How Lockerz Is Making Shopping a Lot More Fun for the 19 & Under Crowd
Seattle-based Lockerz is trying to build an all-new e-commerce experience targeting teens, by stealing aspects from FarmVille and Facebook.
For adults, it makes a lot more sense when described as the teenage version of American Express, which rewards you with points for making purchases that can be redeemed for discounts.
The almost three-year-old company has already had a lot of success.
It has raised $30 million from high-profile investors such as Kleiner Perkins’ sFund and Liberty Media. It has 18 million members in 195 countries, and has eight original Web video series in production for 2011, one of which was launched last week. It has 73 employees, and recently acquired Plixi, a photo-sharing site.
The company was founded by Kathy Savitt, who says by her own admission that she’s not exactly stereotypical for starting a company at the age of 45.
But she says her passion is fueled by her obsession with how the generation you grow up in affects the way you live your life. In particular, she has a fascination with Generation Z, which as you may guess follows both ‘X’ and ‘Y,’ and is defined as kids no older than 19, who were born between 1992 and today.
There’s a long story about why Savitt became interested in the category, and after chatting with her earlier this week in the company’s Seattle Pioneer Square headquarters, it’s definitely worth retelling. Here’s the video of my interview with Savitt:
I first became acquainted with Savitt back in the dot-com heyday.
She was president of MWW Savitt, a public-relations firm in Seattle, which helped launch 100 start-ups. After nine years, she sold the agency to Interpublic.
A vacation was on the horizon, until one day she found herself being recruited by one of the leading e-commerce sites, and she caved.
Amazon’s Jeff Bezos talked her into accepting the job of VP of Strategic Communications, Content and Initiatives.
The task in front of her was to refocus the company’s marketing efforts from traditional TV to a PR blitz that put the product and customer experience at the forefront, including the novel idea of free shipping. While at Amazon, she sat on the senior leadership board, which coincidentally included working alongside her brother, who helped start Amazon’s Web services.
But Savitt was never one to sit still. She decided to leave in 2006 for American Eagle–to everyone’s surprise, she said. “I’m a huge Jeff Bezos fan, but at the heart, I’m a geek–not of algorithms, but of demographics.”
She moved to Pittsburgh and helped grow the youth apparel company’s Web site from a $100 million annual business to $250 million, among many other accomplishments.
But once again, her interest was drawn to Gen Z kids, who were barely hanging on to the low end of American Eagle’s demographic–and not really the focal point of any well-established brand or retailer.
She determined there was no company organized to interact with the next generation of kids. “We were heading towards a global emergency,” she joked.
She parted ways with American Eagle after three years to conduct focus groups on her own dime and to determine exactly what drives that generation and how they interact with the Internet. Savitt describes what she learned from those focus groups in the video above.
With those learnings in hand, she wrote a business plan and founded Lockerz in March 2009.
She calls the site, which was officially launched in February 2010, the homepage for Gen Z-focused content, commerce and community.
There are three main functions:
— Members earn points: “PTZ” can be earneda dozen different ways, by watching videos and discovering new clothes, electronics and other goods. This is where a comparison can be made to a social game on Facebook. Users can help friends earn points by clicking on content and items the friends have accumulated on their page–much like the way FarmVille players give gifts and items to neighbors in hopes that they will return the favor.
— Redeem Points: Users can redeem PTZ by participating in an auction for a chance to win a prize. Chances are high, and prizes include things like videos, Xbox games or even PayPal gift certificates. Users can also redeem points to get a discount on a full-price item from the store, which includes clothes, consumer electronics and a number of other categories.
— Decalz: There are also virtual goods. Users must purchase “decalz,” which are placeholders for items they like from the store, such as a Dakine backpack or a G-Shock watch. They cost $1 each, and once they appear on their site, friends can start earning you PTZ by clicking on them. Users also earn decals when they purchase an item.
While this sounds confusing, these are the kinds of dynamics Savitt says Gen Z is looking for. It’s the same crowd that can multitask efficiently with three tabs open at a time, surfing YouTube, Amazon and Facebook.
To be sure, Lockerz also has content, including video and soon photos through its acquisition of Plixi.
It has partnered with content owners for most of the 3,000 videos, but it is also producing several original Web series of its own. “The Homes” launched last week, and is about a teenage girl who moves across the country and meets the cute boy next door. Generally, the video production is good and the acting is mediocre, but it’s all about cross-promotion, so the actors’ clothing and the girl’s laptop and sunglasses can be purchased from the Lockerz store.
Lockerz is planning to announce today that the series has already reached one million page views in less than a week, and that it’s opening up its video collection to non-members immediately. That means members can share the clips on other social networks, where non-members can watch, and potentially earn PTZ if they choose to sign up afterward.
So, how does all of this result in revenues?
Savitt says that while there’s a lot of moving parts, it’s simple.
The company is selling advertising (banners and pre-roll video), and it’s an e-commerce site that sells physical and digital goods.
Since many of the items end up being discounted because of the points being redeemed, Savitt explains: “We hedge the revenue loss in other ways,” like selling Decalz to members and selling ads, “which allows us to lower our margins.”
Savitt’s goal is to reach profitability by year end.