Dstld, the direct-to-consumer premium denim and basics brand, has set a tall order for itself, armed with $3.1 million and plans to refine its supply chain, boost the product and ramp up marketing. This all comes with the recent hiring of chief operating officer Hil Davis, who is the founder of men’s made-to-fit brand J. Hilburn and online retailer BeautyKind.
It’s the next chapter for the company, which has carefully crafted a brand focused on high-end wardrobe basics — hence the name Dstld (pronounced distilled). The company’s aspirations in this next phase of growth are being bolstered by last month’s equity raise, known as Regulation A+. The process can be likened to a mini-initial public offering allowed under Title IV of the JOBS Act. That follows the company’s last Reg A+ raise, which closed at $1.7 million.
“What they’ve created, especially on the marketing and brand side, is interesting and I think it’s in a really hard category, which is denim,” Davis said of why he joined the firm. “I think that they’ve proven the front end of the business. It’s a really good model from that perspective and I also just believe in the compression of the supply chain that digitally native brands can bring.”
Now, it’s about further tightening of the supply chain, bringing on the right vendors and continued improvement in the product mix. On that last point that could mean taking existing product and making it better, such as elevating the T-shirt quality to something akin to a Vince or James Perse, Davis said by way of example. It could also mean introducing items in the way of knits, cashmere and technical fabrications.
“Dstld is basically in the first step of that evolution,” Davis said. “As a start-up, there are so many people wearing so many different hats, you can only get into so much stuff.”
Once the product is improved and inventory levels are in line with demand, the company expects to ramp up marketing to tell its story beginning late this year.
On the store front, Dstld counts one temporary door in West Hollywood. It also had a short-term lease at the Platform shopping center in Culver City last year. The goal would be to bring the brand to New York some time around the fall, the executive said. The company’s also in talks with several developers for shop-in-shop concepts that could bring Dstld’s mostly Millennial customer base into more traditional retailers’ doors, according to Davis.
“We think that four walls is a huge opportunity,” he said. “If you look at it just from a high level, retail has always worked. The only difference is e-commerce came along. In the past there wasn’t any e-commerce, so you maximized the box for the square footage and now that 20 to 30 percent of your revenue is coming from e-commerce, so those stores are just too big. Stores are still really powerful. We’re seeing the market start to understand and appreciate that.”
Physical retail, Davis said, should be viewed as a marketing and customer acquisition opportunity with e-commerce the retention engine. Stores, as many brands are realizing, can become what Davis called the piazza, a central gathering place to do events or takeovers when new product is released.
“When you start to look at the world that way, you can start to parse out what a store really stands for and where the value is you can add,” he said.
As Dstld rolls out more retail, Davis estimates, the sweet spot footprint for the brand is right around 1,000 square feet.
With all these growth plans, it begs the longer term question of what Dstld is thinking from a mergers and acquisitions standpoint. Davis confirmed the company’s not looking to sell off to anyone but did say there is an opportunity to build and buy brands.
“It’s definitely something we’re looking at and we’re weighing all of those options now,” he said. “I think the first step is to get the supply chain in place.”
He pointed to opportunities for cross-marketing if the company were to pair with another brand, even just on the collaboration side and more pairings are due out beginning in 2019. More brands, according to Davis, have also stepped forward and reached out to Dstld about either doing collaborations or being acquired by the company.
“I think they realize that there’s a lot of value to that and it’s just gotten harder,” he said. “A lot of these companies have been around for five to 10 years and they’re looking at what’s the next step. Fund-raising isn’t easy.”