Fast-growing Kidbox has secured $15.3 million in a Series B funding round, bringing the total amount raised since the company was launched in 2016 to $28 million.
The latest round was led by Canvas Ventures, an early stage venture capital firm in Silicon Valley investing in AI/machine learning, online marketplaces, digital health, fintech, enterprise software and female-led companies including Arianna Huffington’s Thrive Global and the Zola wedding registry site.
Fred Langhammer, former chief executive officer of The Estée Lauder Companies Inc., and the Gindi family, which owns the Century 21 Department Store off-price chain, also participated in the Series B round.
Original investors were HDS Capital, Firstime and Kids II. Haim Dabah, founder and chairman of Kidbox and an apparel industry veteran, is managing partner of HDS.
Kidbox is a unique business model revolving around selling kids and baby fashion via “push commerce.” That involves an advanced machine-learning algorithm making data-driven decisions or predictions which help stylists select items and create customized assortments. Boxes include six or seven items, for a total price of $98, and are shipped six times a year, for spring, summer, back-to-school, fall, winter and holiday.
“The algorithm part and the human touch together is really critical,” said Dabah. “No two boxes are ever the same,” though occasionally there’s a request from a parent with twins for two boxes with duplicate clothes.
Once the Kidbox is shipped and arrives at a home, the family opens it up to discover what’s been selected for the kids, in the spirit of opening birthday or Christmas gifts.
Rather than shopping stores and dealing with their fitting rooms, “Kidbox offers the ease and convenience for parents to shop for all of their kids in the comfort of their homes where the living room is the new dressing room and where kids can undergo true self-discovery when deciding which styles, brands and looks fit them best,” said Miki Racine Berardelli, ceo of Kidbox.
The Kidbox format also offers value pricing and a charitable component, and was largely inspired by Trunk Club for men’s wear and Stitch Fix for women’s wear, which both provide home deliveries of fashion selected by stylists.
The new funding will be used to expand Kidbox’s data science capabilities to optimize the assortment by determining voids and what categories pose the most opportunity for growth; ramp up customer acquisition and marketing activities including testing TV and radio advertising for the first time; bolster paid social media, and add talent to the team. In January, Lisa Kempa became chief financial officer. She has 27 years of experience in financial and operational jobs at Giggle Inc., Nike’s Cole Haan and Converse divisions, and The North Face.
The Kidbox executives also said they plan to develop private brands and continue to add categories and labels, based on customer demands. Coming up: baby blankets, bibs and other non-apparel baby products; cold weather accessories, hats and jewelry; an “essentials” box for replenishing socks and underwear, and a box for school uniform components such as khakis and pleated skirts.
“We are talking to customers all the time about what they need and how we can improve our offering, and by doing that, we can improve our business on a dime,” Dabah said. Each time a customer receives a Kidbox, the company follows up with inquiries on the experience, he added.
Kidbox does not charge a subscription fee. Customers become members by filling out a short questionnaire about size, fashion preferences and the personality of the child, such as whether they are shy or outgoing.
Aside from the customer feedback and data, Kidbox has another source of information — the Kids board of directors. It’s composed entirely of children who offer insights and ideas for the company.
In an interview at the Kidbox headquarters in Midtown Manhattan, Dabah and Berardelli portrayed the two-year-old Kidbox as a rapidly growing player in the $60 billion U.S. children’s apparel and accessories market. They said that in the first quarter of 2018, customers grew 3.1 times over the same period a year ago and that the Kidbox “community” has over 1.2 million families, meaning active members frequently making purchases and those that just follow the business online. They declined to specify the volume of Kidbox or the number of active Kidbox shoppers.
They said Kidbox has expanded its assortment to over 100 brands — Adidas, Puma, 7 for all Mankind, Diesel, DKNY, Splendid and Jessica Simpson among them — from 35 when the company launched.
The return rate, the executives said, is just under 30 percent, whereas the industry average for online apparel retailers is about 40 percent. They attributed the lower return rate to “bundle” pricing at $98 for all seven items in the box. If any items are returned, customers pay “à la carte,” Dabah explained.
Customers are further encouraged to keep everything in the box because that’s when the charity component kicks in. For the $98 spent, a new outfit, jacket or dress will be sent to a child in need via the Delivering Good organization. Customers can choose which charity to donate to from the 600 under the umbrella of Delivering Good. Kidbox is on a mission to clothe one million children in need and has so far donated $3.9 million in clothing value to children via Delivering Good.
Paul Hsiao, Canvas Ventures’ general partner, will join the adult Kidbox board. He said the company has “struck a chord with parents, grandparents, and children” and credited Berardelli and Dabah with building a culture that encourages parents and kids to discuss the importance of giving back, sometimes for the first time.
“We have a lot of respect for Haim and we’re impressed with the team he put together at Kidbox,” said Raymond Gindi, co-ceo of Century 21. Asked whether Century 21 could one day start up a business like Kidbox, Gindi replied, “We’re not sure. We are studying the subscription model. We’re just intrigued, especially in the children’s space.” He said his family invests in other businesses, mostly real estate and start-ups.
“When I look at new investments, I look at the people involved. I invest in rule breakers,” said Langhammer. “I’m very impressed with the Kidbox management team. Kidbox is a rule breaker and totally differentiated from what’s going on in brick and mortar. The system they have of attaining knowledge from customers about the boxes seems to be working. They’re gaining traction.”