Online men’s clothing startup Bonobos has raised $55 million to quadruple its brick-and-mortar stores.
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The online retailer, which began selling pants online in 2007, opened its first store three years ago in the lobby of its New York City headquarters. Today, there are ten locations of Bonobos “Guideshops”; in late June, Bonobos opened the newest store in Los Angeles.
The $55 million Series D round, led by Coppel Capital with participation from former investors including Accel Partners, Lightspeed Venure Partners and Nordstrom, brings Bonobos’ total funding to $128 million. Dunn said the funding will be used to open 30 new stores over the next three years.
Last fall, rumors surfaced that Bonobos was heading toward an IPO in 2014. Given the latest injection of capital, however, Dunn said there are no immediate plans to take Bonobos public.
“[W]e wanted to buy ourselves the ability to remain independent. And so we think we’ve raised enough not only to get to profitability, not only to fund Guideshop expansion, but to remain independent, and to make that IPO an elective event, rather than a required event,” said Dunn.
The Bonobos In-Store Experience
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The Bonobos “Guideshop” provides a unique experience: Men come in, try on clothes with the help of a Bonobos “guide,” place an order and then have it shipped to their home.
Dunn said the concept was more or less an accident.
“We thought, hey! We’ll build a direct sales force, and we put two fitting rooms in this lobby. And we thought, we’ll train people who are going to go out to the field to offices and visit our customers. But within about 90 days, we were doing a million dollars in run rate out of this lobby,” said Dunn.
Dunn said he’s found that male shoppers don’t actually care that much about the instant gratification of walking away with their new purchases – and the Guideshop concept provides Bonobos with a competitive advantage compared to traditional brick-and-mortar stores.
“You’re not walking away with product, and what that enabled us to do is … take the square footage and reduce it by half, eliminate the stock room, remove all this chaos around managing inventory and focus on what then can remain, which is a fantastic customer service experience,” said Dunn.
Dunn said the majority of sales still come from the online website. And yet, clothes that are harder to fit, such as shirts and suits, sell better in-person. According to the company, suits sell at twice the rate in the Guideshops as they do online, and dress shirts sell at a 50% faster rate.
Tackling the Women’s Market
In February, Bonobos launched Ayr, a women’s line focusing on denim. In the first 100 days, Dunn said Ayr, which stands for “All year round,” did $500,000 in sales – beating Bonobos’ initial sales in the same time period.
Despite the early sales successes, Dunn referenced challenges facing the women’s line.
“[The] women’s business is really competitive, and it’s really hard. And so we bring no hubris to the fact that this will [not] be an easy second act. Our team is working incredibly hard. And we hope that we earn the right to a comparable opportunity with Ayr that we’ve secured with Bonobos,” said Dunn.
Dunn said Ayr is part of his vision to build “the most loved clothing company of all time.”
“[W]e can’t fulfill our mission of being the most-loved clothing company of all time without serving the gender that most loves clothes,” he explained.
With that said, Dunn said the company decided to launch Ayr with its own brand identity with the intention of preserving the relationship Bonobos has with its male customers.
“As a guy growing up, you go with your mom to the department store, you march through all the women’s makeup section and through the women’s clothes and then the men’s is at the top. We really wanted to make sure we didn’t compromise the great relationship that Bonobos has built with the male consumer, and moreover we weren’t confident that great women’s brands can emerge from a great men’s brand,” said Dunn.