This week our guest is fashion resale pioneer Sarah Davis, the Founder, President & CCO of Fashionphile, the leading purveyor of preowned ultra-luxury accessories. We learn all about Fashionphile's 20+ year journey from scrappy boot-strapped start-up to its break-through partnership with Neiman Marcus. Along the way we learn the ins-and-outs of retail recommerce, what's driving its growth, how COVID affected its evolution and what it will take for all the various resale models to succeed in the future. In addition, we discover Fashionphile's remarkable track record of year-over-year growth and--brace yourself--profitability, as well as plans to add 10 more Neiman Marcus locations by early next year.
This week our guest is fashion resale pioneer Sarah Davis, the Founder, President & CCO of Fashionphile, the leading purveyor of preowned ultra-luxury accessories.
We learn all about Fashionphile's 20+ year journey from scrappy boot-strapped start-up to its break-through partnership with Neiman Marcus. Along the way we learn the ins-and-outs of retail recommerce, what's driving its growth, how COVID affected its evolution and what it will take for all the various resale models to succeed in the future. In addition, we discover Fashionphile's remarkable track record of year-over-year growth and--brace yourself--profitability, as well as plans to add 10 more Neiman Marcus locations by early next year.
Then we wrap up the episode with our fast-paced weekly segment “Remarkable or Forgettable?” where we give our hot takes on retail headlines, and deem them wow-worthy, best ignored or somewhere in between. This week's big stories include earnings from other resale brands ThredUp, Poshmark and the RealReal, as well as Canada Goose. Victoria Secret spin-out and prospects for a revival, JC Penney's updated prospects.
As the very first ultra-luxury re-commerce brand of its kind, FASHIONPHILE is the brainchild of Founder and President, Sarah Davis. Like most of the brands we love best, FASHIONPHILE began in 1999, with little more than a good idea. In 2006, Sarah introduced business partner & CEO Ben Hemminger, who evolved the brand by expanding the collection and presenting it to a larger market. Over 20 years later, FASHIONPHILE is now one of the world’s top resellers of pre-owned luxury and the exclusive re-commerce partner of Neiman Marcus.
In the words of Geoffroy van Raemdonck, CEO of Neiman Marcus Group, “FASHIONPHILE’s hyper-focus on curating high-quality supply and providing best-in-class shopping experiences makes it the ideal partner.”
When Neiman Marcus calls you ideal, you blush and just, well, let it in.
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks and The Food Professor with Dr. Sylvain Charlebois. You can learn more about Michael here or on LinkedIn.
Michael LeBlanc 00:04
Welcome to the Remarkable Retail podcast, Season 2, Episode 16. I'm Michael Leblanc.
Steve Dennis 00:10
And I'm Steve Dennis.
Michael LeBlanc 00:11
Steve, I've known you for a while, but one thing I don't know about you, do you collect stuff? Do you prowl the neighborhoods, whether it be virtually or drive, looking for that antique, that collectible thing, that last Jedi Knight to your Star Wars collection? Do you, do you, are you a hobbyist of any kind?
Steve Dennis 00:28
You know, not, not really. I think probably because I've got too much junk, which may tie into this episode a little bit, too much stuff I need to get out. I'm hesitant to bring too many new things in, and when I do, I'm pretty picky. But I have been exploring some of these resale sites, and there's, there's quite a lot of interesting stuff. So maybe that'll change.
Michael LeBlanc 00:50
Well, this whole idea of, of pre-loved fashion, and it goes from like, cheap and cheerful, all the way to the exclusive. It's, it's really interesting to me because, you know, and this whole idea of reCommerce, I guess we could call it, or resale, is just really, the numbers of, that I've been hearing in the market are just huge. Like it seems to be really catching on.
Steve Dennis 01:10
Yeah, I think it's a great example of how technology, you know, just, kind of like Uber or Airbnb, brings the two sides of the market together. Same kind of the same thing, same thing here. There's a lot of products out there that has been loved and may, may need to find a different, different home. And that facilitates, as we'll hear from Sarah, the sale of additional products. So, yeah, it's really, it's really fascinating. And of course, I think all this interest in sustainability has, has driven a lot of activity.
Michael LeBlanc 01:38
Yeah, it feels like that puts topspin on it, and now you've got the brands involved, because I was always wondering how the brands felt about this. But you've got Lululemon, you’ve got Nike, they're all kind of jumping on the trend, in one way or another. And, I guess, as you said, is the big, is, was the big headwind COVID and is the big tailwind, just the mega trend of, of, of sustainability amongst, amongst younger, younger shoppers?
Steve Dennis 02:01
Well, you know, I think that the hesitancy, in my experience with a lot of the big brands, is competing with themselves, right. Like why would you sell a used item, when you can sell a new item. But, I think, as the market matures and you really dig into it, you realize that, well, you may just be losing share. It's other people that have a better mousetrap, or it's actually incremental sale. I'm sure there's a lot still to play out here. But I think that's part of what's driving it, and you just can't ignore a customer's interest in, in recycling product.
Michael LeBlanc 02:34
Well, it's funny, right, because it, it's almost like buying a car now. You're thinking about, you’re thinking about, both the resale value, thinking about the automobile, and, and the used car markets, the whole thing, in and of itself. So, I guess we shouldn't be surprised. And we have an amazing guest to start to unpack, so to speak all of this for us.
Steve Dennis 02:52
Yeah, we've got Sarah Davis, who's the founder and Chief Customer Officer of Fashionphile, and they are the largest ultra-luxury handbag and accessory reseller in the United States. And they have some big brands behind them, in particular, in April 2019, they took the first round of investment, and partnered up with my former employer, the Neiman Marcus Group. So, let's bring Sarah on and learn all about it.
Steve Dennis 03:16
Well, welcome Sarah, we're delighted to have you on the Remarkable Retail podcast. Maybe we could just start off with you telling us a little bit about yourself, your professional journey, and how you came to start Fashionphile, way back in 1999.
Sarah Davis 03:32
So long ago, yes, I know. It's interesting because we have a lot of people who come to us now from, you know, startups that have been around a couple of years, and I always joke that we've had a very, very long start to our startup. But yeah, I started selling on eBay, back in 1999. And that was prior to, like, PayPal, and so those early days that, you know, where I would wait for your check to arrive in the mail, and then you'd wait for the check to clear. Do you remember those days?
Steve Dennis 03:58
Oh yeah.
Sarah Davis 03:59
eBay back then, but eBay, in the early days, there was no online payment system of any type, and so that's how it worked. And I also took photographs with a 35-millimeter camera, as everybody did, and then you developed your film at CVS, and then you put it up on a photo host. So again, I mean it's crazy that so many iterations, doing this a very, very long time. But I was in law school at the time and was looking for ways to make some money and started selling my own stuff. And then I had friends and family that were like, hey can you sell my stuff too, and it grew from there really. So, that was those early, early days and graduating from law school, passed the bar, and then, like, my husband's like, what the heck, like, never got a job in the industry at all, because I fell in love with, really with what I was doing.
Sarah Davis 04:48
And I, you know, I grew up, you know, just, kind of, solidly middle class, but in a household where, if I wanted to buy nice jeans, then I had to buy it myself. And I always wanted nice jeans, or nice stuff, I always wanted stuff that was nicer than I could afford. And so, I always would shop consignment stores, thrift stores, or whatever, because I found I could buy things that I, you know, that were outside of normally what I could afford, but I could buy, I could afford them if they were used.
Sarah Davis 05:19
So yeah, so I started selling on eBay back in those days, and, and it was just a really great home for someone like me, who was always looking for a bargain, and wanting to find a deal on something designer. And then, also had stuff to sell, that I wanted to get rid of, that had value. And, and I found that it was a really, back in those early days, there was, it was, eBay was more like Facebook Marketplace today, or you know, Craigslist or something, there was hardly any regulations, or wasn't a very safe place to be selling designer goods.
Sarah Davis 05:53
And so, I tried to create a safe, little corner of eBay, and found that was fairly easy, because there was nobody really doing it. And so, was able to develop a little following on eBay, which helped me to develop a following as I got off eBay. We opened our website in 2007, we opened, actually our first location, our first brick-and-mortar in 2007, in Beverly Hills. And then, we opened our second physical location in 2009, in San Francisco, and then 2012, in North County, San Diego, and then in Manhattan, in 2018. And we're bootstrapped until 2019, so, you know, I started 20 years—
Steve Dennis 06:19
Right.
Sarah Davis 06:28
And bootstrapped, and then, and then because we were growing 50% a year, year-over-year, and we were profitable the whole time. And so, kind of, thought why get, raise money, you know, we were doing it alone. But we got to a point where we realized there were so many competitors, who really were, just had so much money to compete against us, really in awareness. And so, we just figured if we wanted to really get in the game, grow the technology we were developing, get a team on board who could help us get there, and really, you know, get some awareness, we were going to need to raise some money.
Sarah Davis 07:09
So, went out for traditional fundraising round, and the end of that round, we ended up with Neiman Marcus as our first investor. So, that was really exciting. I think, truly revolutionary, you know, move on Neiman Marcus' part. It was a, you know, real, like honor, and like, shocker to us. We weren't even expecting that as we went into it, we were looking at, for traditional, private-equity-type investor, and they've been an amazing partner to us. And anyway, so, we've just been growing, really, you know, quickly, again, still year-over-year 50% growth, and then also, you know, have had, still profitable. So, that's, kind of, the most unique part of what we do, is that we've always been profitable.
Steve Dennis 07:52
Not everybody can, can say.
Sarah Davis 07:55
Everybody's so shocked when we tell them that because we have been, mainly direct-to-consumer on this, on the sales side. But we've had these locations all the while, where they're convenient locations for you to come in and transact with us. And we're able to write checks there, accept your returns, do lots of different activities in these physical locations. We're in five Neiman Marcus stores right now, but we're in the process of opening five more by the end of summer, and then we'll have 10, 10 more by next February. So, 15 by February, so it's very exciting, kind of, that inter-, interaction we've had with Neiman along the way too, so it's, kind of, how, from there to here.
Michael LeBlanc 08:35
Yeah, that's amazing. So, I imagine we've got some listeners who completely understand, or largely understand, the resale or, I don't know if you like the term re-commerce market, but, but for folks who don't, can you just give us a sense, kind of, big picture, of what the market is about, but in particular, how Fashionphile is, is positioned and differentiated from—
Sarah Davis 08:35
Yeah.
Michael LeBlanc 08:58
Maybe some of the bigger, more mass players?
Sarah Davis 09:00
Absolutely, yeah. And so, kind of, like, like I said, the thing that I find exciting about resale, or re-commerce like you're talking about, is that this isn't, like a, kind of, sexy, new way to sell something online.Like, you know, you might learn about, like, flash sales or, you know, something that's like a new shiny penny, in the way that you sell online.
Sarah Davis 09:21
It's not that, what it is, is, it's something that we've been doing for literally hundreds of years in resale. Meaning my grandma, you know, shopped consignment, and are, you know, that people will buy things that have value, and want to be able to sell those things. And so, what we are doing today is adding, you know, technology that helps us to scale this up to a point that we've never had before.
Sarah Davis 09:45
And so, it's just really exciting what you're seeing in re-commerce, in every different capacity. Like I said, I got into this because I love getting a deal, and I love, especially in the pre-owned world, I just find that that's the way that I can find, get the best, kind of, able to get the best products, for, kind of, already driven off the lot, so to speak. So, we shop, in our house, every one of our competitors, not as a trial to see, to test their services because, but because I love it.
Sarah Davis 10:14
So, we buy, you know, from, my son is in a band and buys instruments, and sells instruments on Reverb. You know, they sell musical instruments or StockX, for sneakers and you'd think they only have, like, sneakers that are, like, multiples of retail, but they don't, they have stuff that's under retail as well, so, or, you know, there's obviously thredUP. I love shoving all my clothes into a thredUP bag, sending it off, they give me a few bucks for it, I'm stoked to get it out of my house.
Sarah Davis 10:43
And then, my kids, you know, love to buy, use that credit to be able to buy on, more on thredUP, and all of my daughter's Dr. Martens came from The RealReal, you know, and so, it's very exciting. What it is, is people taking old school resale, that used to be in a, you know, kind of, just siloed off in little, mom-and-pop consignment shops, or even, even in, what do you call, pawn shops. You know, that's how you used to buy a used guitar, is you go to a pawn shop, and now it's just, you know, there's just a lot of order and scale, that's really exciting, that you see in re-commerce.
Michael LeBlanc 11:19
It's so exciting to listen to, and what intrigues me, as you said, exactly, it's been around a long, long time. So, what is it that's driving, I think, the growth, I mean, I perceive a lot of growth in the category, certainly looking at the numbers and looking at, at what you've been talking about. Is it, is it the fact that technology has removed the friction, like payment, and validation, and, or is it, is there something deeper going on? Is there some ethos, is something millennials driven, that they really see that, that, it's a win-win, they have both, economics, and economic responsibility, and responsibility to not, you know, continue to make more, and buy more new stuff. what, what's driving all this?
Sarah Davis 12:01
I mean, you know, it's, it's really, kind of, a perfect storm of a lot of things, I think. You know, I joke that, you know, we, we've been doing this for so long, bootstrapped for so long, and really were around for, like, 14 years before we even had some competitors getting into the market. There was, like, eBay, your mom-and-pop consignment shop, or pawn shop, and then Fashionphile, for a very long time. And then, now there are so many, really amazing, stable, successful resale companies, in lots of different areas of the, you know, kind of, for every tip, type of product.
Sarah Davis 12:35
And so, so one thing I'm really grateful to all of them for, including our direct competitors, is them spending hundreds-of-millions of dollars, of money, that they raised on awareness building, that really brought awareness to the category, that you could buy an authentic CHANEL bag online. And, as more awareness came into the category, it benefited Fashionphile, even if we weren't participating in that type of awareness building. So, just awareness to the category, awareness to the fact that people are shocked, like, you can buy authentic, like that, this is something that is possible, these are reliable, you know, authentic products. Like, that type of awareness has been really helpful, because there's been a lot of suspicion, and, you know, and for good reason, about, about the kind of authentication practices.
Sarah Davis 12:38
But the fact that there's large reliable companies, that aren't going anywhere, that you can transact with, that have return policies, and that are, again, that are, that are running honest businesses. That, that awareness has been very helpful, like you said, the younger customer who, not only wants a deal, but actually cares about sustainability issues, and is really interested in that part of the, of the piece of the story, the fact that these, you know, that when you, the thing I love about, about our, what we do in resale, and the sustainability story, is sometimes when you talk about something sustainable, it's, kind of, a lesser experience, but it's the right thing to do, like a plastic straw where you're like, oh my gosh, I, it's the worst experience, but—
Michael LeBlanc 14:08
Piece of pasta, I'm going to use a piece of pasta, but I feel good about it.
Sarah Davis 14:12
Yeah, it's like, I feel, okay, I know it's the right thing to do, drink the paper straw, use a paper straw, but it's not as good of an experience as the big, fat McDonald's straw, just does the job, you know, like plastic. But I love, there's certain areas in sustainable, like you look at, you know, electric vehicles, like, it used to be an electric vehicle was like the same thing, it's like eh, you know. They're not very, the cars aren't fun to drive, they're not cute, cool at all, but they're, it's, kind of, the right thing to do, and they don't have any get-up-and-go, but whatever.
Sarah Davis 14:40
And now, you got a Tesla that people are driving, you know, it happens to be sustainable, but it's also just like, super-fast, super sexy. It's a better experience in lots of ways, or whatever, arguably, and I feel like that's in resale. I love that, that, like, what we do, is a sustainable thing to do, but it's also the best experience. You're also buying a CHANEL bag at less than retail, which you can't do in any type of traditional, you know, retail environment, that's outside of resale, and so, because CHANEL doesn't have sales.
Steve Dennis 15:10
Right.
Sarah Davis 15:10
And so, it's one of those things where it's like, okay, you're going to have this CHANEL bag, which, we just did this big sustainability study, that we released Thursday, and people who spend a lot of money on handbags, which it's like, do you really need a study to find this out, but, expect to hold them longer, take care of them better, and are more likely to get professional repairs.
Sarah Davis 15:31
And so, you've got a bag that someone had for 10 years, carried quite a bit, and now is, you know, we're able to take that item and sell it again, to another person who is going to care for it, for another 10 years, who's also going to care for it. And it just really extends that, that life cycle. And so, it's really just, like, win-win-win-win-win, you know, as far as that, you know, that, kind of, idea that it's sustainable. And so, you know, and so, I feel like all of these things, that awareness, the sustainable stor-, sustainability story that everyone is so excited about. Millennials are really, kind of, jumping in on it, and saying, you know what, I'd rather have one, you know, pre-owned CHANEL bag, then buy 12 of these other, you know, kind of, like, more fast fashion brands, bags, or whatever. Just lots of those things all, kind of, simultaneously happening at once. It's, kind of, gotten us to where we are today, obviously the awareness of all these re-commerce brands going public and those stories, so.
Michael LeBlanc 16:28
I mean, it's not like the brands, though, would stand up and say, you know, I'm a big fan of unbridled—
Sarah Davis 16:33
Oh, yeah.
Michael LeBlanc 16:34
Consumer consumption. How do they know, how do these brands, who build an exclusivity-uniqueness, how do they feel about this, this whole trend wrapped around their, their product?
Sarah Davis 16:45
Well, I, you know, I, as you know, I'm sure, they've been very slow to be friendly. I mean, it's super interesting, because, you know, probably 10 years ago, the only interactions we had with brands were, like, in cease-and-desist letters. And now, in the past couple of years, we've been able to engage in conversations with most of the big brands that we sell, and many of the small ones, and they're not adversarial, they are saying, we understand that our customers are now thinking more about the purchases they make.
Sarah Davis 17:17
When you spend, you know, a CHANEL Flap is a $7,200 purchase, people are making that purchase, thinking about the investment quality of that purchase. And, in fact, kind of like when you buy a car, and you say, which one has the better resale value? That is a question people are 100% having when they're thinking about purchasing these luxury accessories. Men have actually thought that, along those lines, in their watch purchases for a long time. And, more and more, women are coming into these making substantial purchases, and thinking, what's the resale value on this? And so, we're part of that story.
Michael LeBlanc 17:54
Like many businesses, COVID has really struck some categories very hard. How has it been in the resale? I see on the, on the one end, it would be a headwind, just as, as, you know, folks are buying less, consuming less, potentially. But on the other ways, it could be a tailwind, as people open up to very, very new ideas. How have you found it?
Sarah Davis 18:15
We found it to be super interesting, as probably everyone, I mean that's like another episode, we could have like a three-hour conversation, right now. But the truth is, is that, in, as we benefited, like, direct-to-consumer ecommerce companies did over COVID, that we actually had that tailwind of sales. People were sitting at home, who, normally you're spending on travel, and going to concerts, and going to sporting events, and, had nothing to spend their money on, and we just were shocked, because we originally, when COVID hit, we thought, oh my gosh, people are going to really buckle up.
Sarah Davis 18:49
They're going to be afraid they're going to be furloughed, or out of jobs, they'll be nervous and not spending, and we were just like, bracing for this, you know. And then, all of a sudden, like, our biggest sales, non-promotional sales day of our lives happened, like, early April of 2020. And we're like, what is happening, and then sales continued to go on. And so, we actually never had, we had that, kind of, odd behavior, that we weren't expecting, that I think, we did, we hear from other direct consumer brands, you know, those types of activities.
Sarah Davis 19:24
But, on the other side, there were some things we had to figure out on the intake side. So, our entire business relies on you boxing up your belt, and your shoes, and that, you know, messenger bag you never carried, and, you know, taking some photos, uploading them to our site, getting a quote, whatever. Or, going into one of our physical locations and getting a quote, and then, like, shipping it into us, and we found that, for many reasons that we tried to unpack, that intake was difficult for us, for a couple months there, and we can only ever sell a percentage of what we get in.
Sarah Davis 20:01
So, while our conversion rate was, had never been higher, and is still, is higher than it's ever been, we can only sell a percent of what we're getting in the door. So, our big job, you know, at the beginning of COVID, was how can we help this be easy for you. And what we've seen on the, for all re-commerce sites, is the companies that did best during COVID, are, as, when you talk about direct-to-consumer, if you're, the more direct from consumer you were, on the supply side, the better you were able to do during COVID.
Sarah Davis 20:35
If you had a bunch of physical stores that you had to, you know, go in and drop your stuff off. Or, if you're used to having a white-glove service, where people are coming into your house, nobody was having people into their houses and clothes were all, stores were all closed. And so, the, in re-commerce, you're only as good as your supply. And every re-commerce seller, we're all supply constrained, we can't just go order a bunch of skus, or like manufacturer this or that, or find a new vendor for this. It's like, wait, we need you to be motivated to get us your stuff. And we need to make that as easy as possible.
Sarah Davis 21:12
We happen to, as fate, I mean, just cause, the way we've done it over time, is that 85% of our inventory comes from closets, directly to us, mailed in. So, we made a few changes early on, like, your ability to set up an, an, you know, UPS pickup at your house, instead of dropping it off somewhere. Those types of things made it, we were able to turn that around fairly quickly, and then get our sales back up, because our sales are a percentage of whatever inventory we have on the site, so.
Michael LeBlanc 21:42
So, Sarah, just maybe quickly, I want to make sure that, number one, the consumer, that might want to use your service, or your competitors service, this, kind of, fundamentally get how it works. So, maybe you can explain that, and how Neiman Marcus is involved. And then, also, maybe, just for the strategy people, the analysts, or other sort of people we have listening to the podcast, just kind of compare and contrast your model to some of the others that people might be familiar with.
Sarah Davis 22:08
Yeah, yeah. So, it's, it's actually really interesting. So, like I said, you could use our app, 85% of the people who, the inventory we get from our sellers come from, you taking a picture of that backpack you never carried, and you upload it to our site, and we send you an email that says we'll give you $1,000 for that. And you say perfect, you accept the offer, and then we send you a free shipping label, and you mail it to us. That's how we get 85% of our inventory.
Sarah Davis 22:36
But, we have, I'm telling you, I think the relationship we have with Neiman Marcus is truly revolutionary, because there's no one else, nowhere else, that I know of, on the planet, actually, that you could take that same backpack, you walk into Fashion Island, Neiman Marcus, you drop it off on the Fashionphile counter. Every, every Fashionphile location in Neiman Marcus is run by Fashionphile employees, they are, we train them, they're, they're not Neiman Marcus employees.
Sarah Davis 23:02
So, you drop that backpack off on the fat-, at the Fashionphile counter, and you go shop shoes, or go, you know, have lunch at the cafe or something. You get an alert on your phone that says you have a check waiting for you for $1,000, or if you put that check on a Neiman Marcus gift card, they'll give you 10% more, you now have $1,100 on a gift card, and, and it's burning a hole in your pocket in Neiman Marcus.
Sarah Davis 23:25
So, it's, it's really a revolutionary thing, that you're doing it in the same shop, you literally can buy this year's backpack, with last year's backpack, in the same shopping trip. I don't know anywhere else where that can happen. For Neiman Marcus, they're excited because this is a new, you know, every department store is thinking, how can I create services that make us more relevant in this new world, that introduce our brand to new customer.
Sarah Davis 23:50
And, one thing that is super interesting, as we kind of evaluated our partnership, is that there's not, there hasn't been as much crossover as you would think in the Fashionphile customer and the Neiman customer, before our, you know, our partnership. And so, there's no reason why any one of our sellers shouldn't be a Neiman Marcus customer, every single person who's selling to us is buying these luxury branded goods. We only sell 51 brands, we only sell the ultra-luxury, we don't go downstream. So, every single one of the brands we carry, Neiman Marcus carries, they should be their customer, so.
Sarah Davis 24:26
Our customer tends to be a, you know, more younger, more diverse, you know, type of customer, and so, the idea that we've got now, potentially customers of ours that are coming into Neiman Marcus, having these interactions, or for us, that the Neiman Marcus customer, who is not been our customer historically, many of them, that they're able to learn about Fashionphile and have those interactions.
Sarah Davis 24:49
Another really crazy, cool synergistic relationship, is the Neiman Marcus Stylist, what they do, they know how to fill a closet, but part of that filling a closet is editing the closet, and saying you never wear that backpack—
Steve Dennis 25:02
Right.
Sarah Davis 25:02
Why is it still there, and so, we had a pilot for a year with, and we, with six Neiman Marcus Stylists, and during that year we truly treated a pilot as a pilot, just learned everything we could about what was working, and not working for that Stylist, as we built out an app to support that for this team. And we just rolled it out with 66 more, just in April 16, it's more Stylists, because they're, they're the experts at editing the closet.
Sarah Davis 25:30
And again, you know, so that, so then, now they, as they, they sell to the Neiman Marcus, their Neiman Marcus clients, they get a commission when they make those sales, and then as they help them edit the closet, Fashionphile pays them a commission as they, you know, edit the closet, and we pay that commission in a Neiman Marcus gift card, which then the stylist helps them to spend, and it's just this really virtuous—
Steve Dennis 25:53
It's circular commerce in every respect, right.
Sarah Davis 25:56
It is, and that was, the, that was the goal of Neiman Marcus, they said, they said, we believe, this is 2019, by the way, before it was cool, today lots of brands are talking about participating, but it was a riskier move back then. Honestly, they said, we believe in the, in extending the life cycle of luxury, we believe it's something our customers are already doing, just, kind of, in a, in a messy way that's not very elegant, or elevated, or, you know, doesn't have the ability to do what, what we do, you know, here at Fashionphile and they wanted to participate.
Sarah Davis 26:28
And so, it's been, people said to us from the beginning, because we were bootstrapped for so long, they were like, oh this is, you know, honeymoon's probably going to end soon, with your, now you have these investors, it's, and honestly, it's the honeymoon is, we're still in the honeymoon, right now, were in Tahiti.
Michael LeBlanc 26:45
All right, well, that's fantastic. So, just being mindful of our time, I'm curious, your take on, I mean, it seems like everything I read about resale, at least broadly, is, there's just going to be this mega-growth, we've got several of folks, that I guess aren't necessarily your direct competitors, that have gone public, or rumored to be going public. What, what, help us separate the hype from the reality, and it sounds like you have been profitable, which as we talked about earlier, not everybody can say. What, what does it take to take this resale, in general, to the next level, and some of the challenges you have in particular?
Sarah Davis 27:23
That's a really great question. And the, the crazy thing is, I mean, again, we've been doing this now for 20-something years, and like 2020, 2020, obviously, because it was such a weird year, we were more probable, profitable than ever. And we're like, oh it's probably COVID related, because we, you know, were even more conservative on some marketing spend, and all that. But then 2021, we're growing faster than we ever have, and we're more profitable than we ever have been.
Sarah Davis 27:48
So, it's definitely, we're experiencing some of those tailwinds you're talking about. And then, we've been doing this a really long time, so we have like a, you know, kind of, solid foundation, but we are excited about the entire sector. There is just so much room for so many successful resale companies. You know, when you look at The RealReal, The RealReal is really the consigner, you know, they're America's consignment shop, is what they really are. They can find everything in the house, they would take this, the conference room chairs that we have at Fashionphile, we bought on The RealReal, you know.
Sarah Davis 28:23
They would take this lamp, you know, a couch, they'll take your kitchen table and chairs, they'll take your Nike gym shorts, they'll take, also your CHANEL Flap, and your Cartier LOVE bracelet. But they're the, you know, basically America's consignment shop, and thredUP is America's thrift store, and, like I said, like, I mean, they are a mind blow, they, I think they get 10, I mean 100,000 items in a day. Their ARV is, like, under average selling prices, I know under $20, and, but they've got huge margins.
Sarah Davis 28:56
And so, you know, there's room for a lot of these companies, I think, we need, so great, if they could, if thredUP can figure out how to create, you know, America's thrift store online, like, how cool is that. I heard that Goodwill's actually going to, wants to give them a run for their money. Goodwill, shopgoodwill.com, I think, does pretty well, as well. But anyway, so, I think there's a lot of room, and for a lot of different categories to be successful.
Sarah Davis 29:20
We specialize in the ultra-luxury category; we only do accessories. So only handbags, shoes, belts, travel goods, fine jewelry, fashion jewelry and watches. So, that type of category, and only 51 brands. I mean, every brand we accept is highly counterfeited, you know, and sophisticated counterfeiting, and so, we are very careful. Our average order value is, you know, around $1,400, I mean The RealReal is under $400. So, it's just a different type of, you know, product mix.
Sarah Davis 29:54
I think The RealReal has, like, 65% women's contemporary and again, it's like, like I said, like, I'm an average shopper of all these sites, you know, for all those different types of products. But at Fashionphile we create a, kind of, different level of service, it's just, you need a different type of service level for accepting your $45,000, you know, Rolex.
Sarah Davis 30:18
You know, and I feel like, when, because everything we do is that. We're able to create a better experience for the customer. What's really hard is, how do I get more of these authentic CHANEL bags? Like I, like I said, we can't order them, CHANEL is never going to give them to us. And so, but so, for us what's really important is just, how can we make this as frictionless, easy, to how we get you to come back, with not only the backpack, that was so easy, we gave you so much for it, so you are going to go back and go through your shoes, your, your watches, your wallets, your belts, your luggage, whatever and (inaudible).
Michael LeBlanc 30:56
You know, Sarah, your, your enthusiasm is, is, I don't even, I don't even know if you say this anymore, contagious, but your enthusiasm is contagious.
Steve Dennis 31:04
Careful.
Michael LeBlanc 31:04
I got to be careful these days, but, but really your experience and your enthusiasm for the category, after being in it for 20 years, is really impressive. So, you know, what you've pulled together, over, what I'm sure wasn't always easy treading, has been, has been really impressive, and I want to thank you so much for sharing it with us on the Remarkable Retail podcast. I think we just barely scratched the surface though. There's so much, I have so many questions, but only so little time. So really, thank, thanks so much for joining us. It was a great conversation; I learned a lot and really appreciate it.
Sarah Davis 31:37
Yeah, no problem, thanks for having me, appreciate it.
Michael LeBlanc 31:47
Well, it's another episode of Remarkable or Forgettable. Steve, lots in the news today, let's start out with thredUP earnings and, you know, it's a nice theme into our show today. From the outside-in, when I look at the numbers, they look pretty good, they look, they almost look remarkable, what's your take on it though?
Steve Dennis 32:06
Well, we had actually three of the resale guys report this week, thredUP, Poshmark and The RealReal, and they all had excellent sales growth, which is kind of remarkable, given that apparel has been down so much. But the thing that is revealed in the numbers is, it's still, they're all still losing a lot of money. And you would think, or I would think, with this kind of perfect storm of low customer acquisition costs, and people being more digital first, that, you know, might be not necessarily as good as it's ever going to get. But it should have been pretty good, so, still think we have this challenge with a lot of these pure plays, in their unit economics, is figuring out how to make money, and, you know, it's not that hard to grow top line if you're willing to spend a lot of money to buy those sales, so I'm a little interested to hear more here.
Michael LeBlanc 32:59
Well, what also struck me is, is the size of the business. It's not that big a business, like there's a lot of, you know, compared to the story of the business, and these businesses aren't huge.
Steve Dennis 33:10
Yeah, I think they're, you know, a couple-100-million a year, which is certainly nice, coming from, you know. A few years ago, yeah, lots of people have not, and myself included, have not built a business from scratch, to several-100-million dollars, so it's nothing to sneeze at. But yeah, in the scheme of things it's, it's very small share of the market at this point. But absolutely growing very quickly, a lot of consumer interest, as we talked about with Sarah. So, a lot, lot more to pay attention here, but I wouldn't conclude, I think we're seeing an era of, you know, profitless prosperity, but not remarkable overall results, quite yet.
Michael LeBlanc 33:47
Canada Goose takes flight, the goose, the goose's earnings, Canada Goose's earnings were pretty blockbuster. What do you think?
Steve Dennis 33:53
One of my favorite brands, I talk about them in the book. I think they're doing a lot of interesting things, they've, they've created a certainly very remarkable brand, and they've got good growth. Again, in an era where, or at least a timeframe, where, where high-end and apparel-related products have not done particularly well. You know, they're a brand that does not have a ton of global presence yet with their own stores. So, some of this is being driven by the growth in China. Some of this is being driven by more people learning about the brands, so they're in really good shape, but I find, yeah, pretty, pretty remarkable, particularly their eCommerce growth.
Michael LeBlanc 34:31
News out around Victoria's Secret, the ELLE brands are going to spin-off Victoria's Secret by August 8. I'm like, I'm not so interested in the M&A story, I'm more interested, from your perspective, can what was, clearly, a remarkable brand, I mean think back for a few years ago, like their, their runway shows were like some of the most, most watched television ever, but they maybe flew a little close to the sun, singed their wings, can kind of brand like Victoria's Secret be remarkable again?
Steve Dennis 34:58
I think so, I don't think, you know, certainly, and I think, think we touched on this in an earlier episode, when it was announced they were going to be spun-off. I don't think a new owner, per se, is automatically going to change something. But I think a fresh set of eyes on this, on this brand, which, you know, has tremendous brand awareness, a lot of stores, so they have a really good base to build on. But it's been a very mismanaged brand for, for a number of years. So, I think the brand's a bit tarnished in a lot of consumers’ minds, but there's a lot to be, a lot to work with there. So, I'm more optimistic about their ability to turn themselves around than perhaps a retailer we might talk about soon, like maybe even next I'm not sure.
Michael LeBlanc 35:41
Well, let's talk about JCPenney.
Steve Dennis 35:44
I was right.
Michael LeBlanc 35:45
Yeah, you and I have been waiting for the penny to drop, ba doom boom, on that one for a long time. I, I'm, I had to L-O-L, as the kids would say, when they said they were on their way to becoming a 21st century retailer. Remarkable, or forgettable?
Steve Dennis 36:01
Laughable. I mean, I think, you know, you’ve got to become a 20th century retailer before you become a 21st century retailer, I mean.
Michael LeBlanc 36:11
Let's just skip that, let's just skip that, that sad story. Let's move on to the next.
Steve Dennis 36:13
Yeah.
Michael LeBlanc 36:15
LeapFrog, LeapFrog.
Steve Dennis 36:17
I mean, I guess if I were in their situation, you got to, you got to spin things as, as much as you can. But you know, this is a business that's been in trouble for 10-15 years. Obviously, I'm sure people are pretty aware of the very, you know, the Ron Johnson days, and then the subsequent attempts to resurrect the brand, and they've been losing market share and relevance for a long, long time. So, they have a long way to go. So, as I frequently say, better, is not the same as good. It's great that traffic's up a little bit and the trends are up, but, you know, that department store sector got, got hit, so, so you're only, you know, 50% off from where you were 10 years ago, as opposed to 60% off, you know.
Michael LeBlanc 37:03
Well, I got to think you're cheering for them, right. Texas-based, I mean, you got to have a little bit of hometown, you know, hope for the underdog there, right.
Steve Dennis 37:12
I mean, I hate talking smack about brands really. It's just more like, you know, when you put out these, kind of, BS statements, I feel like we've got to call them on that. But no, I would love, I would love to see that brand turn around, have a lot of friends who have worked there, some that still work there.
Michael LeBlanc 37:27
Great people, yeah.
Steve Dennis 37:27
So, I would, I would be great for, for lots of people if Penney's were to resurrect itself, but they have a long, long way to go, and unfortunately at this point, I would continue to not be particularly optimistic. So, that statement is remarkable in its chutzpah, forgettable as a strategic statement.
Michael LeBlanc 37:49
Well, we can't have a Remarkable Forgettable episode, it seems, without at least talking about Amazon once, and in this case, Amazon crushes it. Not their earnings, but 2 million counterfeit products last year. It seems like, you know, one of the weak spots about running a marketplace is it can become a bit of a wild west. And I have to think, again back to your thinking around strategy and brand, that there's risk there to erosion of trust and brand, when, that you have to really watch carefully as, as a marketplace. So, it seems like this is a remarkable statement by Amazon, that they're taking hold and, and having ownership of what goes on in their platform.
Steve Dennis 38:25
I agree, and, and we got into this with Sarah too right. I mean the, the ability to have, to, if you're going to sell products or resell products, the creating that trust with the consumer is absolutely key. And certainly, in Amazon's case is they've, the marketplace part of it's been growing faster than the rest of their business, but just in general, their business is huge in scope. There's a lot of opportunities for people who want to do ill, to do that. So, I applaud them for, for being aggressive about it. And you know, it's just an ongoing, going challenge. The more you deal with third party sellers, essentially.
Michael LeBlanc 39:00
Yeah, it's a bit of a whack-a-mole challenge. But anyway, all right, well, that was a Remarkable or Forgettable.
Michael LeBlanc 39:10
Alright, Steve, take us home.
Steve Dennis 39:13
If you liked what you heard, please follow us on Apple, Spotify, Amazon Music, or your favorite podcast platform, so you can catch up with all our guest interviews and insights, and new episodes will show up every week. And please take a minute to drop us that elusive five-star rating and tell a friend in the retail industry. I'm Steve Dennis, the expanded and completely revised second edition of my bestselling book, ‘Remarkable Retail: How to Win & Keep Customers in the Age of Disruption’, is now available at Amazon, Indigo, bookshop.org, or just about anywhere books are sold.
Michael LeBlanc 39:46
And I'm Michael LeBlanc, producer and host of The Voice of Retail podcast, and you can learn more about me on LinkedIn or on meleblanc.co. Steve, have a safe week.
SUMMARY KEYWORDS
brands, Neiman Marcus, buy, people, remarkable, sell, resale, sales, customer, big, driven, spend, long, products, backpack, sarah, neiman, years, consumer, awareness