Intimates etailer Adore Me pads its bank with $8.5 million in Series B funding

By Michael Carney , written on July 9, 2013

From The News Desk

Ecommerce is a brutally tough category. For upstart companies, the space is fraught with potential pitfalls including merchandising, manufacturing, inventory management, fulfillment, customer service, and ultimately, financing all of this operational infrastructure. Yes, there are inherent advantages over brick-and-mortar retail, but most of these are only available at scale. Given this, it’s always impressive to encounter a company that is overcoming these obstacles and building a business based more on fundamentals than on vanity metrics.

By all available indicators, women's intimates and swimwear etailer Adore Me appears to be just this sort of company. Today the two-year-old startup is announcing an $8.5 million investor vote of confidence in the form of a Series B round led by Upfront Ventures, with participation from Mousse Partners and previous investors Redhills Ventures.

Most companies that succeed in ecommerce do so because they address a fundamental shortcoming in their traditional retail competitors, whether that be price, selection, convenience, or a number of other qualities. In the footwear category, for example, we explained previously that it’s selection, fulfillment and pace of inventory turnover that has allowed Zappos, JustFab, and others to disrupt their offline competitors.

In Adore Me’s case it’s been the ability to bring fast fashion product cycles and affordable pricing to intimate wear without sacrificing quality. Category staples like Victoria’s Secret are slow to introduce new products and styles, in addition to being subject to all the pricing restrictions inherent in the traditional retail model. Adore Me, on the other hand is vertically integrated, including design, manufacturing, and marketing, although fulfillment is currently handled by a third-party logistics provider. As a result, it’s able to offer hundreds of different styles, adding new options monthly, and to deliver matching bra and panty sets for $39.95 ($20 for the first set), roughly half the price of its shopping mall competitors.

Founder & CEO Morgan Hermand-Waiche is a Harvard Business school alumnus and comes from a family with roots in the European fashion industry. As a result, he had a head start when sourcing materials, manufacturing partners, and talent, as well as developing Adore Me’s brand aesthetic. The company was also able negotiate manufacturing contracts that enabled it to launch in March 2012 with a full product catalog of more than 200 different items without meeting the industry standard minimum order quantities that would have cost its competitors multiple millions of dollars. Such are the perks of having friends in the right places.

Adore Me completed its 100,000th transaction prior to its one year anniversary and has grown revenue by an average of 40 percent month over month during the 15 months since its launch, according to Hermand-Waiche. The company anticipates reaching profitability prior to its second anniversary, which is less than nine months from today. But Adore Me isn’t the only intimates etailer, so what has the company done so radically different than its online competitors?

Hermand-Waiche breaks success in this category down to three fundamentals: merchandising, branding, and user experience. Naturally, he feels that Adore Me has bested competitors like intiMint, Brayola, and True & Co. in each, although such claims are subjective at best. There’s no arguing, however, that New York-based Adore Me has grown the fastest among its competitors.

One clear point of differentiation is in Adore Me’s user experience. The company offers free shipping in both directions and allows its customers unlimited free returns and exchanges. Hermand-Waiche calls this a must in the fit-, comfort-, and self confidence-driven intimates category, particularly when selling online. The startup also offers its customers live, real-time consultants which are available by phone, chat, or email to provide feedback on everything from sizing questions to pairing undergarments with specific outfits. The company also offers consumers the option to purchase merchandise à la carte or on a recurring subscription, but chooses not to incentivize one model over the other.

Adore Me’s core audience is 25- to 35-year-old women, according to its CEO, although he extends the target market to a wider 20- to 40-year-old range. The current customer base is evenly distributed by population among urban and suburban consumers, he adds, and is diverse in its taste for sexy and everyday styles. Hermand-Waiche’s big focus with the new funding, in addition to the predictable hiring and inventory expansion, will be to increase Adore Me brand awareness among this segment of the population.

One of company's biggest challenge going forward will be to continue satisfying the needs of its increasingly diverse audience. To do so will require carrying additional styles and sizes, and thus introduce greater inventory risk. At the same time, the company will be challenged to maintain its current cost of customer acquisition, something that becomes increasingly difficult as it runs out of proverbial "low hanging fruit: and is forced to move further away from its core demographic. These are challenges faced by all ecommerce players, and which have been known to be the undoing of many a seemingly successful business model.

Hermand-Waiche’s company appears to have pulled all the right strings early on, but building a sustainable and meaningful ecommerce business is a process measured more often in decades than years. The company faces countless challenges ahead. One of the strongest endorsements of Adore Me, however, is the fact that UpFront Ventures is leading its round. The LA-based firm has been historically been tough on the current generation of ecommerce companies, and the vanity metrics that drive much of their hype. That UpFront founding partner Yves Sisteron is confident enough to join Adore Me’s board suggests that beauty in this company’s case is more than skin deep.