Can Everlane Really Become the Next J.Crew?

Racked is no longer publishing. Thank you to everyone who read our work over the years. The archives will remain available here; for new stories, head over to Vox.com, where our staff is covering consumer culture for The Goods by Vox. You can also see what we’re up to by signing up here.

The strategy, as it's been from the beginning, is for Everlane to keep slowly rolling out classic products that deeply resonate with its growing list of customers.

"We make products that are timeless in look," explains Everlane's CEO Michael Preysman. "The clothing has a current point of view, but can also be worn in 10 years. It's a very tricky thing to pull off. In our view, the best way to be environmentally sustainable is to create really great quality clothing that lasts and that has a lasting timestamp."

Everlane officially launched in 2011, after raising $1.1 million from investors, with a simple cotton tee. It now stocks nearly 200 different items, and sells tens of thousands of that same T-shirt every month.

The brand has found its niche producing simple basics — button-down shirts, V-neck sweaters, trousers both slim and slouchy — in androgynous cuts, uncomplicated fabrics, and neutral colors. In stark contrast to fast-fashion behemoths that produce wastefully and under mysterious conditions, Everlane also gives shoppers a full snapshot of how and where its clothing is made.

Photo: Everlane

Now the company is in growth mode. In August, it tapped Rebekka Bay, the former Gap creative director tasked with fixing the troubled retailer only to have her role eliminated, to lead Everlane's product and design teams. A few weeks ago, it sent out an email blast announcing it was looking to fill almost 20 new positions in its design, creative, engineering, and marketing departments — a bold move for a company that only has 70 existing employees.

If, as many believe, Everlane is on its way to becoming the next J.Crew, this expansion phase will be crucial to its success, if not its survival.

---

The Everlane silk short-sleeve dress is just the right amount of understated and luxurious. The fabric (100 percent crepe de chine) is soft but substantial, delicate enough to create a billowing silhouette, but not too thin or slippery as to feel cheap. Brands like Uniqlo and A.P.C. make similar dresses; Uniqlo's version is made of material many steps down in quality, while A.P.C.'s is four times Everlane's price.

Everlane's dress also comes with lots and lots of context. On the site, the piece's production costs are broken down — $22.17 for materials, $12.39 for labor, $2.99 for duties — as is the markup. The dress costs $38 to make and would be sold for $190 at comparable retailers; Everlane charges $98. The site also has a rundown of the Hangzhou, China factory where the dress was made, complete with photos of the factory's workers and the facility's interior.

"Retail isn't a space where there's a lot of information," says Preysman. "It's very obfuscated. You don't know where your clothing is made or what it costs to make. You pay a price for something and you have no idea why. So that's how we went about it, with a real inspiration to change the way retail works."

Ethical sourcing and competitive pricing is all part of what the brand calls "radical transparency," which has helped earn Everlane a cult following and a 200 percent sales increase last year alone.

Preysman says Everlane is able to cut down on its costs so it can price products lower than traditional retailers by cutting out the middleman. Everlane does all of its design in-house and works directly with factories; this is how it's able to charge, say, $128 for cashmere sweaters instead of $245. Everlane now works with 14 factories in five countries and visits new facilities constantly to determine if potential partners align with the company's ethical mandate.

Photo: Everlane

"We were looking at a new factory in China to produce our new line of close-to-body stretch cotton wear and it was a total nightmare," Preysman says of a recent compliance trip. "Clothes are all over the floor, people are sitting on little chairs, bent over for nine hours a day with hunchbacks because they've been sitting like this for years. That's when we say, ‘Okay, there's no way we can work with this factory.' Even if other brands are using them, we won't produce there."

Rachel Krautkremer, an editorial director with creative agency Deep Focus, explains this element of Everlane's success thusly: Millennial shoppers care about pricing first and ethics second, so when Everlane offers similar clothing to J.Crew at a slightly cheaper price and makes its sustainability efforts known, it becomes an easy buy.

"Sixty-four percent of millennials would rather wear a socially-conscious brand than a luxury brand," she says. "It's a shift in how this generation views their clothing. They want to know where their product is coming from."

This is a factor that has not been lost on the fast-fashion sector. Jeff Trexler, the associate director of Fordham's Fashion Law Institute, notes brands like H&M and Forever 21 have touted more ethical initiatives as of late. H&M just announced a $1 million prize to whoever comes up with a way to help it reduce waste and pollution; Forever 21 made plenty of noise about the installation of solar panels in its LA headquarters last year.

"All of this is in direct response to Everlane's presence," Trexler posits. "Everlane has photos of smiling employees and clean factories abroad, and they are putting pressure on brands to follow suit, because otherwise it looks like they are hiding something."

Like many of its peers (Bonobos, Warby Parker), Everlane chose to launch its brand online in an effort to further cut down on standard retail expenses. But as Sucharita Mulpuru, an analyst at market research firm Forrester, notes, e-commerce has become more competitive than ever: "There are 8,000 places to buy a T-shirt online!" Everlane, however improbably, has managed to stake its own claim on a segment of the market.

According to The Economist, Everlane had 350,000 members signed up for its email newsletter as of 2012. Earlier this year, when the brand offered pants on its site for the first time, it had a 12,000-person waitlist. Most of its exposure has come from social media; Everlane heavily promotes itself on Tumblr and Instagram.

"I haven't seen a brand grow this fast in a really long time," says Brian Sugar, one of Everlane's investors and board members. "Making a brand like Everlane is like capturing lightning in a bottle."

Everlane doesn't release collections by season, but instead introduces products one by one, with a small run of a new item appearing on the site a few times a year. This allows Everlane's design team to incubate an idea slowly, execute it with one prototype, and test it on customers before releasing larger editions.

"We're a living assortment, constantly editing the line and adding new product that builds on what we have and is relevant to the current cultural trends," says Preysman. "We expand what's working and lightly test what we don't do already. It's a multi-year process because we want to make sure the category works and resonates with our customer. We just launched the Everlane Trench and it was a huge hit. We started with a fabric and an idea based off our Swing Trench, then built it out once there was success."

"There is always a story built around every new product," says Nick Brown, an investor in Everlane with New York City-based venture capital firm 14W. "That takes time and effort. They think about everything before something is released. They think about where it's position will be, whether customers need it, and if they'll respond to it. The design team takes their time figuring this all out because it takes a lot of time to do this well."

While Everlane doesn't have the same robust assortment as its competitors, Krautkremer says this is a conscious preference of the typical Everlane shopper and reflects the appetite of many consumers today: "People really like the convenience they offer. They like that they can sign onto the site and pick from a select few T-shirts and pants. It's not choice-overload, like with the Gap or J.Crew."

Julie Zerbo, the blogger behind watchdog site The Fashion Law, believes Everlane was also one of the first brands to execute ethical fashion in a way that didn't compromise style. It helps that Everlane's rise dovetailed with the emergence of so-called normcore fashion.

Photo: Everlane

"They do a good job at beating the stigma that ethically-made clothing has to be weird and made out of hemp for hippies," says Zerbo. "They do a really good job making it appealing without being too trendy to the point where people who buy their clothes become jaded with it after each season. They teach about simplicity and building a wardrobe of basics."

Zerbo adds Everlane has become a retailer shoppers can trust, one reason being that the clothing never goes on sale.

"We don't want to play games with anyone, because in traditional retail, brands sell 80 percent of their stuff at discount and it's really just them lying to their customer," echoes Preysman. "Our view is that we want to keep things as simple as possible for people. Wouldn't it be nice if you can go to a place and know that tomorrow and today, eight weeks from now, it's always the same price?"

A focus on the customer experience has also helped Everlane get ahead. The company has invested in technology to make its shopping experience more seamless. In March, it announced it was working with Facebook Messenger to connect directly with customers; in July, it debuted a dual shopping and weather iPhone app.

"They have very thorough sizing information on their site and they treat customers really well," Ariella Major, a 25-year-old marketing associate and Everlane devotee, says. "Their marketing emails are very inviting and they send you really nice personal emails too. You can tell a thoughtful person wrote it."

---

Last year alone, Everlane's gross profits jumped from $8.1 million to $18 million, according to numbers compiled by PrivCo. Its revenue tripled in that same time, soaring from $12 million in 2013 to $36 million in 2014. (Everlane would not confirm these numbers nor would it disclose any additional financial information.) According to Sugar, "Everlane is marching down the path of becoming the next iconic American brand."

But for all its talk of transparency, Everlane is extremely tightlipped about internal goings-on. Preysman was the only Everlane employee offered up for this story, and no one from the design or creative teams was made available to be interviewed. Repeated requests to visit the brand's New York office were declined.

Though Preysman wouldn't share future plans for expansion or customer acquisition, Everlane's recent hiring push hints at a desire to contend with big-name brands.

"It seems like they are positioning themselves to eventually compete against retailers like J.Crew and the Gap, and I think they can," says Zerbo. "J.Crew has gotten too expensive and fashion-y, and Gap has just descended down the ladder in terms of the desirability of young professionals."

Everlane, however, has a ways to go before it can stand up to these multi-billion-dollar brands. Preysman says the company has no plans to open brick-and-mortar stores and admits that the company has yet to see a profit.

"Without cash in the bank, you can't invest in the future of the company," he says. "Profit will be good to move the business forward, but we're not in it yet. In retail, it's generally quite challenging to start profiting until your company is really big."

Visibility is also a factor. While Preysman maintains he doesn't believe Everlane needs to be more aggressive in terms of consumer exposure, experts disagree. Right now, Everlane doesn't advertise — "it hasn't proven to be the most effective way to spend our time or money" — and only sends sporadic promotional mailers to current shoppers. Preysman says this strategy has worked for the company so far, but Forrester's Mulpuru underlines a simple fact: "Once they've hit everyone who's interested in Everlane, there's nowhere else to go."

Analysts are also worried the brand, like many that have come before it, may have a hard time scaling. Brown, of 14W, says the brand's biggest challenge is "to capitalize on the moment Everlane is having by fueling the business without growing too quickly."

"A lot of these companies that come out of the venture capital mill believe they can create a business and hit a homerun by expanding, when really, you're just launching a suicide bomb," muses Mulpuru. "It's a distorted way of thinking and is a product of Silicon Valley and other venture capitalists coming into the retail space who don't know retail behavior. Sometimes being small and special is a good place to be."

Editor: Julia Rubin