Planning for International Growth Across Channels | Rothy's | PI Apparel

My name is Michelle McLeif. I'm a fashion consultant. I create my company like 9 years ago. I'm started 20 years ago, I started working as a fashion buyer and fashion assistant for different brands and retailers in Ecuador and later for Latin America. Later I open market for Inditex in South America and work a lot with so many retailers and brands around. At least I am teacher also and work for Metropolitan Institute for Design in Ecuador. And later I create my brand consultant to help some people. It's my pleasure to speak with Giovanni Alipori. I also see that he has an amazing CV CV with a lot of brands that he collaborate. Please, Giovanni, tell us about your journey in Rothy's and about their experience. Sure.

Good morning. Thank you for having me. It's a bit of a mix of accent, so sorry, you'll— I'm Italian. Yeah, so my background is in luxury goods, and I joined Rothy's. I don't know how many of you know the brand. Or have ever heard of it? Okay, it's good. It's a good show. Yeah, so the brand was one of the first DTC brands born out in California in San Francisco. And probably one of the, if not the only one, brand that was started to be sustainable from the get-go. So wearing Rothy's for those who've never seen it. We should have had some images. But anyways, the journey for the brand was really creating shoes without waste. So I think where a lot of the sustainability gets a lot of plays, you know, the material using recycled plastic and all of it, but really, and we do use recycled PET, but we also use other materials. And really what the brand is about is about a platform that is sustainable from the get-go. And what the founders set out to design and to create was really a brand where— sorry, not a brand, a product. And then the brand started from, you know, from the product, but really that didn't, where they were cutting out all the waste. So what they looked at, you know, when you make shoes, they're done in a very, they've been made in the same way for whatever, thousands of years. I don't know how many years we've had shoes, but whatever. Which is cutting and sewing, and so there's like a 30% waste in just the leather and the cutting and the sewing. And then from there, there's a waste in terms of production because usually it's outsourced, so you have to like plan and buy a year out or 2 years out because the materials and the amount of materials it takes. So it's a very complex supply chain, and what they really set out to do was to make shoes essentially out of knitting. And we have over 70 patents on the shoes. It took them 6 years to develop the product, bought a factory in the US, they just couldn't scale it to production. And so eventually they, Bought a bunch of knitting machines and created a factory in China. And so that's kind of like the story of Rothy's before we got to market, which was in 2018. It really took them the best part of 6 years to get to a product that was scalable and that was really sustainable in terms of waste and production time. And so where we are today is, and we've added retail and everything, but the company started as online only, so D2C. As the founder Roth, who was one of the two founders, always says, we make every shoe we sell, we sell every shoe we make. So we control 100% of the journey of the product, which allows us to, A, reduce waste in many ways. So the way it's produced, the factory, for instance, it's Platinum LED certified in China, but it's also the first ever factory in China to be a zero-waste factory. So we're really— and because we control everything, you know, we're not running into the situations where a lot of, you know, that you see in the press now, where a lot of the brands have issues with using third parties that are really not complying with their, you know, sustainability or their ethical, you know, or work labor. And so that's really helped us to you know, launch the first phase. And then the second phase, which we're really working on, is really full circularity. And again, because we own the whole journey from production to sale and back, we can really start to implement that aspect of the, of the product and really reuse the shoes that, you know, people bring back, which is a lot more complicated than it sounds. But, you know, we're, we've pledged and we're committed to be, you know, to have full circularity within the next 2 years. So I'm giving you a— all right, sorry if this was too long.

No, it's amazing. Rothy's have an amazing journey, just in sustainability. And for sure, Rothy's has become known for its focus on sustainability, and both in product design and also and store format. And I wanted to know, how does this commitment to sustainability influence your approach to creating the in-store experience? Because, you know, it's—

Yeah, so I mean, the brand is about sustainability in and out, you know, through in and throughout. The reality is, I don't know how many of you— I'm assuming you're all Americans— but most Americans don't really care about sustainability. You know, the reason why they buy these shoes is the main thing that I should say, it's comfort. So comfort and style are really the reason why we sell shoes or why people get excited about our shoes. And then you layer in the fact that they're washable, which, you know, it's actually machine washable, I should say. So you can throw them out in the machine and, you know, they come out like new, which is great. And then the fact that they're sustainable, it's like it's an added bonus, but it's not really why people buy our shoes, and it's the same with store design. So we really do it because the brand, you know, the ethos of the brand is about sustainability. That's how we were born. It was before, you know, all these kind of like buzz about green sustainability, all of it. So, you know, at a time where it wasn't suspicious and we, you know, we just do it from the get-go. So part of it is also in the store design is really making sure, You know, and again, you know, the reality is with anything that's green, sustainable technology and, you know, it's evolving every day and it's getting better and better. And because more people are doing it, which is great, it allows for things to be scalable and to be, you know, economically viable. So using products that are either recycled, FCC certified, we use our, you know, thread, which is made out of, again, recycled PET bottles and it's kind of like our fabric. You know, paint, you know, every single element is really thought through and it's obviously more expensive than using, you know, whatever, you know, run-of-the-mill products. You know, do the customers care? Maybe. You know, it's not really visible. We're not screaming, you know, there's not a sign that says made out of recycled plastic or made out of recycled wood or made out of whatever. But we are making an effort to elevate it. We just, well, we opened our flagship store here on Fifth Avenue in Flatiron in July. And we have a couple of installations that are made from artists that are made out of recycled plastic. But if you look at them, they're just interesting visually and beautiful. We're not screaming, okay, it's made out of recycled plastic. So that's kind of like the way we're thinking. And then we're experimenting with new materials that are also sustainable that are not necessarily recycled plastic.

Yeah, you incorporated recycled materials from your shoes into the design of the stores.

Yes.

Like all the plastics are around. And also what has the response with the customers? Because, and how did this Does choice help to the fidelity of the customers for the brand?

I mean, I don't want to sound too cynical, but I think consumer and customers really respond more to the aesthetic. And then if you layer in the fact that it's like, oh, but this is made out of recycled plastic, right? Then it has that wow factor, but it's not— the first element, you know, the element that attracts them is the design. And then, you know, it's the customer service and really layering that piece in, but it's not, you know, I'd say it's a positive response, but it's not what's driving the brand and it's not what's driving the community and the consumer and the excitement. It's part of it, but it's not the leading factor.

Yeah. Okay, I saw also that the sales this year grows like 16% in the first semester of the year. It was amazing because for the one of the biggest challenge in the fashion industry is grow in January because, you know, it's so hard. And tell me about the strategy that you use.

Well, I mean, the strategy, again, everything sort of harks back to sustainability. So with, you know, the company from the get-go, A, we were very lucky to have like a really strong community. And so we have a really high percentage of repeat consumers. So our, you know, we're not essentially— we're not like a lot of brands are forced to like have a high churn and you're forced to like pay to get new consumers. In our case, it's really the customer base is really loyal and they come back. So we have, you know, both online and our stores, let's say It's somewhere between 40 and 50% returning customers, which is, you know, very high, particularly for a product, you know, like ours. And the other element is really, you know, again, and this goes back to the founders creating something that's sustainable from the get-go, which meant creating a company that's profitable. So profitability was really at the core and it wasn't really just grow, grow, grow, grow, but it was really create something for the long run that's sustainable where we're not overdoing, you know, anything and where we take really a more, you know, thought-out approach to whether it's online, whether it's offline, to how we're growing. So we're not opening 100 stores. We're opening, you know, 5 to 10 stores a year in markets where we know we have customers. You know, we're launching new products, but we're not, launching a crazy amount of products. A lot of the brand is really around creating a new silhouette and then just changing whether it's the material or the, you know, pattern. And so that has created, you know, a growth that's been more paced and that hasn't, you know, sort of like you see a lot of brands where you explode and then it's kind of like goes down and then— and part of it, it's also because we were you know, not to name competitors, but we were not built on one product where, you know, if you have one product, it's like, it's kind of like it's everywhere and then all of a sudden, you know, people move on. But really more, you know, as I said before, on a platform of products that you really, you know, on a technology that you can really build on. And now we're, you know, up until now we only had flats and now we're playing with maybe wedges or heels. And so there's a lot of elements that we can sort of play with that we still haven't tapped into. And thankfully consumers are responding. And then, you know, we don't have international. I mean, there's still a lot of untapped potential and we've been very disciplined about doing it at the right time and when we were ready.

Yeah, don't grow and go down, grow down.

Exactly. And we've been lucky that consumers have responded, obviously.

Yeah, for sure. And also in my research, I saw that Rothy's have a lot of videos and guides, and you are very open with the creative design of the product. And also you share a how-to take care of the shoes, wash the shoes, and create the fidelity of the customers. How important is this for Rothy's? And how do you think about the competitors about this information that it's very open with the public?

We don't really think about competitors, to be honest. The, you know, it's quite unique, like the brand, and it's really like really about engaging with the with the customer and educating the customer. So a lot of customers don't even know that the shoes are washable, and so it's really making sure that they know how to wash them.

It's a big plus, and also it's a huge plus.

Yes, well, even for guys, I mean, honestly, it's nice just to be able to throw them in the washing machine and, you know, they come out like new. So especially, you know, white sneakers or whatever else, it's like, and you feel even the seat, it's It's a great advantage, but at the same time, you need to make sure that people don't throw them in the dryer because obviously they're going to melt, or don't wash them with hot water or any of that stuff. So it's important for people to educate because it's a new kind of product, and so people are not used to it. And again, a lot of our own existing customers didn't know that, like in stores or online, they didn't know that they were washable. It's really taking them along the journey with us and engaging with them on, you know, in a very transparent basis, which goes again on, you know, on the sustainability aspect. I mean, we're not, you know, we're effectively not hiding anything. I mean, we're just very transparent about who we are, what we are, what we do, how we do it.

And do you think that this also creates the fidelity of the customer?

I think so. I mean, customers respect, I think, you know, customers respect honesty and not being like, they don't want to feel cheated on. And so, you know, we've always been very open about things that have worked and things that have not worked. I mean, not everything goes well and nobody's perfect and that's, you know, that's totally fine.

No, this is very good because also, you know, the communication itself, It's direct with the customer.

Yeah, look, communication is key, and in our, you know, particularly for brands that were born online like we are, there's, you know, and you see it with social media all the time, I mean, with celebrities, with everybody, it's, you know, you have a core consumer that's really, really engaged. I mean, we have this customer base of self-anointed, they call themselves, Rothy's addicts. And they're really, you know, they're really, I mean, Roth is Attics, so they, you know, they go to stores if we have a release or like one time they found drawings, I don't know how, online of something that was gonna come out. So it's really, they're really super engaged and I think, you know, keeping them engaged and it's really what's built, you know, what has helped us to build the brand because they're the ones that, go out and talk about it and they're super excited and they come out when there's a new release and they come out when, you know, when we open stores, there's a customer and we had them at the store on Fifth Avenue that bakes, you know, cookies that are like made out of like our pointe shoe and sends them to like every store that we open. So, you know, you can't sort of buy that or, you know, make it in a PR or marketing. It's just, you know, it's, it's grassroots engagement that customers are genuinely excited about and like to engage. And, you know, it's great for us and it creates the community and it's a self-reinforcing element.

Yeah, maybe today the most important thing about the brands are be authentic, be clear, the communication very open with the customers. And I also, my next question is about I saw your social media and you work with the customers. Your feed, it's very organic, very easy to go, very, very clear. You don't use maybe the top models or something like this to be clear with your customer. And how, how is work this strategy, Gloria?

Look, you can look at it both ways. I think it's worked well for us, again, going back to the sustainability and to the, to the talking to that customer. We're not, you know, we're not a brand that screams. So it's not, you know, around celebrities. It's not about stunts. It's not about, you know, oh my God, did you see what they did? Or that sort of stuff. It's very, you know, clean, proper, modern. It just kind of fits the brand and the aesthetic and the design. It doesn't, it's not going to rock people one way or the other or rub them, you know, it's It's not about creating controversy just to get clicks and likes. It's again around, you know, who we are, the lifestyle, you know, we're, I mean, we have men's as well, obviously, but 90+% of the customers are women and we have kids too. But, and you know, we talk to a woman that's, you know, a busy woman. So, it's a mom, it's a working, you know, because part of the, the appeal of the product is really that you can go from the office to the gym to picking up the kids and still look proper and put together. And but it's, it really is, you know, I mean, the slogan is that we're about possibility, but it's really about, you know, kind of like having it all. And so that customer that we talked to is not someone who's gonna react to, you know, kind of like the crazy extremes. It's really a working mom for a better spending.

Yeah, for me, you are specific and create the perfect product for women because all of us have two bags and one have high heels and another one we have the flip-flops or the ballerinas. And for sure, I saw that you have the perfect trends and do you have also concepts? Existentially in your styles, the pointy style, the everything. And also this question, it's about, I saw that Rothy's is created by men, men for women, and also you're men and the creative direction is men and design is men. How it's involved the women in your enterprise?

It's probably like 98% women in the company, to be honest. I mean, the two founders happen to be two men, but the senior leadership now is all women. The— yeah, it's— I mean, it's pretty much all women. The CEO is a woman, the head merchant is a woman, head CMO is a woman, the head of design is a woman. So it's pretty much all women. Except the two founders.

How involved in the creation of these perfect trends or perfect products that are, for example, the Pointy 3?

So, the idea, I mean, you know, the idea for the product and for the brand was always from the get-go to create the sort of like a, you know, a distillation of the perfect point, loafer, driver, sneaker. So they're all called the point, the loafer for that reason, because it's kind of like taking, you know, like an ideal, like what's in your mind of a point and really distilling it down to something that's clean and modern. And that's always going to be the same. So we don't change the silhouette, we just change the effectively the upper. And so it's new colors, it's new materials, but the style, meaning the actual, uh, the actual shoes, stays the same, um, which is what takes forever to create because it's, you know, part design, part, uh, technical. And so that's always been the, the idea of like having new product, meaning new colors, but The silhouette stays the same. It's the same loafer.

Finally, maybe do you have, what advice will you give to other brands looking to create better alignment between sustainability, digital innovation, and their manufacturing process? Build your own factory. We don't have too much time, but finally, maybe to close.

Yeah, I mean, look, the manufacturing process, I think we're very lucky because we own the factory and it's it's probably, I don't know, we're probably in the 1%, if not less, which is a huge, huge advantage because we, you know, can drop 20 shoes if they sell and make more, which you can't do if you have a third-party manufacturing. I think, you know, rising tides lifts all boats. I think the fact that there's, more talk about sustainability, that everyone is at least making an effort, is great. And we also were in a very privileged situation because we control the distribution. So we're not reliant on third parties for pretty much anything. And so the conversation is really between us and the consumer, which You know, if it doesn't work, you know, we know, and if it works, we know, you know, we put it on the website today and we know tonight if it works or if it doesn't versus, you know, you're placing an order, you're having it made, you're selling it to somebody, then, you know, it's a very different value proposition and, you know, it's worked out in our favor, but there's obviously downsides in in terms of CapEx and risks.

Perfect, Giovanni. Thank you so much.

Thank you, Michelle and Giovanni, for your contribution.