TLQ 1.2 | The Foremost 50

The Foremost 50

The Lead’s Head of Research explains the selection process and key takeaways learned from 2019’s leading digital-native brands.

Following half a year of research, countless interviews and the work of an all-star selection committee, we are pleased to present The Foremost 50 List of 2019. These are the 50 high-growth, break-out, digital native and DTC brands that are reinventing and redefining the future of fashion and retail.

The Foremost 50 process and final list are designed not only to recognize break-out companies but also to acknowledge the collective trends and best-practices that signal to where the fashion and retail industry is headed. Their product offerings are not to be overlooked, but our predominant focus is on the ways they are innovating in the market, including marketing and customer acquisition, customer experience, technology implementation, channel diversity, and capital efficiency. We aim to highlight companies that not only represent the future of the industry but are also taking risks while creating investor value.

Arriving at 50 is not an easy task and along the way, we discover many companies that might be too early for this list but are on the cusp of selection. These are companies not to be overlooked and we are honored to select them to the Companies to Watch list. We are looking forward to tracking their innovation and growth over the next year.

Act + Acre (Beauty, New York, NY, CEO: Colm Mackin), Armoire (Clothing Rental, Seattle, WA, CEO: Ambika Singh), Baboon to the Moon (Accessories, New York, NY, CEO: Andy Person), By Humankind (Personal Care, New York, NY, CEO: Brian Bushell), Clare (Paint, New York, NY, CEO: Nicole Gibbons), CubCoats (Children’s, Los Angeles, CA, CEO: Zac Park & Spencer Markel), Cuup (Underwear, New York, NY, CMO: Abby Morgan), Hatch Collection (Women’s Clothing, New York, NY, CEO: Ariane Goldman), State Bags (Accessories, New York, NY, CEO: Jessica Davidoff), Swet Tailor (Men’s Clothing, Los Angeles, CA, CEO: Adam Bolden), Ten Thousand (Men’s Clothing, New York, NY, CEO: Keith Nowak), The Inside (Home, New York, NY, CEO: Christiane Lemieux), The Sill (Home, New York, NY, CEO: Eliza Blank), Violet Grey (Beauty, Los Angeles, CA, CEO: Cassandra Grey), and Willow (Underwear, New York, NY, CEO: William Herlands).

Through the years, our methodology hasn’t changed much, though the weight we attribute to each category has evolved. We start by reviewing countless nominations from our community and the brands themselves, while also conducting internal research. The analysis focuses on private companies and their execution across innovation, commercialization, media buzz, competition, team, market opportunity, and investor value creation.

Once a short-list of around 100 companies is determined, The Lead’s selection committee spends hours interviewing the CEOs of these leading DTC companies to narrow down our final selection. Throughout the interviews, we dive deep into business execution, opportunities and challenges, and emerging trends for the larger fashion & retail industry.

Here are some of the most interesting insights that we identified…

TRENDS

The Industry — Overall, the DTC industry continues to expand and mature but brands are now much more focussed on becoming category leaders in their respective niche markets as 81% of consumers plan to or do shop at direct-to-consumer brands (per Retaildive).

Physical Experiences — DTC brands continue to expand their retail footprint and invest heavily in creating unique in-store ‘experiences’. Brands are actively leveraging new technologies such as smart cars, voice commerce and augmented reality to enhance the retail experience and create stores of the future. Omni-channel shopping is also the new normal.

Marketing & Customer Acquisition — Customer acquisition cost (CAC) is the new rent and CAC to LTV (loan to value) is the new purchase funnel for DTC brands, with community and story-telling being the main drivers. 70% of Glossier’s online sales came through peer referrals (source: IAB). As the cost of advertising on Facebook and other digital channels continues to rise, alternative channels, including television and radio, are becoming more and more important. Most brands have a 360-degree marketing plan including the aforementioned channels. But the biggest piece of that pie still goes to community.

Data Obsession — DTC brands continue to innovate for ways to leverage data for sourcing, customer experience, supply chains, and delivery, among other things.

Exits — Merger and acquisition activity is at a high, as iconic brands and retailers are looking to DTC brands to help grow their presence. There were several noted exits in 2019 including Eloquii and Harry’s, both featured on 2018’s Foremost 50 list, among others.

Financing — Selling equity for growth is going out of fashion, as DTC brands are increasingly relying on alternative, non-traditional options (such as Clearbanc) for providing fantastic growth financing options.

MARKETS

Resale — The newest big trend in fashion is things that are not new, and DTC brands and marketplaces are well-positioned to fill this demand. The tremendous rise of resale (including luxury) is perhaps the biggest trend this year, with projections for the market in 2022 reaching $41B.

Size Inclusivity — The plus-size market, long ignored by traditional brands and retailers, is expected to grow to about $24B by 2020. We saw many DTC brands emerging in this space in 2018 and they continue to disrupt the market by filling the void.

The Ethical Closet — DTC brands focused on sustainability and transparency continue to see explosive growth, as these remain to be important criteria for modern millennial consumers. 57% of consumers today list sustainability as the 4th most important criteria for them when purchasing fashion.

Beauty’s Big Moment Continues — The global beauty market is expected to reach a market value of USD 805.61B by 2023. Many beauty brands are taking a page from the playbook of apparel companies like Everlane, whose “Radical Transparency” model lists the sources and origin of materials and the true cost of manufacturing. Signaling the significant category growth, this year Shiseido spent $845 million to acquire Drunk Elephant, the female-founded clean beauty brand and Foremost 50 2018 alumnus that has become one of the fastest-growing prestige skin-care companies in history.

Taken together, the 50 companies on the following pages are a strong indicator of the fashion and retail industry’s future. By understanding this group of rising stars, we believe leaders across the industry can extract best practices, apply new business models, and anticipate ever-evolving consumer expectations.

See the full list here.

Nominate a company for the 2020 list here.