Resilient Retail: The Adore Me model for ecommerce

The Brapocalypse

As we closed out last year, I started thinking a lot about Adore Me’s eight-year startup journey. Everything that’s happened, and what opportunities and challenges the next decade in retail might present. As an online lingerie startup, 2019 was an already eventful one. Victoria’s Secret’s slow collapse ushered in unprecedented discounting. On the other end of the spectrum, huge venture rounds for competitors like ThirdLove and Savage x Fenty meant skyrocketing acquisition costs. Our team often heard me musing that 2020 would be the year of the #Brapocalypse.

I began the year outlining a number of key ideas that have helped Adore Me become what I think of as a resilient retail operation. The exercise was to help me reflect on our past decisions while helping guide our team through what might be unforeseeable challenges.

When it comes to 2020, unpredictable is an understatement.

As these efforts often go, when I began writing this, the world was a different place. When I finished the first draft, the world had changed even more. When I was making a final edit on Monday morning, the world was a different place. The Victoria’s Secret — Sycamore deal was off 🤯.

Our concerns last year were endogenous to our sector, not about dealing with a once-in-a-generation shock. But as we’ve all began enduring this new normal, it’s become clear the things that shaped us as a startup are the same things that will help us navigate this current moment. Nothing was, or ever is, predictable.

Managing uncertainty has always been second nature for any successful startup. Now every organization has to operate in that mindset and model.

Those hundreds of tiny decisions every member of your team makes, every single week, all add up into the company you are and will become. But amidst all that chaos, there was consistency. There were certain things about how we’ve always done business that started to resemble a straight line.

We’ve always been flexible. We’ve been agile. We’ve been adaptable.

I see those terms usually used in software development, or sometimes biology. They’re equally applicable to retail and DTC. Globalized supply chains, just-in-time inventory, changing customer tastes, impossible logistical demands, and complex customer acquisition strategies mean you’re dealing with hundreds of thousands of variables and millions of scenarios every day.

You slowly realize that no one is ever in full control of the entire beast. No matter how many dashboards you build or how much talent you bring on, it’s out of your hands. The only thing you can do is to build things that make you more resilient.

The best thing can you can do is create an environment that gives you the flexibility to respond to sudden change.

Once you’ve created that environment, you need to build the technology and systems that provide you the agility to respond to that uncertainty.

And finally, you need to surround yourself with a very specific group of people that thrive in this way of working; teammates that breathe adaptability.

I realize it’s quite the leap from lingerie to the almost academic idea of business as a complex adaptive system (though lingerie is an incredibly complex product), so please allow me to explain how each of these principles has helped Adore Me build a resilient retail business.

FLEXIBILITY (Your financials)

We grew fast early in our life, a success that invited a lot of tough decisions. How much money should you raise? Who should you raise from? What growth targets should you set? What should your acquisition strategy look like? We always viewed these decisions through the lens of flexibility.

If you raise a lot of money, it provides you plenty of short-term financial flexibility. But those often excessive valuations can act as a golden millstone, hanging around your neck and limiting you in the long-run. Hyper-growth is no longer a win, it’s a must. That inflexibility can easily force bad decisions like pursuing unsustainable growth strategies and unfavorable unit economics.

This is not a recent belief. In 2015, I wrote an op-ed in Techcrunch about the dangers of over-raising:

It felt a bit surreal to write that at the time. The Fall of 2015 was when fundraising and valuations just started getting crazy, but founders needed to be reminded there were other options. You could be flexible and not singularly chase venture.

If you are raising venture (which we have done to a much smaller degree than our competitors), who you raise capital from defines how flexible your business can be. We’ve raised from a very limited number of investors who are either from or hyper-focused on, the fashion and retail industries. That was purposeful. When we had unorthodox ideas or wanted to evolve the business in aggressive ways that didn’t return instant growth, we were supported.

We didn’t get to join the thundering herd of unicorns, but it gave us the flexibility to build for the long-term.

LEVERAGE

The retail industry is prone to over-leveraging in many ways. Signing too many leases on physical stores. Taking on huge amounts of debt. These traditional modes of leverage have long plagued retailers when plans aren’t executed to perfection. We’re seeing how dangerous this leverage can be in real-time. Leverage works great when times are good, but the speed at which we’re seeing J. Crew, Neiman Marcus, and others pushed towards bankruptcy is frightening.

Adore Me has opened a number of retail stores in the past few years. The constraints that physical retail impose are quite clear. But from the beginning, we looked at ideas like negotiating percentage leases, where a portion of your rent is a percentage of sales. Find flexibility wherever you can.

We also made the firm-wide commitment to prioritize profitability over top-line growth and have been profitable since 2018. I’m certainly proud of that fact (insanely proud of our entire team), but I write this as a reminder that profitability is not an end in itself. The primary function of profitability is about affording operational flexibility. It is one simple thing you can try to control in a chaotic world. When we made this commitment a few years back, it sounded like a nice commitment, but it wasn’t instantly clear why it mattered.

It’s clear today.

AGILITY (Your Technology)

It’s one thing to create an environment flexible enough to navigate constant change, it’s another thing to steer through it. The word agile has dominated technology and business circles over the past decade, and for good reason. Moving fast and smart is tough.

Build vs. Buy is an eternal question every founder has to face. When it comes to the infrastructure that will power your business, what can be outsourced and what should be built from scratch. This is at the center of that industry debate about “what is a tech company?”

Trying to be a tech company should not be about getting that lucrative valuation of a technology company. It’s about building real tech assets that allow you to find needles in a haystack. Scouring millions of customer transactions, tens of thousands of items in a supply chain, monitoring your sales and inventory in real-time; having the visibility required to make informed decisions. The infrastructure that allows you to respond to shifts in the marketplace in real-time, advantageous ways.

AGILE PIZZA

You see it with a company like Domino’s Pizza. As most restaurants outsourced their delivery to specialized platforms, Domino’s tripled down on building their own technology they could leverage at every level of the customer experience. There were the fun customer-facing efforts like the Pizza Tracker app and a chatbot called “Dom”, complemented by important infrastructural things like a proprietary Point-of-Sale system called Pulse.

According to HBR:

It was about building and leveraging technology at every possible point in the value chain. That takes a huge commitment from every stakeholder.

OUTSOURCED BRANDS

We’ve always been adamant about building technology. It can sometimes feel frustrating and encumbering, but it’s what separates us from what I think of as Outsourced Brands. Especially in DTC, it became incredibly easy to outsource nearly all of your technology, logistics, and manufacturing processes. Raise money, launch a brand, plug together a few different ecommerce platforms, and acquire customers on Facebook. They can be very attractive businesses as they can invest a much larger percentage of their budget into customer acquisition and branding. It works well when things are all working well.

But as one scales, it becomes nearly impossible to respond in an effective manner. Every product in your supply chain, every customer data point, every button on your website becomes a bottleneck to manage. It becomes hard to move. Building technology takes time and effort. It requires the flexibility allowed to us by our unit economics and our patient investors.

While pizza and lingerie are normally not included in the same conversation, Adore Me views technology in the same way. There are thousands of challenges unique to the products you sell that require highly customized and scalable solutions. Bras present incredibly unique challenges in ecommerce. The average bra has 35–40 unique components. It’s not a cotton t-shirt. Fit and style are highly personalized preferences. Procurement lead times are incredibly long, so inventory management is critical.

These challenges forced us to be extra thoughtful about the technology we built from day one. Something as seemingly simple as creating a smooth return process is highly complex. Scaling customer service requests is another huge challenge. Optimizing your marketing spend, especially in a frothy market like the one we faced is yet another mountain to climb. Sometimes I still marvel at how many people and systems have to work to get a bra from manufacturer to the customer. The materials procured. The products made. The bar codes scanned. The packages packed. The clicks and the carts and the checkouts. The bar codes scanned again. The packaged packed again. The delivery from station to van to door.

The next time a box shows up at your door, take a moment to remember how incredible it is that can happen.

This is just one part of getting that box to your door

To do that well, and especially to scale that well, is quite something. The challenges you face force the systems you build.

Procurement: We invested in proprietary software for inventory management because early on we saw the dangers of over-purchasing. Building a system from scratch made us question everything about the ones we already had in place, forcing a new level of discipline. It’s why we’ve never written off inventory as other retailers burn unsold goods.

Marketing: You see the ads in your feed, but there is so much behind them. The optimization of marketing spend. Thousands of A/B tests on copy, images, timing and everything else. Managing communications across email, SMS, push, every social platform. Communicating with millions of customers sometimes feels like you’re running a cutting-edge media company.

Business Models: Finally, coding our own sites and apps from scratch gave us the modularity to play with crazy and incredible experiments in personalization and segmentation. But far more importantly, it allowed us to quickly launch new business models.

Amazon’s CTO Werner Vogels once described the value of Amazon Web Services was allowing customers an increased “Return-on-Agility”:

He nails it. It’s about the cost of experimentation. Building all these assets allowed us to launch completely new ways of shopping for our customers like our try-at-home service. It allowed us to launch a series of satellite brands leveraging the knowledge and capabilities of Adore Me, core.

Our teammates have ideas. We launch them. Agility is about experimentation and creating an environment that allows you to constantly try new things without breaking the bank.

AGILITY IS NOT JUST CODE

One of our biggest investments was building our own logistics center, Adore Me Services (AMS) in Secaucus, NJ. This presented a perfect example of the operational implications for a build or buy decision.

Normally, for a DTC startup, even one like us with over $100 million in revenue, the idea of building your own logistics center might seem like it would make you less agile. For a digital operation, you now have a lot of gigantic, physical things to manage. You hire a big new team. There are plenty of options out there for outsourced logistics and, at first glance, this feels like the type of thing that would weigh you down.

But this has been one of the most rewarding decisions we’ve ever made.

  • A small example: because we have full control over our own packaging, it’s allowed a faster transition towards sustainable polybags.
  • A bigger example: it’s allowed us to launch and manage the fulfillment of our satellite brands because we built every system with this in mind.
  • An even bigger example: the logistical capabilities allowed us to launch our try-at-home service I mentioned above. It’s been the fastest-growing segment of our revenue and we’re betting will play a huge role in our future.

And an example of a benefit we never could’ve predicted: it’s allowed us to create an exceptionally safe environment for our workers. We were way ahead of the curve on implementing temperature checks, social distancing, and masks for our workers while maintaining business continuity. Everything about how we built out AMS, from the people, to the technology, to designing the space, to the strategy played a role in making these things possible

Alberto from the AMS team

Experimentation with software products is one thing. Combining digital experimentation with physical products moving around the world, while keeping customers happy, takes patience, talent and investment I never would’ve previously imagined. There are no quick ways to create that environment. It requires an almost ingrained cultural commitment across everyone on your team.

ADAPTABILITY (PEOPLE)

To end on that point of culture — the third and most important component of a resilient retail operation: The People. It takes a special group of people to thrive in an environment where you’re building things that don’t show benefits on day one. I almost can’t believe we galvanized an entire online lingerie company around something as unsexy as cost discipline in 2017, a time when everyone in your industry was throwing money around. Building a team of adaptable, resilient individuals has always been at the core of what we do.

It’s important to note, a lot of the conversation around operational agility and flexibility in the tech sector results in looking at people as essentially expense line items; chess pieces to be moved around on a P&L. But being flexible and agile and should not mean this way of thinking. In fact, the same way building a huge warehouse ended up allowing us to move faster and smarter, steadily investing in our people has done the same.

There are staffing decisions, like hiring everyone at Adore Me Services as a full-time employee with benefits. This completely changed our approach to logistics during the pandemic, in a good way. When someone is an employee, you’ve built a relationship. There can be an open and honest conversation around whether people feel safe and the challenges they are facing. It was our AMS team’s suggestions that led to being very early on safety measures. Investing in them has made us all much better during this madness.

There were strategic decisions, like building out our engineering team in Bucharest. It inadvertently trained our entire company in the art of remote work since our inception. It created a culture of incredibly talented and loyal engineers. I’ve watched as engineers in the SF and NYC market hop around from company to company, and have marveled at the longevity of our teammates.

Speaking of longevity, our senior management team. I took inventory recently and nearly all of our senior management has been with us for the majority of our lifetime. I’ll admit seeing it on paper shocked me a bit. Hypergrowth startups create an intense environment and strong personalities. I won’t deny we have healthy debates, but it was such a strong reminder that flexibility isn’t about moving people in and out the door. It’s about getting the right people to persevere with and adapt with.

THE ADORE ME WAY

For our entire team, working in that special Adore Me Way, driven by numbers, creativity, and risk, continues to be something I treasure. Even during the times of worldwide tranquility, our company sometimes can feel chaotic and unpredictable, but that is what trains us to strongly respond to uncertainty and rapid change. Everyone constantly adapts.

Our designers comfortably talk about product margins. Our engineers talk about spring color trends. Our marketers research sustainable fabrics. Our procurement team writes email copy.

It’s how we’ve all been operating forever. As I began this piece, I’ve long believed that digital companies are complex adaptive systems that are more helix organizations than matrix ones. We’re always in a constant state of flux. It can be absolutely exhausting, but it’s what makes us collectively resilient.

WHAT COMES NEXT

If you told me when Adore Me was launched that we would end the decade at well over $100 million in revenue, profitable, and with hundreds of employees, I would’ve assumed we’d be taking a well-deserved breath. If you told me that Victoria’s Secret would fall while we thrived, I would have thought that meant we were supposed to take some kind of victory lap. That was the entire original pitch — the “Victoria’s Secret Killer!”!

What surprises me the most is, the way we’ve built Adore Me, that is just not how any of us are wired. In the last week alone, we’ve been obsessing over a new sustainable satellite brand, new robotic picker arms at Adore Me Services, an Instagram concert series, a technically insane new wireless bra, the launch of a procurement platform we might start licensing, and I’ll stop now because this post has already gone on long enough.

I have trouble reading any predictions about what will happen to our industry right now because things are just too uncertain. Always focus on learning to manage the uncertainty as best as you can, rather than crafting intricate, long-term plans. This year has reminded me, more than ever, the only thing we can all do with certainty is building a team, systems, and products that are made to be resilient.

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