Trunk Club is Locking it Up, Throwing Away the Key
Not many people know their market as well as Brian Spaly does. His market is men, and specifically men that want to dress fashionably, but don't want to spend a lot of time working on their fashion. So Spaly and his team at Trunk Club does it for the men and as you would expect:
They do it with style.
Spaly isn't the founder of Trunk Club, but that doesn't mean he isn't enthusiastic about the product. While Spaly isn't exactly the person you would expect to launch an outfitter, he does have the chops to run a business. Previously, Spaly worked for Bain & Company as well as a number of other suit-and-tie institutions. He also co-founded Bonobos, giving him the experience in the fashion industry necessary to jump into his next venture.
Spaly was asked to join the Trunk Club team as the founding CEO. After noticing some accounting irregularities, Spaly made some changes and was left as the head honcho at the startup. Spaly quickly turned the company into something that he thought men would want: a trunk full of hand-selected clothing, a personal shopping assistant, and not the most expensive prices.
Hearing this, I had one question: who would do this? Is the market big?
Turns out the market is not the average guy, but someone more along the lines of a higher yearly salary, working too hard to dig through stores looking for good clothing, and at the same time maintaining a desire to have better clothing. Sound like a small market? It's not. It's huge, and it's a market has been waiting for this.
Starting in 2009, it isn't an exaggeration to say that the company is rocking it. The company started with four people, and now it has eighty. Of those, one is the former entrepreneur in residence at Greylock, and an ex-Ebayer, Rob Chesney. Why would a man with years of experience in retail and sales go to a relatively untested startup? Well, let's let the numbers speak for themselves.
The company raised $11 million last year from US Venture Partners, Greycroft Partners, Apex Venture Partners, and Anthos Capital. On top of that, the company is expecting to see around $10 million in revenue this year, with expecations that they will see around $25 million in revenue next year.
The plan is to grow the already sizable sales team from 40 to several hundred, with the eventual goal of having each sales member bring in tens of thousands of dollars in revenue each month. Each trunk that is sent out full of clothing is worth about $1,500, with the average person buying $500 worth of clothing. Back of the napkin math shows that this isn't going to be a small business, and that it is just getting started.
While these numbers are certainly sizable, the company isn't yet profitable. That is naturally a pain-point, but the company expects to hit profitablity by the end of the year. According to CEO Spaly, they could be profitable now, but the company is working on a customer management engine, along with other tools, which will help them scale in the future.
Of course, the company isn't without its problems. Upon walking into the Trunk Club offices, you realize that they know their market -- perhaps too well. Clients are encouraged to just "drop by," to be fitted and welcomed in. You can walk out the door with your clothing. Great system.
The problem is that the company, like many retailers and outfitters, relies on attractive young women for staff. Not that there is a problem with that, but it is immediately apparent and more than a little off-putting. While Spaly insisted that the company doesn't do this on purpose, and that "these are the people that work in the industry," it is a bit too large of a coincidence. Much like Abercrombie, this may end up being a thorn in the company's side down the road.
To throw fuel onto the fire, as an extension of startup woes - or careful planning - the male-heavy development team is kept in a separate part of the building. In fact, the main space occupies half of the fifth floor of a building, while the development and product team occupies a corner on the ground floor. Not exactly a memo enforcing discrimination, but also not exactly the best circumstances.
While this is a problem for the company that should be remedied or hidden soon, it isn't the end of the company. It is understandable that they want to create a welcoming atmosphere. And for a company that provides men's clothing, what could be more welcoming than being fitted and appraised by attractive women while being offered a cold beer? On an objective level, genius marketing; on a practical level, the company should be careful.
Don't let the problems diminish the success, though. The company really is doing great work. For the future, the plans are big and have all of the trappings of a successful business model. The company has back-of-the-mind plans to expand to other cities, with San Francisco, Austin, and Atlanta at the top of the list.
In addition to that, Spaly also pontificated upon the possibility of someday moving into women's clothing. With many of their customers being married men, their wives are clearly seeing the benefits of quick, easy, and fashionable shopping. Sure, the stereotype states that many women love to shopshopshop, but there is still a sizable number that would benefit from such a system, according to Spaly.
It will be interesting to see how this company develops. Not only in the near term, but also how it scales in the future. When each client has a personal contact to take care of their fashion needs, it will likely be a bit of a struggle to scale that to a larger client base.
That being said, with companies like the Dollar Shave Club entering the market of men's lifestyle simplification, it is clear that they are on to something. Something big, and something profitable.
Certainly better than the jeans Spaly was selling out of the trunk of his car during the college years.