Five years, 25 stores and 500 employees later, Fabletics is gearing up for its second phase of growth.
The athletic apparel brand, which is owned by TechStyle Fashion Group, sells leggings, workout tops, sports bras and, most recently, sneakers through a “VIP” membership model. With actress Kate Hudson as the brand’s co-founder, creative director and the celebrity face of its TV ads, Fabletics has been the fastest-growing brand in the TechStyle stable, which includes other similarly modeled brands JustFab, Shoedazzle and FabKids, as well as Rihanna’s Savage x Fenty line. According to the company, it counts 1.4 million active members and $300 million in annual revenue, up from a reported 1.2 million members and $250 million in revenue at the same time last year. In 2017, TechStyle was valued at $1.5 billion.
Adam Goldenberg, the co-founder and co-CEO of Fabletics and TechStyle, wants to fast-track his biggest brand’s growth rate: His goal is to double Fabletics’ business over the next three years. To do that, Fabletics is speeding up and improving its design and merchandising strategy, plotting expansion in more countries, and opening 75 stores globally, bringing the total to 100 locations.
At the core of the store strategy is a new retail concept, the first of which will open this fall in Bellevue, Washington and include a cross-channel customer data platform (built in-house), a new point-of-sale system for employees, and a rethought merchandising strategy for leggings, the brand’s biggest product category.
“What, critically, hasn’t changed about the brand over the years is the membership model. That’s been the same since day one,” said Goldenberg. “Thanks to that model, we know so much about our customers — their sizes, fabric preferences, color preferences, workout habits. We also run everything in-house, which makes personalization, targeting and expansion much more high-touch.”
Fabletics’ membership model unlocks a consistent flow of customer data around product reviews, fit feedback, and browsing and purchasing behavior. The VIP membership works by bringing customers back regularly: By the fifth of every month, if members don’t want to shop, they must decline. If they forget, $49.95 is added as site credit. The model, which has brought the brand under fire in the past for being misleading for new customers, is now becoming an e-commerce mainstay, as other sites like Adore Me have adopted it as a customer loyalty and repeat-revenue play.
“The closer the connection to the customer, the better, and that means the data relationship and the exchange of value between the brand and customer is at the center of the sustainability of growth,” said Chris Paradysz, founder of the digital marketing agency PMX. “The subscription model keeps a nice, tight grip on a customer-brand relationship, where both are accountable to the other. She gives information about fit and what’s important to her, and the brand responds.”
Fabletics’ expansion strategy is reliant on understanding and responding to that customer data. Using an in-house e-commerce platform called FashionOS, it monitors member patterns to determine how likely they are to make a purchase in the next 30 days, and it uses AI-driven algorithms to surface smart recommendations for members based on everything they’ve purchased or browsed in the past. The data tracking system also allows it to properly invest in inventory buys around products, trends and categories, quickly fading out underperforming pieces and investing in fast sellers.
Speed is key to the next phase of growth as Fabletics looks to minimize its production window from a nine- to 12-week cycle down to a six- to eight-week cycle by early next year. A lot relies on newness, since customers come back each month and decide if they want to buy something or not, and the company will introduce weekly new product drops this month. Fabletics hired Karen Pornillos, Lululemon’s former vp of women’s design, as its vp of design and fashion director, to help maintain product quality as it veers toward a fast-fashion production model.
“We know what people wear, what they’re most likely to buy and what repeat rates are,” said Goldenberg. “None of that matters if we don’t sell good product.”
Linking the wealth of online data to its new stores as it plans to quadruple its store base is critical: Goldenberg said members spend 3.5 times more on average in a year than non-members, and stores serve as a lucrative member acquisition channel, second only to its paid digital advertising across Facebook, Instagram and display. Another system, built in-house, called Omnisuite, is put in the hands of all store employees to check members in, make in-person product recommendations, connect in-store try-ons and purchases to online profiles, and introduce non-members to the program. Stores also send valuable feedback on fit to the main data system: With fitting-room technology that logs what products are taken in to be tried on, the brand can monitor what products aren’t converting and fix the issue.
“This is why we build everything in-house,” said Goldenberg. “We’re not playing the game of passing data back and forth. We get the data, we modify, we personalize, we retarget. That’s the benefit of having it all in our own hands.”
International growth, the last phase of the three-year expansion plan, presents a challenge around in-house control. Fabletics, which is next to launch in The Philippines with plans to expand throughout Asia, will work with external partners in those countries on a case-by-case basis.
What matters is that it maintains the same level of product quality and customer experience as it acquires new members.
“People churn,” said Paradysz. “And as businesses become more complex, offering the same value and experience becomes harder.”