By Fritz Nelson, editor-in-chief
Perhaps one day we’ll look back on how we weathered a global pandemic and its economic aftermath and examine the traits of businesses that managed to make it through unscathed. And perhaps those traits will look a lot like those of LA Collective, a direct-to-consumer business that designs and manufactures fashion lines centered around hand-selected celebrities (Morgan Stewart, Lisa Rinna and Alexis Ren). LA Collective also has two in-house brands.
Let’s examine those traits:
LA Collective is e-commerce native, which is to say that it started its business life selling its fashion online, although it also sells select items through big-box retailers.
It is vertically integrated, meaning that it controls or owns almost every stage of its operations, starting with a select but diverse set of suppliers. It manufactures its goods, and it warehouses and ships them.
It relies heavily on the social media and brand influence of the stars whose fashions it incubates, creates and sells.
I talked with co-founders and co-CEOs Karl and Jaynee Singer via video about how their business is adapting to the uncertainty arising from the coronavirus. Spoiler alert: It’s adapting by growing. Karl said he is seeing peak revenue run rates.
Karl talks about how the company prepared for the worst, some of the actions the company has made due to a limited supplier pipeline and restrictions on workers in the company’s own factories. Watch the conversation for more insights into the biggest issues LA Collective has faced, how it’s managing its family of employees, how it’s dealing with a shutdown of brick-and-mortar retailers, how it’s experimenting with new marketing channels such as TikTok and how it’s working on some new digital marketing ideas for the future.
Watch our conversation with LA Collective's Karl and Jaynee Singer in the video above.
Here’s the full transcript of our conversation:
Fritz Nelson: All right, joining us today are Jaynee and Karl Singer. They are the CEOs and founders of LA Collective. Maybe for those who haven't seen or heard of the LA Collective or read our great piece on Grow Wire, can you describe what LA Collective is?
Karl Singer: Yeah, for sure. We launched LA Collective about three years ago with the premise of being an e-commerce company first and also a fashion incubation company for celebrities, personalities and fashion influencers in the digital space. What LA Collective does is gets behind a certain talent; builds their brand, soup to nuts; runs the operations; and launches it to market through our e-commerce platform, which is http://www.lacollective.com. We also partner with some third-party retailers, and then we see that brand through in market, follow through on the marketing, advertising fronts, and really grow and scale each brand that we put in our portfolio.
Fritz Nelson: How many celebrities are you working with now?
Karl Singer: Currently there's three celebrity brands in our portfolio, and we have two house brands, which we own through LA Collective.
Fritz Nelson: Got it. We're here today to really talk about what's happening in all industries but in particular your set of industries, I guess, so we can talk a little bit about that, but in terms of the coronavirus and its impact on business. Let's start broad and then we can narrow in. What are some of the biggest impacts that this crisis has caused for your business in particular?
Karl Singer: I mean, I think for us it's been supply chain. It's been an interesting turn for our business, we've seen a lot of growth. But through that have had to adapt to the mandated closures in the supply chain side of the business and the industry overall. Adapting to that is been the most critical factor, I think, of continuing our growth, building our inventory and being able to try to operate as normal as possible. Just going into our fabric suppliers, our production facilities, our warehousing, one, making sure everybody is safe and healthy, but two, trying to maintain business so we can continue to grow.
Fritz Nelson: Have you seen changes on the demand side from your customers?
Karl Singer: We've seen an uptake in demand, actually. Last week we actually hit one of our peak revenue run rates in the business. We've seen an incredible uptake in demand for our product, our business overall and the way we've been positioned, which is great. I think, again, just adapting to the supply side of the business is where we've put a lot of our focus on.
Fritz Nelson: Just to explain, you guys are involved in pretty much the entire supply chain all the way through to, as you say, your e-commerce sites and how to sell to retail, so that includes the manufacturing, design, also warehousing, shipping, all of that. In all of those spots, where have the biggest pain points come?
Karl and Jaynee Singer are the founders of LA Collective.
Karl Singer: I think in the manufacturing side, so that being dealing with suppliers, that's fabric suppliers, trim suppliers, and then our factory. From a fabric supply standpoint, what we've done to adapt it because a lot of them have either closed or they're opened maybe a couple of days a week and limited in that capacity, so what we've done on that side is, we've increased our inventory in certain fabrics that we know we can make garments in that sell well all the time. We've almost tripled our investment in inventory across our fabric suppliers, so we know at any given time we have that fabric on hand, we can run it through our factories and produce the inventory needed to supply our customers.
From a factory standpoint, actually producing the garments, we're open and operational. We're limiting the amount of employees in the factory at a given time, where on a regular time period or going back before this happened we had, at any given time, 80 to 100 sewers, now we're narrowing that down to 40 to 50 sewers. Everybody has their social distancing within the factory floor, and we're able to maintain a healthy environment and not overcrowding anything at all.
Fritz Nelson: One of the things that we're hearing from some manufacturers is, just in terms of maybe now thinking more about having more sources of, well not necessarily manufacturing, but supply even, some of them that have supply, manufacturing happening in China being able to diversify. It sounds like you guys are pretty well diversified, is that a fair statement?
Karl Singer: Yeah, I mean we are. Because we're vertical and we can manage and operate our manufacturing directly, it gives us a bit of advantage versus outsourcing, especially outsourcing overseas right now. Because we can directly adapt to this environment quickly and have that be impactful for our business in real time versus the outsourcing model and diversifying, which is what a lot of businesses are doing and should be doing. But it also adds layers of complexity, especially given the situation at hand.
Fritz Nelson: When the virus started to hit and everybody got concerned, did you do some scenario planning for a downturn rather than an uptake? What did that look like?
Karl Singer: We did. We were actually ... It was interesting because we had conversations with our board about this whole thing when it was happening and what we think the impacts on our business would be. There was a consensus at the table that pretty much said, "Well, there might be an advantage point to this, so prepare for that, but also prepare for the downturn." The downturn being, for us, we're a lean operation, so we never keep a lot of inventory on hand because we think inventory is the death of all fashion businesses. We wanted to avoid, and that's being a brand ethos of ours from day one. We were protected in that way, wherein if there was a total downturn, we knew we had X amount of inventory that we were going to sit on, but we knew that inventory wasn't going to crush our business.
Where on the flip side, to plan for the uptake, and I think that's where a lot of the thought went in was, “How can we fulfill our supply chain and our customer orders in that case?” Because we're a lean operation, we don't handle a lot of inventory at a given time, if we see an increase in demand, are we able to fulfill it? We balanced out those things, and luckily for us, it was the latter, and we had an uptake in business. But we've also carefully planned with all of our employees and our warehouse employees and things like that for both scenarios, making sure the … cycles are in place where everybody is getting hours. … The hours might not be as long as they were previous to this outbreak, but all employees are going through a cycle where they're receiving working hours and still getting paid and compensated during this time, which is important to us.
Fritz Nelson: Yeah, I want to ask a little more of that but I wanted to touch on one other thing which is the retail side. Some of your lines do sell through major retail, brick and mortar.
Karl Singer: Yeah.
Fritz Nelson: I imagine, obviously, that business has been impacted. Not only have you seen an uptake, you must have more than made up for the loss of sales that are coming that way?
Karl Singer: Yeah, we have. That business did stop because a lot of the bigger retailers aren't receiving any new goods, of course. We were able, actually, to take ... We had orders on hand from retailers that got pushed out, but we ended up just taking that inventory back because we needed to sell it direct to consumer, so we were able to, in some ways I guess, take advantage of that.
Fritz Nelson: Your suppliers and manufactures, the ones that had to scale back or close down, are you concerned when things come back that they'll still be around, and what are you thinking about in terms of how companies like yours … obviously you can't save everybody, but that companies like yours can do to help them through this tough time?
Karl Singer: Yeah, I mean we're trying to give as much business as we can right now. I think that’s the way we can help some of the smaller production houses, sample rooms even, all the way down to pattern makers, make money during this time. I mean, I actually had a sample room outside of our operation, but she had closed down her office. I speak frequently with her, because we give her a ton of business every week. I told her, "Open up, I'll give you guys a small production run to keep you busy. I'll give you a ton of sampling to do so you can maintain at least some revenue stream during this time."
For us and the industry, especially fashion and the local manufacturing industry, is made up of a ton small businesses, small factories, mom-and-pop type shops, so doing the best we can to allocate out some production and some development to some of the smaller businesses is definitely been an effort of ours, it's where we can do it. Hopefully a lot of the businesses can sustain through everything going on.
LA Collective creates fashion brands in tandem with celebrities such as Morgan Stewart.
Fritz Nelson: Let's move to the warehouse, distribution side of things. Obviously, there are concerns with working in tight spaces and handling goods and keeping things safe. How are you looking at that, and how are you managing that?
Karl Singer: Our warehouse, we've limited our staff every day, and we have turn-times of half a day. We probably cut down 50% of our warehouse staff, which has led to small delays in fulfilling of orders. But at the same time, we would rather put the safety and health first and make sure we're delivering that product carefully. That was our first step, we cut our staff down by 50% in the warehouse. We cycle that in half days, so first half of the day is one group of staff, the second half of the day is another group of staff.
From a cleanliness standpoint, everything is always wiped down, sanitized. All of our warehouse employees wear gloves and masks, which they probably change three to four times during their shifts. Through that I feel like we've been able to protect against, or at least try to protect against, the outbreak and everything that's going on.
Fritz Nelson: I'm wondering, Jaynee, how is your, the two of you, your roles changed pre and post? How would you describe that?
Karl Singer: We see each other a lot more, we're married so we live together.
Jaynee Singer: Yeah. Yeah.
Karl Singer: I think we work closely together, more so because a lot of the times I think ... I'm on the operation side, Jaynee is obviously on the creative side, so she's designing collections day to day with the talent and things like that. I'm more running the business and the operations and the manufacturing side. A lot of the days our lives are separate and then we conjoin, now they're just conjoined. But I think it's been interesting because we've been able to cross over and work in each other's areas of focus and give ideas and input there, while Jaynee obviously focuses more on the creative side. I sometimes get restless and jump in and try to weigh my thoughts there and vice versa, so maybe that's it.
Jaynee Singer: Uh-huh.
Fritz Nelson: I've heard a lot of people on different ends of the spectrum. Some people say they're working harder than ever before, and some people say, "Oh, I have more time to do the things I've been wanting to do for a long time." I wonder if on the creative side you do have that time to think through some of the ideas that were stewing in the back of your head.
Jaynee Singer: Of course, of course, yeah.
Karl Singer: I mean I think for us we're working harder than ever, and I think there's an opportunity in the marketplace. I think fashion has gone through this rollercoaster ride the past four years, and I think this is another part of that rollercoaster, and at the end of it there will be another shakeup in the space. Companies that can really be hyper focused during this time and take advantage where you can, and see the opportunity where it is, can come out even stronger at the end.
Fritz Nelson: Yeah, I think we're hearing some of that too. We've heard from some people that they're having to, whether it's to change a business model or change how they look at their supply chain or some new innovative ideas that have come out, and they're like, "Gosh, we wish we'd have thought of this all along. We're going to keep this when we're past this." Are any of those ideas things that you've talked about in that way?
Karl Singer: Yeah, I think so. I mean listen, a lot of our marketing strategies that we had in place, some shifted obviously because ... We do a lot of events, pop-up shops, things of that nature, which obviously right now you can't do, and probably for the next couple of months aren't going to be interesting marketing initiatives to have in place. We've shifted that marketing to more digitally based. We've tested a lot of new advertising channels … You look at TikTok for instance, I think they've had a massive upturn during this whole pandemic. We've noticed it two weeks ago, everybody joining the platform. We are starting to run ads now through TikTok, which is a totally new channel. I think there's a lot of opportunity there for cheap media and to acquire some new customers.
Also testing more digitally creative ways to market the product, wherein pre this we were doing workouts at studios or partnering with really cool fitness studios across the country and doing an LA Collective takeover or specific brand takeover, wherein now we're doing these partnerships with different, whether they're personalities or celebrities or digital influencers or models or fitness trainers, but these in-home workouts that we can stream live through our social media pages, we can repurpose through emails and different channels, have actually done incredibly well and at a much less cost than what we were doing previously with actual brick-and-mortar retail in-person takeovers.
So looking at that, I think there's an interesting underlying value there, where people respond really well to the digital landscape of things versus the in-person. But I still think there's importance of that in-person customer experience over time.
Vita LA is one of LA Collective's handful of athletic apparel brands.
Fritz Nelson: You talked a little bit about what you're doing with employees, and I think that's great you've been able to give them all hours, maybe a little reduced. But how did you manage those conversations? That's something people are struggling with now, whether they're having to cut hours or even lay people off or furlough them, how do you have that conversation in such a devastating time?
Karl Singer: Our employee ecosystem is like a family, we're very close to all of our employees. I think the culture at our company is, no matter who you are in the company, whether you're an executive, a senior management or you're warehouse staff, we know everybody's name, we deal with everybody. Because our operations are ... Not now, but our offices prior to this shut down, we had our front office, we had our warehouse. We had our factory all in one space. We always had very good touch points with our warehouse employees, our factory employees. We were able to walk those floors on a daily basis, talk to everybody and really develop that relationship. So when we had these conversations, I think for us is a little bit easier because we have such a close-knit relationship with every employee, all the way down to the bottom.
We came into the conversation not in a panic but more in a way of saying, "Listen, there is this pandemic happening. There might be the case where your hours are limited. However, we're going to do our best to cycle through everything and make sure you're getting the hours you need and the minimum you need ... money to really make in a week." Really it impacts your hourly employees a lot, so It was important for us to talk with each of them, let them voice their struggles to us and their concerns to us, and then come back at that and say, "We're going to do X, Y and Z to make sure you're earning enough in the next couple of months where you can cover your experiences and your bills that are due."
Fritz Nelson: That's great. One last thing I think is if you look over... I mean your company covers a lot of different spaces, apparel and fashion and manufacturing and direct consumer and also retail.
Karl Singer: Right.
Fritz Nelson: You seem to have chosen a model that has some resilience in this kind of time, but if you look out at your peers and competitors who are struggling, what advice ... Have you talked with some of them? Are there some things that you're seeing happen in the industry that give them cause for optimism or new ideas that are promising?
Karl Singer: I think at the end of this ... People and the companies that are struggling I think a lot of the brick and mortar retailers obviously taken a hit, from the huge one like Macy's to even the smaller boutiques. My suggestion would be to, at this point right now, invest in the digital space. If they haven't put forth an effort on the digital side of their business, whether they're a one-store boutique or a chain of boutiques, if 70% of their business was brick and mortar, 30% was retail, take this time now to invest in digital and see where you can build on that, because I think at the end of this the shift, even more so than it already is happening, because over the past three years the shift has been going digital. I think at the end of this it'll be in more digitally focused. My suggestion would be to invest time and effort into the digital side of your business, growing those channels and trying to capitalize there.
Fritz Nelson: Fabulous. Well, thank you again for joining us. Best of luck and stay safe.
Karl Singer: Thank you.
Jaynee Singer: Thank you.