Listening To People Is So Last Season -- And So Is Getting Money For Your Company On PR: Fashion Startup
When two out of three would-be fashion moguls can't make a deal, it's less a reflection of the deal-making climate and more a sign that good ideas and business sense don't always go together.
Retail is my fantasy football -- I love the stats behind monthly sales (blows kisses to the Thompson Reuters Monthly Same Store Sales Roundup), I love the brainpower and creativity that goes into audience research and marketing, I get excited by the possibility of the cultural commentary that clothing can convey. Any business is a blend of creative thinking and savvy execution, but retail is so visual and so performative, it's like sports for people who get distracted by shiny things.
So this show has not yet disappointed. Granted, it's only two episodes deep, but so far, it's been two hours of bliss.
That said, some of these people are better at retail ideas than they are at execution. The exquisite torture in watching this show is seeing someone with a good idea who is probably going to run their business into the ground because they can't hear what successful people are telling them to do.
Let's review these aspiring retail superstars in order of least to most forehead-smackingly, blithely unconcerned with what the investors have to say.
- Ix Style
I will admit to regarding any do-gooder commerce with a gimlet eye, mostly because it's cynical to market very expensive straw baskets with a picture of a barefoot little girl collecting firewood in the snow and a caption promising "a portion of proceeds goes to a charity that lets this child collect firewood while wearing shoes."
However, Ix Style has managed to walk the walk -- and in some very stylin' huaraches. The origin story is simple: former finance whiz Francesca Kennedy returned to the Guatemalan lake where she swam as a child, and was horrified by a) its pollution and b) the little girls collecting wood from this filthy water. So she figured she'd bring money to the area in two ways: By employing people to make huaraches at $12 a pair and by diverting 15% of her profits to Puente, a Guatemalan association that works to reduce child malnutrition and provide water filtration systems to women.
Everything Ix makes is very cute and on-trend, the numbers are very good (the shoes are made for $12 a pair and go for $89 retail, so the margins are strong), Kennedy's managed to build relationships to the point where her stuff gets given away in gift bags, she's got an army of influencers showing off her stuff, and both Gap and J. Crew have sold her products.
So there's a bidding war. Kennedy shows why she did well on Wall Street by asking the three investors bidding for her -- Gary, Katia and Rebecca -- if they'll all be willing to work as a team with her, as they all bring different strengths to a business. Everyone agrees to kick in $50,000 for a 10% investment, and Kennedy skips out in her huaraches, the happiest would-be mogul on the show.
This is a great idea: TsuRag is a modified do-rag that provides a more comfortable fit thanks to its wider ties and firm compression. And it's aimed at a growing market: Black hair care is estimated to be a $500 billion industry by 2017. And Aaron Henry is the kind of entrepreneur who knows his audience.
Unfortunately, he doesn't know his numbers as well as he should -- and the ones he knows aren't that impressive. Christine is out once she hears that sales were flat from the first year to the second, and Katia is out once she hears that Henry has no idea what his cost of acquisition per customer is. That leaves Rebecca Minkoff, who loves Henry's hustle and his market opportunity. However, she is nervous about Henry's weak grasp on his financials, so she makes a $150K offer that would give her 51% of the company and install her numbers-savvy brother as a business partner. Since that effectively reduces the company's valuation from Henry's projected $1 million down to a whopping $300,000 -- and takes away his majority ownership -- he rejects the offer.
It comes down to Gary, who makes an offer of $150,000 for 15% of the company -- but with a catch. He'll only pay out in $50,000 installments over three years and each installment is contingent on Henry's company meeting a specific milestone. Henry balks at this, and thus he walks out empty-handed.
That said, I will watch any sequence where four people look at do-rags like they're alien brainsuckers, yet gamely try to put them on. That's a cultural studies symposium in sixty seconds.
- Superfit Hero
Micki Krimmel, professional roller derby skater out of Los Angeles, has a dream: to sell $90 leggings to women on the strength of her "celebration of body positivity." Translation: She makes her leggings in sizes from XS to 3XL. On the surface of this, it's not a bad plan: the athleisure trend has trained consumers to get comfortable paying lots of money for what your mother used to call play clothes, and the industry's willful ignorance of customers who don't fit into "straight sizes" (i.e. size 2-12) is the second dumbest thing in retail right now. (Number one is obviously fast fashion and its mission to turn the Earth into a desert hellscape pockmarked with mesas fashioned from compressed polyester-blend discards.)
In practice, however, Krimmel can't bring herself to connect her business plan to her patter. Because 70% of her sales are in straight sizes, she's focusing a lot of her attention there -- to the vocal displeasure of everyone, who ask why she's not focusing more on the underserved market of plus-size, active women. And when Krimmel does a road show at the Gwynnie Bee HQ, her demo rack full of clothing starts off with size 2. It's like she's self-sabotaging.
The real ridiculousness comes after the road show, when Krimmel heads back to the fashion investors. Gary points out that in terms of the crowded athleisure market, the one underserved segment which can offer real profits is the plus-sized market, but Krimmel sticks to her guns about including straight sizes. And when her one remaining prospect (Christine) basically says, "We can do this, but you're going to give me more of the company and we're going to focus more on the plus-size market," you can see Krimmel blanch at the prospect of repositioning away from "body positive" and toward plus size.
This isn't a surprise, per se -- "body positive" has become a buzzy way for brands to claim they're not enforcing fascist beauty standards while not actually offering anything beyond straight sizes (see also this article about a "body positive" lingerie company that had to scramble to offer anything above a size 12, right on the heels of a campaign showcasing "real" bodies). It's a way to appeal to socially conscious shoppers without actually reducing any of the snob appeal of a label that doesn't dress larger women.
And Krimmel's reaction to Christine's proposal isn't surprising: Although Krimmel's got sizes beyond L, she didn't do a very good job of presenting them at the company which is known for renting clothes in sizes 10-32, and she's not real thrilled about Christine's offer: it slices her company's valuation to 11% of the $2 million she thinks it's worth, and she'd be giving up 33% equity. So, citing all the future financial deals she'd be walking away from if she committed to this one, Krimmel leaves without any funding from the investors here.
And so, women who are sized out of straight sizes, you'll just have to wait and see if you can continue to get $100 leggings from someone who talks the body positivity talk but walked away from the actual, Gwynnie Bee-partnered walk.