No venture capital or private equity money.
That’s the promise from Everlane co-founder Michael Preysman about a new apparel brand he is working to launch. The effort began just last week, days after Preysman was appalled to learn, along with many customers, that Chinese fast-fashion giant Shein would acquire Everlane.
The hand-wringing about this deal reflects a sense that it breaks Everlane’s promise to its customers — that it has sold out to a retailer whose uber-fast supply chain and bottom-basement pricing are inimical to Everlane’s dedication to curation, sustainability and, as the brand’s trademarked tagline goes, “radical transparency.”
Preysman is onto something, in the sense that Everlane’s financial woes and pressure from its backers contributed to the betrayal of its founding principles, experts say. Analysts peg the company’s debt at $90 million, which would be covered by the reported $100 million transaction with Shein. Terms of the deal were not disclosed publicly.
But the betrayal began years ago, not last week.
“They've been transitioning to fast fashion long before Shein even entered the picture, so this deal was almost an inevitable afterthought,” DeAnn Campbell, founder and chief strategy officer at StoreWyse, said by phone.
Preysman’s dismay is confounding to some because he was on the board, maybe even still CEO, as Everlane backed away from its own ethos. He co-founded the apparel brand in 2011, was chief executive officer until 2022 and served as executive chair of the board until earlier this year. He has not responded to questions for this story.
Private equity firm L Catteron, affiliated with LVMH and its founding Arnault family, bankrolled the brand in 2020. Investors often prioritize a profitable exit, rather than ensuring a company follows a path appropriate to its brand or employs people with the necessary skills. Experts say Everlane suffered on both counts.
"Rather than taking the money to do the right thing, they cut costs to do the fast thing."
DeAnn Campbell
Founder and Chief Strategy Officer, StoreWyse
Everlane had a strong start, becoming known for understated style and high-quality construction at good prices. But years ago, some say even before the pandemic, the brand began to field customer complaints about inconsistent sizing and fit and deteriorating quality. Garments that were once made with high-grade cotton and cashmere were replaced with thinner, lower-quality materials and even synthetics, several experts said. The cashmere pilled, the fabrics were thin, seams were glued rather than sewn, according to Campbell.
“When those things start diminishing — and I think that there is something with these VCs or PE firms running some of these companies — sometimes they don't have the expertise behind them,” Jessica Ramírez, co-founder and managing director of The Consumer Collective, said by phone. “Diminished quality is going to raise questions, and it will turn off the consumer, and it will make the consumer look for the next thing.”
Everlane also struggled to compete against brands like Reformation with “similar silhouettes, fabrics, even values around transparency and sustainability,” according to Liza Amlani, principal at Retail Strategy Group. They didn’t seem to do the basic homework of shopping at their rivals’ stores.
“So, I don't think that they had a distinct point of view anymore, and that's when they're like, ‘Let's just throw things in the assortment and see what sticks,’ instead of ‘Let's figure out why do our customers want to shop with us, what delights them, why are they coming to us versus others.’”
Rather than doubling down on the production approach that led to the quality and sustainability its customers valued, Everlane put new funding toward speeding things up to handle its rapid growth, Campbell said.
“They had a good supply chain, but it was a slow-fashion supply chain,” she said. “So when you have double the customers in a short period of time, it takes a lot of discipline to say, ‘We're going to grow at a more measured speed, that we can handle. Negotiate deals with manufacturers that can maintain our quality.’ Instead, they started cutting quality. Rather than taking the money to do the right thing, they cut costs to do the fast thing.”
Preysman’s desire to forgo venture capital and private equity funding indicates how intense pressure can be from these firms. The other tack is to “push back on your investors to think of you longer term,” Campbell said.
“Unfortunately, the minute you start cutting quality, it's all but over,” she said. “This is a trend that I see across a lot of these companies now. It's not driven by customers leaving the brand, it's by brands leaving the customer first.”
