With the launch of MZ Wallace in 2000, Monica Zwirner and Lucy Wallace Eustice were early to the direct-to-consumer game. But now, thanks to strategic relationships with department stores, wholesale makes up a big piece of the pie.
Zwirner and Wallace Eustice first started their handbag brand, known for its nylon totes, by opening a store in NYC’s SoHo neighborhood. They followed up by launching its e-commerce site in 2004. Though DTC sales now far exceed that of other channels, according to the founders, the brand also maintains a robust wholesale business that includes major department stores and hundreds of specialty stores nationwide. While brands are pulling out of multi-brand retailers to own their presence and tighten distribution, MZ Wallace is expanding its reach through the channels without losing control.
Among its department store partners are Nordstrom, where it doubled its doors in 2018 to 75; Bloomingdale’s, where it’s sold in all locations; and Saks, where it’s ramping up its 24-store presence. “We said no to Neiman, to everyone else. We’re not at Shopbop, we’re not on Amazon — we don’t need it because we started early,” said Wallace Eustice.
As a rule, the brand doesn’t discount in its own channels, and it’s managed to dodge sales across the board, despite partners’ practices. “Everyone’s trying to figure it out, so you have more wiggle room,” said Wallace Eustice. “We don’t do Friends and Family [sales], or any of that stuff — we’re kind of prickly. But we’ve been able to work with them where they respect our rules.”
Where department stores have been beneficial to the brand is in customer discovery and education. Store associates in NYC, which now houses the brand’s only two stores, provide daily recaps of customers who come in, including how they found out about the brand. Many find it through a department store and hit the flagship on a trip to New York to buy an exclusive. Shoppers who cannot visit the New York stores often hit the brand’s website to shop the full assortment.
Regarding MZ Wallace store exclusives, “[Department] stores get very grumpy about it,” said Wallace Eustice. “But we approached wholesale with eyes wide open, knowing a bit about it. We never want to build our company on a wholesale business, because we don’t want to feel powerless. We respect them and we want to partner with them, but it’s our brand.”
Zwirner said part of the brand’s advertising budget now goes to a “bidding war” with, for example, Bloomingdale’s, to be the first retailer to pop up in a search when someone types in MZ Wallace. “We compete for the customer. Any woman who buys an MZ Wallace bag from Bloomingdales.com is not buying it from us.” Still, the brand has no plans to break ties with wholesale partners.
Unlike through the brand’s own stores, Wallace Eustice said department stores do not offer any data other than sell-through information. As a result, it’s established a wholesale department, with a team that spends much time on the road talking to salespeople and hosting product knowledge workshops for them. “Salespeople have incredibly valuable information that sometimes doesn’t get upstairs,” said Zwirner. “So we go downstairs to get it ourselves.”
Oftentimes, they’ll realize the store has not restocked MZ Wallace product on the floor or never implemented an MZ Wallace section in the first place. They’ll also learn from sales associates that the buyer continues to order certain colors that never sell. MZ Wallace will communicate that to its buyer. “It’s crazy how much work you do for them because they’re not going to all the stores and listening,” said Zwirner. “Our team does that work.”
“It will be interesting to see what happens to department stores,” said Zwirner. “Right now, they’re in a state of paralysis, trying to figure it out. They’re cutting down staff, and once you do that, there’s no customer service. It’s a snowball effect.”
Overall, MZ Wallace — which has been privately owned from day one — has doubled its business in the last three years. In the last two years, the brand saw its highest sales to date. Year-over-year, DTC, department-store and specialty-store sales are up in the high double digits, with the brand’s own web sales in the first quarter seeing a 75% boost from last year at the same time.
The founders owe the growth to bringing a lifestyle to the brand, largely through digital advertising, facilitating a community (including through in-store events and a Facebook Group) and working with influencers who feel authentic. In addition, they’ve actively responded to feedback, for example, launching a collaboration with SoulCycle when activewear retailers and gyms started showing interest. — Jill Manoff
3 questions with Michelle Cordeiro Grant, founder of Lively
After opening its first retail store in New York last year, DTC underwear brand Lively just opened a second location in Chicago.
The brand first experimented with retail as a way of supporting its community of more than 70,000 brand ambassadors. One week after the store opened, I spoke with Michelle Cordeiro Grant, founder of Lively, about some of the details of a DTC brand’s transition to physical retail.
Why was it important to you to open a physical store?
It started when we just wanted to have a place to bring our community of brand ambassadors together, so we started with a few pop-ups in New York, Dallas and Nashville. We weren’t really expecting these to make a lot of money on the actual space and the product — the goal was more about bringing the community together. But to our surprise, the ROI was positive on the pop-ups, so we opened our first store in New York and now our next one in Chicago.
Do you think brands today, especially small DTC brands, need to have their own physical stores?
We kind of fell into the world of retail. We didn’t intend to have stores this soon. But we are clearly seeing the benefits of bringing digital and physical together. For young brands, I would say go down that path sooner rather than later. Gen Z is more likely to buy physical than digital. They are spending so much time on their screens, but they want to buy physical. It used to be that physical retail dominated, then it was digital, but now I think there’s a real balance in how people shop, and physical retail is really important.
Have there been any unexpected benefits or challenges in retail for you?
Returns is one. The amount of customers who buy physical and return their products are next to nothing because they are finding the right fit on the first try. Online, you’re trying for the first time, and they give it their best guess, and returns can be in the double digits.
In terms of challenges, getting the space up and running is serious sweat equity — in New York especially. The leases and everything are so complicated. You have to give yourself the time to get it all together. The other difficult part is finding the right staff. We were really fortunate to hire our head of retail, Samantha Foster, from Warby Parker. — Danny Parisi
Making returns environmentally friendly
This week, post-purchase payments company Returnly rolled out its new Green Returns program to a host of clients, mainly in the direct-to-consumer space, to help fight the 5 billion pounds of waste that retail returns contribute each year.
Returnly currently works with DTC companies including Outdoor Voices and Thinx to credit most returns almost instantly, even before the shopper has even sent the unwanted item back to the brand, and collect shopper data in the process.
Returnly tested the Green Returns program with beauty and intimate brands (like Thinx) before opening it up this week to more clients. It’s well suited these brands, which often must discard opened products once they’ve been returned. Essentially, if a shopper wants to return something like a foundation, Green Returns tells the customer to keep it, or give it to a friend or colleague, and then credits the shopper the full amount to make another purchase.
“We avoid the return altogether, and when you compare this against the incumbent process, the shopper is now surprised and aware of the fact that this brand is living up to its values. For all these mission-driven, direct-to-consumer brands, returns are a big system of failure, so we are enabling these brands to live up to their values,” said Eduardo Vilar, founder and CEO of Returnly. — Katie Richards
What we’ve covered this week
How fashion brands can respond to the waning power of the mega-influencer
“We need to redefine what a real influencer is and look at our audience and see who is actually influencing them.”
Luxury beauty brands are launching skin care for children
“It’s a natural extension that mothers are ensuring that their children have the same quality products and start to build healthy self-care practices through something simple like skin care.”
CFDA’s Steven Kolb: New designers ‘have to be nimble’
“If young designers are trying to build a business like someone 20 years ago built a business, they’re not going to succeed. They have to be more nimble than that. They have to think differently than that. And they have to find their validation in terms of their creativity and product and in the way that they sell product.”