Elizabeth & Clarke: The New, New Thing

by melanie_io

On October 5, 2011, Sara Chipps and I launched our new project: Elizabeth & Clarke. We had a number of reasons for starting the business, the most compelling of which was to solve our own problem. Below, a bit of color on our theses around starting the business, and why we made certain business model decisions.

Women Hate to Shop Too

The main reason Sara and I decided to work on Elizabeth & Clarke was to solve our own problem: we hate to shop. I know, it sounds crazy. I work in apparel for god’s sake. But, it’s true, every season we find ourselves running around Soho trying to find a few great basics for the season: a couple of white shirts, maybe some black flats, pants for work. When it comes to the very basic, functional items, we do not want to spend a ton of time or a ton of money. These are not the ‘fun’ items like a beautiful dress for an event or a new pair of Louboutins: that’s when I want to go to Saks and be spoiled and get the champagne. But for the basics, many times the reasons I buy are very mundane: the weather is getting colder or warmer, or my staple blouse just got a stain on it and I need to replace it, or maybe I just got a new job and need a few shirts to wear under my blazers. I just want to get in and get out.

Sara and I thought, ‘we must not be the only women who feel this way’ and turns out, we were right. The consistent feedback from our members goes something like this: ‘when it comes to stuff I want, I want to have fun and do the shopping myself; but when it comes to stuff I need…ugh…I just don’t want to deal with it.’

The Goldilocks Principle

Each season, when on my search for The Perfect White Shirt, I traditionally have had three choices:

Too Cheap: H&M, Zara, American Apparel

My first stop is usually one of these retail behemoths, where I search through the racks, on 3 floors, and then wait in line for a fitting room for 27 hours… And, ironically, Zara and H&M do not have a large selection of basics. Because that is not what they focus on. They focus on trend pieces: fashion-forward looks that will be out of style in 2 weeks. No, they do not trade in function, only form. While at least at American Apparel you can be guaranteed to find a tee, that is all they have: ONE fucking tee-shirt. The same ill-fitting cotton V-neck that every hipster this side of the Mason-Dixon line has.

Too Discontinued: J Crew, Club Monaco

Second stop: usually Club Monaco and then J. Crew as they have stepped up their game of late. And I usually have good luck here. Granted, the tees and blouses are a bit pricier, usually in the $50 – $100 range, but I’m willing to cough up the cash if I find something great. Problem is, after I have spent all those hours searching for the perfect shirt, when I go back next year to replace the item (as these things wear out eventually, no matter how high-quality), it has been discontinued! That’s crazy! It’s a white fucking shirt!

Too Pricy: The Row, Theyskens’ Theory, T by Alexander Wang, Kain, James Perse

While I do love me some Alexander Wang and Olivier Theyskens, the $150 – $600(!) price point for a basic tee or blouse is not only not in my price range, it should probably be illegal as well….

To make matters worse, these are the items designers mark-up the highest. For example, I was in a Theory this past Summer, browsing Olivier Theyskens’ new line. I picked up a beautiful ivory-colored, gauzy blouse, perfect for pairing with almost any look. The price tag? $249. Okay, at least I expected that. The garment tag? 100% polyester, Made in China. WTF?? I know that shirt cost $4 to make and the other $245 was going to pay the rent on the store, the commission of the annoying sales girl trying to sell me shit I don’t need, and the multi-million dollar marketing budget of Theory.

A light bulb went off: we can use the Internet to find a solution that is just right.

Don’t You Just Love Paying a 10x Mark-Up?
We Thought So.

While it may seem like highway robbery to charge someone 10x the cost of producing an item, in apparel, that type of mark-up is necessary in order to turn a profit (typically a 4x – 13x mark-up is common in apparel, depending on the category and the brand). Before the Internet, a brand only had two methods of possible distribution: building physical stores or selling at wholesale to retailers. Under both of these scenarios, the brand is forced to allocate a significant portion of their profit margin to something other than the cost of making clothes.

Because of this, we deliberately planned to build Elizabeth & Clarke totally online. No stores, no wholesale accounts, ever. Our unit economics are fundamentally different than a traditional brand (servers are far less expensive than rent for a store in the Village…) We can produce the same quality shirts you may find at T by Alexander Wang or Kain, but at a significantly lower price point and a lower mark-up, while still turning a profit.

Another strategic business model decision we made up front was deciding to sell shirts by subscription only. As a result, customers pay up front for their items, and we order based on demand. We hold no inventory, and do not incur any costs associated with planning, managing, storing, or insuring inventory. That is a lot of money saved for a new brand. Savings, that we pass on to you.

The Paradox of Choice

Many of the reasons behind the decision to start Elizabeth & Clarke run contrary to the conventional viewpoints taken by the lightweight ‘social shopping’ apps launching constantly. The accepted dogma runs something like: ‘more selection, more choice = better’.

Barry Schwartz, a psychologist who’s work lies at the intersection of economics and psychology, wrote a fantastic book and did a subsequent TED Talk on, what he calls, The Paradox of Choice. I would highly recommend you check it out here. He argues that, in modern Western societies, more choice has made us more miserable. Barry walks us through the many steps the brain must follow when a decision is made. Even something as simple as deciding which salad dressing to have out of 20 available choices is extraordinarily cognitively taxing.

Fashion magazine editors and retail store buyers have known this instinctively for decades. They are paid to edit, to cut down, to make the choices for the consumer. This is the service they provide. Or in Internet vernacular, it’s a feature, not a bug. However, the apparel industry at the mass level has grown so rapidly in recent years with the introduction of fast fashion (Zara, H&M, Uniqlo), as a result, the number of SKUs available at the mass price point have gone from thousands to hundreds of thousands to millions. Add to this the fact that, at the mass level, the consumer is expected to do most of the work. The stores are crowded, the sales associates few, the return policy strict. The common wisdom is: ‘well, you are paying $12 for a tee-shirt, and you want customer service with that too?’

This is one of the main reasons we chose to limit our choice of styles to 5 or 6 each season. The white shirt, more so than many items, tends to perform a functional use, rather than make a fashion statement. Even the most chic women will pair high with low, for example, a $12 shirt from Target with a $5,000 Prada skirt. The idea being that the tee or blouse acts as an accompaniment to a look, one that, hopefully, works with many looks in your wardrobe.

At the end of the day though, Sara and I started Elizabeth & Clarke because we are solving a problem we both have and want to work in a space about which we are passionate. Reasons, in and of themselves, that are pretty darn good for starting a business.

Note: Currently, we produce 3 styles each season. We will introduce the ability to choose 3 styles out of 5 or 6 (as well as the ability to reorder older styles) for the Summer 2012 Box.