ThirdLove has been named one of Forbes' Next Billion-Dollar Startups for 2018, a list of 25 companies that Forbes' editorial team, in partnership with TrueBridge Capital Partners, have determined are "likely to reach a valuation of $1 billion or more in the near future."
The lingerie startup, whose innovations include an online fit-finder tool and bras available in half-sizes, is among a handful of retailers challenging Victoria's Secret in the space, including American Eagle's Aerie brand and rival startups like AdoreMe and Lively.
Since its founding in 2012, ThirdLove has been jockeying for position among lingerie upstarts, while stalwart Victoria's Secret seems content to let them all grab market share.
The company has notched a few milestones; In 2016, ThirdLove raised $8 million and added former Victoria's Secret CEO Lori Greeley to its board. Perhaps even more important than its half-sizes (which aren't commonly found elsewhere) or even its tech (which the company seems to be constantly improving) is the brand's muted hues and pretty-but-simple styles that focus on comfort. That is resonating with consumers, especially younger women and girls, and Victoria's Secret is missing the boat, according to Jane Hali, CEO of investment research firm Jane Hali & Associates.
"The lingerie market has become a focus as consumer attitudes towards body image has changed," she told Retail Dive in an email earlier this year. "Many of the new pure-play intimate brands not only offer proper fits, but make it easy to shop online by helping consumers discover their true size. Their messaging is also modern, appealing to millennials."
As Hali noted, however, ThirdLove is not the only company with such appeal, or even the only one with helpful fit tech, so it's not alone in taking advantage of Victoria's Secret's complacency. Rival Adore Me recently announced plans for as many 300 stores in the next five years, for example, and True & Co. (which has a "fit quiz” similar to ThirdLove's) was acquired last year by Calvin Klein owner PVH.
The company has other challenges. In a press release, ThirdLove said it has fitted more than 11 million women with a bra, but its generous try-before-you-buy and 30-day return policies could mean a steep level of returns, even with its data-driven "Find Your Fit" tech. The company also sources half of its bras from China, where tariffs could hurt. CEO Heidi Zak told CNBC in August the company is working to change that, and the company didn't immediately respond to Retail Dive's inquiry into what sourcing adjustments tariffs may have wrought, now that they've been implemented. Plus, unlike AdoreMe, True & Co., Aerie and, of course, Victoria's Secret and its Pink label, the brand can't be found in any stores.
Still, ThirdLove is profitable, the company told Retail Dive Thursday, and, according to Forbes, with an estimated revenue this year of $160 million, it has captured 1% of the market despite raising only $30 million in venture capital so far.
It's not the only profitable retail startup on the list. Trendy direct-to-consumer luggage brand Away earlier this year said it achieved profitability and raked in a fresh $50 million in venture capital funding from investors like Forerunner Ventures, Global Founders Capital and Comcast Ventures. Away has raised a total of $81 million and Forbes estimates it brings in an estimated $150 million in annual revenue. Similar to ThirdLove, the digitally native direct-to-consumer brand is disrupting a retail segment in need of innovation, and doing so in a way that prioritizes lifestyle storytelling and social engagement.