BRICKS AND CLICKS
Model turned entrepreneur Yael Aflalo is betting physical “tech stores” and data can turn her eco-friendly It-girl brand Reformation into a fast-fashion empire.
On an early-september morning, Yael Aflalo, 40, glides through the techheavy West Hollywood store of Reformation, her eco-friendly fashion brand. Wearing frayed cigarette jeans, a dark Reformation tee reading, “I went to Mars and all I got was this stupid T-shirt” and Chanel flats, the founder and CEO mimics the path of a shopper. She holds up a Reformation bestseller, a flowing flowered dress, then walks over to one of a handful of large touchscreens along the wall to browse everything from blazers to crop tops.
With a few taps, Aflalo can choose what she wants to try on, then go grab a coffee or flip through the racks, while behind the scenes store employees assemble her selections, deliver them to a dressing room and, when all is ready, notify her by text. In the dressing room, she can charge her phone, play her favorite music and choose from a set of mood-lighting options like “sexy time” and “golden,” which are perhaps more pleasing for trying on a swimsuit or an evening dress. From the dressing-room screen, she can ping “wizards” in the back to call in new items. “This is how people shop now, standing next to each other at a screen in a store,” Aflalo says.
Flattering silhouettes, quality and that ever-sotrendy trait—sustainability—have made Reformation wildly popular among Millennial women of certain means, who are willing to drop anywhere from $60 to $250 per item. It doesn’t hurt that the label is regularly seen on celebrities like Taylor
Swift, Rihanna and model Karlie Kloss.
With a growing number of “tech stores” like the one in West Hollywood, Aflalo is now building on that success and putting Reformation on a path to $140 million in sales next year, up from just $25 million in 2015. The incessant hustle and bustle at the company’s four tech-infused stores suggests Aflalo has cracked the code on a “bricks and clicks” strategy, a seamless meshing of offline tangibility and online convenience that seems essential to success in the age of Amazon.
While e-commerce makes up 80% of Reformation’s revenue, the stores help attract customers and boost sales. Reformation’s stores are doing so well—customers are twice as valuable to the label when they discover it through brick and mortar—that the company, which also has a handful of more traditional outlets, plans to add between five and eight tech stores next year in the U.S. at a time when many retailers are retrenching. Paris, London and Scandinavia are in Aflalo’s sights for the following year. “Although retail e-commerce is growing by leaps and bounds, the store experience is becoming more important,” says Ananda Chakravarty, an analyst at the research firm Forrester. “Companies that capture the customer’s heart and mind are going to win.”
Reformation’s stores don’t just remove pain points for shoppers—they also collect data that traditional retailers lack, everything from how long customers spend trying on particular items to which pieces convert best from dressing rooms to cash registers and which pieces shoppers browsed. Reformation merges customers’ online and in-store activity to improve recommendations. Most retailers know how many people walked in and how many bought something, but not much else. “We created a store where all the interactions are tracked,” says Aflalo, who is also Reformation’s product mastermind. (Her husband, Ludvig Frössén, is creative director.)
Aflalo started Reformation in 2009 as a side gig and took no outside funding. By 2013, she turned her attention to it full-time. The company has since become profitable and grown to nearly 550 employees. In 2015, it raised $12 million from a group of venture investors led by Stripes Group and 14W, at an estimated valuation of $87 million.
Aflalo says surveys show product design is the main driver of Reformation’s sales, with the promise of sustainability a close second. Like the fast-fashion giants H&M and Forever 21, Reformation operates on a rapid design-to-rack cycle of 42 days. But unlike cheaper fast fashion, Reformation spares its customers the notorious lines, piles of sizes and uncomfortable dressing rooms. The turnaround time limits the number of units of each style and color and creates a sense of exclusivity without designer prices.
While Aflalo started with Millennial women, her vision is to bring her collections to the masses, adding product lines that span gender and age brackets. She is betting that a focus on quality and rising environmental awareness will help Reformation take on not only standard fast fashion but also higher-end Goliaths like Urban Outfitter’s Anthropologie and Free People brands.
“Yael has created that opportunity to be a next-generation Zara,” says Ken Fox, the founder of Stripes Group and a Reformation board member. “She merges a merchant’s view with state-ofthe-art data technology to serve the customer.” For all its early success and potential, Reformation has a long way to go before it can stake a claim as a real competitor among the fast-fashion giants: Zara had revenue of $18.3 billion last year, and H&M Group, the parent company of H&M, had $27.7 billion. Meanwhile, fashion consumers are notoriously fickle. What’s hot today may not be around tomorrow. Witness Nasty Gal, a oncetrendy online fashion brand that did nearly $100 million in revenue in 2014 only to file for bankruptcy two years later, or Gilt Groupe, an early ecommerce unicorn that sold last year for a quarter of its peak valuation.
To move fast and ensure it can live up to its green promises, Reformation manufactures 60% of its clothing in its Los Angeles factory, where nearly 280 employees cut, sew and press dresses and attach zippers. There’s an on-site masseuse, and employees have health benefits and access to classes in career counseling, English and citizenship, which are popular with the company’s heavily Latino workforce. The factory is also the hub
for photo shoots, fittings, shipments and returns, and engineering. Most remaining items are made in other local factories, with a few imports rounding out the collections.
To back up the sustainability claims, Reformation says it compensates for 100% of its waste, carbon dioxide emissions and water use by purchasing “offsets” that help pay for clean water, planting forests, capturing landfill gas emissions and wind power. It uses eco-friendly and recycled fabrics, and it screens suppliers to protect against unsafe or unfair labor practices. Its labels include a “Refscale,” which shows customers the environmental benefit of each piece through a breakdown of how much CO2, waste and water they helped to save. Small changes add up: The making of a pair of Reformation “seamed” jeans, for example, consumes 196 gallons of water, compared with an industry average of 1,656 gallons, and emits 5 pounds of CO2, far less than the average of 36 pounds.
While Aflalo drives a Tesla and geeks out over sustainability, eco-friendliness wasn’t always part of her mission. The Beverly Hills native started her first fashion company, Ya-ya, as a 21-yearold model turned entrepreneur, after growing up watching her parents run a clothing shop. She briefly enrolled at the University of California, Berkeley, and then at the Fashion Institute of Design & Merchandising in Los Angeles, sold her first designs to Fred Segal and dropped out. “Every time I took the clothes I had designed to a store, they bought it,” Aflalo says. “I was like, ‘This feels right.’ ”
She spent the next decade working on Ya-ya but didn’t get serious until her late 20s. “I was just partying, being 27,” Aflalo says. In 2005, revenue peaked at $20 million. When the Great Recession hit, excess inventory bankrupted the company, leaving Aflalo with millions in debt. She took a year off, then made clothes for Urban Outfitters to pay the bills. On the side she bought and freshened vintage dresses, selling them in a Los Angeles storefront in 2009 called Reformation. The dresses made money, so she opened a second store in New York. It sold out on its first day.
A 2010 business trip to China changed her trajectory. Aflalo witnessed firsthand the wastefulness and pollution caused by manufacturing and learned that fashion is among the world’s most polluting industries. She was appalled that it took 200 to 500 gallons of water to make one basic cotton T-shirt and hundreds of years for synthetic fabrics such as polyester to biodegrade. She left China with a mission: to create sustainable clothing at an attainable price without sacrificing style.
She paid off her debts and began to focus solely on Reformation. Eco-fashion was still seen as shapeless and “granola,” but watching industries like automotive go green without sacrificing product quality convinced Aflalo that fashion was primed to change. She was right. “Yael challenged the misconception in the fashion industry that anything tied to being sustainable means that it can’t be cool,” says Miroslava Duma, a Russian fashion entrepreneur who has invested in Reformation. “It’s the perfect example of where the industry should be moving. Reformation is for a new generation of customers who want to consume with purpose.”
What’s next? Aflalo is designing a series of new product lines to broaden Reformation’s appeal. This year the company launched eco-friendly denim and swim lines, and additions to its bridal and petite collections. Aflalo aims to launch children’s clothing, handbags and shoes by the end of 2018, and she’s eyeing men’s clothing for 2020. “Our goal is to bring sustainable fashion to everyone,” Aflalo says. To do that, she knows she’ll need to keep expanding her collection of tech-chic outlets. “I want to do 100 cool stores,” she adds.
FINAL thought “Examine each question in terms of what is ethically and aesthetically right, as well as what is economically expedient.” —ALDO LEOPOLD