Private-label intimates manufacturer Gelmart International is set to expand the brand portfolio of its company-owned incubation arm, FullStride Ventures, which provides startups with funding and vertical supply-chain options.
The venture arm’s mandate is to invest in the next generation of industry disruptors in the intimates and loungewear categories by unlocking early-stage funding. Gelmart also provides expertise in product development and marketing strategies, as well as access to company-owned factories in China and Philippines. The 70-year-old intimates manufacturer, which is the largest private-label player in the industry, has partnerships with some of the world’s largest retailers, including Target and Walmart.
“We are fascinated about new ideas, white space opportunities, the ever-changing consumer, and passionate founders. We have experienced only one constant, and that is change,” said Yossi Nasser, Gelmart’s CEO and FullStride’s founding partner.
FullStride’s first investment was in intimates startup Lively, founded in August 2015 by Michelle Cordeiro Grant. The venture firm developed Lively’s supply chain, focusing on customized needs and prioritizing flexibility over speed, while enabling the manufacturing process to handle short quick test runs to gauge customer reaction before putting larger production orders in place. The direct-to-consumer brand was acquired for $85 million by intimates firm Wacoal International Corp. in July 2019. Earnouts over a four-year period pushed the total deal value to $105 million. Grant is now a strategic advisor to FullStride.
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FullStride will launch WKND Nation later this month, a DTC brand in a category deemed “style wear” that combines comfort with style. The brand’s concept is creating classic styles with a twist that combines the aesthetics of weekday and weekend apparel. It also plans to introduce a sustainable, affordable and as-of-yet unnamed basics brand this fall. In a telephone interview, Nasser said the sustainable line is “in partnership with a big retailer in the U.S.”
During the interview, Nasser said that Gelmart’s intimates know-how from supply chain to consumer can help FullStride brands become fully vertical. While that, of course, may limit some of FullStride’s investment opportunities, Nasser said there still is plenty of runway for growth.
“We’re looking into more casual wear, basics and other types of adjacent apparel categories,” Nasser said. He ruled out outerwear as a possible category for investment, but noted that socks and thermals easily fall within the bailiwick of Gelmart, which also manufactures swimwear.
The CEO said that the venture arm is funded by “some of the cash flow generated from Gelmart’s market position in its bread-and-butter business.” While there are strategic partners too, they participate on a deal-by-deal basis depending on which brands they want to help incubate and launch, he added.
“We start at the very early stage, from pre-seed to angel and we’ve [participated] in the past in [Series] A and B rounds,” Nasser said.
One of the advantages of using Gelmart’s supply chain contacts is the ability for volume production aggregation. “In most circumstances, we try to make an order in itself, but if there are some challenges with minimums and pricing, we’ll look to leverage current orders. We can leverage our factory relationships as well, since we own our factories,” Nasser said, noting that its partners also custom built a factory for Lively to support its growth.
Gelmart’s Philippines factory offers a strategic option, given that most firms that elect to exit China decide to move manufacturing to neighboring countries.
“Philippines is interesting because it used to be one of the biggest for apparel manufacturing, although now, with the exodus from China, it is not seen as one of [the countries others are moving toward]. A lot of that depends on the type of production. For high-volume basic production, it may not be right to do it there,” he said. One issue that makes it easier for brands to either stay in China or head to Vietnam over Indonesia, and even in some cases Bangladesh, is the availability in the supply of raw materials, Nasser added.
“Philippines does not have that as much, so you have to order a lot of raw materials supplies,” he said. In addition, the Philippine government has focused on the value add to its labor force, a move that has helped build a position in electronics production. “Despite this, there’s still a lot of the skill set that’s remained in the Philippines from back in the day,” he said.
Looking forward, Yasser described incubating new brands as a “unique way that a company like ours has seen itself participate in the marketplace.” It used to be that a brand would launch through wholesale accounts at the department store, but Lively has shown that the new ecosystem is online. With supply chains remaining a big challenge, Gelmart’s expertise can help provide critical resources, he added.
“We’ve seen the environment change and shift. Five years ago, it was a great time to launch a DTC brand,” Nasser said, adding that e-commerce and low customer acquisition costs allowed brands to build an infrastructure that fit the online channel. Fast forward five years, and now those costs are much higher as traditional players have gotten into the mergers and acquisitions game. “That has pushed DTC to other types of partnerships, including wholesale,” he concluded.