Ellie gets $2M in backing to take the ecommerce fight to Lululemon

By Michael Carney , written on February 1, 2013

From The News Desk

Marcus Greinke hopes women never buy from Lululemon again, and he’s nearly shouting it from rooftops. The Los Angeles entrepreneur and his co-founder Lindsay Daniels are launching Ellie, a lifestyle and activewear brand and ecommerce platform today that gives women an alternative to looking and feeling great, without abusing their bank accounts to do so.

The company which was co-founded in October by Science, Inc., the technology studio behind Wittlebee, Uncovet, Fourth & Grand, and Dollar Shave Club, has raised $2 million of Seed financing from the likes of Trinity Ventures, Rustic Canyon Partners, and Blumberg Capital.

Ellie makes high-end, comfortable, fashionable tank tops, workout shirts, yoga pants, hoodies, and leggings for women out of the very same fabric as the aforementioned womenswear giant – a technical performance fabric called Eclon, that the latter renamed “Luon.” [See Update below for response from Eclat Textile Co and Lululemon.]  It uses the same construction methods as well. The difference is that Ellie’s items cost between $32 to $74 online, versus Lulu’s $90 to $200 in luxury retail stores. Women who choose to become members of the service get even better price points, not to mention a host of other perks.

“Making time and funds available for a superior gym and workout experience is hard enough for most of us,” Greinke says. "Why should you pay $130 or more for workout clothes like yoga pants? A healthy lifestyle should be attainable for everyone, and Ellie wants to make sure you look and feel good whether you begin or end your day with a trip to the gym.”

When was the last time you ran across a consumer-facing startup that had 50 employees prior to launching its product? What about one with a team this size that was also just a few months old? That was my experience earlier this week when I first met with Ellie, and I’m still trying to work through all the implications of what it means. Apparently the company, and its investors, take the opportunity of disrupting the $14 billion women’s activewear category seriously.

Science doesn’t launch companies based on a hunch. Instead, the technology studio is incredibly data driven, and tests all of its concepts in a variety of ways prior to launch. In the case of Ellie, that meant everything from testing the cost of acquiring customers, to actually launching a disposable, experimental brand called PVBody to gather real world feedback on the product and business model, while ironing out its operating processes.

When the company proved that it could create a high quality product at healthy margins that women would love, it was off to the races. Money was raised, the team grew from six to 50 in a matter of weeks, including designers, marketers, engineers, and management. Walking into Ellie’s office today is like walking into that of a two-year-old company.

“I mean who does this, right?” Greinke asks. “This is sorta nuts.”

With today’s launch, Ellie will begin introducing new collections of 16 to 24 pieces each month, all of which are available in limited quantities, for a limited time. Members of the company’s Fit Fashionista Club get early access to the collection and are able to pre-order items from the 20th to 30th of each month, with items shipping on the 1st of the next month. Non-members can begin ordering on the 1st.

Members also get the benefit of being able to purchase any two items on the site, regardless of their respective prices, for $49.95 per month. Members can skip, pause, or cancel at any time. Additionally, members get invited to private local events and receive other exclusive perks. All shipping, for members and non-members, is free, and items can be returned at no extra charge.

The secret sauce behind Ellie consists of a few ingredients. First, the company has built an extremely experienced fashion design and manufacturing team – the kind of team that young companies in the space, online or offline, never even contemplate assembling. The startup also used its industry relationships to develop a local supply chain in Los Angeles that can turn around entire production cycles in 10 days, down from the standard six to eight weeks.

This production efficiency, combined with its internal ability to prototype a new item in a matter of hours, means that Ellie can gather feedback from its customers, both in terms of preferences and the popularity of individual items, and rapidly reflect that in production volumes and future designs. In that way, Ellie operates more like an established brand at this point than one that no one’s ever heard of.

Finally, Ellie’s founders are painfully aware of the challenge of creating a brand that people love. As a result the have eschewed celebrity endorsements, and invested heavily in creating the story of the “Ellie girl,” a fun, fit, relatable, Southern California girl next door that everyone wants to know, but also aspires to be just a little more like. This narrative is reflected in the way the company presents its items within advertising and its online catalog, and also in the way it communicates with its audience. Early feedback suggests that consumers are eating it up.

I went into my meeting with Ellie’s founders convinced that this could never work. I believed that women were loyal to their brand of performance wear, which likely offered quality and selection that a small online startup could never match. I was wrong about both things.

As someone who’s engaged to a woman who has single-handedly propped up Lululemon’s stock in many months, I’m acutely aware of the quality, fit, feel, and appearance of their product. I was blown away when I first saw Ellie. The product is hardly distinguishable – until you see the price tag, that is. Not only is it the highest quality, but the product is extremely fashionable, whether the consumer wants to wear it to the gym, to the grocery store, or, in the case of a few limited-edition items made from non-performance fabrics like silk chiffon, out for a night on the town.

“Ellie's unique model [of building a vertically integrated direct to consumer internet brand] enables massive improvements in business efficiencies that translate to the highest quality clothing at the most affordable prices,” Science co-founder Ryan Sit sit. As he further pointed out, the company is taking advantage of this cost structure to bring manufacturing back to America. Not a bad feather in any startup's cap.

The team behind Ellie has given the brand every advantage at launch, but the road ahead is still an incredibly challenging one. As we’ve seen from other online commerce companies, consumers are a fickle bunch that constantly demand value and are often unforgiving when things fall short.

The startup is already running a massive operation, on a relatively limited budget. I’m told that the company will likely raise additional funding sooner than most startups, but finding investors who are comfortable with this degree of spending and risk is no easy task.

Ellie has crafted a compelling story and a high quality product in a very short time. That much is beyond debate and is impressive in its own right. But the company is just beginning and it’s far too early to predict how this one will end. Science has a strong track record in the ecommerce category, and being in LA gives the company a number of advantages. Whether they can distill all this down to a sustainable business is the next question to be answered.

Update: Following the publication of this article, PandoDaily received additional information from lululemon containing an official statement from Eclat Textile Co., maker of the Luon and Eclon fabrics discussed herein, disputing certain claims made by Ellie. That statement is published in full below:

This is an official statement from Eclat Textile Co., LTD for the clarification between Eclon and Luon. The clarifications between Eclon and Luon –

1. Eclon is not Luon. 2. Eclon is using Nylon 6 as its raw material; Luon is using nylon 6,6 as its raw material. Two fabrics are different. 3. Nylon 6,6 is a premium material which has better performance in hand feel, color fastness, yarn strength, and durability comparing to nylon 6. 4. The fabric Eclat provided to lululemon, so call Luon in lululemon is a state – of – art fabric which is exclusive to lululemon and lululemon only.