The denim upstarts making noticeable inroads on the jeans scene are often taking the direct-to-consumer path.
Sifting through Big Data sets gleaned from customer clicks, these brands are getting the leg up as online denim sales continue to gain traction.
Los Angeles-based DSTLD, which closed a $4.4 million round of seed funding last year, is a good example.
The born-online brand — found at dstldjeans.com — makes its jeans in Los Angeles and sells directly to its customers online, eliminating retail markup and other middleman costs. Its denim retails for $65 to $105, versus what it estimates would be an opening price point of about $180 at traditional brick-and-mortar stores.
The company, which launched last year and has 15 employees, has been seeing 20 percent growth in sales month-over-month. Its executive team thinks the company could turn a profit this year.
“In any fashion brand — traditional or off-line — you’re building a brand,” says cochief executive officer and creative director Corey Epstein. “The variable for online businesses is digital customer acquisition, which the traditional incumbents wouldn’t have to deal with. The ability to do this very laserlike, precise targeting through social media channels — that’s a new world that really differentiates.”
But you can’t just be tech-savvy, adds co-ceo Mark Lynn.
“When you start the company, you have to be exceptional at product,” Lynn says. “You also have to build essentially a technology company and your entire back end of e-commerce operations and databases and everything else, and you also then have to build a digital marketing agency to acquire customers. If you can do that really well, you can offer a value proposition and have a relationship with the customer that none of the incumbents can ever have.”
Starting with denim was tough, the two founders note, but it set the backbone and provided the avenue into basics, such as tanks and shirts, that are slowly being rolled out on the DSTLD site.
El Segundo-based fast-fashion e-tailer JustFab, which focuses on footwear, began dabbling in denim in 2011 before launching a full sportswear offering this year.
“It’s such a staple in the closet,” says fashion director Yuchin Mao. “Denim is very versatile and it could reach far beyond what a pair of leggings can [do]. There’s a variety of categories you can do with denim.”
The four styles for the denim launch were priced at $39.95 and the majority of the offerings still hover at that price point. However, JustFab is testing how customers respond to more stud and rhinestone embellishments, special rippings and washings for fall that will boost prices to as much as $44.95.
Understanding what that JustFab customer wants is a constant process, according to co-ceo Don Ressler.
“We’re always tweaking the algorithm to learn more and more about the customer to gain more data points,” he says. “We are a fashion company, but at the heart of it, we are a technology company.”
Traditional denim brands that didn’t grow up online are relying on third-party companies like Rancho Dominguez, Calif.-based Onestop Internet Inc. to build and design their Web sites, handle online marketing, provide customer service and do fulfillment.
Onestop works with about 10 premium denim brands, including AG, Hudson Jeans and Seven For All Mankind. Its denim portfolio saw overall 2014 revenue from e-commerce rise about 24 percent from a year earlier and the company is seeing similar growth patterns for the portfolio this year, reports ceo John Tomich.
The average order value for the group of brands is $150. There is some compression on prices, but that’s being offset by a rise in units per order, Tomich says.
Return rates for denim are high — around 25 to 30 percent — making it all the more crucial that merchandising be done right online, he points out.
“The more effort you can put into product descriptions, not just the flowery brand-focused descriptions, but the technical aspects, is really important,” Tomich says.
Jeff Shafer wanted to run an experiment online when he launched Bluer two years ago via Kickstarter. The brand’s jeans, which start at $95 and go up to $145, are only sold online through the Bluer site and a store, Bluer Than Indigo, Shafer recently opened.
Bluer customers initially had the option of trying up to three pairs of jeans on at home for free, but Shafer has since discontinued the program.
Shafer said the program failed not because of fit, but because customers would send back two out of three jeans on average, a 66 percent return rate. “Really, you can’t underestimate the value of the person at retail. At the end of the day, it was a worthwhile experiment to validate the retail [associate],” he said.
Bluer’s sales are up in the 20 to 25 percent range and Shafer expects the brand to become profitable in the next 18 to 24 months.
The lesson, Shafer says, is that denim, much like any other online product, has to exist in all channels to succeed. “To do it right,” he adds, “you have to do all of it.”