Forbes Asia — October 2017

FORBES ASIA

SUSTAINABLE STYLE

Bricks and Clicks

BY KATHLEEN CHAYKOWSKI

Model turned entrepreneur Yael Aflalo is betting physical “tech stores” and data

can turn her eco-friendly It-girl brand Reformation into a fast-fashion empire.

O

n an early-September morning, Yael Aflalo, 4 0,

glides through the tech-heavy West Hollywood store

of Reformation, her eco-friendly fashion brand.

Wearing frayed cigarette jeans, a dark Reformation

tee reading, “I went to Mars and all I got was this

stupid T-shirt” and Chanel flats, the founder and CEO mimics the

path of a shopper. She holds up a Reformation bestseller, a flowing

flowered dress, then walks over to one of a handful of touchscreens

along the wall to browse everything from blazers to crop tops.

With a few taps, Aflalo can choose what she wants to try on,

then go grab a coffee or flip through the racks, while behind the

scenes store employees assemble her selections, deliver them to a

dressing room and, when all is ready, notify her by text. In the dress-

ing room, she can charge her phone, play her favorite music and

choose from a set of mood-lighting options like “sexy time” and

“golden,” which are perhaps more pleasing for trying on a swimsuit

or an evening dress. From the dressing-room screen, she can ping

“wizards” in the back to call in new items. “This is how people shop

now, standing next to each other at a screen in a store,” Aflalo says.

Flattering silhouettes, quality and that trendy trait—sustain-

ability—have made Reformation wildly popular among Millenni-

al women of certain means, who are willing to drop anywhere from

$6 0 to $25 0 per item. It doesn’t hurt that the label is regularly seen

on celebrities like Taylor Swift, Rihanna and model Karlie Kloss.

With a growing number of “tech stores” like the one in West

Hollywood, Aflalo is building on that success and putting Reforma-

tion on a path to $ 140 million in sales next year, up from just $25

million in 2015. The hustle and bustle at the company’s four tech-in-

fused stores suggests Aflalo has cracked the code on a “bricks and

clicks” strategy, a seamless meshing of offline tangibility and online

convenience that seems essential to success in the age of Amazon.

While e-commerce makes up 8 0% of Reformation’s revenue,

the stores help attract customers and boost sales. Reformation’s

stores are doing so well—customers are twice as valuable to the label

when they discover it through brick and mortar—that the compa-

ny, which also has a handful of more traditional outlets, plans to

add between five and eight tech stores next year in the U.S. at a time

when many retailers are retrenching. Paris, London and Scandina-

via are in Aflalo’s sights for the following year. “Although retail e-

commerce is growing by leaps and bounds, the store experience is

becoming more important,” says Ananda Chakravarty, an analyst at

the research firm Forrester. “Companies that capture the customer’s

heart and mind are going to win.”

Reformation’s stores don’t just remove pain points for shop-

pers—they also collect data that traditional retailers lack, every-

thing from how long customers spend trying on particular items

to which pieces convert best from dressing rooms to cash registers

and which pieces shoppers browsed. Reformation merges custom-

ers’ online and in-store activity to improve recommendations. Most

retailers know how many people walked in and how many bought

something, but not much else. “We created a store where all the in-

teractions are tracked,” says Aflalo, who is also Reformation’s prod-

uct mastermind. (Her husband, Ludvig Frössén, is creative director.)

Aflalo started Reformation in 2009 as a side gig and took no out-

side funding. By 2013 , she turned her attention to it full-time. The

company has since become profitable and grown to nearly 550 em-

ployees. In 2015 , it raised $ 12 million from venture investors led by

Stripes Group and 14 W, at an estimated valuation of $8 7 million.

Aflalo says surveys show product design is the main driver of

Reformation’s sales, with the promise of sustainability a close sec-

ond. Like the fast-fashion giants H&M and Forever 2 1, Reforma-

tion operates on a rapid design-to-rack cycle of 42 days. But unlike

cheaper fast fashion, Reformation spares its customers the noto-

rious lines, piles of sizes and uncomfortable dressing rooms. The

turnaround time limits the number of units of each style and color

and creates a sense of exclusivity without designer prices.

While Aflalo started with Millennial women, her vision is to

bring her collections to the masses, adding product lines that span

gender and age brackets. She is betting that a focus on quality and

rising environmental awareness will help Reformation take on not

only standard fast fashion but also higher-end Goliaths like Urban

Outfitter’s Anthropologie and Free People brands.

“Yael has created that opportunity to be a next-generation Zara,”

says Ken Fox, the founder of Stripes Group and a Reformation

board member. “She merges a merchant’s view with state-of-the-

art data technology to serve the customer.” For all its early success

and potential, Reformation has a long way to go before it can stake

a claim as a real competitor among the fast-fashion giants: Zara had

revenue of $ 18. 3 billion last year, and H&M Group, the parent com-

pany of H&M, had $27.7 billion. Meanwhile, fashion consumers

are notoriously fickle. What’s hot today may not be around tomor-

row. Witness Nasty Gal, a once-trendy online fashion brand that

did nearly $ 100 million in revenue in 2014 only to file for bankrupt-

cy two years later, or Gilt Groupe, an early e-commerce unicorn that

sold last year for a quarter of its peak valuation.

To move fast and ensure it can live up to its green promises, Ref-

ormation manufactures 6 0% of its clothing in its Los Angeles facto-

ry, where employees cut, sew and press dresses and attach zippers.

24 | FORBES ASIA OCTOBER 2017