The Anti-Unicorn Playbook That Beat Fashion's DTC Boom

0:08Sheena Butler-Young: Hello and welcome to The Debrief from the Business of Fashion where each week we delve into our most popular BOF professional stories with the correspondents who created them. I'm senior correspondent Sheena Butler-Young. picture this it's 2016 you're swiping on your glossier bomb.com pulling on everlane box cut tee and slipping into your all birds before heading out the door back then these direct consumer disruptors weren't just selling products they were selling the future of retail one instagram ad one venture capital round one minimalist logo at a time fast forward a decade and the picture looks very different.

0:49Sheena Butler-Young: While many of those once high-flying DTC darlings have stumbled, a quieter class of brands founded around the same time, labels like Doan, Hill House, Kate, Laleen, and Stodd are thriving. So how did these brands stage their growth playbook to allow longevity while others ran off course? Today, I'm joined by BOF editor Diana Pearl, and we're asking what these brands got right and what the next generation of fashion founders can learn from the class of 2016. Diana, welcome back to The Debrief. Thanks for having me. So we should start by laying out the counter narrative. What exactly was the dominant playbook for brands like Everlane, Glossier, Allbirds, and Outdoor Voices in 2016?

1:31Sheena Butler-Young: They were the ruling class. What did their founders believe they had to do if they wanted to build the next great consumer brand? Yeah, I mean, there was definitely a playbook at that point. It was raise a lot of venture capital, You know, hire some sort of fancy branding agency or creative agency to develop this very, you know, like you said, minimalist, beautiful, oftentimes like pastel colored brand identity. And then use that money that you raised in venture capital to just pour into social media ads with the hope of just growing sales quickly. And the hope was that profitability would follow.

2:08That hope did not turn out to come to fruition, but that really was the strategy.

2:15Sheena Butler-Young: And then you had this other crop of brands that didn't do that to the letter. They did some of it, though. Right. There was a little bit of they all had some similar inklings of the same idea, but they definitely went against the grain. to what extent were they rebelling against that playbook? And then, you know, to what extent was it that they had their own limitations, like not the least of which is probably to raise capital. A lot of these brands probably struggled to bring in the hundreds of millions of their counterparts who happened to be male led. Yeah. Yeah. No, I think that it was a little bit of both.

2:50Yes, there were limitations. Some of these brands tried to raise money and it didn't happen. You know, Nell Diamond, the founder of Hill House, said that she really viewed that almost as like a failure that she wasn't able to raise much money before the brand launched. And because she had come from a finance background and she, you know, an MBA and that was what you did. You raised money and it just it wasn't happening. And then others sort of made the choice to either not raise venture capital or just raise a small amount, you know, via friends and family or a small seed round. I think for some of them, though, it was a choice.

3:22Molly Howard, the CEO of Laleen, told me she had come from also a finance background. And, you know, she really was just like, we need to be profitable and we need to focus on profitability, which just was something that wasn't really in ether at the time. There was really a thought that you could just kind of buy your way to sales growth. Profitability was inevitably going to follow. Of course, like I said, that thesis really proved to not be correct. But I think it was a combination of having having an inkling that it's better to start small, grow slow, but also limitations of, you know, maybe we couldn't raise money.

3:57Maybe they were, you know, news to the industry and just didn't have those sort of connections or that sort of thing. So it really, I think, was a combination of the two. It's very true.

4:06Sheena Butler-Young: I remember reporting on some of these brands 10 years ago, and it was almost like a competition with who could raise the most, like the big headline of the XYZ brand just raised$100 million. Another brand just raised$200 million. It started to become its own competition for the biggest headline. And you're right, I think some brands would have counted that as a failure, that they couldn't get that headline. And then some were probably like, you know, even if they even if it was a failure in the end, you know, for some of them, it came together. I remember reporting on a lot of those brands around 2016 and it sort of became a headline getting competition.

4:42Sheena Butler-Young: It was like X, Y, Z brand just got 100 million. ABC brand just got another 10 million. And it felt like founders were competing for the big headline. And I think the ones that didn't get that money probably felt like they were, to your point, failing. And then it worked out in the end that all money isn't good money. The other interesting thing was a lot of these success stories today, they did not have a bold stance against wholesale. The way that in particular Allbirds, Glossier is a good example, which I think some people would say isn't completely off course, but finding its way back. But I remember Glossier and Allbirds being very pro DTC.

5:20Sheena Butler-Young: While it sounds like the brands you wrote about were a little more open to wholesale. Why was it so popular to be anti wholesale 10 years ago? What was the thinking? You know, I think at the time it was revolutionary. And, you know, that's a great point that that was obviously a huge part of the playbook, if not the cornerstone of the DDC playbook was selling direct to consumer. And I think the thought was just that at the time, oh, we don't need this anymore. Wholesale for so long had been the channel that got your brand in front of new customers. But then there was social media and there was this thought of like, OK, instead of selling to wholesale and giving up the margin, selling in that sense, we can just pour money into social media ads, acquire customers that way, et cetera, et cetera.

6:00But it just ended up being that, A, there's only so many customers on social media. You know, even obviously a lot of people are on social media, but there's plenty of people who aren't. And that's not really how they're discovering new brands. You know, there's plenty of people who still shop at department stores, shop via wholesale. So A, there was a limit on how many customers you could reach. And then especially as social media ads, particularly on Instagram and on Meta, just got more expensive. it turned out that that wasn't as cost effective of a strategy as initially thought.

6:33Sheena Butler-Young: And a lot of people don't actually transact from social media. I think it's probably truer today maybe than it was 10 years ago, but it is discovery. And it is like that next step to purchase is much harder than I think brands anticipated in the beginning. It's like, I look at this beautiful dress and I like it with the Instagram top, but I don't actually purchase it. um to what extent though do you think that that uh that playbook that you know those brands were using the glossiers the all birds um the everlanes of the world was it a broken playbook or was it just taken too far because there's some there's inklings of truth and like sound business business logic behind it but they just probably took it too far yeah i think that there were things that were really flawed in the thinking but i think there were also things that were revolutionary I mean, selling direct to consumer is a way to control a lot more of the margin.

7:27It's a way to control a lot more of your brand identity and how your brand is presented. You know, Staud, which is one of the brands that was founded in 2016, they started off selling a lot more via wholesale. But now that they've sort of built that foundational business, you know, they're on track to hit 250 million in annual sales. Now they're pulling back and doing more direct to consumer, opening their own stores, that sort of thing. So it's not that direct to consumer can't work. You just need to build up that brand identity. where I think that a lot of these big 2016 names went wrong was just in raising so much money without maybe, and then using it all for social media ads or using a lot of it without really building that brand identity in the same way.

8:08Because that identity and that brand world, which I think Hill House has done a great job with, Delwyn's done a great job with, having that strong aesthetic, it allows you to apply that to all sorts of different categories. It builds that loyalty with the customer. And I also think, you know, was a footwear brand like Allbirds really needing to be raising over 250 million in venture capital funding? You know, this isn't like a healthcare startup where you have to do all this research and pay, you know, doctors and that sort of thing. So I think that it was kind of people wanted to position these apparel and footwear and accessory companies like tech companies.

8:45is, but there's just a difference in terms of how much money are you going to make and how big the business possibly can be and the payout. But when once you take that venture funding, especially at that level, you know, you just are under a totally different set of pressures. And for even these class of 2016 brands that I focused on, you know, even the ones that took venture capital funding, they didn't take quite so much.

9:07Sheena Butler-Young: It's also in the same vein of when you talk about how much money they're collecting, also the size and the prominence that you gain right away when you're doing that, it doesn't give you room to make mistakes. That was another big theme in your story. It's like that public attention alongside shareholder pressure, like they want to see returns, they want to see returns quickly, doesn't allow a young brand to make mistakes, right? Your story talks a lot about how the brands that seem most successful from 2016 were able to make early mistakes without as much scrutiny. What were some of the mistakes that they were able to make that made them stronger?

9:43Sheena Butler-Young: Anything stand out? You know, I think a big one is just like inventory. And a lot of these brands dealt with sellouts early on and maybe misjudging demand. Hill House is a great example. You know, their nap dress took off so quickly. And also, if you don't have like all that venture funding to, you know, build up your inventory, it's hard. You know, you frustrate your customers, that sort of thing. So I think that that is definitely a mistake or not even a mistake, but just like a learning curve that a lot of these brands had to adjust to. But at the same time, I also think that in a lot of ways it was a benefit because when you see, you know, products sell out, you get to see what your customers are really resonating with versus if you're just like advertising so much on social media in order to grow sales.

10:27Are you really appealing to the customer that's like going to be die hard for your brand? Or are you just finding, you know, someone random who's going to tap tap and then never shop with you again? I think they had to fight a little bit harder to keep those customers. But then that meant that they knew their core customer better and were able to grow their assortment in a better way versus you look at like an Allbirds that really struggled to go beyond that basic, you know, tree runner, wool runner shoe that they, you know, first became known for.

10:55Sheena Butler-Young: I mean, I have to say I was, I want to give myself credit that I was skeptical. I was very skeptical of how much they were going to grow with this one hero product of footwear, but that's for another day. The other thing that you mentioned Hill House Home and other, or Hill House, which started off as home, but is much broader for good reason, but they did not invest. One of the biggest ways that they went against the playbook was not investing as much into the marketing. One example, like Laleen spent$0 on marketing, I think for the first two years, which is when they became profitable. How did they build that awareness and interest without the marketing spend?

11:36You know, I think a lot of these brands, especially being female led, they were early to influencer marketing and it didn't necessarily need to be about doing paid deals. They would just send product to influencers. I know that Hill House did that. Stodd did that. And that was, you know, at the time, like 2016, 2017, 2018. Yes, influencer marketing was a thing, but it's it was nothing like the way it is today. And a lot of fashion companies had not really like tapped the power of it to, you know, build a community and find people who really loved your product. And really that's just paid dividends now because, you know, Nell Diamond from Hill House said that they worked with some influencers, you know, back in the 2010s who were a little bit smaller, but their businesses have grown alongside each other.

12:16So now those people are big, they have big followings and they still have that relationship with them. I think word of mouth has been a really powerful tool and even just doing things like getting on the ground and doing trunk shows, you know, Argent, which is a workwear brand that was founded in 2016, they would pop up at women's conferences. And, you know, it's like meeting, finding your core customer, meeting them where they are and giving them what they want. I feel like is, was the core of a lot of their strategy.

12:42Sheena Butler-Young: The most fascinating thing, well, not the most, but one of the most fascinating things that I, I read in your story on Hill House specifically, one of the features that we're talking about today, was that I think that 10 % of their shoppers own an average of 19 pieces from the brand. I can't think of any brand that I own 19 pieces of anything from. It sounds like the strategy was not just, you know, it wasn't less spending on marketing, so to speak, and more so slower spending, more strategic, more thoughtful, more relationship building? Is that the secret sauce sort of across the board or is it different?

13:21Sheena Butler-Young: Is that different for Stodd versus Laleen or versus Dolan? Like, did they all do it a little differently or was it, is it a common thread? I think there are common threads, but they all definitely took their individual approach. You know, with Hill House, Nell Diamond is, you know, like has become something of like an influencer and a public figure herself. And I think that the brand really reflects her aesthetic. Like I know she said that when they launched the nap dress, like she didn't know if it was going to resonate. She was like, is this just like a weird Nell thing? She's told me, you know, that was like ran through her head of like, I don't know, we'll see.

13:56And, but I think when a brand reflects an individual person, it's like, and their aesthetic, their perspective, you know, with Hill House, they really like looked, okay, what is it about this nap dress? Like once that product went viral, they were like, okay, what is it about this dress that people are so obsessed with? And they realized, oh, it's really the smocking, which is, you know, the ruching on the bodice. And then they just expanded that universe and they made a mini version. They made a long sleeve version, a short sleeve version, you know, a version with different spaghetti straps, you know, all these different versions of the dress and in all these new, you know, prints.

14:31And they would do collections like having like a fish print or I remember in like maybe 2021, they did the mermaid collection. There were all these fun prints that get people excited to buy. And especially if it's a dress, you already know fits you well. You like the fabrics. You like the construction of it. And then you have a reason to buy with a fun new print or product. I think that that goes a really long way. But yeah, I think that they all sort of had their own approach, you know, with Laleen. Two of the founders were former Vogue editors. So I think that they already had those connections within the fashion industry.

15:01They knew really like how to get to the heart of what women wanted to buy and create those, you know, hero pieces in your wardrobe. Like the Colby pant has been super popular in the last few years. The Marin sweater, you know, just these like workhorses in your wardrobe, like a great pant, a great sweater, a great dress. And I also do think the fact that all these most of these brands were founded by women. They know they know their customer because they are the customer. And I really think that that just goes such a long way. And also being very defined with your aesthetic and your point of view.

15:30you can then take that and apply it to a bunch of different categories. And it feels very authentic.

15:35Sheena Butler-Young: No, I think that's so true. And I'm also going to be biased and say, I think that the women founders tend to know their customers best. The thing that I've been asked a lot when I write about raising capital is, especially for women founders, because they've struggled to walk into those meetings and sell something. And the thing they hear back, a lot of founders say is, oh, that's really interesting. I'm going to go ask my wife. Have you heard this one, Diana? Oh, yeah, of course. So I think there are some elements of the philosophy of fundraising that these success stories do have, right? So a few of them did raise money.

16:12Sheena Butler-Young: So I think it was Joe in that raised about$500 ,000 prior to launch. You had Hill House raising$6 million in Series A and then$20 million in Series B. Laleen raising$4 million. What was special about their philosophy? because they were successful in getting money and that money was put to good use, obviously. Did they have a different philosophy than their counterparts who took on so much? Yeah, I think that a lot of them raised with very specific goals in mind. They also raised more money once things had sort of already taken off their, you know, business strategy and their business proposition was proven already to a point.

16:48Like Hill House raised with the idea of we want to open stores. And, you know, they reached profitability last year. So now it's like they can open more stores based on the funds of the business. But sometimes you need that extra capital to get to that point. So I think it was really being specific in what goals are we looking to achieve with this capital? You know, how is it going to help us? And not just raising, being like, OK, to keep growing, let's keep growing. Let's keep raising more money, just being strategic and also not just like keep raising. You know, I think that Allbirds and Glossier both raised how many rounds?

17:20I think Allbirds did a Series E. So did Glossier. You know, that's a lot of different times you're raising money versus once or twice.

17:27Sheena Butler-Young: Yeah, raising with intention has been sort of one of the key themes that I've heard from founders that have found success, like have a specific goal and that goal should be growth oriented. Like we now know our customers want to see our store, see us in a store. So I'm going to raise this round specifically for retail footprint growth, not raising for the sake of it. I want to talk about some of the other, you know, what growth looks like for these brands. the hard lessons that you encounter when you start thinking about growth. Something that one of the founders in your story said was that there were points, I don't know if it was Nell or someone else, but there were points on the journey where she wondered if they were too quiet, like that there was some anxiety about, you know, the big growth stories on social media, maybe in Allbirds, maybe it was Everlane and they didn't feel like they were getting that.

18:17Sheena Butler-Young: And it was a little bit, it was a source of anxiety. in an industry where the headlines are all about, you know, rapid growth and still is and all the excitement around that. How difficult was it for those founders to stick with this sort of the long game, this longer strategy, the sustainable growth that you get from them? What would that look like on the inside to get here? Yeah. Yeah. Who said that was Jane Siskin, who is the founder of Syncacept, which is another 2016 born brand. And they were one that really embraced wholesale early on. You know, she's a retail veteran and she had seen the power of wholesale.

18:49And that's really how they grew their business. I think that like, they're all human. And of course, especially at a time like 2016 was just such an exciting time in our industry. And there was so much, you know, venture capital flowing into fashion for, you know, really the first time in a lot of ways in a very meaningful sense. And I think that there, there was probably pressure and it was a little bit harder to ignore, but I also think all these founders really listened to their gut instincts and said, you know, we like, let's not just grow to grow and we need to be profitable. And, you know, that was something that all of them were really focused on from an early stage, which a lot of these big names of 2016, you know, weren't quite as much.

19:29So I think, yes, there's always going to be pressure to, to grow more and to do more, especially at a time where so many brands are getting so much attention. But I think that a lot of them had a very strong vision for what they wanted their businesses to be, what they wanted it to look like and, you know, stuck to it. And, you know, it's paid off.

19:48Sheena Butler-Young: If we could pick on maybe Allbirds for a second, because they're all but done, right? Like they have moved on, their founders have moved on to invest in what probably would have been AI, which would have probably warranted the kind of funding they took on for Allbirds, maybe, let's just say. But would you say that the biggest mistake of the brands that have faltered significantly. Like I put Glossier a little bit in a different bucket because I think it's a TBD. And for now it looks like there's some, there are some signs that the turnaround is working. Everlane is probably somewhere in the middle, certainly not what people expected it to be, but not completely out of the conversation.

20:26Sheena Butler-Young: But is the biggest mistake in prioritizing hype and big gains over discipline and strategy? Does that characterize what really went wrong for those brands? Yeah, I think so. And I think maybe like, and again, I don't necessarily put Glossier quite in this category, but not having this very clear idea of who you are and how you're going to evolve with your customer. You know, you can't stay the same forever. I mean, I think in 2015, when they launched, they were revolutionary and, you know, I had tons of Glossier products. They were like the millennial beauty brand. And I think beauty is also just a hard category because there's always new brands popping up and it's very trend driven and that sort of thing.

21:07But I really think like knowing your customer is the most important thing. And I feel like also is your customer someone who's going to want to shop? That's what I always felt about Allbirds. Like they were selling to, you know, tech guys in Silicon Valley was their prime demographic. And it's like these men like don't shop. They wear the same pair of shoes until they're, you know, falling apart. Whereas, you know, someone who's going to buy 19 dresses from Hill House, like that's someone who wants to shop, wants to spend money, gets a lot of joy out of this. You know, and obviously tech guys in Silicon Valley need shoes too.

21:36But again, maybe that business didn't need to raise$250 million. I don't know how many more sneakers. So yeah, I think knowing your customer is key.

21:45Sheena Butler-Young: Do you think as we look ahead, I mean, a lot of what we've covered on BOF, even with the luxury reset, talks a lot about sustainable growth, sensible, disciplined, if not pragmatic growth. When it comes to these indie brands that are generating excitement, certainly they're not, we're not seeing the dozens and dozens of new brands that we were seeing at the height of this, but there are lots of new ones entering the conversation. Will the success stories look more like Staud, Doan, Lalene, all the brands you wrote about? Is that the new picture of success for the next great consumer brands? 100%.

22:23I really think that now, like, A, I just don't think that, I mean, investors have been burned by the all birds of the world. They're not, I think, interested in investing in fashion businesses in quite the same way. Or if they do, it'll be smaller amounts. It will be businesses that, you know, have already proven themselves in a way and are already on the up and up. I think that really, like, one of the most important qualities you can have as a founder is patience and the understanding that it is so much better to get one customer who is going to stick with you versus 10 new customers. You know, it's not like you need to play the long game and have an eye on sustainable growth and also growth that you can keep up with growth and growth, meaningful growth, like not just numbers on a page, but like actually growing your customer base.

23:12That's going to keep coming back to you. That loves your brand that will evangelize your brand to other people. talk about it on social media. I mean, now like influence marketing obviously is everywhere, but you know, we're seeing people with 2000 followers on Instagram have shot my accounts and linked to people. And, you know, if you can really develop that brand loyalty, I think that is so powerful. And yeah, just knowing your customer, knowing who you are and your identity and, but also being open to evolution while still staying true to that.

23:41Sheena Butler-Young: Absolutely. So it's time for my favorite segment, which is our lightning round. I will not limit you to one word on these answers. We did a lightning round on luxury recently, and I limited Robert and Mimosa to one word, but we can talk on this occasion. So first question, hero product, blessing, or trap? I think a blessing if you know how to expand upon it and you don't become overly reliant on it. You know, I think that like the nap dress has ultimately been a blessing for Hill House. It still makes up, I think, 17 % of their annual sales, but they have like learned how to expand upon it. And, you know, Laleen, they have, like I said, the Colby pant, the Marin sweater, they have these key core products.

24:22Those have been a blessing, but you want that product to be an invitation into your wider world, not just like the one-stop shop.

24:30Sheena Butler-Young: Absolutely. And I would agree. I think, especially in beauty, I think you have to get it, have an invitation. I think the brands that are like the word, I like the way you described it as an invitation into your world, because I think the brands that don't have the thing that you that invites you in you they sort of falter too it's like almost too gray like I love my Tarte concealer but then I've like learned to love other things next question what's the better problem to have selling out too quickly or holding too much inventory yeah I think selling out too quickly I feel like yes that's not like in some ways that's not ideal but I do think it builds hype I also think that that is a problem that you can move away from, whereas holding too much inventory, like you just inevitably have to discount.

25:12And you know, that can be a drag on your margins and on your bottom line. So, you know, I think both are problems you're probably going to want to solve. Inventory management is really important. But one at least is like marketing for the business. And one means that you haven't, I think it's better to like underestimate than overestimate generally. Agreed.

25:32Sheena Butler-Young: You've sort of answered this question in many different ways throughout our conversation, But this one, I am going to restrict you to just a couple of words. OK, so complete this sentence. The next great DTC fashion brands will grow more like this than like what? You know, I'm going to go with a classic tail. I think they're going to grow more like the tortoise than the hare. Like it's better to, you know, like it's better to go a little slower and slow and steady wins the race. And yeah, I think patience. That's like my big thing. I think that you have to be a founder, you need to be patient and ready to take that time to like study your customer, learn your customer, learn your brand.

26:13And then once you have that knowledge, it's like that's what allows you to grow.

26:18Sheena Butler-Young: I love that. I love that you went with a literary analogy. Thank you. Thank you. That's great. Diana, thanks so much for joining us today. Yeah, thank you for having me. please be sure to check out diana's articles for these brands resisting the dtc playbook paid off and the nap dress propelled hill house to 110 million dollars what's next at businessoffashion.com these and other stories are available to bof professional subscribers only and you can find the links in the episode notes you've been listening to the debrief produced and edited by olivia davies and angel nemov i'm sheena butler young we'll be back next week with a new episode Thanks so much for joining us and be sure to follow us wherever you get your podcasts.