From a shared workspace in Shoreditch, Threads Styling sells luxury fashion to ultra-wealthy twenty-somethings from around the world the same way they are used to chatting with their friends: via social media messaging platforms like WhatsApp, Snapchat, Instagram and WeChat.
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A recent Instagram Stories posted by Threads, called “Fresh Fendi Finds,” shows a video of a model in a denim logo-covered trench coat posing in a decadent store, a close-up of her white knee-high crocodile-skin cowboy boots and a series of photos of her gold logo earring hoops with the hashtag #hardwareheaven. Swipe up and you are connected to a personal stylist. “Hello! I would love to help you with this enquiry,” a live chat begins.
“It’s something really personal and really digital and how you can go beyond e-commerce,” says Threads Styling founder Sophie Hill. The company is not yet profitable, but sales growth has doubled annually for the past four years, putting yearly revenue “in the tens of millions of pounds,” according to a source close to the business. Revenues come from “wholesale to commission” partnerships with brands, though the company does not hold inventory, Hill explains. Now, the start-up has secured $20 million in Series A funding from Highland Europe and C Ventures.
Hill, a millennial herself, launched Threads Styling in 2010 as a personal shopping service that was entirely mobile and social media-based because it was “exciting, convenient and more personal and curated.” She started by partnering with five-star hotels in London to deliver a shopping concierge service to their guests and quickly built up a following with young, Middle Eastern royalty who not only wanted the bag of the season, but also advice on how to style it, serviced exclusively via their phones. Freelance stylists curated a constant stream of looks to post on social media, while personal shoppers offered fashion advice, sourced items and then dispatched them globally. In 2012, Hill hired her first full-time staff member. Today she has 90.
Powered by algorithmic “chatbots,” messaging-based e-commerce, or “conversational commerce,” was once believed to be the next big thing in online shopping. Facebook was particularly bullish, painting a bright future for chat-based commerce on its Messenger app. But the technology failed to take off and the hype died down. Now, the introduction of Apple Business Chat has rekindled interest in the space. Threads Styling plans to scale its business with chat bots that can handle conversations with demanding luxury customers. It also plans to add offices in the US and Asia.
Hill had the foresight to see that Generation Z, born post-1996, do most of their shopping research on social media, while their smartphone ownership is close to universal, with an average of 2 hours 43 minutes a day spent on social networks and messaging services, according to GlobalWebIndex, a consumer data analytics firm. Gen Z are also less loyal to retailers, so developing real relationships is key.
“It’s a relationship we build with the customer. We’re more like an influencer and less like a brand,” says Hill. Their shoppers are “extremely loyal” repeat buyers, who shop at full price and often buy the entire look in one of the company’s social posts.
The average shopper at Threads is 25 years old. Many of them are also ultra-high net worth individuals, defined as those with assets over $30 million, says the company’s vice president of brand strategy Rachel Reavley. Average basket size is $3,000 with a return rate below 5 percent. That compares with average order size of $373 at Yoox Net-A-Porter, $729 at MatchesFashion and $1,400 at Moda Operandi. No wonder Threads has over 250 luxury brand partners from Fendi to Chopard and Dior.
Gen Z is growing in importance for luxury brands. Currently, this generation only accounts for 2 to 3 percent of luxury market sales, while millennials make up 30 percent, according to John Guy, luxury analyst at Mainfirst Bank. But the split is set to shift. In China, half of luxury shoppers are under 30, according to research by Secoo and Tencent.
Threads is certainly not alone in targeting wealthy Gen-Z shoppers. At MyTheresa ultra high net worth individuals account for 30 percent of total revenues, and “the speed with which Gen-Z customers currently show up in this group is faster than any other customer type, although still at a small scale,” says Michael Kliger, president at MyTheresa. “We have seen a progressive increase in the number of young customers shopping with us globally and have to tailor the way we service these customers, particularly with their focus on social and mobile. They react with speed to any social content, in particular pre-launches, new arrivals or exclusives.”
“One thing we find that sets Gen Z apart from our other EIP customers is their openness to try new designers; they’re not brand loyal and instead they look for the right product and design over the designer,” says Elizabeth von der Goltz, global buying director at Net-a-Porter, referring to high-spenders that the e-tailer calls “Extremely Important People” or EIPs. “Having said that, the brands that consistently perform really well for this audience are those whose collections are more logo-focused or who offer a more streetwear aesthetic: from Gucci and Balenciaga to Vetements and Off-White. And they’re obsessed with newness.”
But physical stores are anything but dead. Most Gen-Z consumers actually prefer to make purchases in physical spaces though they may be researched, price compared and influenced by friends on social media prior to the actual transaction. That means luxury stores need to be experience-focused, Instagram-worthy, fun and include engaging customer services akin to a VIP experience, according to Tiffany Zhong, the 21-year-old founder of Zebra Intelligence, a Gen-Z consumer insights platform.
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“I think a lot of luxury brands are missing out, they think millennials are more important and they do not know how to target Gen Z,” Zhong says. “For them, luxury is stuff that’s scarce or stuff that others don’t have, limited edition items. Gen Z cares about being unique,” she continues, adding: “The experience is just as important as the product, whether its in-store or online it’s about making it unique and fun.”
(Source: The Business of Fashion )