The company is on track to triple sales this year from 2010’s $9 million in revenue, as it expands its sportswear offerings and introduces denim next month. Founded in 2007 as a purveyor of better-fitting pants, the e-commerce site is also growing its lineup of third-party brands and collaborations.
In March, the New York-based company tripled its office space, moving into a new 15,000-square-foot headquarters in Chelsea. Employee count has doubled from 23 in the beginning of the year to 46 today, with plans to grow to about 70 by yearend.
Fresh financing was injected into Bonobos at the end of 2010 when it received $18.5 million from two of Silicon Valley’s top venture capital firms, Lightspeed Venture Partners and Accel Partners, along with a small group of angel investors — which include JetBlue chairman Joel Peterson, StubHub co-founder Colin Evans and Kirsten Green of Forerunner Ventures.
“With a growth track like that, it’s hard to complain about anything,” said Jeremy Liew, managing director of Menlo Park, Calif.-based Lightspeed Venture Partners. “Sales have been terrific and the company has been able to build a very strong management team. I’m glad the company has expanded beyond just pants and now stands for a complete men’s wardrobe.”
The new Bonobos jeans line, priced at $125, will launch just before Thanksgiving. The denim comes from Cone Denim’s White Oak plant and the jeans are produced in Los Angeles facilities. Fits include a boot cut and a straight leg, with each available in three washes.
Bonobos took a pared-down approach to the design, creating a classic five-pocket model with no exterior branding or signature details. “When we looked at men’s denim, we realized the space was over-detailed and overpriced,” said Andy Dunn, co-founder and chief executive officer of Bonobos. “Denim is all about subtlety and guys have been working so hard to find something without all the back-pocket details or tears or whiskers. We wanted to bring something that was missing from the marketplace.”
While Bonobos was launched in 2007 with just pants, other categories have rapidly grown in importance. This fall, the company added 52 stockkeeping units of sport shirts, making it the largest product category after pants. The shirts join existing lines of shorts, jackets, swimwear and a small tailored clothing program.
The business was 100 percent pants in 2008; 91 percent pants in 2009, when Bonobos added polos and swim; 66 percent pants in 2010, when it expanded to shirts and outside brands, and is now just over 50 percent pants. Dunn expects that figure to dip below 50 percent within six months as the company continues to expand its nonbottoms offerings.
In February, Bonobos hired Brad Andrews away from J. Crew as vice president of merchandising to oversee the product extensions. Other key new hires include vice president of marketing Richard Mumby, who came from Gilt Groupe in February, and vice president of operations Andrew Weber, who came from Random House in May.
Bonobos now offers more than 75 third-party brands, including Jack Spade, Oliver Spencer, Timberland, Gant Rugger, Grenson, Hunter and Luminox. In November, the company will introduce a co-branded line of flannel shirts with Burkman Bros. and later this winter a line of wool shirts with Woolrich.
Outside brands now account for just north of 10 percent of total sales. Dunn expects that figure to grow to between 25 and 50 percent of the business, although the Bonobos segment will remain the core foundation of the company. “We are focused on a vertical model,” he emphasized.
Bonobos has been in talks with one of its outside vendors about acquiring that brand in order to leverage the Bonobos e-commerce platform, said Dunn.
The company faces several hurdles going forward, admitted Dunn. Bonobos has only two internal designers and he would like to at least double that number within the next six months. In addition, the hiring process for new computer engineers has become very competitive in New York and Bonobos needs to ramp up its capabilities in that area. Thirdly, Dunn is aiming to create formats such as pop-up shops, showrooms and even a permanent retail presence that would allow potential customers to interact with the Bonobos brand and products in person, which would be capital intensive.
“I don’t think Bonobos can truly offer a great customer experience if you can’t try stuff on,” explained Dunn. “That’s an issue that will take years to address nationally.”
In its new enlarged headquarters, the company added a showroom that allows customers to make appointments with “fit ninjas” who walk them through the Bonobos offerings to find the correct fits and styles — which makes online ordering at later dates much easier. Several dozen customers a week have been taking advantage of the service, said Dunn.
The company places a premium on customer service — requiring customer service reps to have college degrees — and that’s led to strong repeat orders. Within one year of placing their first order, 42 percent of customers place another, a figure that grows to 62 percent within three years.
Lightspeed’s Liew pointed to two big-picture trends benefiting e-commerce sites like Bonobos. The first is the affordability of online media, which makes acquiring new customers easier and cheaper. “It’s a tough time to be selling ads and a good time to be buying ads,” noted Liew.
The second is that more people are shopping for fun, discretionary purchases online, such as fashion, rather than just need-to-buy items like textbooks or diapers, as they tended to do previously. “Online shopping is catching up to the real world and become more entertaining,” said Liew.
Looking ahead, there’s a good chance Bonobos will consider a public offering down the road. Dunn declined to provide details on whether the company is profitable, but tipped his hand when he noted: “We’ll release those figures when we file our S-1,” referring to the document used to file securities with the Securities and Exchange Commission.
“I think Bonobos has the potential to go public if it remains on the growth track it’s been on,” said Liew, who cautioned that it was still early to consider that option — and that a larger company could also take an interest in Bonobos and acquire it. “The math in the venture industry is that there’s about one IPO for every seven acquisitions."
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