From the source: Will Sked, Status Anxiety
Will Sked started Status Anxiety in 2004 after noticing a gap in the market for simple, stylish wallets for men. The brand’s high-quality leather and minimal branding quickly gained traction with consumers, and Status Anxiety soon started showing up in stylish boutiques all around Australia. Today, the brand offers a wide range of wallets, bags and leather accessories for men and women, and is stocked in nearly 600 boutiques, as well as major department stores, including Myer and David Jones.
Status Anxiety has recently opened two of its own bricks-and-mortar stores – the brand previously sold directly to consumers online – and Sked has plans to open another 10 or more over the next five years.
Here, the founder and CEO talks about Status Anxiety’s approach to Black Friday, and the one thing he argues with wholesalers about.
Inside Retail Weekly: Christmas is right around the corner. How are your sales looking so far? Any noticeable changes from last year?
Will Sked: We’ve been growing around 20-25 per cent year on year for the last 12 months, and Christmas is looking a little stronger than last year. If we’re comparing the activity we’re doing to stimulate sales, I would say it’s reasonably similar to last year as well. We’re doing different activity but at a similar level.
IRW: There have been some mixed forecasts around Christmas this year, but it seems like Status Anxiety might be a little more optimistic than other retailers. Why do you think that is?
WS: I think there is something in the fact that we’re not trying to blow the market out of the water with our product, we’re just looking for strong stable growth that comes from the organic draw of the product. We have a core range, so that is quite stabilising. People become really familiar with the product, and they often come back for the same product again and again, even a few years later. They’re not coming back and finding a whole new range that might not have something suitable for them. I think there’s something stabilising in the fact that 80-85 per cent of our products at any given time are core. I also think it’s our value proposition.
IRW: Did you offer any Black Friday promotions this year?
WS: We did, but only for our VIP subscribers. We never discount to the general public site-wide, but we have a database of around 100,000 subscribers that we have gathered up over time – nobody has been brought in from anywhere else – and we get a really strong reaction from them.
We also [launched the promotion] early this year. We’ve always held a “get in early” sale ahead of Christmas, even before Black Friday was a thing here, but we’ve brought it forward because of Black Friday. Last year, we brought it up to the Black Friday date, but we found that wasn’t as successful, so this year, we brought it up to the Monday before Black Friday, which was just a little less competitive and noisy. But we noticed there were a number of other brands that went earlier as well, so next year is going to be a challenge again.
IRW: There is always a lot of anxiety around Black Friday and discounting in the lead-up to Christmas…whether it will hurt margins, or pull sales forward. What’s your take on this?
WS: Like I said, we’ve always done a sale, so it was never a question of whether or not we were going to do it. I think there’s definitely a percentage of Black Friday customers who would have bought products at full price, but there’s also a percentage who wouldn’t have bought at all without a discount to incentivise it. We’ve noticed the number of multi-item sales goes up quite dramatically [during Black Friday promotions]. It’s quite difficult to ascertain whether the net outcome, or net profit, is greater [by participating], if or you’re just spinning your wheels and losing margin. But from the analysis we have done, we feel that the increased volume of sales is still enough to come out ahead than if we just stayed at full price.
You’re also competing against the market forces if you don’t participate, which is what a friend of mine, who runs a brand that they’ve chosen to never discount, did. They said they could hear crickets over the weekend of Black Friday. It was their slowest weekend ever, and it’s the end of November. It shouldn’t be that way.
For us to not participate would be shooting ourselves in the foot. What it does is get product into the hands of people who love the brand and will potentially gift the brand to other people who may not have heard of it. That’s part of our strategy; we want to get our product out there because it speaks for itself. We’re confident that the more it’s out there, the more it grows.
IRW: As you say, customers are receiving dozens of emails about discounts and promotions in the span of a few days. How do you ensure that your message stands out?
WS: I think the timing is one way, but I think it’s also about the content of our mailers. We try to keep them in line with the content of the brand, which is quite eye-catching and quirky. There’s usually an element of humour, particularly in the subject heading, to try to get people to click-through.
IRW: What’s the breakdown between your wholesale and direct-to-consumer business?
WS: We sell about 35 per cent through our own website and 65 per cent through wholesale partners. That’s made up of standard wholesale, which is independent boutiques, online wholesale, which is e-commerce sites like The Iconic, Peppermayo and SurfStitch, department stores like Myer and David Jones, and overseas distribution in countries like Japan and the US. They’re all on different margins.
IRW: What’s your approach to pricing and communications, since the department stores and small boutiques you sell through may offer discounts when you don’t, or vice versa?
WS: For all of our wholesale partners, we send them brand marketing guidelines, which we ask them to affirm. Essentially that says that they need to notify us of any significant discounting, other than end-of-season sales or after Christmas, so we can have some idea as to levels of discounting that independents are doing in-store.
Because the products are core products – they’re not being discontinued – it should only be necessary to mark the products down if they’re not selling. And if the product isn’t working, we deal with it ourselves. We would rather have [our wholesale partners] send the product back and rotate it than mark it down. We offer that option, but it rarely gets taken up, because the product almost always sells without issue.
It’s a different story with the majors and The Iconic because they’re often pushing much harder for more frequent activity. We’re constantly arguing with them because they want a markdown contribution from us, so if they do a 30 per cent sale, they want us to cover 15 per cent of that discount. We also want them to do just end-of-season and Boxing Day sales, but they want to do mid-season and pre-Christmas.
For them, it doesn’t even matter whether the product is performing or not. They’re looking for an easy way to drive sales and bring people in. It’s the simplest way they can see, and they’re not as interested in protecting the brands that they’re housing. They’re more interested in just the short term, even though they talk lip service to [the opposite]. If the sales were not happening at full price, we would understand the need to do that. But even they would admit that we’re one of the highest-return full-price brands in our category. We have a constant tug-of-war over this.
IRW: Given that, do you see Status Anxiety shifting away from wholesale in future?
WS: We want it to take a multi-pronged approach, where we’re introducing the brand to new customers, and wholesale accounts are good for that…if they do a good job; that’s the challenge. But that’s why we’re opening our own stores now: to introduce the brand to new customers through a channel that we can control very closely. Online is great because we can reach new customers through social media, or do collaborations with other brands that have customers who are like-minded, or whatever the strategy is, but there is something about customers seeing the product…
Ultimately, it’s about getting new eyes to see the brand, which is why we still value our wholesale business. We’re looking to grow it, but in the right way. We’ve tightened up our criteria for independents to make sure it’s presented in the right way. We want to have our cake and eat it too in some ways.
IRW: Over the last 12 or so months, you’ve opened two bricks-and-mortar stores. How are they going?
WS: They’re going well. They still make up a small percentage of our overall business, and the margins are lower than our online store, but they’re helping to get the brand out there in the way we want it presented, and they’re making money.
We’ve got our feelers out to open another couple of stores in the right places, but we might try a shopping centre or another type of location to see how different people react to the brand and what the right combination is. It’s hard to say how the stores are impacting online, but the majority of people walking through the stores haven’t heard of us before. And that’s the reason we’re doing it, to introduce the brand to new customers.
IRW: Have you run into any unforeseen challenges or complications with the move into bricks-and-mortar?
WS: We have definitely encountered some new challenges. Two of the big ones are staffing and the distance from head office. Even though the distance is not that far – we’re in the same city – it’s a challenge because everything else we’ve done has been in-house. We could flex if someone was sick, whereas the store has stretched our resources a little bit. We’ve also found it hard to get good staff who are committed to doing things in the way we want them to be presented.
We haven’t had any issues with getting the right premises or leasing arrangements. Whether it’s a timing thing, I’m not sure, but we’ve found that we’ve been able to get some good flexible leasing options.
IRW: How many stores do you anticipate having in five years’ time? Or are you still in a sense “trialling” the bricks-and-mortar channel?
WS: We’re reasonably committed. Obviously we want to remain flexible based on what’s happening in the market, but at this point, we anticipate having between 10 and 15 stores in key locations in the next five years.
There’s quite a broad appeal for our brand, which is why it’s so successful in department stores. A 20-year-old, or 40-year-old or 60-year-old customer might buy our product. Even though the core demographic we’re aiming for is 18 to 35 years old, we find the appeal is much broader than that. By going into retail, we feel we’ll expand into markets that aren’t on social or wouldn’t find us in other ways.
IRW: What stories, trends or stats are you seeing that give you hope about the future of retail?
WS: I think we’re buoyed by the fact that while our wholesale partners are declining, we’re growing. I think it’s because there is something quite unique about our product. The materials, brand voice and price point are three things that we feel are quite unique. We don’t have much competition. Even when some stores we’re in are struggling, the feedback we get is that our products continue to sell really well.
We’re definitely not bullish with our approach to opening stores, but we see it as part of the overall growth strategy. As we continue to grow in other areas, we can expand there as well, but we’re always looking to make sure we have flexible arrangements. We won’t be looking to take on any long-term new leases in a hurry. Being nimble and able to adjust if we need to is always foremost in our mind.
IRW: At the same time, your wholesale partners need to be doing well too. If they go out of business, then they can’t sell your products.
WS: They need to be doing well for sure. If their doors close, then it’s lost business for us, and we don’t want that for them either. We know a lot of our partners personally.
But we have nearly 600 independent accounts, and while we might see three or four close a year, we would maybe put on 20 or 30 new accounts a year. There is a sense that some accounts either don’t have the right mix, or aren’t in the right area, they fail for a myriad of reasons, but someone new comes in with fresh ideas and they tend to be quite vibrant and active. Part of the strategy for us is keeping an eye out for new accounts that are doing new things.
IRW: Are you working on any other major projects right now?
WS: We’re working on a new website at the moment. We’re basically designing it for mobile, and pushing it to desktop after that. We’re finding that almost 70 per cent of our traffic is mobile, but our website is not set up for it, so even though our visits and average order value are increasing, our conversion rate is decreasing month-on-month. That’s something we want to correct.
There are some other internal projects too. We’re working on a wholesale portal, which will coincide with the launch of the new website at the end of April, and ideally we’ll open two new retail stores by then as well. We’re also just about to start development of new range. We recently launched our tech category, which is watches and laptop sleeves, and travel, so now we’re looking at what the next area will be.