Is it time to unleash a social enterprise Internet business on the global multibillion dollar wedding industry? A case study.

Stephenson, Harriet ; Lockwood, Diane

CASE DESCRIPTION

The primary subject matter is the potential entry of a business with a social enterprise strategy into a highly competitive industry. It can be used to introduce business social enterprise, triple bottom line, and sustainability strategies and practices. Secondary issues include the use of business plan competitions for testing out an idea, securing initial funding, and developing vital networks. The case has a difficulty level of three to five and works well in the undergraduate policy or strategy capstone class or first-year MBA. The case is designed to be taught in one to two class hours.

CASE SYNOPSIS

This case revisits a business plan that won first place in 1999 in its university's business plan competition. Subsequent to winning the award, the team had concluded the opportunity, as they had explored it, was a "too-little-too-late" Internet startup, and the team members were not in a position to want to pursue an online wedding information site at the height of the dot-com boom. Six years later, Bill, the would-have-been CEO of Wedding Information Site, received an e-mail from his instructor urging him to revise the strategic position of Wedding Information Site and secure an MBA team to enter the business plan competition again. The instructor proposes that a social enterprise component be added to the business strategy that would result in a significant impact for good (i.e., the "triple bottom line" of people, profits, and environment) on the $70 billion a year wedding industry in the United States alone. The key issue is how to position Wedding Information Site's social enterprise strategy and practices to become a competitive force, to secure initial financing, and ultimately to become a desirable buyout from an established competitor or to become a significant competitive force in the multibillion dollar industry. Venture capitalists are not traditionally known for looking first at social return, then financial return. However, this is potentially a very compelling investment opportunity for the right investor.

This case is a teaching tool to explore how to use social enterprise and the triple bottom line strategies and practices from the startup as a viable market entry strategy. This model can potentially change an industry and have a significant impact on people, profits, and environment while meeting the needs of various stakeholders, including shareholders. It is arguably the predominate model of the 21st century for doing business.

THE CASE STUDY

Bill Shutes was ready for a career change. He had been with Microsoft for 15 years and had a yearning to start his own business. This itch had been festering for some time. He thought he wanted something that could build on his background in computers, website development, and experience at Microsoft, and he wanted to do something that could make a difference with his life. It was at this point he received an e-mail from one of his MBA instructors which follows:

 Bill, how about getting an MBA team to work with you to submit
 to the annual business plan competition again? You could revise
 your first place winning Wedding Information Site from 1999.
 Change its strategy and value proposition to reflect a triple
 bottom line/social enterprise thrust, like the Starbucks model,
 Ben & Jerry's, or Newman's Own, and carve out an underserved
 piece of the $70-$100 billion wedding market in the United
 States. Are you interested?

 With average wedding costs of $22,000 or higher, there are
 big dollars in the already served middle-class to affluent
 market. And, in a society with 10% to 20 % of its population
 at or below poverty level, and globally there is a huge
 potential market that is not able to participate fully in this
 currently highly commercialized, glamorized experience which
 seems to be a precursor to increasing divorce rates. In
 addition, a sizeable piece of the already served market may
 want to utilize the engagement/wedding experience as an
 opportunity to make some contributions or take some actions
 that would significantly affect the quality of life for
 themselves and others in the long run, while having a
 highly memorable and meaningful wedding experience.

 From what I can tell, The Knot.com (an established online
 competitor) is singularly focused on building a brand and
 being known as "the" place that newlyweds-to-be register
 and surf for products, services, and information. Its major
 source of revenue is from service providers paying an
 advertising listing fee. On The Knot.com's 10K form, they
 note that net income in third quarter of 2004 was $1.0
 million versus $202,000 in third quarter of 2003.
 Cumulative membership served over 5.4 million in 2004
 compared with 4.4 million in 2003. Clearly their business
 is profitable and growing. Nevertheless, they point out
 that securing good employees could be an issue for them in
 the near future. Also, the $1.6 million of operating
 expenses they incurred in the third quarter to defend
 themselves against patent infringement claims may turn
 out to be a costly issue. This might be an opportune time
 to build an online wedding startup business with a socially
 conscious strategy. The exit strategy of Wedding Information
 Site could be to sell out to The Knot or one of the competitors
 in the wedding information, products, or services space. The
 Knot does not seem interested at this point in being a
 triple-bottom-line organization. By the time Wedding Information
 Site is on the scene, The Knot will have waited too long to
 take advantage of building a triple bottom line internally.
 You could be a strategic addition to its offerings, very similar
 to Unilever's buyout of Ben & Jerry's to jumpstart its whole
 triple bottom line thrust which became a strategic necessity
 to restore and enhance the Unilever brand.

 Globally there is a huge market which might have some additional
 possibilities if you secondarily target the bottom of the
 pyramid (BOP) of lower income and/or budget conscious part of
 the world population. The BOP can be lucrative when such numbers
 are involved. The Wedding Information Site's tag line such as,
 "quality weddings to meet your price and quality of life and
 planet concerns"--could be operationalized in sourcing decisions
 to feature products and services which provide jobs/living wages
 for underemployed, homeless, low-income people in the United
 States as well as globally. Ecologically sensitive and triple
 bottom line issues are even more recognized in Europe and
 emerging as serious issues in China and Japan.

 There are indications that the market is ready for a socially
 conscious, philanthropic approach to weddings. "Good cause
 weddings" (i.e., giving instead of getting) have been gaining in
 popularity since 2001, perhaps fueled by the 9/11, Asian tsunami
 flood tragedies, and Hurricane Katrina. For example, the I Do
 Foundation (www.idofoundation.org) makes it easy for couples to
 have a philanthropic spirit be part of their celebration. The
 site offers options to couples who want to channel money--theirs
 or their guests into the hands of charities. Similarly,
 JustGive.org allows wedding couples to set up charitable
 donation registries. The I Do Foundation has a pool of stores
 from the likes of Amazon.com, Mikasa, and Target that have
 agreed to earmark eight percent of the money spent on pots,
 pans, silk sheets, china plates, and other selected registry
 items with charities of the couple's choice. MarriedForGood.com,
 OrganicWeddings.com, and the GlassSlipperProject.org also mix
 nuptials and charity.

 The University's 2006 judging criteria include a new "triple
 bottom line/sustainability" category which was not presenting
 prior years: http://www.seattleu.edu/asbe/ec/newventure/
 Executive%20Summary%20Screening%20Round.pdf. In addition, the
 criteria for the Global Social Venture Competition can be
 accessed at http://www.socialvc.net/index.cfm?fuseaction=
 Page.viewPage&pageId=113&parentID=110&grandparentID=58&nodeID=1.
 That is an opportunity to enter to win startup funds and get
 access to social investors after you clean up at the
 University's competition. ("This competition is for businesses
 that plan to be financially profitable or sustainable, whether
 tax exempt or not, it must be self-sufficient on its earned
 revenue, and must have a quantifiable social and/or
 environmental bottom-line impact." (Some social enterprise or
 social venture competitions are only for nonprofits.)

 The Industry looks robust. According to National Vital Statistics
 Reports from the National Center for Health Statistics, there
 were 2,187,000 marriages in 2003. This information is available
 at http://www.cdc.gov/nchs/data/nvsr/nvsr52/nvsr52_22.pdf.
 Fairchild Bridal Group in its American Wedding Study 1990-2002
 reports the average wedding in 2002 cost $22,360, including all
 aspects of the wedding day event from ceremony to reception.
 The website Sell the Bride provides a link to the report at
 http://www.sellthebride.com/documents/americanweddingsurvey.pdf.
 Forty-three percent of couples say they spent more on their
 wedding than they had planned. The break out costs for weddings
 are provided in Table 1.

 Additional items: The average American engagement lasts 13
 months during which time couples buy: $4 billion dollars in
 furniture, $3 billion in housewares, $400 million in tableware,
 and $19 billion is spent buying presents. More than 91% of
 couples register for wedding gifts. Average amount spent on
 wedding gifts is $70 to $100 per gift. Honeymoons equal an $8
 billion per year industry--acquiring, for example, honeymoon
 travel wardrobe, swimsuit, sunglasses, sunscreen, luggage, and
 video cameras. The potential to influence for good is huge: You
 could impact the future through energy efficiency, recycling,
 environmentally friendly practices, and using wedding industry
 to help solve other social problems while having a good solid
 bottom line. Agreements with suppliers could positively
 influence the manufacturing processes and fair trade practices
 globally.

 The article "Ka-ching! Wedding price tag nears $30K" at
 http://money.cnn.com/2005/05/20/pf/weddings/ refers to a
 nonscientific survey conducted by the Fairchild Bridal Group. In
 its "American Weddings" study of more than 1,000 brides,
 Fairchild Bridal Group has upped the average cost of weddings in
 2005 to $26,327. According to their figures, it's a 73% increase
 during the past 15 years. The bridal industry is now referred to
 as a life stage including fashion, travel, and home furnishings.

Bill dug out the business plan that he had worked on with three others on a team in his MBA Entrepreneurship class. That plan had gone on to be the grand prize winner in that university's first annual business plan competition in May of 1999. He looked at the Executive Summary, the Mission Statement, the Epilogue, and the SWOT Analysis.

WEDDING INFORMATION SITE EXECUTIVE SUMMARY (1999)

INTRODUCTION

In 1995, more than 2,336,000 couples got married in the United States, spending more than $32 million on their weddings. Additionally, Ovum Inc., an independent analyst group, says research indicates that the Internet will support 500 million users worldwide by 2005. At WeddingInfo.com, we believe that bringing engaged couples to the Internet will be a tremendous opportunity for growth and profit over the next several years.

WeddingInfo.com will be the premier website catering to engaged couples who are planning a wedding. It will work as a portal site, acting as a central location where customers can link to a variety of companies' sites based on a chosen geographic region. Couples will be able to plan their wedding virtually--from finding a seamstress, choosing a florist, and finding a pianist--right from their homes. Additionally, our site will include an online bridal registry where companies such as the Bon Marche and Williams Sonoma will have links to their bridal registries. Not only will couples be able to choose the items on their bridal registry right online, but their guests will be able to place orders for the gifts and even have them mailed to the couple, all right from their computer. Finally, our site will offer advice from professional wedding planners on how to choose a caterer, find the best location for a wedding, keep costs down, and other important pieces of advice. A "Wedding of the Month" and "Wedding of the Year" will be featured on the site to show examples of well planned, exciting weddings.

Currently, competitors in this market include www.weddingchannel.com, www.theknot.com, www.weddingnetwork.com, and other startup websites. While these sites offer most everything between them that WeddingInfo.com will offer, none of them offers all of the features on the same website, and none offers an online bridal registry. Additionally, we found in a small sample of market research that only 2% of married couples were even aware that online wedding sites exist. We believe that our competitors have not advertised sufficiently, and that through a large-scale marketing campaign, we will be viewed by customers as the best, and perhaps only, wedding website available.

WeddingInfo.com's management team consists of four MBA trained businesspeople with a variety of experience in sales, marketing, finance, website development, and entrepreneurship. Specifically, Bill Shutes has a solid background in computers and website development with his experience at Microsoft. Silvia Snyder has entrepreneurship experience through starting a business with her husband. Cindy Mitchell has seven years of sales and marketing background with Merck Pharmaceuticals, Biagio, and other retailers, and Sarah Michels has been comprehensively trained in finance and accounting.

As a result of our unique product features, extensive advertising campaign, and solid management team, WeddingInfo.com will show a profit in year 3 (2001). Revenues are projected to hit $3 million in year 5. Growth in the first five years will be tremendous. During the first five years, Net Income will grow at an average rate of 177%. This will level off to an average of 30% in year 5. The average growth rate over the 10-year horizon is estimated to be 76%. WeddingInfo.com is seeking $1,000,000 in equity capital. These will be used to fund operations in the first three years. In return, the investor will receive 40% of the pro-rata outstanding common shares of WeddingInfo.com

MISSION STATEMENT

The Mission of Wedding Information Web Site is to provide continual improvements in services to our online users. This is the formula for business success at Wedding Information and prosperity for our employees and investors.

SWOT ANALYSIS

Strengths

The company's key strength is that the website is a portal site that can change dynamically to the user's selected state. By allowing such customization, customers can be assured that they are dealing with a merchant in their state. This allows a customer to foster a relationship with the merchant and, hopefully, come back to use the site again. The online bridal registry allows customers to purchase gifts for engaged couples from any department store in the United States that is connected to our database. This also allows customers to shop around online for the cheapest price for the gift.

Weaknesses

The company's website is still in the development stage, while our competition is already online. Our competition has the ability to become the incumbent in the wedding website market. The market rewards companies who are the incumbent while penalizing those who aren't. The company has a monumental task to try to develop relations with department stores and trying to cajole them to join the online bridal registry. It is possible that companies we solicit will reject joining our bridal registry and start their own.

It is possible that we over-estimated the number of potential "hits" we will obtain through search engines. The company is spending a tremendous amount of money on advertising and might not get the expected turnout.

Threats

The Internet has become such a quick phenomenon, that new businesses go online every day. It appears that there are no barriers to entry when setting up an electronic-commerce website. The problem the company faces is numerous competitors coming in every day. In addition, technology changes so fast, the company needs to keep up on the latest advances and be sure to provide those new services to our customers. There is a possibility that our competition can provide better goods and services to our customers resulting in our website not becoming the incumbent in the market.

Opportunities

The Internet offers a wide variety of opportunities. Our company's website has the potential to become the juggernaut in the online wedding industry. New companies are coming online every day, and our site can provide links to those companies providing a broad range of merchants from which our customers can choose. This allows the company to generate more revenue. Electronic commerce is becoming an extreme convenience for customers and the online bridal registry provides this. The Internet is still in its infancy, and the company can be in an extremely lucrative market.

EPILOGUE

After investing a great deal of time and effort into our idea to develop a wedding website with feature strengths in gift registry (the mega-database) and localized links, we came to the conclusion that we could not go forward with this approach.

We came to this realization near the end of the quarter after we received feedback about our plan from our peers and mentors. We thought we could entice many large retailers to use our mega-database that would seamlessly link their database with ours for this website. The feedback we received indicated that this was unlikely, as retailers would have no incentive to do so. They could keep their own database and not pay to have someone else manage it. They would not leave themselves open to competitive pricing and risk their same giftware being purchased elsewhere, and they would not provide this proprietary customer base to another company.

This left us with only one major competitive advantage--localization. We wanted to be a portal site that would instantly localize information for the user. To see if this advantage was still strong, in March we revisited our competitors' websites to see if anything had changed. Not only were our competitors stronger, but we looked at these sites with clearer eyes and dug much deeper. We found that the weddingchannel.com had vastly increased and improved its local hyperlinks to wedding vendors. We also found a new competitor, ultimatewedding.com, whose strategy mirrored our localization portal-site strategy.

Not only did we see our plan eroding, we saw the lead our competitors had on us.

A more thorough investigation of TheKnot.com revealed many things we overlooked when we thought we had a grand e-commerce scheme. What we discovered was this: The Knot had added maps to its local vendors as well as credit ratings and business profiles that could be purchased. It still did not have extensive hyperlinks, however. But what did amaze us was the strong brand that this site was building. It was doing this because it had deep pockets and great visibility. The Knot had received seed money to start its site from AOL. It had an exclusive wedding site on AOL where it was receiving 6 million page views per month. In addition, it had established agreements with Intuit, and its wedding planning site was tied in with Quicken's pages. It was able to make these moves because of the venture capital provided by Hummer Winblad Venture Partners. The Knot was also building its brand offline. It was publishing wedding planning books through Bantam Doubleday Dell and developing a wedding planning series with a PBS affiliate. It also had numerous alliances with other large retailers and commercial entities.

We realized we had no competitive advantages that we could pursue in the short time left in the quarter. We do believe, however, there is opportunity in this marketplace. If we had to do it again, we would seek a niche market within this arena. A site could be developed and marketed to all wedding websites. Some ideas could be:

* A rating service similar to AAA that would provide couples an expectation of the services provided by a vendor.

* A wedding insurance clearinghouse. This site could pull together various policies from national insurance companies that relate in any way to putting on a wedding or function.

* A localized wedding planner. Make the plans, arrange contracts with vendors, and offer cookie-cutter packages to couples for set prices.

Bill was rather intrigued. He had wanted a career change, and he wanted to do something that would make a difference. He had not previously considered that a triple bottom line Wedding Information Site might be an answer.

AUTHORS' NOTE

The Wedding Information Site was the winning business plan in Seattle University's 1999 first annual business plan competition. Thank you to the team of Mary Noel-Meade, Bruce D. Katis, Michelle Sayles, and Sarah Kenefick for use of the Executive Summary, Mission Statement, SWOT Analysis, and Epilogue from original case. Additional materials for this case study are fictional.

SUGGESTED DISCUSSION QUESTIONS

1. Are "social enterprises," "triple bottom lines," "sustainable businesses," and "social return on investment" just academic discussions in the competitive world of bottom-line focused U.S. businesses? Didn't the social responsibility and ethics era cover it all? Note to students, for definitions, the "Social Enterprise Lexicon" is useful: http://sealliance.org/resources_lexicon.cfm.

2. Bill's instructor says to follow the Starbucks model of stating triple-bottom-line concepts in the mission statement. What values are reflected in Starbucks mission statement? How do they translate these values into specific business practices? On Starbucks' website, the Corporate Social Responsibility 2004 Annual Report "describes our social, environmental and economic impacts on the communities in which we do business."

3. An effective assignment has been to request the students to write a report to the CEO of The Wedding Information Site. He has hired you to develop a new Wedding Information Site mission statement. Use the Starbucks' model as a guide and keep in mind the criteria for University's business plan competition (http://www.seattleu.edu/asbe/ec/newventure/ Executive%20Summary%20Screening%20Round.pdf). He has also asked you to give examples of programs, practices, policies, and services that would reflect the triple bottom line mission and strategic positioning. This is a particularly useful assignment to help clarify that individual students understand and can operationalize the concept. This assignment can be for individuals or teams. We prefer it as an individual assignment even though the class is teamed.

Or

Assign this as in-class assignment. Allow one hour to work on assignment. Work is to be done by teams with a report given at the end of class.

Or

Assign mission statement for homework. Each student brings five copies of mission statement to class. Break out in class into teams. Each team picks one mission statement. Teams then brainstorm practices, policies, services ... identify 10. Then conduct a round robin with whole class, getting one suggestion from each team until all suggestions have been put up on blackboard or transparency or PowerPoint. This has been run successfully several times at graduate- and undergraduate- level. It clarifies if students understand what it is and how it can be operationalized.

4. What would be a SWOT for the new Wedding Site?

5. Debate: Assign half of class to one side of argument and the other half to other side of argument. Bill should enter the University business plan competition again and the Global Social Venture Competition.

6. The Global Social Venture Competition Judging Criteria (http://www.socialvc.net/index.cfm?fuseaction=Page.viewPage&pageId= 113&parentID=110&grandparentID=58&nodeID=1) require a social impact assessment and calculating an SROI--social return on investment. What would be some of the venture's potential social impacts both quantitative and qualitative?

Harriet Stephenson, Seattle University

Diane Lockwood, Seattle University

Table 1: Today's Average Wedding Costs Over $22, 000

Invitations, Announcementts, Thank-yous, etc. $381
Bouquets and other Flowers $967
Photography, Videography $1,814
Wedding Favors $241
Music $900
Clergy, Church, Chapel, Synagogue Fee $297
Limousines $577
Attendants' Gifts $510
Printed matches and napkins $112
Wedding Rings $1,301
Engagement Ring $3,576
Rehearsal Dinner $875
Bride's Wedding Dress $799
Bride's Headpiece/Veil $181
Other Bridal Accessories $186
Day of Wedding Hair and Makeup $357
Bridal Attendants' Apparel * $735
Mother of the Bride's Apparel $236
Grooms' Formalwear (Rented) $110
Formalwear for Ushers, Best Man (Rented) ** $575
Wedding Reception $7,630

Source: American Wedding Study, 2002.

* Average cost of 5 bridesmaids dresses (including maid of honor).

** Average cost of 5 ushers apparel (including best man).