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How This Sustainable Cashmere Startup Brings its DTC Supply Chain Story to Stores

How does a digitally native direct-to-consumer sustainable cashmere brand drum up awareness about its first official foray into brick-and-mortar?

Pictures of goats. Randy, breeding goats. Lots of them.

Over the past week or so, New Yorkers may have noticed some of the 1,500 ads strewn across downtown Manhattan depicting the shaggy cloven-hoofed critters doing what animals do. It’s a suitably cheeky tack for Naadam (pronounced “NAH-dumb”), the 3-year-old millennial-focused cashmere label that is taking a brand born online into the real world—at 392 Bleecker Street in the West Village to be precise.

To paraphrase CEO and co-founder Matthew Scanlan: If we’re not having fun making sweaters, what are we doing?

Scanlan’s background will sound all too familiar in today’s “move fast and break things” culture. Though the New York University grad cut his teeth in private equity and venture capital, Scanlan pivoted away from the investment scene into the world of cashmere and its veritable epicenter: Mongolia. The more he learned about how traditional cashmere sourcing worked—with its markups and middlemen—the more he saw an opportunity to craft a better product at a lower cost, all while improving the livelihoods and lifestyles of the hardworking herdsmen who make it all possible.

Which is to say: for Naadam, the supply chain story is essential. Like many of today’s digital disruptors, Scanlan sees the supply chain both as an opportunity and a differentiator. It’s why the brand placed a video telling its story as the hero on its website instead of burying it somewhere in a remote corner of its digital home.

Before Naadam was born, Scanlan had some help launching a nonprofit in a remote region of Mongolia that focused on “preserving culture and heritage in the community,” he said. But that effort failed in some senses, Scanlan said, because “no matter how much we invested in breeding programs and livestock insurance, the herders would never be able to sell the raw material for more money” in a rigged system where traders set the prices.

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By eliminating the middleman, Naadam pays the herdsmen directly more for raw materials—twice as much, actually—but gains control over how that product is then sorted, spun and manufactured. That’s critically important, Scanlan noted, because how material is sorted dictates the kinds of product the raw tonnage creates. The longest fibers make the best final product, the silky cashmere that commands top dollar. But even the shorter fibers can create a great, soft cashmere—which is partly how Naadam developed the 100 percent $75 unisex cashmere sweater that sold out all 10,000 units in just three days when it launched on Sept. 18.

“Our costs are between 35 percent to 50 percent lower than most of our competitors’ so instead of taking big markups, we just lower our margin to 50 percent and we’re able to [make a $75 sweater],” Scanlan said.

Because Naadam controls its product down to the individual herds—which total roughly 1 million goats altogether—the brand can spring into action at the first sign of trouble, much as it did when Scanlan visited in May and June this year in his annual raw material purchasing trip. Concerned about the Gobi Desert’s deeply bleached golden hues resulting from a lack of rain, Scanlan, who spends a month each year in the central Asian nation sandwiched between Russia to the north and China to the south, knew Naadam had to be proactive in preparing for what looked to be unfavorable conditions.

“I hadn’t seen it like this in a long time,” Scanlan said of the grassless plains whose faded ochre tones evoke those of drought-ridden California.

When cashmere goats eat well, and that means lush, verdant grasses, they produce a higher-quality fiber. Otherwise, the fiber that comes off the animal is coarse—“like human hair almost,” Scanlan said. With little rainfall in sight, Naadam began rolling out vaccinations across flocks to improve goat health, adding vitamins to their diets and instituting selective breeding programs. It turned out to be much ado about nothing as the summer ended up as one of the wettest in recent memory once Scanlan had returned to the United States at the close of June.

But it points to how involved the brand is in every step of its sourcing and how it embraces the unpredictability that’s part and parcel of working with raw materials and their fragile ecosystems. “The terroir of wine is very similar to the terroir of cashmere,” Scanlan explained, noting that variable weather creates variable yields that can make product planning a challenge. “It’s something that never gets told or properly explained because it doesn’t benefit the industry. There’s no traceability to tell the story.”

In fact, Scanlan said bringing Naadam’s story off its website and into a physical shop was one of the biggest influencing factors when thinking about brick-and-mortar. The brand got its first sampling of store life with a four-month Elizabeth Street pop-up last year also in New York City that exceeded all expectations, the 30-year-old said.

“We realized the impact that touching and feeling product had not only on customer interactions but on the lifetime value of a customer,” Scanlan explained, describing the pop-up as a “valuable brand-building and revenue exercise.” When Naadam closed a $16 million Series A round of funding in May, much of that money was earmarked for an expansion into physical retail after the success of that initial pop-up. After Bleecker Street, which opened on Sept. 25, Naadam is planning a second New York City location on Prince Street, as well as a pop-up in the Washington, D.C., area’s upscale shopping destination, Tysons Galleria. That temporary shop, Scanlan said, will help Naadam get a feel for retail inside a more traditional shopping mall setting.

Naadam tapped Bobby Redd, the creative design studio behind experiences for Allbirds, The Black Tux and an Adidas x PopSugar collab, to bring the 1,500-square-foot Bleecker Street shop to life and convey what the cashmere brand is all about. Off-white clouds of cashmere are a prominent design theme throughout, complementing the emerald faux grasses meant to capture the fertile Gobi Desert after the seasonal rains.

There’s also what seems to be a literal cloud of cashmere forming the store’s centerpiece. Suspended from the ceiling, the cashmere cloud obscures a virtual reality headset from Oculus that brings viewers into the vibrant colors inside a yurt, the traditional tent-like housing found throughout Mongolia. It’s one of the ways Naadam wants to bring customers into its world, Scanlan said, and “translate the desert and where the product comes from and the people, more importantly, directly to the clientele.” And it’s the high-tech complement to the throwback View-Master, mounted on the wall alongside a pair of fitting rooms, that with each click brings up colorful glimpses into the far-off people and panoramas that make up Mongolia.

Today, Naadam purchases 175 tons of raw material, where a yield of 1 ton translates to about 4,000 sweaters. Scanlan sees the brand scaling to the point where it’s purchasing 1,000 tons. Of the 22,000 tons of raw cashmere in the world, nearly half—10,000 tons—comes from Mongolia, Scanlan said.

Naadam’s sales have grown from $1.5 million its first year to $7 million in 2016, $20 million last year, and between $40 million and $50 million in sales targeted by year’s end, Scanlan said. “It’s a lot of growth,” he added, “but it’s rewarding.

“The opportunity for us gets bigger and bigger,” Scanlan said, “so we just have to maximize our exposure to that opportunity and execute well.”