By Ian McCue, commerce and retail reporter
⏰ 12-minute read
Retailers Alton Lane, For Now and Sh*t That I Knit all quickly changed their business models after the coronavirus forced stores to close and changed customers’ purchasing habits.
While sales are down at Alton Lane and For Now, Sh*t That I Knit has seen a spike in direct-to-consumer sales driven by a quarantine kit for first-time knitters.
All three retailers are moving forward with plans to open new stores and develop new products, though some timelines have changed.
In a matter of days, the coronavirus upended the business models of retailers across the country:
Alton Lane, a custom menswear brand, usually does 90% of its business at its 12 showrooms, but all of them are currently closed. Its two New York locations closed first, and other cities and states soon followed with orders that required nonessential businesses to shut their doors.
Menswear retailer Alton Lane had to close its showrooms due to COVID-19.
Retail incubator For Now, located in Boston, had one retail store in which small brands could showcase their product and no e-commerce website when it closed on March 15.
Retail incubator For Now also shuttered its brick-and-mortar shop.
Knitwear brand Sh*t That I Knit is in a slightly different situation, as its direct-to-consumer (D2C) e-commerce site accounts for 70% of sales. However, 30% of the Boston-based brand’s revenue came from boutiques and pop-up shops that suddenly shuttered.
Knitwear brand Sh*t That I Knit continued online sales, allowing COVID-19 to inspire a new product.
A few states recently allowed nonessential retail stores to reopen, and more will follow in the next few weeks, though employees and customers in these stores must still practice social distancing.
👉 The continued uncertainty around when retailers will be able to open and how they will operate has made for a uniquely difficult situation.
“A lot of the things we’ve experienced over the last 10 years, you either have time to prepare for it — you see where the economy is going and you have all these signs of things — or it’s tough, but it’s really quick,” Alton Lane President Colin Hunter said, pointing to Hurricane Sandy in 2012 as an example of the latter.
“The biggest challenge here is the uncertainty of everything. Successful business is all about having the right plan and the right strategy and then executing on it, and the uncertainty of the timeline I think is challenging to determine a plan.”
Overhauling their businesses – quickly
All of the three companies we spoke with had to quickly and fundamentally change their business models to operate in this new reality:
In early April, Alton Lane started accepting virtual appointments, turning its one-on-one in-store consultations into video calls to fit customers for a new suit, blazer, dress shirt or pants. It also offers virtual “closet reviews,” during which an associate helps clients identify gaps in their wardrobe and recommends products they could add, including apparel that Alton Lane doesn’t sell such as T-shirts and activewear.
To enhance the virtual experience, Alton Lane has sent customers tape measures in addition to its self-measurement guide to make ordering online easier. It has also mailed clients fabric swatches so they can get a true feel for new colors and patterns. The custom clothing brand has seen promising traction with these virtual appointments, and about 25% of those who have signed up are new customers.
Alton Lane plans to keep at least some elements of this remote engagement long term, as it helps the retailer reach customers in areas where it doesn’t have a showroom. Hunter thinks these virtual sales could one day account for a quarter or even half of all revenue.
👉When faced with closures, imagine ways you can go the extra mile to deliver the in-store experience to customers.
Alton Lane took its custom suit fittings virtual in the wake of COVID-19.
For Now long debated setting up an online store but never did so because the retailer sees itself as an "offline community for these brands that traditionally only exist online,” co-founder Katharine ReQua said. For Now sells various brands’ products for a minimum of three months on a rotational basis. ReQua and co-founder Kaity Cimo devised this concept after discovering emerging brands’ greatest need was access to physical retail space that could provide much-needed shopper feedback and exposure.
But the COVID-19 shutdowns forced For Now to launch an online store on short notice. The 3-year-old retailer already had a platform that could support e-commerce, but it hadn’t yet used that functionality. For Now started building a product catalog, pulling images from partners’ sites.
It helped that Cimo had experience building e-commerce brands.
“We’ve been really pleasantly surprised,” she said. “Not only have our customers bought things to support us and the brands we work with, but people that have never stepped foot in our store are buying online. So that’s great news for us, because we have the confidence now that [we should] really put a lot of effort behind an online store, COVID-19 or no COVID-19.”
For Now has received a consistent stream of orders, though online transactions have more items but a lower average order value than in-store transactions. Items per order have increased because For Now is selling more timely gift packages like a “WFH Kit” and “Zoom Conference Kit.”
👉 The current environment will have a long-term effect on consumer shopping behavior, so setting up an e-commerce site will drive results for years to come.
For Now stood up an online shop in days as a result of the virus.
Sh*t That I Knit worried that the coronavirus’s economic impact would threaten its business selling premium beanies, mittens and other accessories. But founder Christina Fagan, a knitter since age 10, turned to her favorite hobby while cooped up inside and realized others may want to join her. Fagan asked her Instagram followers if they would be interested in learning how to knit and, after receiving a lot of interest, picked up 50 skeins of yarn at a local store.
The brand’s “quarantine kits” sold out in 10 minutes and soon had a long wait list after going on sale March 15. It has since sold more than 3,000 kits, which include yarn, needles, a pattern, weekly classes and access to a private Facebook group of other knitters.
“No one really knows when the stay-at-home order across the country’s going to be lifted, and people are really looking for things to make themselves happy right now and to relieve anxiety and stress,” said Megan Teggart, director of communications. “They can watch only so much news, so they’re looking to companies that are really producing some feel-good content right now and doing good in the process.”
Sh*t That I Knit has not yet decided whether it will continue to offer these kits and classes once people are not forced to spend so much time indoors.
👉 Get creative. Does your business sell products you could repackage into something that would sell well with people spending more time at home?
Sh*t That I Knit introduced knitting kits to its online store, a coronavirus-era hit.
Managing the supply chain
Alton Lane sources fabric from mills across Western Europe and uses apparel factories in Europe and Southeast Asia. That diversified supply chain became a major asset as factories in some countries, like Italy, shut down. The retailer could divert orders to a different factory the same day when that happened.
“Clearly we never would’ve expected a global pandemic, but we always try to protect against geopolitical risk,” Hunter said. “So we have redundancy in our supply chain, both on the fabric side and the factory side, across multiple countries.
“Over the years we have been very thoughtful and methodical about that expansion of our supply chain, and it really has been a benefit for us.”
The only product Alton Lane cannot source is belts, as just one factory it works with made those.
👉The coronavirus has revealed precisely why companies need to diversify their supply chains.
Sh*t That I Knit relies on a team of 170 women in Lima, Peru, to create its knitwear and accessories. Though Peru has a stay-at-home order, most of these knitters are women who already worked from home, and the impact was minimal. There have been some delays shipping spring and summer products to the U.S.
Previously, a student from Northeastern University’s co-op program helped with fulfillment, but she moved back home to California when the campus shut down. Fulfillment fell to Sarah Jackson, Sh*t That I Knit’s operations manager, who is fulfilling orders from her home with the help of her mother.
For Now is primarily fulfilling orders with inventory that was in its store. ReQua herself is packing and shipping most of those orders from the store.
The retail incubator planned to add several new brands to its store in the second quarter, and most partners have been able to get those products to For Now. However, some brands had to push out the delivery date because their factories closed.
👉Successful company leaders are often those who aren’t too proud to fill orders by hand when all else fails.
Adjusting to changing buying habits
Apparel and accessories is one of the retail sectors hit hardest by the sudden economic shutdown, with sales down more than 50% in March year-over-year, according to the U.S. Department of Commerce.
For Now’s monthly sales climbed 60-70% year-over-year heading into March, and sales still grew about 40% last month. But the retailer expects year-over-year sales to drop by about 50% in April since its store will be closed the entire month.
Similarly, Alton Lane was “on a pretty aggressive growth curve,” but revenue fell over the last month.
That left the retailers looking for ways to cut costs. Cimo and ReQua are not taking a salary right now, while Hunter and other Alton Lane executives have taken major pay cuts. For Now made its one full-time employee part-time and had to postpone the start dates for two employees who were supposed to join the company the week it closed.
For Now's founders took pay cuts to support their employees and keep their business healthy.
Alton Lane has avoided layoffs so far. The menswear retailer is working with its landlords to try to restructure leases, offering to extend them in exchange for more favorable terms right now. As Alton Lane has shifted more orders to certain factories, it’s asking those partners for flexibility on pricing and credit terms.
“Our team is the lifeblood of our company; we’re trying to protect them as much as possible, protect the future of the company as much as possible,” Hunter said. “We also want to be good partners. We don’t want to be the people that just say, ‘Hey, we’re not paying.’”
For Now has not received rent relief from its landlord in Boston’s Seaport neighborhood, though its landlord for a Nantucket location, which the founders planned to open in May, has been flexible.
However, both companies are in a better position than many apparel and accessories retailers because their cash is not tied up in inventory. Since all of Alton Lane’s clothing is bespoke, it has fabric on-hand but no warehouses full of suits or shirts it purchased from a wholesaler. The inventory in For Now’s store is owned by the partners, and the retailer takes a cut of each sale and sends back anything that doesn’t sell.
On the other end of the spectrum, Sh*t That I Knit’s D2C sales are up about 400% month-over-month and 130% year-over-year thanks to its quarantine kits. To support this sudden shift, the company added a few knitting experts on an hourly basis to help lead classes and monitor the Facebook group.
👉 Restructuring leases, striking deals with suppliers and cutting pay for owners/executives are all options retailers should explore to reduce expenses.
Finding financial relief
applied for a Paycheck Protection Program (PPP) loan soon after the program opened and was approved about a week later. It’s also exploring Facebook’s small business grants program and other local, state or national programs it may qualify for.
“We’ve been fortunate to have a group of people that could dedicate their time looking into this,” Hunter said, referring to the company’s finance team. “But I’ve got friends who are small business owners that are owner-operators. They’re trying to keep the lights on, and they don’t have the resources to help navigate it. So my hope is that more support will come.”
“We’ve been fortunate to have a group of people that could dedicate their time looking into [loans].”
For Now was not as fortunate. For the first 48 hours after the PPP application opened, it could not apply for a loan through Bank of America, where it has a checking account, because it does not have a line of credit with them. More than two weeks later, Bank of America sent an update saying it would submit the retailer’s request for a loan once the Small Business Administration (SBA) started accepting new applications, indicating the bank never submitted the application. For Now applied for a PPP loan through another bank, as a backup, because colleagues seemed to get better results with smaller institutions.
“It was just a lot of red tape, which in one breath I understand, but because we didn’t have debt, we were sort of being penalized by not having access to this federal program,” ReQua said.
“It was just a lot of red tape.”
After waiting several weeks, For Now unexpectedly received a $6,000 deposit from the SBA’s Economic Injury Disaster Loan program.
While Sh*t That I Knit’s quarantine kits have been a tremendous success, it’s also thinking about its long-term economic health. With that in mind, the business is “exploring the options available,” including the PPP.
Shifting future plans
These three retailers had big plans for 2020, and the coronavirus has forced them to adjust — but not cancel — those plans:
Sh*t That I Knit has postponed the launch of its spring and summer products, like earrings and wraps, until the situation improves.
“We’re not in a place where we want to have a big, splashy launch,” Teggart said. “We don’t think it’s an appropriate time to do that.”
“We have best-case scenario, worst-case scenario in terms of product launches for the summertime,” she added. “We have if-then cases in terms of marketing calendars and operational plans [that say] if we get the products by then, we will launch it by then.”
For Now’s new Nantucket store is currently scheduled to open May 15, but ReQua expects that will be delayed until mid-June. Although Massachusetts’ stay-at-home advisory ends May 4, it could be extended, and Nantucket may have additional restrictions given its very limited medical resources.
Before the coronavirus outbreak, the retail incubator was looking for future locations, but it’s halted that search.
Alton Lane will open three more showrooms this year in Miami, Philadelphia and Houston. The Richmond, Va.-based business is also fast-tracking a new line of casual clothes including polo shirts, sweaters and sneakers that its customers are more likely to wear while working from home. Its hope is that making the right strategic moves now will put the business in an even better position once demand returns to a normal level.
“We do have to conserve money, and we are conserving, but it’s also about spending appropriately,” Hunter said. “I think that’s something that actually a lot of people maybe don’t understand in an environment like this. We’re making certain investments.”
Since Alton Lane only sees one customer at a time, it can more easily operate at full capacity while social distancing than other retailers. Customers also step into a 3D body scanner that captures hundreds of measurements, and the company’s newest machines are all self-guided. An employee usually takes measurements by hand, as well, but that’s the only part of the shopping experience in which it’s difficult to stay six feet apart.
👉Planning for the future is not just about cutting costs. Reallocating budget to certain projects that may excel right now could improve your company’s long-term outlook.
🌱 The bottom line
Despite the challenges these retailers face, they’re trying to show compassion for customers who, just like them, face unique circumstances and stresses. Finding the best ways to support those people is an ongoing effort.
“We’re not super focused on trying to get more money out of our customers right now,” said ReQua. “We’re focused on getting through this and being the best we can be for our customers on the other side.”
That empathy extends to business partners, as well. Many landlords and suppliers are also small businesses facing their own financial challenges.
“As an industry and as a country, I think the more we can approach this relationally and treat other business owners as people that are facing some sort of challenge with this, and try to be reasonable, hopefully we come out all a bit better on the other end of it,” Hunter said.
🙋♀️ For more helpful information from Grow Wire and our friends at Brainyard and the NetSuite Blog, visit the Business Now Resource Guide.