Naadam Cashmere will use its new funding round to acquire more customers by opening its first stores.
The 3-year-old sustainable fashion brand has received $16 million in a Series A funding round led by private-equity firm Vanterra Capital, and CEO Matt Scanlan said that he wants to amp up customer acquisition by opening stores both in the U.S. and abroad.
“By keeping operating costs of the store low and the lease terms loose enough, the risk is low and scaling can be quick,” he said.
The rising costs of online advertising and customer acquisition have forced many direct-to-consumer brands to rethink their business model in the name of dodging a brick wall. Based on data from Naadam’s first pop-up, in late 2017, Scanlan concluded a $100,000 store investment could lower the cost of customer acquisition in that area by 60 percent, motivating the move to physical retail.
The brand will open a store in NYC’s West Village neighborhood in September. The space was previously home to an Everlane “Cashmere Cabin” pop-up, making it ripe for a Naadam takeover, said Scanlan. He also plans to open a store in Los Angeles later this year and a mobile pop-up in October: A ger — a Mongolian tent used by nomadic herders, an ode to the brand’s roots — will travel the coasts to cities with a large Naadam following, including San Francisco and Seattle. For the pop-up tour, he’s working with Bobby Redd, which has partnered on experiential pop-ups with brands including Allbirds, Peloton and Bonobos.
Scanlan, who currently operates three offices (in Beijing, Amsterdam and New York) and has a staff of 35, claims Naadam has been profitable “forever.” He declined to disclose specific revenue numbers but said sales grew 350 percent in 2017 and 300 percent year-over-year in the first half of 2018. In August, Entrepreneur reported a projected brand revenue of $45 million in 2018. Naadam initially launched with funds from Kickstarter, before securing a $2.5 million loan to get the brand off the ground and raising another $6.5 million to build the website. While Scanlan has tested the waters of physical retail with pop-ups and shop-in-shops, opening permanent stores will be a new ballgame.
If the first two locations prove successful by boosting brand awareness, Scanlan plans to open more stores, including in Europe, where he currently sells through retail partners — the U.K., Italy and Germany are promising markets for the brand. (He said the brand is not yet ready to tackle Asia, “the holy grail of international expansion,” as he’s heard only homegrown brands and those with great brand recognition succeed in the market.)
“I’m more or less free to explore strategies that didn’t align with some early objectives around cash flow: Expanding into retail could be meaningful for us, doing experiential retail could be meaningful for us, doing billboards and subway ads could be meaningful for us — we’ve now got the platform to test it all at once.”
This time next year, Scanlan said he would have double the staff. And in the future, 50 to 60 Naadam stores is a possibility — but he said he’ll never sign a 10-year lease. “Traditionally, that’s how retail has been exploited, right?: opening a bunch of stores, signing long leases, hiring all these people,” he said. “I see us having a large retail footprint that is more mobile, more fluid, than what has traditionally existed.”