A winning second take on men’s fashion e-retail
Here’s a sneak peek excerpt from the April 2014 issue of Marketing
Shortly after Christmas in early 2012, Ethan Song and Hicham Ratnani realized it was time for a rethink.
Their e-commerce venture, ModaSuite, an online retailer specializing in custom-tailored menswear, was struggling to get traction.
And so the business partners, friends since high school, set out into the worst snowstorm of that winter in Montreal to deliver a message to their investors that it was time to shut down. Returning to their office later in the afternoon, they found a window had been left open and to a brand Song and Ratnani had spent the last two years building.
Giving up on a startup is tough, but the thing about entrepreneurs is they are resilient. And when they’re young (Song and Ratnani were 28 and 27, respectively), they bounce back even faster, especially if they are convinced they were so close last time. They still believed they could make it as an online men’s clothing retailer. This time, however, they would do things differently, starting by abandoning the tailoring focus. Fast forward a few deep breaths and all of just six weeks and a new brand was born. Goodbye ModaSuite. Hello Frank & Oak, which specializes in premium basics like Oxford shirts, well-fitted pants, blazers and ties, all geared towards what Song and Ratnani refer to as “the internet generation”—20-to-35-year-old men who spend more time online than they do walking store aisles.
Not long after , Song and Ratnani invited Roger Chabra, a local venture capitalist, to come visit. The pair had courted Chabra before, but he’d turned down their pitch to invest in ModaSuite. Chabra believed the men’s online apparel market was a good investment opportunity, but that online tailored clothing would be a hard business to scale.
This time Chabra found a lot more to like. First, he was an instant fan of the clothing itself and took a liking to a shirt hanging on a rack in the warehouse. As a deep-pocketed investor, Chabra was accustomed to having people shower him with gifts, but Song and Ratnani indicated the shirt wasn’t one of them . “I thought: ‘ These guys are going to make me pay for this shirt.’” It was obvious Song and Ratnani were all business. Chabra liked their new business model and says within 15 minutes of hearing their plans he knew he wanted to invest. “They are true visionaries and have great instincts about what young men want in a lifestyle brand.”
The clothes were designed in-house, avoiding middleman markups that would come with carrying other brands. It was direct sales online and through a mobile app, with a distribution arrangement that allowed them to sell into the U.S. as much as Canada. They included a subscription-based model called the Hunt Club that saw a box of clothes sent to members every month for a free at-home try-on with no obligation to buy—plus free returns. Put simply: Frank & Oak was made for the way men shop. Chabra’s Rho Canada Ventures w as part of the $5 million VC investment announced in October 2012. Lightbank—the venture capital firm established by Groupon co-founders Eric Lefkofsky and Brad Keywell—also took a stake.
The online fashion space is becoming more and more crowded as the adoption of digital commerce continues to rise. And increasingly, e-commerce brands are chasing the misunderstood male consumers. The last few years have seen the launch of male-focused e-commerce sites such as Bonobos, Trunk Club, Birchbox Man and Mr Porter. Each offers variations of personalized shopping services, free shipping and access to top-quality products that fit the shopper’s lifestyle.
But in just two years, Frank & Oak has emerged as a leader of the pack; a 100-plus-person operation with more than 1.1 million members. The brand has broken through with American consumers with 70% of its sales in the U.S., a third of which are in California. Frank & Oak doesn’t release financial earnings, but says it’s “well on its way to being profitable.” It also says it ships more than 35,000 orders a month and that typically those orders contain two to three items each, usually including a shirt and a pair of pants. Even a modest assumption of $100 an order suggests that after 24 months in business, Frank & Oak is on its way to being a $50-million-a-year brand.
Assumptions about men and their interest in fashion have changed significantly in recent years.
“Men are noticeably taking more interest in how they look and they are not relying as much on their girlfriends or wives to shop for them,” says Chabra.
But unlike most women shoppers, most men prefer no-fuss, low-maintenance e-commerce to rooting around in sales bins and fighting crowds. For men, shopping is usually a chore; for women it’s a form of entertainment. While women still have tremendous spending power, men are giving them a run for their money.
According to a 2013 Ipsos Canadian Interactive Reid Report, men spend more online than women (on average $1,080 and $725, respectively). Clothing is one of the most popular online purchases.
That understanding of men has both changed online retail and set the conditions for a general expansion of the men’s apparel market. According to a recent Euromonitor report, menswear accounted for 42% of the global clothing market in 2013, up form 38% in 1998.
Fashion startups are responding with platforms that push convenience and personalized recommendations that take the guesswork out of shopping and make it as easy as possible for men to get the clothes they like.
In the last five years there has been a rise in subscription commerce. These services generally charge members a monthly fee to receive a box of products or samples based on the consumer’s preferences. Recent subscription brand launches include Trunk Club, Dollar Shave Club, Five Four Clothing and ManPacks (“Men’s underwear, socks, razors, condoms and more”).
Members of F rank & Oak’s Hunt Club “purchase much more frequently than they would typically shop from another given online retailer,” says Chabra. “Frequent and repeat purchasing is inherent to our model because we launch new collections every single month, as opposed to every season.”
The men’s e-commerce space is a competitive one. Song and Ratnani had done their homework and were keenly aware of the opportunities within the online men’s apparel category. But they also knew a thing or two about great marketing and how to build an online brand. Frank & Oak is emerging as a top brand because of its strategic online and online marketing, compelling content strategy and GQ-like aesthetic.