Jeremy Cai was born into a manufacturing family and he’s channeling that heritage into a business model that helps global manufacturers of high-end goods turn their extra capacity into lucrative new opportunities.
The consumer is the winner in all of this, according to Cai, a college dropout who “did the whole Silicon Valley thing” and launched a separate startup before building Italic. But he quickly pointed out that manufacturers gain from connecting with a base of consumers who don’t mind bypassing brand gatekeepers—or the markup that comes with doing so.
Italic works directly with one or two rigorously audited suppliers in each category to develop exclusive designs to be produced with the same fabric and material stocks used to make well-known labels like Celine, Christian Louboutin and Prada. Serving as sort of an “unbranded retailer,” Italic handles all of the supply chain complexities so that customers get the same post-purchase experience as they would with household brand names.
Cai readily admitted that manufacturers, based in China and Europe, assume some risk in producing Italic’s lower-than-standard minimums but the payoff is worth it as profit margins can run as high as 50 percent. Factories have been looking for something like the Italic model for some time, Cai claimed, and even more so now that “trade winds” are roiling China’s longstanding dominance in manufacturing. The only way factories have been able to make more money is to take on increasingly larger order volumes—instead of making higher-quality product at a lower volume but with much more attractive margins.
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With so much uncertainty plaguing the global demand and supply markets, many suppliers—especially those that are publicly traded or mulling going public—are eager to diversify their revenue streams. But Italic also gives manufacturers something else. “Even if it doesn’t mean a [significant] financial upswing for them, I think they still want to control the product and their sales,” Cai explained. Gaining greater control means that losing a brand client doesn’t spell catastrophe or hardship.
Italic launched in December with a membership model and today roughly 200,000 people are either members or still on the list waiting for access. “Membership is a way to control demand in the face of limited supply,” Cai noted, and as Italic grows, the membership requirement might disappear.
Members on Italic can shop items like bags, bedsheets—and a $425 leather jacket that typically would retail for north of $1,200 and is “very hot” right now, Cai said. This year the startup hopes to answer the most common customer complaint—that there’s not enough merchandise to choose from—by selling in a dozen categories, including skincare, prescription eyewear and household goods, he said. He looks for product categories with a sufficiently high margin in which consumers don’t usually have high brand loyalty and would be open to experimentation.
Until Italic fully establishes its brand and builds consumer trust, it’s shying away from size-dependent products like apparel and footwear. For now, the company is sticking to products with low return rates, Cai explained. Italic plans to evolve from evergreen, classic styles to the trendy designs appealing to young shoppers.
“We never want to get into fast fashion,” Cai said, though he has his sights set on delivering newness more frequently. Italic tries to offer new product every week but “it’s a little hard to hit that cadence,” he added.
Italic isn’t chasing the shopper who can buy a full-price Louis Vuitton handbag or someone buying an aspirational Michael Kors purse because Italic’s version would be similarly affordable, Cai explained. The startup’s value proposition will appeal to other fans of the direct-to-consumer—or as he says, direct-from-manufacturer—movement who like buying quality and craftsmanship without overpaying.
The timing of Italic’s arrival on the market coincides with the return of heavily logoed luxury but Cai sees a place for branded and unbranded wares. People might want to invest in a flashy statement piece that broadcasts their status or aspirations but they also could be okay with buying other quality products that parhaps don’t have all the branded bells and whistles attached. Millennials buy Gucci belts and bags but they also purchase from Everlane, too, Cai pointed out.
Looking to the future, Cai can see a place in the market for Italic stores. “We think offline makes sense in general,” he said. “We’re just going to take our time to get there.”