Customer-Driven Feasibility Study Bristol, Cuozzo, Holz, Lyman, Patibandla, Sexton

Research Performed and Customer Pain. Shoe Skin System, Benefits, Target Market Macro-Market analysis Macro-Industry analysis Key Lessons and Conclusion Shoe Skins is a unique system that makes footwear fun by allowing children to easily change the look of their shoes any time they want.

“Being different makes me feel good.” Colin (age 8) “At school, you don’t like to be the same. You want to stand out.” Vika (age 11) “I like clothes and styles that nobody else has. “ Phoebe (Age 7)

90% of parents said kids influence their shoe buying decision. 95% of parents said they buy kids shoes because kids outgrow the old ones. Sneakers are the most popular shoes.

Boys and Girls Ages 5-12 yrs Friends important Very active (sports, dance, etc.) Companies Access to a large target market to extend their brands. Promotional opportunities such as give-aways. Parents / Extended Family Want their kids to be happy Save money on multiple shoe purchases As a gift or treat (Skins especially) Organizations Marching Bands Cheerleading Teams Sports Teams Who is seeking the benefit? Who else would buy?

Parents: Having to buy multiple shoes for kids. Kids: More choices and styles with their shoes.

Variety of colors and styles Offers individuality and self-expression Ability to share, collect, and trade skins Cost effective – less need for other shoe purchases. High “cool” factor with something new and innovative Green: less shoes, recyclable skins Online social network Fun online games and activities

Licensing potential Unique designs, match with outfit Accessories (matching Laces, pin) Color, and pattern options truly endless. Limited Editions from artists Add-ons such as noises, LEDs Fitness tracking: GPS, Pedometer

SECONDARY SOURCES Pricing of existing novelty shoe offerings: Customizable Converse sneakers: $58 - $95 Heelys: $43 - $80 Crocs: $20 - $40; Jibbitz (clip- on decorations) $3 - $6 Sneakart stickers: $12-$14 PRIMARY SOURCES All parents interviewed would pay $30 for the shoe skin system. 40 parents surveyed on typical price paid for a pair of children's shoes: < $2535.9% $25-$3543.6% $35-$5017.9% > $50 2.6% These data support a price of about $30 for the Shoe Skins system.

Target Market: 5-12 YO Est. 36M age 5-12 in 2008 * 68% of the total $6.2B children’s footwear market $4.2B in 2009 for this age Benchmarks: – Heely’s: $186M US sales in 06’ – Croc’s: $366M US sales in 08’ Benchmark shoe accessories Jibbitz ** Feb 06 sales: $212K Aug 06 $2.2M ** Oct 06 sold to Crocs for $20M * US Census

Market AMarket B 5-8 years9-12 years

Children’s Footwear Market Size in Value Sales: $6.2 Billion * Expected to grow at 1.9% during year Children’s market represents 13% of overall US footwear market Both Children’s and Women’s footwear market is expected to grow at a faster rate compared to Men’s market Children’s Footwear Market Size in Value Sales: $6.2 Billion * Expected to grow at 1.9% during year Children’s market represents 13% of overall US footwear market Both Children’s and Women’s footwear market is expected to grow at a faster rate compared to Men’s market Children’s Accessories Market Size in Value Sales: $2.6 Billion * Difficult to estimate kids’ shoe accessory segment Competing with all types of accessories Growing at roughly 3% per year Children’s Accessories Market Size in Value Sales: $2.6 Billion * Difficult to estimate kids’ shoe accessory segment Competing with all types of accessories Growing at roughly 3% per year *2009, Euromonitor International*2006, Euromonitor International

TrendDescriptionFavorableUnfavorable PoliticalRegulatory Environment √ EconomicEconomic Down Turn √√ SocialGoing Green √ TechnologicalOnline Shopping √ TechnologicalOnline Social Networking √

Overall Assessment: Moderately Favorable Footwear is a necessity Must be replaced often Large customer base Slow but steady growth Opportunity for focused online marketing Favorable social trends towards re-usable products

SUPPLIERS Low SUPPLIERS Low RIVALS High RIVALS High BUYERS Large Chains: High Small Retailers: Moderate Online: Low BUYERS Large Chains: High Small Retailers: Moderate Online: Low SUBSTITUTES High SUBSTITUTES High NEW ENTRANTS Moderate NEW ENTRANTS Moderate BARRIERS TO ENTRY Moderate BARRIERS TO ENTRY Moderate ? ?

Summary Assessment: Low Attractiveness Consolidation among wholesalers and retailers Discount stores surpassing specialty footwear outlets Retailers beginning to bypass wholesalers Implications Innovative products can find success (e.g., Crocs, Heelys) Must be even more thoughtful about strategy Design strategy (IP) Channel strategy

In summary… Kids want variety; parents want value Appetite for customization Market is moderately attractive Industry is unattractive Will continue to research micro market to strengthen our value proposition Business model development will be crucial to overcome industry unattractiveness

Appendix

CROC Jibbets Custom Converse SNEAKART Strong word-of-mouth. Loyal customer base Break easy Warm weather only, limited activities Many activities Any season, any weather. Established brand. Difficult online setup Limited to colors. Many styles, accessories Share and swap. Online social network Cool styles, make your own styles. Use with any shoe. Hard to Adhere Fall off easy Easy to attach, remove Durable PROS CONS SS BEN

Shoe Skins is a unique system that makes footwear fun by allowing children to easily change the look of the their shoes any time they want. The Shoe Skin SystemWeb site mock-up

The Shoe Skins system comprises a base model casual shoe (or line of shoes) plus a removable “skin,” such as those available for laptops and cell phones. The skin will affix to a special surface on the shoe. Shoe Skins will be sold separately in many different colors and patterns and contain robust potential for licensing opportunities.