Bonobos: Changing Menswear, One “Khaki Diaper Butt” at a Time

In 2006, roommates Andy Dunn and Brian Spaly (now CEO and co-founder of Trunk Club) set out to solve the problem of ill-fitting men’s pants, aka the “Khahi Diaper Butt”. The pair started selling brightly-colored, tailor-made pants from the back of Spaly’s car, and made nearly $40,000 in their first six weeks. They quickly turned their hobby into a company, launching Bonobos exclusively online in 2007. During its first year in business, Bonobos grew 23 percent each month, generating $1.5 million in annual revenue by 2008. Eight years later, Bonobos is the largest apparel brand in America launched online, approaching $100 million in annual revenue. [1,2,3]

Bonobos’ success is due, in part, to the effective marriage of its business and operating models, offering great clothing and great service through vertically integrated etail.

 

The Business Model

Bonobos is built around quality customer service. The company takes pride in understanding its customer, male millenials who find the shopping experience a hassle, and what he wants. It recognizes that male buying behavior is different from female buying behavior:

 

Picture1 [4]

 

Men seek fit and style, but want to minimize time spent shopping. As such, the three pillars of the Bonobos brand are: fit, fun, and service. They offer perfectly fitting pants that customers can purchase online and have delivered in days. [5]

 

The Operating Model

Bonobos delivers on their promise of a unique, hassle-free experience in several ways:

Personalized service through engagement. Customer service agents, known affectionately as ninjas, are specially selected for their communication skills and empathy. They serve as brand ambassadors; they wear the brand and are passionate about the mission and the product. Ninjas are available through the website, via twitter, on the phone, or in-person. The Bonobos website, the heart and soul of this online retailer, is fun and engaging, reflecting their position as a friendly and casual company. On its website, Bonobos offers its “Ask a Ninja” service via phone or email through which customers may ask questions.  Guideshops, addressed in more detail below, offer customers more intimate, in-person service. Similarly, personal twitter accounts allow ninjas to engage with their millenial customers directly.  Whether interacting with customers on the phone, via social media, or in-person, these smart, friendly, empathetic employees are given the freedom to solve resolve issues as they see fit, creating a more natural shopping experience for the customer.[6]

 

Screen Shot 2015-12-05 at 8.47.08 PM [7]

 

Vertical integration and the introduction of Guideshops. Bonobos manufactures, brands, and distributes its own products. Manufacturing within the US and eliminating stores from the supply chain has translated into high-quality products at significantly lower prices. [8] Recognizing that many customers still want to be able to touch the product, Bonobos offers Guideshops, small, service-driven “experiential stores” offer one-on-one, appointment-only service. Because these stores are merely a place to try on Bonobos products (the purchasing is still done online), the stores don’t carry any inventory. This enables them to operate in smaller areas (700 to 1,200 square feet compared to 2,500) with fewer employees minimizing the cost of the store. Guideshops provide the additional benefit of increased marketing. The high touch, highly personalized stores are a good customer acquisition tool and encourage first-time customers to spend more. [5]

Variety allows product personalization. The company’s portfolio includes pants, dress shirts, suits, denim, and more. Their signature chinos come in a variety of colors, cuts, styles, fabrics, and sizes. This large selection allows for a unique level of personalization unmatched in other brands.

Commitment to quality and improvement. Bonobos stands behind its products, which are handmade in the US. Shipping is free, and it offers a 365-day return policy (90 days for a full refund and 365 for store credit). Furthermore, Bonobos is constantly seeking feedback from customers in order to improve its products and services. It uses Facebook, Twitter, and the Blog, not only to promote products, but to request feedback, poll customers, and for its engaging “Question of the Day”.

 

Alignment and what’s next?

Bonobos’ vertical integration and commitment to quality and personalization enable it to offer the superior service that sets it apart from other retailers. Its success is due to this alignment. However, despite this success, Bonobos is still very much in the startup phase. Recent analytics show a healthy base of loyal customers, but also reflect a lack of growth in site visits since the beginning of the year. Dunn attributes this to a cut in online marketing spend and a recent focus on building Guideshops. He expects to grow from 19 Guideshops to 30 by the end of 2016.  It remains to be seen whether Dunn can accomplish his goal of turning Bonobos into the number one menswear retailer in the country. [9]

 

Sources

[1] BloombergBusiness: http://www.bloomberg.com/bw/articles/2012-07-31/b-school-startups-bonobos-provides-a-tailored-fit

[2] Entrepreneur.com: http://www.entrepreneur.com/article/227010

[3] Business Insider: http://www.businessinsider.com/how-bonobos-is-maturing-into-a-major-brand-2015-8

[4] Lightspeed Venture Partners: http://lsvp.com/2010/12/16/why-lightspeed-invested-in-bonobos/

[5] Business of Fashion: http://www.businessoffashion.com/articles/founder-stories/founder-stories-andy-dunn-on-building-the-giorgio-armani-of-the-e-commerce-era

[6] ZDNet: http://www.zdnet.com/article/why-bonobos-lets-its-customer-service-ninjas-improvise-solutions-to-complaints/

[7] Bonobos: https://bonobos.com/

[8] Tech Crunch. http://techcrunch.com/2012/09/29/the-next-big-e-commerce-wave-vertically-integrated-commerce/

[9] Racked. http://www.racked.com/2015/6/11/8762431/bonobos-andy-dunn

[10] The Monsieur. http://themonsieur.com/2013/04/11/bonobos-x-the-monsieur-guide-to-menswear-spring-2013/

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4 thoughts on “Bonobos: Changing Menswear, One “Khaki Diaper Butt” at a Time

  1. You note the importance of Bonobos’ website as a way of eliminating the hassle and expense of company-owned stores as a primary mode of distribution. In fact, Bonobos has taken that idea to an extreme. I infer from your post, since the shops don’t carry inventory, the website is the ONLY channel for buying Bonobos merchandise. That itself seems pretty innovative until one considers the once-towering mail order empires of the 1890’s through 1980’s (think Sears or Landsend). But they mostly went belly up after the introduction of department stores and personal automobiles. (Of course, the internet hasn’t helped things much). With the barriers to entry so much smaller for an internet retailer, what should make me think Bonobos will suffer a different fate? How meaningful is the differentiation implied by “fit, fun, and service?” If I live in a small town, I’ll probably never visit a Guideshop, so what does “fun” and “service” mean to me? Is it so different from what Sears provided in the 1890’s and struggles with today?

  2. Interesting post and question… I wonder if Bonobos is really the new Sears though… they have a ways to go before they get to Sears scale for one… 😉 One interesting difference is that they accumulate everyone’s fit data, which is a significant asset. I haven’t used them but love Original Stitch (which is somewhat similar) for shirts – the measurements are optimized for me and it’s super easy to apply them to a new shirt. I haven’t shopped for a shirt at a traditional retailer since I started using them…

  3. I was introduced to the brand through Nordstroms actually which I think is a perfect complement to their high-touch service model at etail and Guideshops. I think it gives them greater brand awareness but I wonder what percent of their sales is actually through this channel and how it has affected their back end / need for investment as they adapt their strategy to satisfy Nordstrom as a distributor.

  4. I’ve always found Bonobos to be a fascinating company. I feel like it was one of the first to capitalize on the ability to have a vertically integrated clothing store through the e-retail channel, and do so by focusing on men’s clothing, which traditionally was thought to have less opportunity for innovation and creativity than women’s clothing. They then capitalized on the transition from being 100% e-retail to building brick and mortar stores to aid their business model and foray into being an omni-channel retail company. Now Bonobos is offering women’s clothes with a similar “high-quality, great fit and affordable” mindset that their menswear adheres to. I will be interested to see how they try to stay ahead of other omni-channel retail companies in the coming years!

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