The FashionStake Diaries | Part IV: Lessons from the First Month

FashionStake Screenshot | Source: FashionStake

The FashionStake Diaries is a four-part series that gives BoF readers a behind the scenes look at the crucial first months of a crowdfunding fashion startup, seen through the eyes of its founders. Today, in the final diary entry, they reflect on the crucial first weeks following launch: what worked, what did not, lessons learned and plans for the future.

NEW YORK, United States —On the day of “go live” for any startup, planning is quickly overtaken by the reality of operational work. For us, September 1st was a memorable launch day. Months of pre-launch strategising, building, debating and recruiting was replaced with the business of actually running the company: answering customer calls, shipping our first items and managing our online merchandising.

We’d like to share our first month in business with you and, since this is our final post in the FashionStake Diaries, thank you for reading and commenting on our entries.

How we launched

After a sleepless night, we launched the website at 9am on September 1st. All of us huddled around our Lead Developer’s laptop and held our collective breath as he turned on the site. The actual launch went pretty smoothly. As we slowly migrated back to our own desks, the day’s first press coverage and social sharing started to drive thousands of hits to the site. Our server actually crashed a few times during the morning. Heart stopping, but memorable moments!

By the afternoon we were busy with actually operating the company. That was the biggest surprise for us: just how quickly the team had to shift modes from planning to doing. Although the launch date had been on the horizon for months, transitioning to the everyday tasks of answering the phone and checking up on the warehouse was an initial shock to many of us too. We also learned that you need to improvise, no matter how well-planned you think your business is.

Funding Lauren Merkin and Nicholas K

Early October was an exhilarating time for us. Lauren Merkin and Nicholas K hit their funding targets of $10,000 and $50,000, respectively, and their collections went into production. The secret to hitting the targets? A genuine co-marketing effort between the designers and FashionStake. Indeed, both these designers marketed their collections to their own existing customers and received a solid response. The folks at Nicholas K also decided to debut their FashionStake collection on the New York Fashion Week runway, which generated tons of interest.

But as expected, there were a few designers who did not meet their targets within the predefined timeframe. We realised that we need to make sure it’s as easy as possible for designers to tell their existing fans about their FashionStake collections through email, social networks and selected offline channels.

Zooming in

A few days after launching, we noticed that many of our customers were pre-ordering pieces. In fact, when we took a look at the data from September, we realized that over 70 percent of our transaction value was actually coming from pre-ordered items. We also observed that many customers were pre-ordering without purchasing the standard $50 stake. We concluded that our customer behaviour was moving us away from the original premise of consumers investing in designers and towards a model where consumers, in essence, fund collections by pre-ordering pieces.

Pre-ordering is a great way to support designers. This way, designers only produce what consumers order (supply is in tune with demand) and can use the revenue they collect to fund production and remain cash flow positive.

Assuming lead times from production to final delivery can be kept within a reasonable timeframe, pre-ordering is a great way to eliminate inventory costs in the supply chain and offer genuine value to customers. It’s also a way for the public to access “sneak previews” of upcoming merchandise, another win-win for designers (who want to generate demand) and consumers (who want early access to their favourite designers).

After careful analysis, we decided to ‘zoom in’ on this aspect of our business and focus on optimising the pre-order experience, since that’s what our customers were doing anyway.

On reflection, our ability to course-correct and listen to exactly what our customers and our internal data were telling us was crucial. What’s more, this process never stops. Doing a startup is iterative and we think it’s important that we remain flexible enough to continually evolve and solve our customers’ changing needs.

Three e-commerce lessons

Amongst the mayhem of the first month, three e-commerce-specific lessons also stood out:

1. Consumers want “pace” online. It’s no use having only a handful of designers on the website for an extended period of time. Consumers made it clear that they wanted a larger cast of designers coming in and out of the website more frequently. We listened to this feedback and are now offering daily trunk shows, with several new designers a week.

2. Emails are important. The biggest mistake we made was overlooking the value of our email database as a driver of traffic to our website. Our problem was that we didn’t really promote our email signup form anywhere on our website, which meant that we weren’t able to open a dialogue with first time visitors to the site.

3. Make things sharable. The power of people’s social graphs is huge and increasing. We’ve seen the significant impact of Facebook sharing and other means of customers referring their friends in our traffic logs. We’re spending a lot of time at the moment making more of our content instantly shareable, with clear incentives for people to refer friends to FashionStake. A fashion democracy only works with a critical mass of people!

We hope you’ve enjoyed reading The FashionStake diaries and look forward to seeing you on FashionStake soon.

Vivian Weng and Daniel Gulati are co-founders of FashionStake, a new online marketplace for fashion that launched September 1, 2010.

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11 comments

  1. thanks for sharing your learning process, another great series BOF

    Michele from Springfield, MA, United States
  2. Vivian and Daniel, congratulations to both of you for your progress thus far and continued success. It has been great to experience the building of your business through these diaries, kudos to BoF too :) In regards to your comment: “Assuming lead times from production to final delivery can be kept within a reasonable timeframe”, I have recently read about the changing consumer behavior and expectation to have a constant and rapid pipeline of new products due to the introduction of Fast Retailing (Zara). In your guys experience, what has been the acceptable “reasonable timeframe”? Have you experienced cancellation due to the fact that the customers lost patience in waiting for the product to arrive? Thanks!

    Eduardo from Boston, MA, United States
  3. Surprise, surprise … the “revolutionary” model of strangers investing in designers never happened so the site is now just like any other e-commerce site selling clothes accept that they are selling them on pre-order.

    I pointed out very early on that the idea of “democracy” in fashion was a non-starter. That it would never work. What’s bizarre is that with all the research and investment money raised through hype the founders couldn’t see that their model was inherently flawed from the beginning.

    While I applaud the founders hard work, their business is now a totally different business now from where they started, no-matter what spin they put on it. Importantly, it’s doubtful the founders ever could have gotten VC money if their pitch was based on “pre-orders” of fashion by relatively unknown and unsuccessful designers.

    The big problem now facing the team is this: No major designer is going to let these people pre-sell their product. There is no bar to entry. Any designer, any brand, can pre-sell their own product so FashionStake will have to make it work with fairly unknown designers. The concept is still a novelty, by will it go the distance ?

    David Royce from London, London, United Kingdom
  4. Thanks for the support! It’s been an exciting journey and we’ve been incredibly excited and honored to be able to share with BofF readers. Eduardo, to answer your question: we were actually very impressed by customers’ willingness to wait for a product’s arrival. Our experience has been that as long as a customer feels like she is part of the process, she is much more willing to wait to receive her order (than she would be from a “normal” retailer). We have, of course, also tried to keep production times as short as possible. Currently, most items on our site are deliverd within 4-8 weeks of order placement.

  5. I said a few months ago this was criminal, forgetting the concept, I mean the very basics. More growth is being experienced in menswear at present, yet it’s about making feel ‘she is part of the process’. Astonishing. There’s hundreds of start up designers looking to emerge from the woodwork and shine above the rest every season, I would suggest focusing on your platform more than the designers. As of now it’s nothing more than a slight novelty, you need to add more fuel to the fire while it’s still burning, yes? That means investing more heavily in your brand, designers will come and go, very few of them will build consumer relationships. Be smart, involve student collections, limited edition purchases, standard marketing techniques. You cannot rely solely on ‘social networking’ to consolidate your marketing efforts. Personally, I only pre-order on very difficult to get Parisian houses, I think if you were to ask somebody like ASOS about the benefits of pre-ordering they would come back with it being a rather frivolous step-forward. You need a new angle and you need it now… I’ll start you off, allow access without having to register… ? Please don’t take this as an attack either, I’m genuinely telling you how it is, that’s my job.

    moi from United Kingdom
  6. The VC must be freaking out now….I don’t mean this in a malicious way, but I suspect this company will be out of business within six months.

    Charlie Gup from Hitchin, Hertford, United Kingdom
  7. Congratulations on your first almost-2 months! It must be very exciting to see your business taking off.

    I was also skeptical of the idea of selling ‘stakes’ in a company to consumers for $50. Let’s face it, $50 is peanuts and fashion isn’t charity. But the shift to pre-ordered fashion could be valuable by itself, since it removes a lot of the risk to small designers. Produce only what you can sell!

    I’m hoping that you’re encouraging your designers to use domestic factories. If not, I don’t know how you get things delivered in 4 – 8 weeks. That’s really formidable turnaround, and kudos to you if you can keep it up.

    Thank you as well for sharing your experience with us, and I hope you continue to grow.

    St.Valentine from Sunnyvale, CA, United States
  8. Is there any news on how the company is doing? I don’t understnd why everyone seems to think it is not going well.. just read that Derek Lam is doing a crowd-sourcing project with eBay, so seems like Fashionstakes is heading in the right direction or at least playing in the right space.

    Olga N from Brooklyn, NY, United States
  9. —I pointed out very early on that the idea of “democracy” in fashion was a non-starter. That it would never work. —

    Even though the investment part didn’t work out as plan, successfully doing $60,000 in pre-sales on a relatively unknown site with designers who aren’t household names is hardly what anyone could call not working. They’ve admitted it didn’t work as well as planned, but given that they’re still finding they’re footing, $60,000 isn’t bad at all.
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    —While I applaud the founders hard work, their business is now a totally different business now from where they started, no-matter what spin they put on it. Importantly, it’s doubtful the founders ever could have gotten VC money if their pitch was based on “pre-orders” of fashion by relatively unknown and unsuccessful designers.—
    Before Groupon was the runaway hit that it is now, the founder had a similar site with a charity angle that didn’t work as well. He saw what was popular and shifted focus to build that out instead. I’m pretty sure a VC would be more likely to invest in them seeing that they’ve been able to adapt to the unexpected and make it work. Investors want a return, and if Fashion Stake decided to focus on selling socks tomorrow, I guarantee you their investors wouldn’t give a rat’s tail if it were bringing in business.
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    —The big problem now facing the team is this: No major designer is going to let these people pre-sell their product. There is no bar to entry. Any designer, any brand, can pre-sell their own product so FashionStake will have to make it work with fairly unknown designers. —
    I agree that they’ll have to put work into a defensible position, but if they can build a community of users who are willing to wait 4-8 weeks to make a fashion on demand model work, that’s half the battle. Frankly, if they can make it work with unknown designers, they’ll be in an excellent position to get big brands to play and they’ll probably clean up by helping an under-served market. Big brands are rarely the first to do anything. they’re more interested in safe than innovative, so they’re not going to take a risk. So instead of waiting months or years for big brands to make a decision – and that really is how long it takes to get a signoff on anything – they’re making it work by taking chances (with minimal risk on their part) on unknowns. That’s hardly a problem.

  10. Thank you, and wishing you all continued success and evolving through customers feedback. Im certain that there will be on demand models that will be as successful as traditional as ppl behavior evolves from the convergence of tecnologies.

    Eduardo from Riverside, CA, United States
  11. crowd funding sites like fashionstake and kickstarter are the only way for a young designer to fund a collection. For consumers ‘unknown’ designers are the only source of unique exclusive (by scarcity) product.

    Kudos to fashionstake!