By Nicole Schmidt, founder and managing partner, and Cynthia Kaufmann Gabay, consumer & retail team advisor, Oberon Securities
Investors and established retailers are taking note of the rapidly evolving intimate apparel universe and the emerging companies and entrepreneurs that are changing the shape and perceptions of this industry.
Deals like Victoria’s Secret & Co’s acquisition of Adore Me, Inc., Kim Kardashian-owned Skims’ $3.2 billion valuation after a recent private equity fundraising round, and Rihanna’s recent $125 million raised for her lingerie line, Savage X Fenty, are examples of a robust market for investment. They also illustrate some of the trends that are driving the industry forward and the attributes that make early-stage companies attractive investment or acquisition targets.
In addition to societal trends dictating greater diversity, inclusivity and female empowerment, sensitivity and outreach in design and marketing based on inclusive characteristics like size, gender and race, business trends and changing views toward intimate wear generally are having a huge impact.
Intimate wear is increasingly being worn as outerwear and companies are able to market it more effectively through social media and direct channels than they were in the past through traditional media advertising.
Functional innovation and technology are also enabling designs to combine comfort with versatility, not merely underwear as outerwear, but through new products that mesh with women’s lifestyles.
All of this is affecting valuations and interest among investors and in the mergers and acquisitions marketplace. Adoption of technology is also a major factor in driving that heightened interest.
Social media has made views – and reviews – of intimate products more accessible, creating active communities that become brand “apostles.” Direct to consumer channels give consumers more options and more information than ever about products and, in return, provide brands with extensive and immediate feedback on customer preferences, including foundational needs and trending demographic data on such things as evolving body types.
A plethora of online influencers have replaced a relatively smaller number of media reviewers. Customers are now amateur design consultants and brand advocates, able to voice their opinions openly and in the comfort of their own homes – on issues as varied as design, comfort, inclusivity and sustainability. Loyal customers keep amplifying the strength of the brand and community by posting images of themselves baring it all online – validating brand and design innovations and demonstrating return on investment in a way that historically would have been impossible.
Consumers are driving trends and the companies that can rapidly and effectively gather, analyze and act on what consumers are telling them will be the winners. Data analytics enables companies to meet customers where they are and anticipate their future buying habits.
The Adore Me acquisition, for example, gave Victoria’s Secret the opportunity to leverage Adore Me’s expertise and technology to improve its customer shopping experience, especially among younger shoppers, and accelerate the modernization of its digital platform.
Skims is a brand with a strong online sales platform and social media following, thanks to the popularity of its founder. And Savage X Fenty’s new funding will enable this previously online brand to leverage its tech platform and strong following among younger customers as it expands into brick-and-mortar retail using loyalty programs. Their technology platforms and product niche are key to their success and their attractiveness to investors. Beyond regular engagement through social media channels and loyalty programs, these brands are also using subscription services to enhance engagement with their customer base – gaining feedback that can inform brand strategy and decision making.
Investors’ interests and priorities vary depending on their strategy. Private equity and other financial investors recognize intimate apparel as a hot category and are looking for evidence of a consistent growth trajectory, strong product categories, and customized product offerings, proprietary technology platforms that use artificial intelligence, data analytics and other intelligence gathering tools to anticipate trends and deliver what customers want.
In the mergers and acquisitions market, technology is also important as legacy companies that have been slow adopters try to play catch up by acquiring promising start-ups with the capability to transition their technology platforms to a much larger playing field. Tech is not all that’s important to these companies, though. They are also focused on acquisitions that will enable them to fill holes either in the product mix or their customer base and on customer engagement strategies to adapt their product mix to evolving consumer demand.
There are headwinds to be sure. Overall economic issues – increased interest rates, recent debt ceiling uncertainty, cost and availability of talent – are raising the cost of capital and making investors cautious. But they are not going away. There is a lot of investment capital being put to work by financial investors and the M&A market remains particularly robust in the intimate apparel space.
The right mix of technology, engagement channels, analytics, customer demographics and innovative, inclusive product lines are the formula for attracting the capital or the business combinations companies need to accelerate their growth.
