CEO’s Choice To Launch All Digital Clothing Company Was Tailor Made For The Pandemic
The last thing consumers needed in 2016 was another kids fashion brand. But former Gymboree CEO Matt McCauley came out of retirement when he saw an opportunity for classic, heirloom clothes that would be passed to the next generation, rather than the landfill. He insisted the clothes be made of organic cotton to reduce impact of chemicals and pesticides. Plus the product needed an attractive price point, like $24.95 for a girl’s skater dress or boy’s separates. Broadband was key input to this startup which competes in the larger industry of sustainable fashion, estimated at $6.3 billion in annual revenues and growing at 6.8 percent versus the larger “fast fashion” industry of $3 trillion.
From the start, Hope & Henry was a fully digital company with low overhead and no brick-and-mortar presence. “Broadband helped us get the best talent. People want to work where they live,” he explained, noting that the chief clothing designer is based in Vermont. However investors balked at the idea that employees would only Work From Home (WFH) and wanted to see the corporate office. McCauley knew that real estate had to be jettisoned from the get-go to keep costs down. Post-pandemic, this has become the standard for many entrepreneurs and venture capitalists.
Hope & Henry’s employees, many who came from Gymboree, worked for sweat equity for two years until the company was up and running. There was no need to transition when Covid-19 lockdown took hold; Hope & Henry had been pioneering WFH for years. Broadband was also critical to get to customers. “If the vast majority of our customers did not have broadband, our business model wouldn’t work,” says McCauley, noting that many customers buy with smartphones using mobile networks.
Hope & Henry leveraged an Amazon storefront and its services to build multi-page shopping environments coupled with logistics and distribution. Remote work is enabled through Box, the cloud content management and file sharing platform. The team convenes through Google Meet, videos calls integrated with the “G suite” of productivity and collaboration tools. Other essential tools include PayPal and Shopify. Not all software is plug-and-play, however. Now with a dedicated website, half a dozen branded physical locations, and a partnership with Target, Hope & Henry is hacking their own inventory and fulfillment apps as enterprise solutions are not scaled for a small company. McCauley’s vision for a single dashboard for financial, sales, inventory management, and other metrics does not yet exist.
The brand has since evolved to clothing for adults and a popular “Family” line with coordinating pieces for family pictures and holidays. It has learned how to leverage marketing opportunities like Back to School with riding vests and pants, tea dresses, rompers, cricket sweaters, wingtip oxfords, quilted leather ballet flats, and other items inspired by British school uniforms.
Hope & Henry performs to the Global Organic Textile Standard (GOTS) which defines requirements to certify the organic status of textiles through the production life cycle, social and environmentally responsible manufacturing practices, and labeling. While McCauley is focused on fulfilling the mission and awakening the larger industry, the company could be an attractive acquisition for a clothing conglomerate which wants to buy eco-friendly brand.
The story illustrates the challenges of building online brands, even with a full array of tools and expertise. The situation is even more difficult should one want to manufacture clothes in the USA, as the factories and workers no longer exist. The 2021 Reshoring Index just published by the Coalition for a Prosperous America, shows that that America’s trade manufacturing deficit has reached the lowest point ever, with apparel taking the worst hit. As author and economist Jeff Ferry explains, “Apparel manufacturing gross output has fallen 73.5% in real terms between 2002 and 2020 to $19.4 billion in 2020. According to the Bureau of Labor Statistics, apparel manufacturing employment has fallen 90% from 938,000 in January 1990 to 93,400 in May 2021. Even more tragic is that Black Americans made enormous strides in the textile and apparel industries in the southern states in the late 1960s and 1970s, only to see most of those jobs disappear from aggressive import penetration beginning in the 1980s. Half of all US apparel jobs were lost in the 1990s and most of the remaining half in the subsequent years.”
The job loss is attributed to the relaxation of import restrictions and the growth of large-scale textile and apparel production in China, Bangladesh, India, and other countries. The largest source of US imports in apparel is China, an advantage delivered by widespread subsidy of manufacturing for export. Last year’s Census data reports that China accounted for 28 percent of US apparel imports, or $20 billion out of $72 billion. Next on the chopping block appears to the PPE face mask industry on the verge of being wiped out by subsidized Chinese imports.
A recent executive order highlighted China’s furtive use of subsidies to evade World Trade Organization rules, some $200 billion just for semiconductors. This appears to be standard practice for the country since joining the global trading regime in 2001. US policymakers have the power to stop the abuse. The question is whether they will.
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