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Sunday, Oct 1, 2023

Digital Pivot, Profits at Consumer-Oriented Cos.

Apparel, jewelry, restaurant and other consumer-oriented companies with no choice but to go digital over the past three months took the plunge.

In many cases, they aren’t looking back.

Using e-commerce, leveraging apps, installing software or integrating online with offline to market and sell was nothing new pre-COVID-19—but the pandemic forced an acceleration of the trend.

“It’s something everybody was realizing was the future. ‘I have to have digital. I have to have these functions, but they’re not really a necessity right now.’ And then we got into COVID,” said Dac Clark, chairman of retail-focused B2B software firm RepSpark Systems in Irvine, and a partner in women’s swimwear line L*Space, also in Irvine.

Many companies say they are pleasantly surprised with their results—enough to emerge with new go-forward game plans that evolve old business models.

“I think we’re going to come out of this a bigger, stronger company,” said Steve Schulze, co-founder, CEO and president of Santa Ana’s Nékter Juice Bar Inc.

The following is a look at how some notable retail-focused companies in OC have used digital over the past few months to reinvent and refresh their operations.

Right Place for Richer Poorer

Women’s and men’s clothing line Richer Poorer had already been slowly transitioning to a greater reliance on e-commerce over the past two years. So, the San Juan Capistrano-based company was ready from a strategic perspective when COVID-19 hit, co-founder and CEO Iva Pawling said.

“Obviously we saw wholesale come to a complete standstill overnight, and e-commerce did the opposite for us. It completely skyrocketed,” she said.

“For us, it comes down to the fact that, as a brand and product assortment and why we exist, just really resonated at that time.

“We were at the right place for a very wrong time for the world,” she said.

Mid-March saw sales tick up for Richer Poorer’s line of contemporary basics (think fleece sweatpants with elastic leg openings and cropped T-shirts). March revenue doubled from February and May revenue doubled from April for the brand.

Organic interest flowed in with some help from influencers who stumbled upon the brand on their own. When the Richer Poorer team saw that new customer inflow coupled with more press coverage, they leveraged it with digital marketing spend. As a result, the company did not have to resort to lots of markdowns and sales—as was the case for others in the market forced to run sitewide sales and other discounts to woo customers.

“We certainly had some [promotions] planned if we needed to pull those levers, but we didn’t do any sales,” Pawling said.

A rebrand in January helped and a longer-term goal with tactics already set into motion to make the business less reliant on wholesale did, too.

“Last year, wholesale was still dictating our calendar and that’s the biggest transition that we’re going through right now,” Pawling said. “We’re rebuilding the entire calendar with digital and e-commerce in mind and then wholesale after that. So we’re working through it because it’s complicated when you’re used to seasons and taking them to trade shows.”

Adding a Sales Spark

Nearly 100 retail-oriented companies, ranging from action sports brands to footwear firms, use RepSpark’s web-based software to help digitize their product lines to sell to retailers.

The software provides a way to showcase a company’s apparel offerings to brick-and-mortar retailers and other buyers, replacing trade shows or visits to manufacturer showrooms.

Interest spiked, particularly in the last 30 days, as a result of COVID with the software’s ability to create digital showrooms to present new product to buyers, Clark told the Business Journal late last month.

An industry that had already been facing questions around deliveries, trade shows and the whole selling model was forced to quickly come up with resolutions now rather than later.

The traditional way of doing business had major retail accounts flying in to visit brands’ showrooms and see the product range in person.

Companies with the means to do so, began moving to digital platforms a few years ago.

“Today,” Clark said, “it’s the only way to do it.”

In fact, L*Space, of which Clark is a partner, went digital at the end of last year with virtual sales meetings and a showroom. Sales online for the women’s swimwear line boomed during the shelter-in-place order, notching double-digit increases from last year.

Clark said RepSpark is in talks with a few trade show organizers about using the platform to offer brands the ability to create virtual catalogues. The idea isn’t to replace trade shows, but bolster them with technology.

“I think the move to digital is unstoppable now,” Clark said.

Online Relationships Leveraged

Z Supply LLC, an apparel maker with a focus on elevated basics, got creative with its retail partners to help generate new business, said President Mandy Fry.

The Costa Mesa-based company launched an affiliate program at the end of March for its retail accounts as a means of helping keep them in business, while also helping bring traffic to the Z Supply online store by connecting product to stores’ Instagram accounts. Stores didn’t have to carry inventory and Z Supply’s selling base was somewhat salvaged.

“We had some great accounts that really just understood [the program] from the very beginning and knew how to work it to the best of their ability,” Fry said.

The direct-to-consumer online business has grown exponentially during the pandemic, according to Fry.

“If you would have asked me pre-COVID would we have seen this much growth, I would never have guessed it,” she said.

In some cases, certain retailers didn’t even have their own website, but they knew how to leverage social media to generate traffic. In fact, the number one seller is a retailer with only 3,000 followers.

Fry said the company is currently weighing the decision to extend the program for stores that would like to continue with it.

Its work with social media influencers also shifted in the past few months.

“I think influencers became more open minded to different ways of working with brands,” Fry said. “It was almost like we were on equal playing fields. We needed them and [influencers] needed us so they became more open to us. It wasn’t just about the monetary side. It was about ‘How can I get my word out about me, how can I get more followers, how can I work with you guys because I might need you later.’ Honestly, before COVID it was becoming so skewed and the price of working with influencers was really getting quite high.”

Like others, the overall effect to Z Supply’s online business was growth during this time and Fry forecasts that a larger percentage of the business will no doubt now continue coming from online moving forward.

“I think that will be the wave of the future,” she said.

Gorjana’s D2C Priorities

When wholesale stopped, fast-growing jewelry retailer Gorjana had no choice but to funnel all of its energies online.

“With our wholesale business coming to a halt, partners canceling spring and summer orders, heavily discounting what inventory they have and delaying payment due, we had no choice but to finally prioritize our own [direct-to-consumer] business,” co-founder and CEO Jason Reidel said. “And with our own 16 stores closed and store 17 and 18 delayed opening, that meant for the past two months, we were an e-commerce-only company.”

Ad spending, communications to consumers and product drops had to be much more focused for Gorjana. The company listened to consumer feedback and launched charms under its top-selling Parker necklace, along with different gemstone versions and a mini offering.

What resulted for the Laguna Beach-based jewelry company was 300% year-to-date e-commerce growth in May with sales between April and May up 400%.

“It sounds simple, but the growth is attributed to not having our energies be spread across other parts of the business.

“Running a DTC channel and also running a wholesale channel is like running two completely separate businesses, so to be able to only focus on one of those businesses, the one you have direct control over, was powerful,” he said.

During the past couple months, the company rolled out a buy online, store/curbside pickup program, which the CEO said will continue even as stay-at-home restrictions are peeled back.

Gorjana is also in the process of implementing online virtual styling sessions to connect customers with a stylist from the company’s Laguna Beach flagship store.

Learning to Optimize

Nékter Juice Bar was already a brand built around health and wellness pre-pandemic.

Building on the messaging of safety at the start of COVID-19’s stay-at-home orders came natural to a company that had already begun its push into digital a few years prior.

“We were fortunate,” CEO Schulze said. “We got a head start in our space as it relates to the digital realm starting in 2015.”

Today, the company’s got nearly 700,000 people ordering through its app and orders surged 200% during COVID-19 when compared with all of 2019.

Sales dropped in the first three to four weeks of the shelter-in-place orders, but then began picking up with Nékter notching double-digit increases around weeks four and five. The company’s sales are now at about the same level they were a year ago with some locations beginning to comp positive.

The app became a useful tool in communicating safety at stores, curbside pickup, menu offerings and promotions, the CEO said.

“To be able to communicate to that many people made our recovery from COVID rapid,” Schulze said. “Health, wellness and immunity were top of mind so, from an education standpoint, we were able to dig a little deeper in that space and into that community.”

The company offered some promotions to help drive traffic. Check sizes grew by more than 30% as people stocked up during the quarantine on acai bowls and wellness shots. However, Schulze said he expects the increase to moderate some.

“It’s taught us a lot about the consumer needs and how to fulfill them,” he said. “Optimization of labor was important and so was communication with our franchised partners. I was really proud of our team and those that stood up to the task and handled it head on. I think we’re going to come out of this a bigger, stronger company.”

Facial Decisions, Consultations

Management at Facialworks, a Newport Beach-based skincare products company that also operates skincare salons, saw where the world was going, and ended up closing down the in-store business a couple days ahead of Gov. Gavin Newsom’s stay-at-home order in March.

The company temporarily went from 38 employees to one, a regional director, plus its two founders.

“Once we realized this was not going to be just two weeks [of quarantine], which was our initial thought, and the reality set in that this could be months, we had to put our heads together,” said co-founder Jason Gilboa.

“We said ‘What do we have? We have the four locations. We have an Instagram following and we have a product line.’ How do we leverage what we have into some online business?”

The company has locations in Newport Beach, Dana Point, Huntington Beach and Irvine, which are now all open.

Facialworks had already been selling its CleanSea skincare line online, but digital hadn’t been the primary focus.

Consultations, a big part of generating sales, also had to somehow be restored at a time when contactless and physical distancing was mandatory. The company enlisted Zoom and an online scheduling hub for clients to go online and book virtual consultations with the regional director. This same director also used Instagram Live to coach followers on at-home facials or extractions.

In all but one instance, Gilboa said, clients ended up buying the product recommendations during their online consultations.

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