Revolve Clothing gets influencers — and the power of in-house brands.
The retailer involved online content creators in its business long before it was an acceptable way to spend one’s marketing dollars to reach a largely Millennial consumer base — and the strategy is proving successful.
It was reported that 65 to 70 percent of current overall sales at revolve.com are driven by an influencer. And based on projections that Revolve is on track to surpass $1 billion in retail sales this year, that means that content creators could be responsible for up to $700 million of this year’s revenue.
Michael Mente, cofounder and cochief executive officer of Revolve, called the brand’s approach to marketing and speaking to customers a “bit different” from the host of other retailers vying for Millennial market share via the “fundamental old way of doing things” — i.e. traditional marketing.
He pointed out that more than 70 percent of the e-tailer’s customer base is younger than 40 years old — and this group is spending more now than ever before and will continue to do so.
“Consumers are so much smarter.…We all have mental ad blockers. We see logos and ads — and we’re so good at tuning it out,” Mente said. “I view it a little differently…but also it’s just harder to build that trust and really build that loyalty and I think, ultimately, the way we do that is through a lot of experimentation.”
For him, the answer became building a network of influencers to join the Revolve family. There are now 5,000 total, with the upper echelon counted as paid partners who travel with and attend events and parties on behalf of the retailer and its host of in-house apparel brands.
Mente detailed the most significant influencer-fueled initiative to date: #RevolveFestival at Coachella this past spring, which he called Revolve’s “own music festival.” Mente maintained that more than five billion press and social impressions were generated during Coachella, where the retailer outfitted more than 700 influencers.
“That was thousands of outfits…it’s a real fashion show. We had lines out the door…and it was, like, ‘OK, this is really working.’ People were climbing the fences to come in. Consumers are dying to come to our marketing events,” Mente said, adding that while that was all encouraging, it was the analytics that proved exactly how successful the activation was.
Analytics data from Tribe Dynamics revealed that Revolve generated five times more social actions than H&M, the official sponsor of Coachella, for both weekends.
“That’s a scale you don’t see in many places. That’s like a whole half-time show — and we didn’t have to spend nearly as much as that,” Mente said, adding that the company “did spend a good amount of money for sure” on Coachella-related marketing initiatives.
Other influencer initiatives include #Revolveinthehamptons, which for the past three summers entailed playing host to a number of influencers in a lavish Hamptons house with different guests in attendance each weekend. There’s also global #revolvearoundtheworld trips, where influencers are taken to places such as Lake Como on behalf of Revolve. Mente said the four to five influencer trips in 2017 will be ramped up to six to seven next year.
Revolve’s owned brands have become a key revenue driver as well. Mike Karanikolas, cofounder and co-ceo of Revolve, revealed that the portfolio comprises 25 percent of retail sales and is growing at a rate of 100 percent year-over-year.
“We create real brands — not private labels. There’s a very big difference,” Karanikolas said. “Our own brands are not carrying basic products or knock-offs — it’s some of your most fashionable trends. We put real marketing dollars behind it…and we have the results to show for it. If you look at social followers, [you’ll see that] many of them have larger followings than Amazon Fashion, which has invested tens of millions of dollars into marketing.”
Revolve operates 15 in-house brands, including Grlfrnd Denim, LPA, Lovers + Friends and Chrissy Teigen x Revolve, which debuted on the site two weeks ago. Revolve acquired Alliance Apparel in 2015, which was manufacturing Lovers + Friends and NDB at the time, in order to build a portfolio of owned brands. Plans to grow this portion of the business are aggressive, according to Mente, who last week told WWD that three new lines are already slated to launch in 2018.
“Not only do they [owned brands] have higher margins, which would be expected, but they have higher sales and sell-throughs and are turning faster. They are among our highest inbound traffic drivers…[and] it means our own brands aren’t cannabalizing our third-party product. It’s driving, essentially, virtual foot traffic into our store,” Karanikolas said before detailing the company’s history of financial success.
Revolve has been profitable 13 of the 14 years it’s been in business, save for 2008, according to Karanikolas. He started the company with Mente with just $50,000 in cash, and the two waited until the business reached $100 million before taking on a $15 million investment. Karanikolas added that 12 of the 14 years have seen growth of 25 percent or more, and put an average annual growth rate at a little over 30 percent.
As for profit margins, Karanikolas said private brands allow margins 20 gross margin points higher than other brands and that Revolve has averaged quarterly EBITDA, or earnings before interest, taxes, depreciation and amortization, above 10 percent. It now expects pre-tax margins of 10-plus percent and going forward expects them to grow close to 20 percent as private brands account for more of revenues. “We think private brands can be 50 percent of the business,” he said.
An emphasis on influencer marketing, owned brands and, more recently, global expansion and beauty are priority. In December 2016, Revolve introduced beauty to its offerings and is said to be building out the category in the coming months, but little else is known yet.
It was previously reported that Revolve was said to be eyeing an initial public offering and that the retailer had already hired Bank of America Merrill Lynch to advise on future growth strategies and raising capital for further expansion. When interviewed last week, Mente declined to comment on a pending IPO, but industry sources speculated that the Cerritos, Calif.-based retailer is gearing up to go public.
In the meantime, Karanikolas and Mente are going to continue to let data — and the numbers — dictate Revolve’s path.
For Karanikolas, the minefield of data that operating an e-commerce business generates has informed critical aspects of the company, inclusive of how to market to a largely Millennial customer as well as what kind of product they want.
“Great product for the Millennial generation is very different from product for the previous generation. They are turned off by anything that seems too mass,” said Karanikolas, noting that 80 percent of Revolve’s merchandise today comes from an indie or emerging brand.
The “big key” is the assortment itself, which he described as “very vast” but at the same time “very focused” on a specific customer. A department store could have a similar number of stockkeeping units, or sku’s, but it’s marketing to different consumers, from “the mom to the daughter.”
Along with the 50,000 styles revolve.com carries over the course of the year comes the ability to track more than 50 attributes per style — and this results in millions of data points that the team now has information about. Organizing data and atomization — with human oversight — have been ingrained in the brand’s culture from the early days.
“We can turn fashion from a predictive art into a reality science,” Karanikolas said, adding that the flexibility and speed of being a digital first company also means that “we don’t have to commit solely to any trend, and we don’t have to be right every time.”
But physical retail — and whether or not the e-tailer plans to open freestanding doors — is a question that looms. Mente said integrating off-line retail is “absolutely essential” to the company’s future, and in the long-term, the two are very bullish on making brick-and-mortar stores a reality.
The main message, though, was that the cofounders believe Revolve can adapt to the current changing landscape at retail and in fashion and continue to win. “We welcome disruption in the landscape,” Karanikolas said. “We believe that is when we are at our best.”