These Fashion Startups Are Eyeing The $220 Billion In Clothes No One Is Wearing
Silicon Valley is making a contrarian bet: Consumers have enough stuff, and it’s time to institute spring cleaning permanently.
That is, some upstarts — think virtual stylists, decluttering pros — aren’t vying for a stake in the crowded e-commerce arena. Rather, they’re trying to make most of what shoppers already have, à la the Marie Kondo decluttering craze of 2014. Backing them are eager venture capitalists who are also betting that shoppers, namely millennials, really are adopting minimalist, experience-first lifestyles.
According to the 2017 Annual Retail Report from fashion resale site thredUP, women on average have been buying fewer items of clothing each year since 2001. In fact, the average number of clothing items in women’s closets is now 37, a 27 percent drop from 1996’s average. What’s more, the average woman doesn’t wear 60 percent of the clothes in her closet, representing $220 billion in retail value of unworn clothing in closets across the country.
But it’s not just consumer preferences that are creating a path for non-e-commerce retail startups. In addition to accounting for nearly half of the e-commerce market, Amazon’s presence is discouraging investors from seeking new e-commerce ventures. According to CBInsights, there’s “a lot less capital funding innovation in e-commerce”: VC funding for this category fell more than 44 percent in 2016, to $9 billion.
Staying out of the e-commerce game
So instead of battling the behemoths, venture capitalists like Victor Gutwein, a founder of the M25 Group in Chicago, are betting that e-commerce isn’t the only way to get some skin in the retail-tech game. Four months ago, Gutwein invested $100,000 (which is the standard first-round investment that M25 puts into new ventures, Gutwein says) in a startup called Cladwell, adding to the $1.5 million the company has raised since it launched in 2016. Despite not being an e-commerce startup, Cladwell has attracted the attention of e-commerce veterans, including a board member of Bonobos.
The $5-a-month styling subscription service encourages users not to buy things they don’t yet have, but to style the items they have in their closets in new ways. Users don’t have to snap photos of their clothes and upload them to the app; they just have to indicate which items are most similar to those they already have in their closets, a process that takes a little time but allows Cladwell’s algorithm-based system to create “an infinite number of permutations” for outfits, according to its founder, Blake Smith.
“I’m sensitive about getting into subscription clothing. I think that market is saturated,” Gutwein told Yahoo Style. “I’ve taken issue with how sustainable the unit economics are in e-commerce in general.”
Cladwell, which started as a website and now operates primarily as a smartphone app, already has 17,000 active users who pay the monthly subscription fee, says Smith. He also says that the young company is already profitable, though he declined to give more details.
Getting in on the decluttering trend
Like Cladwell, another startup called Fitz — co-founded by Alexandra Wilkis Wilson, the same woman who co-founded the ultrasuccessful Gilt Groupe — promises to clean up your life by cleaning out your closet. While Cladwell operates as a virtual styling service, Fitz sends real people with industry knowledge to go through clothing items with you, decide what to keep and what to purge, and make suggestions for things you might want to buy — a service that costs $300 for three hours.
Other fashion-tech startups go even deeper into users’ shopping lives. Finery promises to declutter your closet through your email. The company launched an entire operating system that parses users’ emails of the past 10 years to account for the items they’ve already purchased online before turning that information into a virtual catalogue, in order to help users see what’s in their closets without thumbing through them. Finery users can also sell, trade, or lend their items to other users whose style mirrors their own, which the company uses a proprietary algorithm to determine.
Finery doesn’t charge a subscription fee, but makes money through affiliate links. The all-female-founded company — which counts model/actress Brooklyn Decker and Miroslava Duma as investors — passed on venture capital money, but raised a first round with angel investors in November. A spokesperson for Finery declined to comment on how much was raised.
As is the case with Finery, the fashion-tech space is one that has been welcoming to female venture capitalists. At the top of that food chain is Kirsten Green, founder of Forerunner Ventures, who has helped her business complete 16 fashion-tech deals in the U.S. since 2013, the most of any VC firm, according to Pitchbook. New Enterprise Associates and Lerer Hippeau Ventures are next with 12 completed deals each. At 10 deals is 500 Startups, which is also the accelerator program that housed Cladwell last year.
To be sure, Pitchbook notes the most valuable companies in fashion tech — Fab, Rent the Runway, and Gilt — are still e-commerce-focused, and have a combined valuation of $2.4 billion, making funding of styling services look like peanuts. And while M25’s Gutwein is wary to jump in the e-commerce ring with Amazon, Walmart is not. The retail behemoth is in talks to acquire men’s e-commerce site Bonobos for $300 million, which would be Walmart’s fourth major foray into e-commerce since September.
“The entirety of the fashion industry is obsessed with what you don’t have, and convincing you to acquire that which you don’t have,” Cladwell’s Smith says. “But there’s more to fashion than that.”
Read more from Yahoo Style + Beauty:
Spanx Founder Sara Blakely Shares Empowering Message About Following Your Dreams
Every College Accepted Her: ‘Black-ish’ Star Yara Shahidi Is Hollywood‘s Most Stylish History Nerd
Woman Shares Mastectomy Scar and Powerful Message: ‘Representation Matters’
Follow us on Instagram, Facebook, and Pinterest for nonstop inspiration delivered fresh to your feed, every day. For Twitter updates, follow @YahooStyle and @YahooBeauty.
Alexandra Mondalek is a writer for Yahoo Style + Beauty. Follow her on Twitter @amondalek.
