Warby Of X: Oliver Cabell, Handbags With A Transparent Story

The handbag space is fierce and competitive. According to Barclays, expectations for the industry included 3 percent growth to nearly $12 billion in 2015, after declining by 8 percent in 2014. Looking to the future, by 2019, analysts anticipate the market to grow at CAGRs of nearly 6 percent revenue and 5.3 percent volume.

A driver and reasoning behind that growth? The direct-to-consumer brands. Ones that fall into the “Warby of X” trend.

Oliver Cabell is a direct-to-consumer accessories and bag company based in Minneapolis that prides itself on its transparency and its ability to cut costs in half. The company was founded by a handful of graduate students who returned from a trip to Asia where they visited a designer handbag factory stuffed with workers earning less than $7 per day. While the bags may have been about $100 to create, they were marked up to about $1,200 each. That trip was paired with the jarring news of the Rana Plaza building collapse in Bangladesh that killed more than 1,000 workers inside. The founders knew there was a more humane way of producing high-end products.

Scott Gabrielson, founder and creative director at Oliver Cabell, spoke with PYMNTS about the founding of the company, where the team sees the most friction internationally and what the “Warby of X” trend means and could see in the future.

PYMNTS: Who or what is Oliver Cabell?

SG: We are an online-only, direct-to-consumer brand specializing in accessories and bags.

So, when I say direct-to-consumer, we partner directly with our factories for all of our sourcing of all of our materials and supplies in Italy. We do all of our own design, have them produced in our factories and then sell them directly online to our customers internationally. And by doing so, we can cut out a lot of the traditional markups that are associated with retail in general and wholesale and really the fashion space.

We don’t do any brick-and-mortar. We only sell through our own website, and by doing so, we can keep markups extremely low.

A bigger part of our story is actually around our transparency. So, we reveal everything about our factories and our products — from where we do production, to what our cost structure is and what our markups are. So, this breaks down to transportation, materials, labor and the like.

PYMNTS: Fill us in on the history of the company. What’s the backstory?

SG: The company was really based on some research that we had done after the 2013 Bangladesh collapse, where hundreds of people were killed. It was a lot of the traditional Western brands that were producing in this factory. And the reality is that a lot of the larger brands related to fast-fashion and high-end brands do a lot of their production oversees in subpar factories. The problem is that there is such a lack of transparency in the space that a lot of consumers don’t know that this is happening, and a lot of these brands place all of their weight on their heritage and their advertising and less on the quality and the production.

With the high-end space in general, which is essentially where we’re going after, there are three conglomerates that essentially rule the entire space. They are able to put a lot of pressure on lobbyists and the like, and there are a lot of loopholes in terms of how they’re claiming production. They can actually do 99 percent production in a country such as China and finish the 1 percent in Italy and claim origination in Italy.

So, when we were in Asia in 2014, we saw one of the brands that we really love essentially doing this. They were producing handbags that they claim to be high-end made for less than $100. The workers make a few dollars a day, and then, they mark them up about 15–20 times cost and sell them internationally, as well as down the street. So, this $100 bag was being sold for $2,500.

The premise of the Oliver Cabell brand is really to bring transparency to light and produce high-end, minimalistic products and really tell the story around transparency.

PYMNTS: Talk about the consumer experience. How do customers typically find you?

SG: It’s a great question and one that is a bit more challenging when you don’t have a huge budget compared to a large retailer. So, a lot of smaller brands will go into boutiques or other traditional retailers, and they’ll use the brand that boutique or that retailer — such as Nordstrom — has built. So, they don’t need to attract an audience — that audience is already built in the store, and they’ll come across the product.

So, for us, it’s a bit different. The reason that we wanted to go the direct-to-consumer route is because, when you start to do retail and wholesale, they automatically mark up your products two-and-a-half times. So, a $250 bag now could be $700–$750 retail, purely because of the business model structure.

For us, we have to garner traffic in a few different ways. One is through public relations and press and by telling our story and garnering stories in magazines and other press. That has been a real driver for us to attract the customer base that is interested in what we’re doing. The second part of it is through collaborations with more established brands. So, we’re currently in a store called The Arrivals, and it’s a New York-based outerwear brand that’s been around for a few years and is a similar model to us where they sell directly online. But a lot of companies that are in this direct-to-consumer space do these sort of short-term pop-up concept stores that will be around for a month or two, and we do partnerships in this realm to garner more attention. We rely on traditional marketing aspects as well, like our email list, as well as Facebook and other social media. So, there’s a suite of things that we use to garner our growth.

PYMNTS: Many “Warby of X” brands have a customization element. Is that the case with Oliver Cabell?

SG: So, like a traditional fashion brand, we do our own products and our own design. We have in-house designers to do this, and we don’t do any customization, which is too challenging logistically to do. But we’ll do some custom embroidery.

PYMNTS: How much funding have you received?

SG: Originally, we were bootstrapped. We raised an undisclosed amount internally, as well as some debt and federal grants, and now, we’re in the process of our first external round of financing, which we will not disclose. Just because it’s not a big part of our story for customers.

PYMNTS: With startups, there’s no perfect trajectory. Can you share a battle wound?

SG: We have a high number of sales internationally. And as much as you want to control the process with governments when they’re importing products, it can be a massive headache. Just given the lack of transparency and judgement to reject or accept packages really at their will with no rationale. It’s something we struggle with daily and how to work with that. We ship internationally so much, and it’s expensive, and we absorb a lot of those costs for the customer, just given that it’s not the greatest experience to ship something for $75. But it’s something we’re working on to try to solve.

PYMNTS: What does the “Warby of X” trend mean to you?

SG: Warby Parker really established this direct-to-consumer idea. We’re taking the same philosophy in that we’re building relationships with our customers online and transition to offline and building and keeping the relationship close. With glasses, one company really controlled the entire space. With high-end fashion, there are 35 brands which are controlled mostly by three conglomerates. It’s not as concentrated as the glasses space, but it’s similar, and many people don’t know about this.

PYMNTS: Do you feel like the direct-to-consumer trend is sustainable?

SG: It can be challenging to build brands in the space just because of how concentrated eCommerce is, but the amazing thing about it is that the idea in general is that you’re automatically cutting prices in half by avoiding retailers. I mean, how could it not be sustainable, especially when we see the growth that is happening in terms of purchasing online? As well as the idea that people are transitioning from going to malls and really using a discovery tactic to find brands that they really resonate with. Millennials are kind of the perfect consumer base to adapt to the direct-to-consumer methodology, and we’ve seen that as our biggest customer base.