Why we invested in Flip Fit

Yaniv Golan
Oct 23 · 6 min read

This is the story of our investment in Jonathan and Noor.

We could say it’s the story of why we invested in 2 mega-serial-entrepreneurs tackling a $700B problem in a $2T market, but that would be somewhat inaccurate, because it’s Jonathan and Noor that we invested in: Jonathan and Noor who intend to reduce the amount of clothing that ends up in landfills every day, by disrupting the fashion market via their brainchild: Flip Fit.

Flip Fit is essentially an online fashion marketplace, though a very different one from what’s out there today. If you’ve been following the performance of the established fashion marketplaces this might give you pause, as you might have noticed that the stocks of most of these marketplaces have plummeted over the past year by 50% or more. So why start a new online fashion marketplace now?

The Dreadful Returns

To understand the reasoning, let’s look at the most dreaded term in the online fashion industry: Returns. Returns are killing the fashion industry.

Returns account for 50% of items purchased in the US (upwards of 80% for loyal/experienced shoppers) — and amount to a cost of $350B a year, with 5 Billion pounds of returns winding up annually in landfills in the US alone. This is coupled with the fact that more than 50% of people don’t return products because the return experience is too cumbersome.

To deal with this high return rate, marketplaces have used 4 main tactics:

  1. Make returns harder and harder
  2. Blacklist returners (sometimes their most loyal customers)
  3. Have better product descriptions, pictures, reviews so that the first purchase is the correct purchase for the customer
  4. Manufacture their own brand clothing, owning the entire supply chain to create higher margins and offset the cost of high return rates.

Why is the returns behavior so different between online and offline customers? Why is the rate of returns so much bigger in the online fashion industry vs other sectors? The answer is “fit”. when you buy an iphone or a coffee mug online, for the most part you know what you are getting. With clothing however you have to touch, feel and try before you know you want to buy.

Brands and marketplaces know that more than 50% of the time items that are purchased online are returned, and yet they are still “surprised” 😮 when this happens. The returns usually happen after 3–4 weeks and need to be put back on the shelves in order for them to be shipped back out to a new customer — enabling marketplaces or ecommerce brands to turn products on average 2 times a quarter.

How can we rethink the online fashion shopping experience to provide customers with what they want and need, instead of fighting a lost battle?

There are two human behaviors critical to the buying experience, that are not currently being addressed:

Bracketing

You walk into a Nordstrom or a Zara today, you find a pair of jeans you like, grab one size up, one size down, in blue and in black, this style and that style, and head to the fitting room with 10 items — for which you will end up liking 4, loving 2 and buying 1. That’s Bracketing.

When you buy online you essentially shift the fitting room into your living room, whereby you purchase 10 items, knowing full well you will return 9, and just looking for a way to try on clothes before you buy them. That’s the online version of “Bracketing”.

Validation

Let’s walk you again into Nordstrom or Zara — or, you could purchase online. When do you make the actual buying decision? Most likely, it’s when you open the fitting room door and say “what do you think?” to your partner, friend, sister, brother, mom or sales assistant or…. If no one is there, you will snap a selfie of yourself and send it to the person whose opinion you care about to receive validation. If that person tells you that the jeans are a “no go”, chances are you will not purchase (and for online purchases you will return) that product.

We are looking for validation everywhere (just look up #fittingroom on insta), and yet it is completely removed from the online buying experience.

Now that we understand the need for Bracketing and Validation, how do we create an online shopping experience that answers these needs?

Meet Flip Fit

For Flip, “returns” are not something to “deal with”. Flip embraces returns, by making them the default. Every box must come back, so in the box you will have a pre-printed return label and the ability to choose exactly what day/time you want UPS to come to your door and pick up the box.

Flip is working with more than 100 of the top denim and t-shirt brands across the US, including AG, JBrand, Hudson, Retrobrand, Boyish, MadeWorn, Junkfood, Mavi and Edwin.

Because returns are the default, Flip is able to circulate products not 2 times a quarter like traditionally is the case with e-commerce but as much as 10 times a quarter, giving brands the ability to have their clothes tried on many more times, and moreover allowing for its customers to create a “pop up shop” for these brands in their living room.

On top that, Flip offers a compelling social validation experience coupled with an attractive incentive system, borrowing the best parts of Amazon, Instagram, Snap, Tinder and others and coming up with an online fashion shopping experience, done right.

Social Flip also has a big social mission — to reduce the billions of pounds of landfill waste caused by returns annually and also a unique byproduct of their service that will help to clothe the world. More on that later…

Jonathan and Noor

Online fashion shopping experience done right is important, and potentially very lucrative financially, but frankly, we feel there are more important problems to solve for the world right now. We decided to go ahead and invest in Flip Fit because of Jonathan and Noor, who feel the same.

Jonathan Ellman, born in South Africa, and raised in the USA, immigrated to Israel to serve in the Israeli Air Force. Jonathan was a founder at Tapingo (acquired by Grubhub), instrumental as CRO of HoneyBook, a founding investor and board member at Storyhunter, Activ Surgical and Tau Motors, Director of Finacity (acquired by Greensill), VP and board member at Gerber Goldschmidt Group (GGG), and the list goes on.

Nooruldeen Agha “Noor” who is from Iraq, born into extreme poverty and raised throughout the middle east — Yemen, Iraq, Jordan and UAE. Noor graduated from the American University of Sharjah as a software engineer, and then went on to start Elephant Nation, a branding and digital advertising agency, with his wife Rand Al Maeeni. Later he founded CREO, Elabelz (one of the largest online fashion destinations in the MENA region) and ST-YL.

It’s when you actually meet Noor and Jonathan together that the magic starts, the air sizzles with energy and the vision takes shape and form. These two guys are out to make a big dent, both in the online fashion industry and in its impact on the wellness of our planet, and we’re delighted to join them and our friends from TLV Partners on this exciting journey!

P.S. Love this screenshot Jonathan took during one of our Zoom calls. I believe this was the call in which we fell in love with them 😍

looltalk

Thoughts from lool ventures and resources for early stage Israeli founders

Yaniv Golan

Written by

Partner in lool ventures. We invest in exceptional founders.

looltalk

looltalk

Thoughts from lool ventures and resources for early stage Israeli founders

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