Making Money in Other People’s Closets – Rie Yano

Material Wrld has found a way to innovate in online fashion commerce, and that’s no easy task. It’s a crowded market, with tight margins. Rie Yano and her team, however, have found success by going against common wisdom. While their competitors were focused on building platforms and reducing the amount of work required by their staff, Material Wrld went the other way. They began to take on inventory risk and doing some of the most labor intensive parts of the process in house.

This is the kind of move that looks foolish on the spreadsheets, but it turned out to be instrumental in enabling Material Wrld to maintain quality, develop lasting relationships with their customers and ultimately control their own brand.

It’s an amazing, and somewhat surprising story, and it’s best if you hear it directly from Rie herself.

Show Notes for Startups

Why people feel guilty throwing out clothes How a credit card provides a physical anchor for an online brand Why traditional recycle shops need to change The need for cross-brand data in fashion commerce How Material Wrld handles inventory risk, and why? What kinds of pieces are easiest to sell online. Why doing things that don't scale pays off when building a brand

Links from the Founder

Learn about Material Wrld Check our Rie's articles on Medium Follow her on twitter @rieglobe Friend her on Facebook

[shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript from Japan Disrupting Japan, episode 58.

Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for listening.

It’s hard to innovate in online commerce today. It seems like everything has been tried before and now we’re just looking at variations on a theme. At first glance, Material Wrld seems like just another online fashion marketplace but that first glance is deceiving. There is something very interesting going on here, but before I tell you what that is, I want you to meet someone.

Online marketplaces are usually designed to be low-risk, low-capital organizations that focus on marketing building a technology platform with the buyers and sellers doing as much of the work as possible. Rie Yano, the founder of Material Wrld, however, ended up taking a very different approach. By taking on inventory risk and shifting non-scalable labor requirements onto her own team, they were able to build and scale a unique fashion commerce brand, where so many before have failed. Her reasoning may surprise you a bit, but you know, she tells the story much better than I can, so let’s get right to the interview.

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[Interview]

Tim: So, I’m sitting here with Rie Yano of Material Wrld and thanks for sitting down with me.

Rie: Thank you, Tim, for inviting me.

Tim: Great to have you here. So, Material Wrld is a fashion trade-in service and, well, rather than have me explain it, why don’t you explain a bit about what material world is and how it works.

Rie: Sure thing. Material Wrld is based in New York. We are a service that helps women easily refresh their closets. Often times, we find ourselves waking up, looking into a closet and feeling a sense of guilt or frustration in that what’s in your closet may not be what you want to wear or how you feel that day. We created Material Wrld so that you can constantly evolve your wardrobe. One day you might be feeling like you want to be a powerful woman. Another day, you might feel like you want to dress with some beautiful, emotional colors. Making sure that our service can enable that idea or feeling that you have by making the refresh very simple.

Tim: So, usually that’s done by just buying more clothes but Material Wrld has a little bit of a different approach. What are the mechanics? How does it work?

Rie: Sure. Everyone thinks about shopping for new clothing when they think about trying to become different or refreshing. Where we’re quite different is really focus on the reuse of designer fashion pieces with quality that lasts long. We know that even if one piece of fashion may not be good for you anymore, if it’s a high quality, then there is definitely going to be someone else that is going to be excited to have that in their wardrobe. So we connect second-hand clothing by using this trade-in service where a woman can easily mail in their fashion pieces that they’re no longer wearing to us and instantly get an offer to go and shop new. In the meantime, the collected fashion pieces are then re-sold to our customers so that we can then excite them with these new pieces of merchandise.

Tim: So what seems to be different about Material Wrld is you don’t simply give them store credit or send them a check. You have a very interesting system with sort of a pre-paid card, and you’re connected with several of the department stores where they can use that. Do most of your customers choose to use those credits to buy new clothing or do they choose to buy clothing that other customers have traded in?

Rie: It’s actually both. We actually started by offering gift cards to retailers in exchange and we only launched this reloadable, pre-paid debit card last fall, in 2015. And we did so because we wanted to create this card—essentially it sits in your wallet once you register with Material Wrld and it becomes so instant and easy. You don’t even have to think about the chore and the pain of trying to clean up your closet and get rid of things. All you need to do is mail things in, do nothing else, and we’ll take care of everything for you. All you need to do is check your debit card because we’re going to continue to reload it with money real time, that can then be used with our retail partners. We think of it as like a fashion currency so you can’t use it at Starbucks. You can’t go and use it to fill up your gas. It’s really focused on continuously evolving your closet.

Tim: I also love the idea of the card because it provides an anchor for your brand into your customer’s everyday experience. They’ve got this in their wallets, they’ve got some money on it, they’re constantly reminded to go spend that money, at your partners, or to send you more clothes.

Rie: That’s right. So it’s really connecting the two experiences. When you think about it, shopping for new things is like this fun sport. It’s exciting; the day you shop something, you’re excited to show people, you want to wear it to work. But then the feeling of getting rid of things is horrible. It’s painful, it’s like a chore, it takes time, and whether you’re going to donate it, sell it, throw it away—it’s not easy. It’s not. So we thought is how can we make that getting rid of fashion part something that is rewarding, and exciting, and easy, so that you can feel great about it. And you can only feel great about it if you also feel that it’s doing you good. So the easiest thing to do is to throw it away.

Tim: Right. And that’s that sense of guilt.

Rie: Oh, absolutely because you’re going and buying new things and wasting precious pieces that could be worn for many more years. The sense of guilt, when you’re just throwing it away because it’s the most convenient thing to do, is quite awful. But if you know that someone else is going to take care of it and make sure it’s going to find a new home.

Tim: It will be loved somewhere else.

Rie: Exactly. That’s an exciting feeling that you don’t have to do the work but you have chosen a service that will allow that to happen so you can really focus on the fun part of going and deciding what else is exciting for your wardrobe.

Tim: Do you find that your customers are using this service as part of their seasonal buying routine? Do you see the spike of returns from the same people every fall and every summer?

Rie: That’s an interesting question because when we started this service, we thought it would be maybe end of season, following the trends in the retail cycle. Our repeat customers actually use this every 2 months.

Tim: Every 2 months?

Rie: Every 2 months, on average. What that means is, on average, our customers are mailing us about 10 pieces of clothing each time. So every 2 months, that cycle is happening.

Tim: Huh. So that’s not seasonal.

Rie: It isn’t.

Tim: Is that just the time it takes someone to get used to or get bored with a particular piece of clothing?

Rie: For us, what we recommend—and it’s actually what I do myself—is if you have something new in your closet, it’s time to let go of something else. It’s really not about waiting until that end-of-year moment when you really have to do your big cleanout in the house. It’s a constant refresh to just make sure you have a current closet that continues to speak to how you want to dress.

Tim: Okay. And after 2 months, I guess that’s the time it takes before you realize that, no, this really isn’t for me.

Rie: That’s right.

Tim: Time to let it go.

Rie: That’s right. And a lot of things trigger that feeling. Sometimes it’s obvious things like you’re moving apartments, or you got promoted, you got married, you had kids. There’s a lot of transition moments. It makes sense that you want to refresh your wardrobe for those transitions. There are other reasons. When we talk with our customers of why anyone would want to continue to evolve their closet, it doesn’t come with any kind of specific trigger. It really is a bit more emotional and that’s why, for us, we realize that letting go of pieces of clothing, even if you haven’t worn it for a year, is a very emotional experience for our customers.

Tim: Okay. Actually, tell me about your customers because fashion in general, and even sort of the luxury consignment space, it’s fiercely competitive. So are focusing on a particular niche within that industry? Who uses Material Wrld?