Eight years ago US company Bonobos was founded on the promise of better-fitting pants for men – to be sold exclusively online. “Most people would have said you can’t innovate in a mature category like men’s pants,” co-founder and CEO Andy Dunn tells ConsumerCurrents. “And even if you could, they would have said you can’t build a brand around a better fit without the capability for customers to try the clothes on.”
Bonobos proved the naysayers wrong: the company now describes itself as the largest apparel brand ever built online in the US. In its first full year of business, revenues were US$2m. In 2014, the Internet Retailer Top 500 guide estimated the firm’s e-commerce revenue had reached US$65m. The start-up’s success has helped make men’s apparel one of the fastest- growing online retail categories in the US, with sales up 17.4% in five years. The company believes its target audience – 18-34-year-old men – are especially keen to buy everything online.
Free shipping and no-hassle returns certainly helped Bonobos grow, but the pants had to look and feel good. Fashion-savvy magazines GQ and New York raved about the tailor-worthy fit – the pants have a patented curved waistband and an array of sizing options to accommodate every body type, banishing what some pundits have called the “saggy bottom” look. Bonobos’ flagship product, washed chinos, come in four styles, each offering 40 sizes and 15 colors. Instead of trying to save money by offering one cut to the widest possible group of men, the company allows shoppers to choose from 5,000 possible combinations of chinos.
“An Internet-driven model removes the hassle of assorting inventory to local stores and is the only way you can offer that kind of variety,” says Dunn, who believes the online store will continue to be the “main engine for disruption in retail. It will be the flagship store for every successful retailer by a factor of 10, and potentially 50 or 100 compared to their best-selling physical store.”
Bonobos was born out of a classroom project by Dunn’s best friend and roommate at Stanford Business School, Brian Spaly, who had been frustrated that most pants didn’t fit his athletic build. Graduating in 2007, he named the company after the bonobo, an endangered dwarf chimpanzee species, and appointed Dunn who, as CEO, helped raise millions in investment capital for the venture.
When Spaly departed by mutual agreement in 2009 (he later became founding CEO of men’s retailer Trunk Club, which was acquired by Nordstrom in 2014), it was left to Dunn to continue the business’s impressive growth. How has he done that? Dunn has taken the e-tailer somewhere he thought he never would. He put Bonobos product into physical stores.
The company now has 20 bricks-and-mortar locations, in such major cities as Chicago, Houston, San Francisco and New York. Most of them have been opened in the past two years. The company calls them ‘Guideshops,’ not stores, because there is no inventory for customers to walk out with, only to try on.
A ‘guide’ helps customers find the right fit and keys in their orders on the computer for home delivery a few days later. Customers who don’t buy anything are still emailed their sizes and a log of what they tried on. By the end of 2016, Bonobos plans to have 30 Guideshops in major urban centers and select smaller markets in the US.
Many ecommerce revolutionaries regarded the bricks-and-mortar store as obsolete, and Dunn initially shared that assumption. “We said we would never be offline and then, wait a second,” says Dunn. “We hit a big turning point. We realized offline really works.”
Bonobos discovered bricks-and-mortar can accelerate online sales and build customer affinity – just not in the traditional way.
It isn’t just strategy that has allowed Bonobos to convert men nervous about placing an order without a fitting – and to convince those who love the pants to try other apparel. The brand’s expansion into shirts and suits, using the same playbook of multiple silhouettes and deep sizing, only took off when they showcased them in Guideshops. Earlier this year, for the first time, sales of its shirts and suits were greater than pants.
Bonobos stumbled onto the Guideshops concept after opening fitting rooms in the lobby of its New York head office in 2011 when it was training a direct sales force. “We were hitting a million dollars in revenue right out of our lobby in 90 days,” says Dunn. “That was a lot of growth when our revenue was about US$15m.”
He says the company took away two lessons from the fitting rooms. “We realized that people still love to touch, feel and try on clothes, and nothing about the digital world is going to change that. But we also knew e-commerce had trained people to accept that the moment of purchase doesn’t have to be the moment of delivery,” he says. “The entire industry is built upon a false premise, which is there is some incredible joy that comes from the gratification of buying a product and immediately having it on-person.” For its typical customer – urban, mobile and time poor – taking their goods home is, if anything, a nuisance. “Now a guy can make a purchase – and continue on with his day without carrying it around,” says Dunn.
One of the key metrics Bonobos follows is its Net Promoter Score, an indicator of how likely customers are to recommend their experience to others. The score for its website is in the mid-70s, well above the industry average. The score for its Guideshops is consistently in the mid-80s. Dunn says this is because its sales people don’t have to manage inventory and can focus solely on providing attentive one-to-one service.
“The Guideshops are enhancing the consumer affinity with Bonobos, which is extremely difficult to do with in-person service,” says Dunn, who learned the pitfalls of traditional retail service as a student, when he worked as a salesperson at a famous upscale fashion brand. “We’ve made the job at retail about delivering great service and not about playing defense against inventory and customers all day.”
Because of the Guideshops’ relatively small size (average sq. ft.: 1,000) and the fact the spaces are essentially showrooms, Dunn says the shops become profitable far quicker than traditional stores – typically within six months of opening. Encouraged by its bricks-and-mortar success, Bonobos formed a partnership to sell its pants in Nordstrom stores, where they’ve become the retailer’s top-selling chino.
The company is on its way to becoming a full menswear company with mass awareness. “We’ve come to realize physical retail isn’t going to compete with our online experience but fundamentally enhances this idea of better choice of fit and better customer service in menswear,” says Dunn. “We’re in no way declaring a victory on our business model yet – because we have more work to do – but we’ve been incredibly encouraged so far.”