Subscription Commerce

What’s Really Behind The ‘Fab’ In Fabletics?

This fashion subscription service is legging it away from the classic apparel retail model, and celebrities like Kate Hudson and a new membership approach to making products available to consumers are the wind at its back.

It’s not that traditional fashion retail is broken; it’s just that it could do better. In the mainstream fashion wilderness, quality products can be expensive and hard to find, eating up time and money that consumers can’t afford to spare.

Even Kate Hudson doesn’t like to pay a premium just to get clothing that isn’t cheaply mass-produced. Her view is that there’s no good reason why a high-quality pair of yoga-style leggings should cost $100.

Luckily, there’s a subscription platform for that. It’s called TechStyle, and Kate Hudson has launched her own line of athleisure wear, Fabletics, on that platform, with prices at less than half of what some of those luxury brands are charging.

TechStyle’s secret is the VIP membership model — a subscription-like product that gave customers the opportunity to get favorable pricing on an exclusive line of clothing. TechStyle first had the idea to try it back in 2010 and TechStyle CMO Shawn Gold explained in a recent interview with Karen Webster how the company’s unique model is creating efficiencies, driving down costs and delivering a better experience (with no unwanted clothes) to the consumer all at once.

A New Approach: Flexible Memberships

“It doesn’t make sense to send a box full of surprises,” Gold said, remarking on the typical subscription-based approach. “The customer might not like it and might send it back. We needed a membership model that didn’t exist.”

Enter the flexible membership model. Gold explained that TechStyle charges customers $49 per month, but only if they like that month’s featured products, which are individually tailored to them by the company’s algorithms based on stated preferences, past likes and purchases, sizing, colors, styles and demographic information – particularly location and local weather.

If customers don’t like the products that are presented to them that month, they can elect to pass, and that works for as many consecutive months as needed. Memberships can be put on hold indefinitely and renewed at the customer’s discretion.

However, said Gold, customers must log in at least once a month and elect to accept or pass. If they simply ignore the membership, they will still be charged the $49 – but no goods are shipped unless customers actively say they want them.

Customers are, of course, allowed to shop more often than the minimum frequency of once per month – and Gold said many are opting for more visits. The more customers shop, said Gold, the more the algorithm “learns” about them, and the better it can tailor each month’s recommendations.

Why Kate?

Since customers only pay if they like what’s being offered, it’s critical for TechStyle to offer products that consumers want to buy, which means staying on top of the latest fashion trends. That’s why athleisure presented an important opportunity: Even consumers who don’t work out love wearing athleisure clothing because it’s just so darn comfortable.

Gold said the company endeavors to choose verticals where a lot of boutique purchases are being made, particularly if they offer a product or category that TechStyle feels is overpriced and therefore a good opportunity to provide value.

“Our goal is to sell products that would normally retail for twice as much,” Gold said.

He clarified that the company isn’t selling wholesale products. Instead, it creates its own products and is able to offer them for less by selling direct to consumer, hedging advertising costs and eliminating inventory risks to drive greater efficiency. That’s why it can sell those $100 yoga leggings for $30 to $50.

And that’s where Kate Hudson comes in. Gold said TechStyle was already interested in the athleisure category and had mutual friends with Hudson, who connected them. They discussed what Hudson would want out of a brand and developed the Fabletics line from there: A southern California lifestyle brand that’s all about being healthy but not taking yourself too seriously – just like Kate, Gold said.

Risk Reduction

Gold said that taking a data-driven approach eliminates some of the risks inherent in a subscription fashion model. The main risks are creating products that people don’t want and having to spend money reacquiring customers who have already shopped with the brand but churned out of the system.

Because TechStyle leverages so much data before producing and shipping goods, Gold said it nearly always sells out of every item. The algorithms can predict inventory with 95 percent precision, including how many of each product will be needed and in what sizes. And because it never ships a thing until the customer says they want it, the risk of creating products people don’t want is all but eradicated.

“We have 1.2 million customers and we know how many like X, where they live, what the weather is there and what their size is,” said Gold. “There’s still art in the process, but it’s more science than ever before.”

As for the second risk – having to reacquire customers who churn out – Gold said that’s the purpose of the flexible membership model. Instead of churning out completely, customers can just say that they don’t want that month’s items, and come back again next month to see what’s new.

Or, added Gold, they don’t even have to see what’s new – if their finances have changed and they know they won’t be able to afford the subscription for a while, they can turn the membership on and off as needed, passing for as many months as necessary before resuming. Visiting the website to click “Pass” takes a grand total of about five seconds out of the month, he said.

For that reason, TechStyle doesn’t have to pour money into reacquisition costs because customers are already coming back to the site. Eighty-five percent of monthly sales come from existing customers, Gold said, with most of the financial investments going into the last 15 percent. Each month, the company runs about 2,500 different Facebook ads, which get streamlined and optimized throughout the month based on what’s most effective.

Reaching Out

Gold says social is a key channel, but the company looks for multiple contact opportunities. Ultimately, he believes it’s a combination of exposure through social media and other channels that gets the brand and value proposition to stick. The benefit of social, he said, is targeting and easier tracking of conversions.

Other efforts are, of course, celebrity partnerships like the one with Hudson, as well as a previous one with Kim Kardashian for the Shoe Dazzle brand. Loyalty points and exclusive discounts to wellness partners are also motivating factors for customers to do business with TechStyle, since fashion isn’t just about what you wear – above all, it’s about the lifestyle you live.

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