Founder of Instagram-famous fashion company that just raised $120 million explains its secret weapon

Lulus has a strategy for staying on top of clothing trends.

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Lulus has a strategy for staying on top of clothing trends.
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Lulus

  • Lulus is an online women’s fashion brand targeted at 20-somethings.
  • On May 16, Lulus announced that it had received $120 million in venture funding.
  • Cofounder and CEO Colleen Winter said that the business has found success thanks to a meticulous, data-driven testing process that allows it to stay ahead of fashion trends.

It might seem like women’s fashion brand Lulus has become Instagram-famous overnight, but mother-daughter cofounders Debra Cannon and Colleen Winter have been quietly building up their fashion empire since 1996.

“We had humble beginnings,” Winter, who is CEO, told Business Insider in a recent interview, adding that the company initially started off as a brick-and-mortar store selling vintage clothing.

In 2008, it transitioned into being an online-only store, selling its own collection of clothing and accessories.

Today, the company has grown to become a business that has “hundreds of millions of dollars in net annual revenue” and is growing over 50% per year, Winter said. On May 16, Lulus announced its latest round of investment, amounting to $120 million from venture capital firm IVP and Canada Pension Plan Investment Board.

Lulus also received funding in 2014, from private-equity firm H.I.G. Growth Partners. Winter declined to disclose how much that round was worth.

The secret to Lulus’ success

Cofounder and CEO Colleen Winter.

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Cofounder and CEO Colleen Winter.
source
Lulus

Winter describes the brand as “affordable luxury,” selling a mix of its private-label clothing and accessories, as well as partnering with other brands such as Free People and Steve Madden. The products cost between $16 and $300 and are targeted at the 20-something, young professional set.

This isn’t what sets Lulus apart in the eye of investors. It is its meticulous, data-driven testing process that allows the company to stay ahead of trends, Winter explained.

“We give customers what they want, when they want,” she said.

Although roughly 50 new items are added to the website every day, each one is rolled out in small batches at the beginning. Lulus then “listens to the data” to gauge how shoppers are reacting to these products before ordering more.

“We’ve developed our own approach to retail,” she said.

In doing so, the company has minimized the risk of having unwanted inventory left over, which is vulnerable to markdowns.

This is one of the main issues plaguing mainstream retailers who order up products in large quantities and run the risk of being left with large amounts of unwanted inventory if the style doesn’t resonate with consumers, or if the weather doesn’t play in their favor.

Lulus puts special focus on search engine optimization (SEO), Winter said. The focus is on driving traffic to the website, and she is frequently told by shoppers that Lulus is a brand that they “see everywhere.”

This is also partly thanks to its army of brand ambassadors, who have helped to build awareness by posting photos of themselves wearing Lulus clothing on social media. Some of these influencers receive financial incentives to promote the brand, while others are given free products.

“We are the best in class,” when it comes to driving traffic to the store, Winter said. “It’s ingrained in our culture, and every decision we make is around SEO.”