This e-commerce unicorn is betting big on athleisure trend
The $350 billion apparel and accessory industry has been caught in a world of pain. Anemic sales at retailers like Macy's (M) and Gap (GPS) have put a cloud on the group. But one start-up online retailer thinks it can buck these slowing trends.
JustFab -- whose brands include the Kardashian-affiliated ShoeDazzle and Kate Hudson's Fabletics -- has aligned its business model with some of the biggest trends in fashion today. The company's focus on athleisure wear, e-commerce, and fast fashion has proven to be an attractive proposition to investors, who backed the e-commerce startup at a $1 billion valuation in its latest funding round in 2014, adding it to the list of so-called unicorns that many are waiting to go public.
Co-founder and CEO Adam Goldenberg joined Yahoo Finance to talk about what sets his company apart.
Athleisure
The company, which was launched in 2010, has seen a surge from its athleisure channel Fabletics, and its women's activewear line in particular.
Fabletics sees itself as a value-oriented alternative to the $100 yoga pants and $54 sports bras popular retailer Lululemon (LULU) sells. "We really strive to deliver the absolute best styles and quality for the price," Goldenberg said.
But the strength of the category as a whole has also driven growth for the Kate Hudson-inspired active wear.
Athleisure has become the dominant growth area in apparel. Even in a struggling sales environment, Macy's called out activewear as a recent source of strength, a statistic echoed by fellow department stores. Shares of athletic-wear powerhouse Under Armour (UA) jumped more than 22% Thursday after reporting revenue growth of 31%, its 23rd conescutive quarter of revenue increase over 20%. NPD Group found that athleisure wear has even taken a bit out of denim sales. For the year ending June 2015, activewear sales were up 17% to $35.4 billion. The athletic wear trend is especially popular among millennials. Goldman Sachs partnered with Teen Vogue in November to gauge which brands are gaining the most traction among young women. Nike (NKE), L Brand's (LB) Victoria's Secret Pink and Converse all ranked in the top 10 of the report's "Love List."
Goldenberg said he has seen a long-term shift of women and men moving to more casual, comfortable wear. "We've been seeing this casual trend developing over the last 10 to 15 years if you just think about dress in the workplace and how much more casual it's become," he said.
E-commerce
JustFab, which operates online only, also stands to benefit from the increasingly rapid shift to online shopping. Over Black Friday weekend, for instance, more American shopped online than in stores, according to the National Retail Federation. According to Goldenberg, $10 billion per year of sales move from traditional retail online to e-commerce each year, which should increase e-commerce sales from 20% of the market to 50% of the market in the next 10 to 15 years.
The company's "VIP Membership" program has helped build predictability for the company, according to Goldenberg. The 4 million JustFab VIP members receive a personalized boutique at the beginning of each month, with new selections of styles and special discounts. Members must check their boutiques by the 5th of every month and can choose to buy an item or simply "skip the month." So there's no cost or obligation to buy (but if members don't check the boutique, they get still get charged, but it works as a credit of $39.95 for JustFab and ShoeDazzle and $49.95 for Fabletics).
While the membership model has received some criticism for being confusing, Goldenberg said he has made it a top priority for all the company's policies to be clearly laid out.
Fast fashion
Fast fashion -- the term for moving designs quickly from the catwalk to retail stores -- is one of the biggest disruptors in retail, with companies like H&M and Forever 21 seen as the paradigms of success in that arena.
Goldenberg emphasized JustFab's fast fashion approach, especially for Fabletics. "Between social media, blogs, how fast the world is moving, women want the latest trends now," Goldenberg said.