustPilot TrustPilot is a review driven platform where consumers rate their shopping experience. On TrustPilot, CafePress received a 3.5/10 rating, which is very low. 52% of the customers polled gave CafePress a 1/5 star rating, which is also very bad. While the majority of the reviews on TrustPilot were negative, 26% of customers gave CafePress 5/5 star rating. This feedback suggests that CafePress is not consistently able to satisfy customers. One  disgruntled  customer  complained:  “Was  sent  wrong  item--customer service defended product and blamed me Ordered auto stickers properly, got wrong ones, customer service defended the product, blamed me, the customer, and did not offer an exchange or refund. Very disappointing. Cafe Press just lost a significant future business order  because  of  their  handling  of  my  personal  order.”  

Another  customer  was  aggravated  about  the  prices:  “I  ordered  a  cancer  survivor  shirt  for  my son who just completed over three years of treatment. I loved the design I found on Cafe Press. The shirt was $25, but I wanted something unique for his survivor party, which is why I went to Cafe Press. The shirt is a basic Hanes t-shirt you could buy for $3 at Michael's. We have washed it maybe 6-7 times in the three months we have had it and the screen printing is crumbling off. I emailed customer service with a photo to ask for a replacement. They said they have a 30 day return policy and there is nothing they can do. I pointed out that the quality should be better and felt a replacement was not unreasonable. The next email said, "sorry, but I can give you a partial reduction on shipping on your next order." Um, no thanks. Why would I spend on another overpriced item where this company will not stand behind their quality? I won't ever order from them  again.”

Glassdoor Glassdoor is a platform where employees anonymously rate and review their employer, managers, and the company CEO. CafePress does not have a sterling reputation as a workplace. CafePress received a 2.6/5 rating from its employees on Glassdoor.com. The CEO has a 35% approval rating, which is concerning. To quote one disgruntled employee: “Cons – Where to begin. The overall experience was like pulling teeth. I worked for the company for shy of two years and I really wasn't even going to be bothered with writing a review but decided that nobody else should be lured into that trap. I never met one person in my time there that loved working for the company. Turnover was always really high and everyone was always looking for another job. It seemed like every time a company wide email went out, we would get together at lunch to gripe about what change had been made.The company doesn't value the individual, they don't really seem to care about anything outside of absorbing smaller companies just to put them out of business as competition to their far less adequate product line...Honestly, I could go on and on about this but when it comes down to it, the answer is pretty simple...DO NOT WORK FOR THIS COMPANY.”

Twitter On Twitter, customers can share honest feedback about their interaction with a brand. Twitter has emerged as an important communication platform between brands and customers. CafePress has a positive perception on social media sites like Twitter (see image). Customers are generally excited about the opportunity to customize various products through CafePress. In many instances, political groups will use CafePress to create and share products to galvanize people for a political cause. Based on Twitter alone, it would seem CafePress has a positive brand identity.

Competitive Analysis CafePress is operating in a highly contested “social  commerce”  or  “personalized  product”  industry. Companies crowdsource include Threadless, Shutterfly, Vistaprint, Zazzle, and Spreadshirt. These companies generally offer many types of merchandize including t-shirts, mugs, greeting cards, and electronic cases. The businesses in this category outsource the designs and marketing efforts to a decentralized network of consumers. While the consumers provide photos and designs, the businesses handle the production, distribution, and quality assurance. The slew of direct competition poses a significant threat to CafePress. To retain market share, CafePress will need to distinguish itself in a substantial way (more on that in the summary).

Threadless Business Summary Threadless has evolved from an online t-shirt design company into an international community-driven design platform featuring merchandise designed by nearly one million users. Threadless boasts a diverse community of designers, artists and general consumers from around the world who submit and vote on designs for ongoing competitions.

Pioneers in the Industry Threadless.com is sometimes credited for pioneering the online business model of crowd-sourced or community-driven design, in which people submit designs that are voted on by the site's 1 million users and printed. Over the past 10 years, the company has amassed a vast archive of designs and has an impressive showcase of 400 of the very best T-shirts created by the community--a barometer of art and design over the past decade. Inc. magazine to hail Threadless.com as "the most innovative small company in America."

Revenue Sharing Model Accommodate Designers On April 24, 2013, Threadless introduced new artist-friendly terms that grant artists all rights to their work through a non-exclusive contract, and a royalty compensation model that gives 20 percent of profits to the artists who created each purchased design. These artist-friendly terms allow artists to share their work across all available platforms and thereby increase financial potential. Threadless sees the changes as increasingly beneficial to independent artists, ensuring the company stays true to their core values and mission.

In addition to the new royalty compensation model, customers will also now be able to digitally tip the artists whose work they are purchasing on Threadless.com during checkout. This new tipping functionality further underscores Threadless' commitment to their artist community in ensuring that artists are fairly compensated for their work while also enabling consumers to play an active role in showing their appreciation for their favorite artists.

Launch of Mobile App On February 27, 2014, Threadless launched its first iOS App by the same name, allowing iPhone users to more easily browse and shop its catalog, score artist design submissions and participate in the Threadless community. As consumers increasingly spend more time on mobile devices, the Threadless App, developed by Prolific Interactive, will serve as an extension of its existing crowdsourcing platform, providing artists a new alternative to reach consumers. Users can discover the work of artists all around the world, offer constructive feedback, and help them get their designs made into real products on Threadless through active support. The  app’s  features include a stream of new designs that users can score via like, comment, and share features. The application also has a one-click checkout.

Layoffs On January 12, 2014, reports emerged that Threadless cut 23 of 84 jobs --27% of staff—as part of a shift in strategy. This reorganization will rely more on established retailers for distribution, the company closed the Threadless store at 3011 N. Broadway. "The core mission remains the same," said Mr. Nickell, the Threadless CEO, "Our strategy to achieve our goals is slightly changing. We are de-emphasizing some of the areas that don't align with the new strategy. . . .We have made the decision to let go of a few product lines that no longer align with our future growth plans and the markets we want to expand into." "We are still pursuing retail expansion, but we are looking to do so with a refined strategy," Mr. Nickell said. "Rather than trying to do it all ourselves, we intend to focus our attention toward our technology platform in order to better service Threadless artists, our community, and design submission and sharing." Despite the recent layoffs, Mr. Nickell says the company "will continue to look to hire as we expand into different areas, including digital."1

Public Perception

TrustPilot Threadless received a good review on TrustPilot with 7.6/10 satisfaction rating. On a scale of 1-5 (5 stars being the best), 62.5% of customers gave Threadless a 5/5, 31.3% gave Threadless a 4/5 star review, and 6.3% gave a 2 star review. Customers were generally very satisfied with the product. One enthusiastic review captures the enthusiasm that many customers expressed on TrustPilot:“Awesomeness  in  a  T-Shirt! Have been purchasing Threadless now for a few years. I LIve in the UK and it always has great service as well as amazing desings. I have found the best thing is in Summer when you spot someone else with a Threadless T-Shirt - you know they know what you know!!!! Defintely recommend :-)”

Glassdoor Threadless does not have a page on Glassdoor with employee reviews.

Twitter Twitter users expressed enthusiasm about Threadless products and the design collaboration process. This enthusiasm bodes well for the Threadless brand. The image below from Twitter depicts customers sharing their Threadless branded gear.

Meetup.com The Threadless has a strong network of designers that are very active and engaged in making products with Threadless. On the popular social network Meetup.com users organize and promote meetings and social gathering. Threadless has a strong network on Meetup.com with over 2,042 “Threadfans” in in 463 places around the globe plan meetings to collaborate on ideas, trade shirts, and socialize with other designers.

Zazzle Business Summary Zazzle is an online retailer that allows users to upload images and create their own merchandise (clothing, posters, etc.), or buy merchandise created by other users, as well as use images from participating companies. Zazzle has raised $46 million in venture funding.

Revenue Model Zazzle enables users to receive a commission on products that they design, create and sell. Zazzle.com is a service that enables users to create their own products. On Zazzle.com, users can create virtually anything, from customized t-shirts to postage stamps. Users can also receive a commission on products that they sell and design themselves.

Competitive Advantage Zazzle has patented color print technology allows them to manufacture multicolored items, especially t-shirts and other clothing items, for pennies at a time. Zazzle's proprietary technology enables individuals, professional artists, and major brands, including Disney and Hallmark, to create and offer billions of unique products for customers worldwide.

Public Perception

TrustPilot Zazzle received a 8.5/10 review on Zazzle, which is good. On a scale of 1-5 stars (5 stars being the best), 81% of consumers gave Zazzle a 5/5. Only 4.6% gave Zazzle a 1/5 star review. One customer suggested Zazzle expand its offerings:  “The  absolute  Best  Products  I  am  so  happy to have found Zazzle, I can be creative, use my own pictures and make products without having to go back and forth with a printing company for approvals. With the huge selection of products to transform into your own brand or creative idea, I did find a couple of things I had to go elsewhere for: Indoor/Outdoor banners and Yard Signs, I would  have  much  rather  made  these  with  Zazzle,  maybe  in  the  future?”  

Glassdoor Zazzle received a 2.7/5 rating from its employees.  Zazzle’s  CEO,  Robert  Beaver,  has  a  48% approval rating from employees, which is below average. After reading the positive reviews on TrustPilot, it was surpising to see negative reviews from employees. Employees also complained about both the declining quality of the product and the management.

One employee noted: “Quality  of  products  has  declined  so  greatly  that  it's  hard  to  even  be  proud of of what we offer. The website is collecting more and more bugs making potential customers look elsewhere. Absolutely zero communication between Engineering, Marketing, and CS, which in this day and age is unheard of. Production delays are never communicated. Out of stock items aren't reflected on the website because  they  don't  want  to  miss  out  on  a  dollar.” Another employeed complained about the CEO: “In nearly 10 years, the CEO has failed to deliver on a single strategy to differentiate the company from its roots as a carbon copy of every other print-on-demand company.” These negative reviews may deter talented professionals from pursuing careers at Zazzle.

Twitter Similar to CafePress, Zazzle has a positive perception on Twitter. Consumers enjoy creating designs and sharing links to the products they create. These positive reviews bode well for Zazzle’s  brand.  

Spreadshirt Business Summary Spreadshirt is an online apparel-merchandising platform for individuals and commercial organizations to design, buy, and sell clothing.

Revenue Model The Spreadshirt platform for apparel merchandising allows operators to create their own online shops for free and sell customized products. Spreadshirt lets anyone from companies to individuals to bands to sports teams integrate these online shops with their own websites. These shop partners can then earn self-determined commissions on each sale through Spreadshop. Spreadshirt has over 300,000 shop partners. Like other social commerce online retailers, Spreadshirt handles the production, shipping, payment processing, customer service, and among other online merchandising tools. Spreadshirt has received $12.70 million in total venture funding.

Public Perception

TrustPilot Spreadshirt received a 6.1/10 review from 168 customers on TrustPilot. When asked to rate Spreadhshirt on a scale of 1-5 (5 being the best), 45.2% gave Spreadshirt a 5/5 star ratings, 16.1% gave a 4/5 review, 7.7% gave a 3/5 analyst, 13.7% gave a 2/5 star review, and 17.3% gave a 1/5 star review. One  customer  gave  a  positive  review  (in  all  caps):  “WE LOVE OUR SHIRTS…THANKS  AGAIN!” Another customer  had  negative  feedback  on  product  quality:  “Print  quality  sucks...  bad... Spreadshirt sells prints on things. I got a printed t-shirt and the printing is way faded. I did a better job on my screen printing for my 6th grade camp t-shirt... And I only paid $6.00 for that. I paid over $20.00 at Spreadshirt and got this... Picture this... Print a picture,  turn  the  opacity  down  by  50%.  That's  Spreadshirt  quality.  Never  again...”

Glassdoor Glassdoor does not have enough information on Spreadshirt to report on.

Twitter Like CafePress and Zazzle, Spreadshirt has built a strong brand on social media. Customers Tweets about Spreadshirt are generally positive.

Shutterfly Business Summary Shutterfly is an e-commerce company specializing in digital photo products and services for the consumer and professional photography markets, the company offers customers the ability to upload, share, store, and edit digital photos through its website. In addition to traditional 4-inch by 6-inch prints, Shutterfly provides prints ranging from wallet-sized to jumbo enlargements. The company also offers personalized items including mugs, photo books, calendars, magnets, and T-shirts through its personalized products and services business segment.

Revenue Model Shutterfly generates revenue through the sale of personalized photo books, greeting cards, stationery, and wedding invitations. In 3Q 2013, Shutterfly (SFLY) saw a 25% year-over-year increase in revenue with improved profitability. The company said it has a strong portfolio of brands and continues to grow via acquisitions. Another peer, PFS Web (PSFW), saw a decline in revenue for the quarter and said its financial results were impacted by previously announced client transitions, partially offset by growth in new and existing clients, including project work, and the impact of its ongoing cost control efforts.

Competitive Advantage Shutterfly focuses on printing digital photographs and therefore has stronger brand recognition.

Public Perception

TrustPilot Shutterfly has a negative public perception from reviews on the TrustPilot platform. There were many disgruntled customers who complained about bad customer service and, in some cases, being sent the wrong photo album. Shutterfly received a 3.7/10 on TrustPilot, which is very low. 56% of customers surveyed gave Shutterfly a 1/5 star ratings, also very low. 25% gave Shutterfly a 5/5 star rating. It seems that Shutterfly is very inconsistent. “Shutterfly  is  horrible.  I  will  never  order  from  them  again.  I  have  been  making  calendars  as Christmas gifts for probably 8 years on different sites. This year I decided to try Shutterfly. The calendars arrived, I mailed them to the people they were for (I don't live near them), and then in January, I finally saw one of them. I was informed that the calendar was dated for the PREVIOUS YEAR. Shutterfly explained that because you make the calendar in 2013 (december) they assume you want a 2013 calendar (already so stupid). So they credit my account and tell me to just place the order again. Fine. So when I update the calendar to 2014, ALL OF THE CONTENT  WAS  ELIMINATED.”  

Glassdoor Shutterfly’s  CEO  Jeff  Housenbold  received  an  85%  approval  rating  on  Glassdoor,  which  is very good. The company received as 3.9/5 reviews, which is also good. 83% of employees surveyed indicated that they would recommend the company to a friend. Despite negative customer experience, the workplace seems to be very good.

Twitter On Twitter, Shutterfly customers were also not enthusiastic about the brand. Below is an image of a unsatisfied customer.

Vistaprint Business Summary Vistaprint offers affordable, professional marketing products and services for micro businesses.

Revenue Vistaprint (VPRT) said revenue for 1Q 2014 grew to $275.1 million, a 9% increase over the revenue of $251.4 million reported in the same quarter a year ago. It said its revenue results were consistent with its expectations across all geographic regions, and it continued to make good progress against its strategic initiatives. Revenue for the third quarter of fiscal year 2014 was $286.2 million, a 1percent decrease compared to revenue of $287.7 million reported in the same quarter a year ago. Excluding the estimated impact from currency exchange rate fluctuations, total revenue also decreased 1 percent year over year in the third quarter.

Public Perception

TrustPilot On TrustPilot, Vistaprint received a 5.5/10, which below average but not terrible. Customers shared positive feedback about the company. When asked to rate the company on a scale of 1-5 stars (5 for great customer experience and 1 for bad customer experience), 28.6% gave Vistaprint a 5/4 stars, 21.4% gave 4/5 stars, and 21.4% gave 3/5 stars, and the remaining 28.6% gave 1/5 star.

One customer was satisfied with the price and selection: “Always  good  service.  I've  always had good service from Vistaprint, and I keep coming back. Is there better? Yeah. But with an incredible selection, and prices that frequently just can't be touched, it's always  worth  it  and  I"m  always  happy  with  the  results!”

Another customer was satisfied with the price but complained about quality: “Not  Bad  for the Price. I have to start out by saying that Vistaprint has amazing prices. Their delivery is even quick. My issue with them though is that the card stock they use for their business cards is kinda floppy. I guess you get what you pay for, but it is important to know that you will not get high quality business cards for their prices.”

Glassdoor VistaPrint received a 3.3/5 rating and 66% of employees recommend this company to a friend. Robert S. Keane, the CEO, has an 86% approval rating, which is very good. Employees praised the company for being a fun place to work, having great perks, and for attracting great talent. Overall, the Glassdoor employee satisfaction review was customer, which bodes well for Vistaprint’s recruiting prospects.

Twitter Vistaprint has a very positive brand image on Twitter. Many Twitter users shared pictures and expressed excitement about receiving their business cards from Vistaprint.

Conclusion Personalized Shopping is Expected to Grow According  to  “Global  B2C  E-Commerce Trends Report 2013″ by the Hamburg-based secondary research company yStats, online shopping is likely to become more personalized, and shopping via mobile devices is expected to grow by 2016. The creation of personalized products online like t-shirts, mugs, stationery, photo-based merchandise, and invitations is growing, and the companies operating in this space seem to be benefiting from these trends.

CafePress is in a Highly Contested Space While personalized shopping is growing, analysts and industry experts believe companies like CafePress also face challenges in the form of pricing pressures due to high competition, integration of acquisitions, and increased pricing, all of which might impact their growth. In the highly contested personalized shopping category, other companies may provide similar offerings, as indicated our survey of competition, and capture market-share from CafePress. recruiting talent is essential for a company to improve its offerings and build a stronger brand. The negative feedback CafePress received on Glassdoor does not bode well for the company.

Negative Reviews May Hurt CafePress As e-commerce becomes more transparent through review sites like TrustPilot, savvy consumers will switch opt to choose services that consistently deliver high-quality products to consumers. CafePress has captured tremendous market-share to-date, but the company may falter in the future as emerging personalized shopping platforms offer better customer service, higher quality products, and better quality assurance. 1 https://www.threadless.com/forum/post/987926/changes_at_threadless_hq/