Revolve IPO Will Soon Explain The Four Secrets Of Standing Up In Sixteen Years.

The Losangeles based US fashion electronics Revolve Group (hereinafter referred to as Revolve) announced that it will make a valuation of $1 billion 200 million in IPO recently (initial public offering).

Revolve owns the same name website Revolve and luxury electric business Forward.

Among them, Revolve contributed 83% of the company's sales, and the remaining 17% of its sales came from Forward.

In March of this year, Revolve launched a new website, Superdown, aiming at Z generation (born after 2000) consumers.

Revolve was founded in 2003 by Michael Mente and Mike Karanikolas.

In the IPO prospectus, Revolve has positioned itself as a "new generation fashion retailer facing the millennial generation" and a "high-end lifestyle brand".

Revolve provides more than 45 thousand clothing, footwear, accessories and beauty products, creating a deep interactive community.

This community connects millions of consumers, thousands of global fashion KOL, and more than more than 500 emerging brands, mature brands and private brands, such as Lovers + Friends, GRLFRND, RAYE and so on.

Revolve aims to change consumer shopping experience through digital channels and technologies, and redefine fashion retailing through its platform and brand, which are closely related to new generation consumers.

Revolve describes the advantages of this model: it is more targeted than department stores or popular online retailers, and offers more choices than specialized retailers.

In the first 12 months of December 31, 2017, the key financial data for Revolve were as follows:

Net sales of $399 million 600 thousand, an increase of 23.7% over the same period

Net profit of $5 million, an increase of 127.5% over the same period

Adjusted EBITDA (interest tax depreciation and profit before amortization) $28 million 400 thousand, an increase of 198.6% over the same period last year.

Gross profit margin 48.5%

Monthly independent visitors 7 million 300 thousand

The average price is 304 dollars.

In the first 6 months of June 30, 2018, the key financial data for Revolve were as follows:

Net sales of $245 million 100 thousand, an increase of 23.7% over the same period

Net profit of $15 million 800 thousand, an increase of 179.9% over the same period

Adjusted EBITDA (interest tax depreciation and profit before amortization) $24 million 300 thousand, an increase of 79.8% over the same period last year.

Fashion electric business is a very difficult business. Over the past decade, many websites have fallen down, and there are still a lot of long-term losses.

So why can Revolve stand up for sixteen years and have a good profit?

Perhaps it can be summed up in a sentence by Revolve chief marketing officer Raissa Gerona: "everything we do is derived from data."

Backend: powerful data analysis capability

Unlike most of the founders of fashion companies, Michael Mente and Mike Karanikolas do not have any fashion experience.

The data science and business background of both sides make the company's overall operation unique.

Michael Mente graduated from the business management major of University of Southern California. After he quit from University of Southern California's entrepreneurial project, he joined a local software start-up company in Losangeles, where she met Mike Karanikolas, who was responsible for data work of the company, who graduated from computer engineering at Virginia Tech.

Above: Michael Mente and Mike Karanikolas

Revolve was founded in the early days to build an e-commerce website that covers as many fashion brands as possible.

Under this goal, Revolve operated for a period of time. Until the financial crisis of 2008, when the competitors began selling goods at half price, the company decided to focus on providing specific products for a specific audience, namely, the millennial generation of women.

Revolve began to recruit niche designer brands (usually these brands do not appear in department stores such as Barneys, Macy, s), and analyze the performance of these designer brands on the website.

Revolve can accurately respond to designer's brand feedback (such as the need for more medium skirt, specific shirt color, etc.).

According to Revolve, designer brands who accept real-time feedback will usually improve their sales.

Continue to provide freshness and launch more than 1000 new models a week.

Revolve believes that traditional retailers are either too popular or too limited to continue to provide goods that are closely related to fashion trends, and therefore can not maintain close ties with young consumers.

In order to improve the supply of traditional retail goods, Revolve has set up a customized professional platform to manage business, especially focusing on developing highly automated inventory management, pricing and trend prediction algorithms.

Revolve introduces this technology to create hundreds of millions of data points of strategic assets from tens of thousands of style data and millions of customer interaction data.

This approach helps the company to provide a sense of freshness, averaging more than 1000 new models a week, and reducing the risk of fashion and inventory.

In 2017, 75% of Revolve's annual net sales came from full price sales.

At the same time, when the sale of goods is faster, Revolve's reorder platform will automatically send notifications to the seller every day. The tag system (tracking every detail from every length of clothing to button) helps the team easily identify and collect data related to modeling and tailoring.

In addition to automation systems, the manual will also intervene in decision making to determine what trend to adopt.

Revolve will contact third party brands and ask if they will add orders based on consumer demand.

When the brand can not be added, Revolve will produce itself.

Develop its own brand, accounting for 27% of total sales.

Obviously, developing self owned brands will help Revolve maintain agility, lead the trend and improve profitability.

At present, Revolve already has 19 private brands.

These private brands are produced locally in China, India and Losangeles, the United States.

According to Raissa Gerona, from design to on-line sales, the whole cycle takes only a few weeks.

Revolve has more than 40 internal designers. Under the "data driven commodity model", they will design some works around a fashion trend and sell them in the official website in a few weeks.

It still benefits from its powerful data capabilities, enabling Revolve to accurately locate customer needs.

In the first 12 months of June 30, 2018, 27% of Revolve's sales came from its own brand.

In the top 10 of the website sales, Revolve owns 8 of its own brands.

It is worth noting that the gross profit margin of private brand is higher than that of the third party brand.

Front end: the forerunner of "KOL marketing"

Revolve avoids the traditional advertising charging mode and takes the lead in "KOL marketing (influencer Marketing)".

Since 2009, Revolve has started working with influencer (KOL) in the fashion industry. At present, a community (community) comprising more than 2500 influencer and brand partners has been established, including Aimee Song, the most influential social media celebrities in the world.

As of the day when the IPO prospectus was released, Revolve has signed a one-year contract with more than 40 influencer.

Revolve will pay cash for these signed influencer, or give clothes, tours and so on.

Revolve has 3 million fans in Instagram.

Browse the Instagram home page, you can see KOL wearing Revolve clothes for holiday, attending Coachella Music Festival and other photos.

For the millennial generation, they are attracted not only by clothes themselves, but also by the way they live.

There is no doubt that "KOL marketing" has become one of the most important marketing strategies of Revolve and has benefited greatly from it.

Revolve said that so far, most of its growth has come from social media and "KOL marketing" strategy.

In the IPO prospectus, Revolve used 79 "influencer".

The millennial generation has its own consumption habits, "want now".

The advertisements in the traditional fashion magazines are often not readily available, but the cooperation mode between Revolve and influencer can enable consumers to "buy them instantly".

In the community established by Revolve, influencer often has diverse backgrounds, fashion tastes and dressing styles. This is in line with the millennial pursuit of authenticity.

Cooperation between Revolve and influencer is still possible.

Just this month, Revolve worked with Aimee Song, a Korean American fashion blogger with 5 million 200 thousand fans in Instagram, to launch a long term product line called "Song of Style x Revolve".

The product line plans to launch 40 to 60 pieces per month, with a maximum size ranging from XXL to less than 300 dollars per month.

Revolve came out last September to prepare for IPO.

Recently, Revolve formally submitted a prospectus to the securities and Exchange Commission of the United States (SEC).

According to the document, Revolve will issue 11 million 800 thousand class a common shares at a price of 16 to 18 dollars per share.

Revolve's shares will be listed on the New York stock exchange, and the stock code is "RVLV".

The IPO release price is in the middle of the expected range and is expected to raise $230 million for the overall valuation of the company to $1 billion 200 million.

Revolve said that the purpose of the IPO is to "enhance the company's financial flexibility and enable the company's A-class common stock to circulate in the open market and enhance brand awareness."

After IPO, about 43 million US dollars will go directly to the company.

In addition, Revolve plans to buy 2 million 400 thousand B shares from the investor TSG Consumer Partners and Capretto at $40 million 800 thousand (TSG will sell 7 million 100 thousand shares in the IPO, and 390 thousand shares will be sold in Capretto).

TSG invested $15 million in the company in 2012.

The remaining funds will be used to strengthen brand building and expand international operation.

Although the company has said that there is no definite plan for financing purposes, Revolve has said it may buy or invest in other brands or businesses.

It is reported that China has become the second largest Revolve market in the world next to the United States.

After the IPO, the joint CEO Michael Karanikolas and Michael Mente will continue to hold 2/3 of the voting rights of the company with its B class shares.

It is reported that Revolve will conduct IPO in June 7th.

Morgan Stanley (Morgan Stanley) and Credit Suisse will serve as the chief joint account manager of IPO.