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Honeylove achieved a milestone in the second half of 2022. For the first time in its four-year history, the underwear brand was consistently profitable before interest, taxes, depreciation and amortization.
Shapewear sellers saw steady sales growth by introducing new categories such as bras, underwear, and pants, reaching $61 million in revenue in 2021. Rather than the more expensive establishments outside Los Angeles, Ohio proved decisive.
Honeylove estimates it saved $400,000 a month by moving logistics to cities with lower labor and delivery costs. According to Honeylove co-CEO Igor Lebovic, this took the company’s EBITDA earnings to about $200,000 in July, doubled in August, and reached half a million in September. reached the dollar.
Lebovic said reducing back-end costs was essential as the company wanted to avoid external funding. The cost of capital has risen sharply, forcing startups to raise capital to accept lower valuations.
Honeylove isn’t the only startup to embrace frugality this year. Supply chain and marketing costs, two of the biggest spends for digital brands, are under particular scrutiny. A slowing economy and investor impatience means the clock is ticking for brands to achieve profitability.
“The strategy so far has been break-even,” Lebowic said. “Our current strategy is to generate cash.”
product power
Cost-conscious businesses pay close attention to inventory. That’s because the industry-wide oversupply of generic and unfashionable products forced many retailers to cut prices sharply over the holiday season.
Brands typically produce a certain number of items based on a revenue growth rate target. He will increase the product by 50% so that sales will increase by 50%. If a company misses its sales targets (for example, if high inflation hits consumer demand), it will be left with a mountain of unsold inventory that needs to be discounted, and profit on each item sold. Rates often drop.
AYR is taking a more conservative approach to inventory planning this year. According to Meg Covington, AYR’s chief financial officer, the cost of creating the apparel brand’s seasonal wardrobe staples, such as high-rise denim, his Breton-striped t-shirts, and Oxford button-up shirts , is often the biggest expense.
AYR will continue to introduce new denim cuts, polo shirts and button downs in lighter materials, as well as more menswear. However, this year we plan to reduce our spending to produce new items by 30%, and we plan to reduce the number of these new items produced. We will continue to sell items that were unsold last year.
“We have the luxury of sitting on a product that we can sell for multiple seasons, even multiple years,” Covington said. I have.”
AYR, which has been EBITDA positive since 2020, expects the new inventory strategy to save $1 million to $10 million this year.
Similarly, Another Tomorrow is updating its manufacturing strategy. The womenswear brand introduces bespoke options for curated seasonal pieces, including tailored suits in exclusive colors. The program helps ensure that each style the brand produces is sold, said Vanessa Barboni Hallik, CEO of Another Tomorrow.
Review of marketing mix
Online marketing remains a major and unpredictable expense for many digital brands. Many brands may be tempted to cut their overall marketing budgets this year. But experts say brands looking to bolster their savings need to invest more in cheaper forms of advertising that can help attract new customers and retain existing buyers.
“People need to diversify their marketing mix… [and] Michael Duda, managing partner at investment firm and creative agency Bullish, said: “You have to figure out where your strengths are.”
For The Honey Pot Company, buying Google search terms related to vaginal health was a cheap alternative to paid advertising on Facebook and Instagram. A feminine care brand costs, on average, 30% less to appear higher than pay-per-click social media ads when users search for phrases like “that honey brand herbal pads.”
Google Search brings 50% more traffic to The Honey Pot Company’s site than traditional paid advertising. The brand is leveraging this channel further to buy more general search terms like “sanitary napkins” to attract potential buyers looking for items like organic cotton tampons and overnight pads. We plan to earn more.
“We are doubling our investment in where people are actually searching,” said Giovanna Alfieri, vice president of marketing at The Honey Pot Company.
AYR spends about 50% of its marketing budget on its catalog, which sometimes shows the brand’s employees wearing its clothes. First introduced in 2021, the catalog helped increase repeat purchases by more than 50% in 2022.
The brand plans to send most of its catalog to existing customers in 2023 and expects to save about 25% of its spending on formats primarily as a customer retention tool. .
“Marketing focuses on the highest repeat spend,” Covington said. “Cost reduction is about optimizing spending and directing it to the most profitable channels.”
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