Unicorns are having a moment — and not just on the children's bedroom walls. The mythically impressive valuations graced a number of retail businesses this year, three within days of each other, and the coveted title seems to be alighting most frequently on direct-to-consumer (DTC) startups.
Since March, Away, Casper, Glossier and Rent the Runway have all earned the title. That's in part because of the strong following they're building, Glenn Kaufman, managing director at investment firm D Cubed Group, told Retail Dive in an interview.
"They're creating not just customers, but true fans — not customers, not influencers, but true fans," he said, "and they are understanding a consumer need and delivering the consumer need in a way consistent with today's culture, and the thinking and acting of today's consumer, which is a very different thing than the way the consumer thought and acted ten years ago."
Many shoppers, especially younger ones, are craving different things than their predecessors, including an active relationship with their favorite brands and a sense of authenticity from businesses. That's manifested itself in the approach of many fresh-on-the-scene DTC brands, which cultivate social media followings by interacting with shoppers and encourage customers to give feedback, which is frequently incorporated into future products.
Away is one brand that fits that description. The retailer is using its latest funding to expand into several adjacent categories, such as apparel and wellness, and is actively using feedback "to understand what our customers want and need within these spaces," Jen Rubio, co-founder and chief brand officer, told Retail Dive in an email.
|Rent the Runway
Source: Company, except where noted. Asterisks indicate data from PitchBook.
Rubio, and co-founder and CEO Steph Korey, both feel that Away has much more to give its customers, and with the backing of an illustrious title — unicorn — and the valuation it signifies, those plans seem within reach.
"Reaching this milestone at such an early stage of the business only means that our journey is just getting started," Korey said in an email, "and our ambitions for what's next for Away will continue to scale as the business does."
At the end of the day, though, 'unicorn' is just a label adopted to describe a startup with a certain valuation. What does it actually mean for a retailer to be a unicorn — or for a successful startup to miss that funding target? Kaufman said the designation gives businesses a convenient media boost, which exposes them to customers who might not otherwise have found them, but the word itself doesn't do the companies justice.
"The term 'unicorn' is antithetical to the reality of what these companies have done because a unicorn is a fiction. What these companies have done … is incredibly real. Their valuations may feel like unicorns, but their businesses and how they operate is the opposite," he said, adding that being successful goes beyond just finding a new market to break into. In his mind, The RealReal should be a unicorn (and it may be incredibly close to becoming one) not for its valuation, but for what it has accomplished in the re-commerce space.
"There are plenty of unicorns to the investment community that have existed at every point in time, but that doesn't mean they've succeeded. What's exciting are incredible businesses that get it, incredible entrepreneurs that understand today's consumer, that understand what it is to be authentic and transparent, that understand bringing that across all channels to the consumer, and that understand doing that while still being an incredibly data-driven, analytically-oriented company," he said. "Those things aren't magic, but they require a certain type of DNA."
That DNA helped companies like Allbirds and MedMen achieve unicorn status in prior years and this year has produced four major retail unicorns so far.
|Date of unicorn status:
|May 14, 2019
It was never just about suitcases for Away's founders. The brand was always a hot startup with big plans. And those plans have recently manifested themselves in new products and partnerships, including a recent pop-up effort with Nordstrom. The latest funding round gives the company more capital to follow up on some of those dreams.
Perhaps one of the most interesting things Away has planned is an expansion into apparel, wellness and "lifestyle accessories," an indication that the luggage-focused business is looking to become much more. Those ambitions aren't surprising. Rubio told Retail Dive in October that the company had its sights set on becoming a complete lifestyle brand. "We want you to be boarding a plane with your Away suitcase and all the stuff in it be Away branded also," she said.
Now that the brand has a bigger following and more money behind it, those plans are starting to fall into place. "We're excited to figure out how else we can play a role in travelers' journeys, not just with what you use to pack, but also what you bring with you—this might include products like skincare and supplements, or thoughtful apparel for more comfortable travel," Rubio said.
|Date of unicorn status:
|March 27, 2019
Source: Casper, PitchBook
A few years after embarking on its journey to make sleep cool again, Casper seems to be the top dog in a space that is now crowded with a slew of similar startups, including Purple, Tuft & Needle and Leesa, among others. Through it all, while touting its disruption of the mattress space, Casper has also been clear about one thing: It's not just a mattress company. It sells mattresses, yes, but its bigger goal is to be a total, complete sleep company.
If that sounds familiar, it's because expanding outside a single category is a common goal for DTC brands trying to make it big. For Casper, that's resulted in massive growth plans, including 200 brick-and-mortar stores by 2021, as well as product expansions into other sleep-related areas, like bedding, dog beds, and a smart nightlight that gradually glows brighter to wake customers up in the morning and dims before bed. Part of the company's category expansion is just about thinking a step ahead of competitors, Chief Marketing Officer Jeff Brooks told Retail Dive in October.
"It's always kind of balancing, how are we going to continue to grab market share and grow, but how are we thinking three years ahead?" he said. "How are we going to disrupt ourselves and continue to disrupt ourselves so that we make sure we remain the leader in the category?"
The startup intends to use the fresh funding to "fuel Casper's category leadership and omnichannel growth," including wholesale and e-commerce channels, as well as its fleet of brick-and-mortar stores.
|Date of unicorn status:
|March 21, 2019
Source: Rent the Runway
Rent the Runway is widely credited with popularizing the retail rental model with its offer of more affordable access to upscale apparel items like gowns for, say, a wedding. The customer appeal is clear: Why spend hundreds of dollars to buy a fancy dress you might only need once when you can pay significantly less and rent it? That same model has been adopted by furniture startups. Even Rent the Runway has gotten in on the action in that space, with a partnership with West Elm for home decor rentals announced in March.
The company launched with an assortment of professional and formalwear for adults, but has since expanded beyond those categories to kids. CEO Jennifer Hyman told Retail Dive a year ago that everyday clothing now makes up the majority of the merchandise mix (and revenue). The retailer's marketing efforts have reflected that shift, with a recent promotion at Compass Coffee locations around Washington, D.C., highlighting the company's casual styles.
The success of the business has also inspired a slew of competing services, including Urban Outfitters, Ann Taylor, Express and American Eagle. With the latest funding, Rent the Runway plans to expand its assortment, grow its subscription base and further develop its reverse logistics technology and operations.
|Date of unicorn status:
|March 19, 2019
Source: Glossier, PitchBook
In the vastly popular beauty space, Glossier is carving out a space for itself with pink jumpsuit-wearing employees and Instagrammable stores. The beauty brand is laser-focused on social media and brand interaction, relying on a network of community members to spread brand love and give feedback to improve its offerings. It's made it onto lists of some of the top disruptive companies in retail, including our own list of digitally native brands to watch.
Glossier is one of several new brands reshaping the beauty space and causing traditional retailers to rethink their approach to the category. Department stores and drugstores have taken to revamping their beauty departments with a focus on services and technology in an attempt to combat the rising tide of beauty brands with more interesting experiences to offer.
Plans for the latest funding were not disclosed, though CEO Emily Weiss noted that Glossier is "building an entirely new kind of beauty company" and highlighted that Glossier's annual revenue more than doubled in 2018, reaching $100 million "as a fully direct-to-consumer business."