Digitally-native brands are entering more wholesale partnerships and breaking ground on their own retail footprints as they seek out cheaper acquisition methods and learn the power of creating an offline experience. At the same time, traditional brands are taking on digital and direct-to-consumer channels—an inversion of the digitally-native brand trajectory. As brands of all sizes and ages increasingly embrace a multi-channel strategy—each channel has its own pros and cons—this shift illustrates that relying too heavily on a single channel, even if a brand exercises authority there, can be highly problematic in the long term. After the digital revolution, 2018 illuminates that diversification is still necessary to stay ahead of the pack—something that will likely never change.

Featuring case studies on:

Class I Brands

Casper, Comme des Garçons, Harry’s, Ralph Lauren, Rimowa, Tommy John

Class II Brands


Class III Brands

Fenty Beauty

The structure and framework of the report has also been updated from last year. Fast or Frivolous 2017 determined three brand classifications:

  • Heritage: Brands that existed before the internet, mainly as product and marketing companies that focused on designing and manufacturing reputable products, which they would distribute wholesale or via retail.
  • Digitally-Native Phase 1: Brands that took existing products and sold them on internet.
  • Digitally-Native Phase 2: Brands founded after 2012 that started online and worked to build communities around their products and create lifestyle brands.

We have revised our brand criteria to more accurately reflect interactions and evolutions within the landscape, decoupling the origin of the brand from the purpose it serves.


  • Digitally-native: the brand started online only.
  • Traditional: the brand started either offline or both online and offline.


  • Class I: Product companies. (Many of these brands may pitch themselves to be “lifestyle brands,” but they remain product companies.)
  • Class II: Companies that create community around their products or brand for commercial benefit.
  • Class III: Brands that create products that serve as a vehicle that propel a value system or a movement forward.

All the data in this report comes from publicly reported information, book and data sources. Fundraising information comes courtesy of Pitchbook; Earned Media Value (EMV) via Tribe Dynamics.

We calculated averages or estimated when numbers from multiple sources differed. Because some of the brands we studied are private companies, we confirmed information to the best of our abilities.

Casper (Digitally-Native, Class I)

Casper was founded in 2014. It made $30 million in sales in its first year, which rose to $100 million the next year. In 2017, Casper reached $300 million revenue, placing it in our $251-$500 million revenue bucket for 2018.

Casper made its mark with digital, direct sales, but turned to wholesale in order to acquire customers and keep growing more efficiently than digital advertising would allow.

Though it began as a direct-to-consumer brand, the company didn’t wait too long before it decided to expand with wholesale. In July 2016, Casper began selling at West Elm, followed by Target in June 2017 (which almost acquired the brand) and Amazon in 2014. (Markedly, Casper never announced its Amazon store, most likely because attracting attention to the ecommerce marketplace would divert from the brand’s direct sales. The company also does not allow shoppers to redeem ad coupons on Amazon, incentivizing consumption on

In order to acquire more customers, the company also went offline with owned retail. In 2015 and 2016, it began a cross-country tour with its napmobile—a trailer that included four sleeping pods. After testing pop-ups in New York, LA and London in 2016, it announced 15 pop-ups across the U.S. between September 2017 and spring 2018, dovetailing as a campaign for its new mattress product, the Casper Wave. One of these pop-ups found a home at Nordstrom, which sold Casper products in select stores and online between July and August 2018.

Casper then opened its first permanent store in New York—its top market—in February 2018. Since then, it has expanded to 19 current owned retail locations, with plans for 200 more by 2021. Central to opening brick-and-mortar has been Casper’s denunciation of the traditional mattress store experience. In its attempt to remove the awkwardness of testing a mattress in front of a sales associate, its New York flagship has six “bedrooms” for customers to lie down in semi-privacy. The company has further rejected traditional mattress retailing with its new experiential retail concept, the Dreamery, where visitors can pay to nap on Casper mattresses in complete privacy (see the Digital Marketing section for more details).

Casper has raised a significant amount of funding—$240 million to date—and remains unprofitable. Likely, the move to sell wholesale was founded in Casper’s need to acquire new customers, which West Elm, and especially Target and Amazon, provide as mass retailers—despite the margin cut. In turn, the exposure and resulting sales from wholesale have helped support Casper’s owned retail efforts. Though a more expensive venture, Casper was smart to test the waters, inaugurating its brick-and-mortar strategy with a trickle of pop-ups in 2016 that only this year morphed into permanent stores. According to the company, its physical stores make more than $1,500 per square foot.

Casper is far from the only direct-to-consumer mattress brand and there is no sign that competition will die down anytime soon. Particularly with its napmobiles and more recently, with the Dreamery, the more innovative Casper can be with mattress retail, the better poised it will be to capture full-price sales and stay ahead of competitors. The brand’s most recent $170 million investment in June 2017 will help it expand its brick-and-mortar presence, but breaking ground for 200 stores will surely require more investment—something the brand may be able to achieve if it chooses to file for an IPO (something it’s considering since the latest fundraise).

Comme des Garçons (Traditional, Class I)

Founded in 1969 by Rei Kawakubo, Comme des Garçons opened its first retail store in Tokyo in 1975, later adding locations in Paris and New York in 1982 and 1983, respectively. The company also pursued wholesale channels—in 1980, Comme had its products in 150 third-party doors, including selling through the London department store Browns in 1981. Comme des Garçons made more than $280 million in 2017 revenue and has raised revenue to at least $300 million in 2018, placing it in our $251-$500 million revenue bucket for 2018.

Comme des Garçons balances a selective wholesale strategy that limits exposure of its labels to maintain exclusivity.

Comme des Garçons has maintained many of its wholesale accounts over the years, but always remained selective about permeation in order to preserve brand prestige. Core to this strategy is Dover Street Market, the conceptual department store, founded by Kawakubo in 2004. The multi-floor store now exists in six cities—London, Tokyo, Singapore, Beijing, New York and Los Angeles—and sells Comme des Garçons brands (there is a heavy focus on PLAY, one of the company’s more accessible labels), in addition to a high-low mix of streetwear brands, nascent designers and established luxury brands like Balenciaga and Dior that wholesale to DSM. Stores are revamped each season—twice a year—abiding by the Japanese concept of “tachiagari,” or “beginning.” This cycles in new brands that redesign the space so that Dover Street Market mirrors a gallery or installation, embracing aesthetic collision and collaboration. Dover Street Market also acts as a sort of brand incubator for up-and-coming designers, parallel to Comme des Garçons as a brand platform; the brands do the designing and retail conceptualization, while Dover Street Market handles operations and inventory.

In selling Comme’s own brands, Dover Street Market acts as owned retail while still giving the appearance of wholesale—in fact, Comme’s own brands saw a 35% profit increase at Dover Street Market in 2017. Today, Dover Street Market also comprises 35% of Comme’s total revenue.

Comme des Garçons uses owned retail to experiment with new concepts, making each store exclusive and a destination in its own right.

Comme des Garçons’ retail and merchandising strategy favors a scarcity-minded formula, which helps to preserve the brand’s reputation. Products are rarely discounted, which prevents brand dilution, many of the lines circumventing seasonality altogether. In terms of aesthetic, the first owned retail stores opened in the 70s and 80s stood apart for the way they played with minimalism and excess, space and emptiness. Each boutique is home to a distinctive design and remains a destination in its own right.

The company’s owned retail footprint—now 45 stores, all fully owned by Kawakubo—also embodies an exclusivity-minded approach. In 2004, the company opened its first “guerilla store”—an early form of the pop-up that existed for only one year in Berlin in order to sell surplus inventory at full price. Since then, Comme des Garçons has brought the concept to more than 20 locations, from Ljubljana to Helsinki, Barcelona to Los Angeles. Predicated on ephemerality, the stores were barely renovated. They were also intentionally located outside of city centers and shoppers were limited to spending a maximum of $2,000. Altogether, the concept united geographical, product and temporal scarcity, limiting supply in order to maximize demand, and always in a way that bolstered Comme des Garçons’ identity and ethos.

Overall, the company’s retail strategy has helped to retain control over its own brand presence, hindering overscaling and overexposure. More recently, Comme has followed shoppers online—in July 2018, it launched its 18th line, CDG, which it plans to sell predominately direct-to-consumer.

The rollout for CDG is a microcosm of the company’s broader retail strategy, while inhabiting an intentionally digital space. Two months before launch, Comme des Garçons created a promotional capsule collection called CDG Breaking News that acted like a shoppable press release (and marketing that the brand controlled itself). When CDG debuted, it sold online and at Comme des Garçons’ Japan stores first—in line with the goal of selling CDG 80% direct-to-consumer—and later made its way to Dover Street Market in Los Angeles (the newest department store location). Three months after launch, it arrived to all of Comme des Garçons’ locations.

Moving forward, CDG’s ability to operate within the vast Comme des Garçons network will depend on how prepared the parent company is to meet the demands of ecommerce, how it continues to market the brand digitally in a way that stands out from the crowd and how its brick-and-mortar presence reflects this online shopping experience. Though it’s not yet clear how CDG will resonate with customers, the parent company is smart to diversify and experiment with online channels in order to maintain relevance in the digital age (though so far, it’s doing so in its own style and the site looks nothing like those of other direct-to-consumer brands). As a traditional brand, entering the direct-to-consumer space points to the limitations of existing in any single channel—a shift that many digitally-native brands are also making as they broach wholesale and owned retail. Adding an intentionally direct-to-consumer option to its platform of brands is supplementary to Comme des Garçons’ ecosystem as a whole as it focuses on something the other lines do not while still utilizing the parent company’s expertise in design and production.

Harry’s (Digitally-Native, Class I)

Harry’s started selling direct-to-consumer on day one and pursued vertical integration soon after.

Harry’s launched in 2011 as a subscription shaving brand. The company bought a factory in Germany in 2014, allowing for vertical integration, likely in order to appeal to investors appetite for better margins and more control over its supply chain. Along with competitor Dollar Shave Club, the two digitally-native shaving companies had a combined 12.2% share of the U.S. men’s razor market by 2017, up from 7.2% two years earlier. In turn, legacy player Gillette’s share fell 54% in 2016, down from 70% in 2010—a clear sign that digital brands have usurped market share from traditional industry players.

Harry’s became profitable on a unit basis in 2018 and is growing at a 50% rate this year. The company made approximately $250-$300 million in 2017 revenue, placing it in our $251-500 million revenue bucket for 2018. The company has raised a total of $475 million in funding to date—more than any other digitally-native brand—and is valued at $1.7 billion, almost six times its 2018 revenue.

While Harry’s started direct-to-consumer, it quickly embraced wholesale and other non-subscription sales in order to grow sales as quickly as it needed to.

After existing online only, Harry’s began wholesaling products at Target in 2016, as well as J.Crew. This shift reflected Harry’s knowledge that a massive customer opportunity awaited the brand in physical stores, especially those of mass retailers, which have long been the go-to destination for shaving needs. It also gave shoppers a way to purchase products outside of a subscription—a common business model for digitally-native brands whose wide dissemination has led to consumer fatigue. Thanks to Harry’s previous factory purchase, the company was in better shape than most other direct-to-consumer brands that are forced to go into wholesale, thereby earning an additional margin from manufacturing its products. While Harry’s likely makes less money on each wholesale purchase than on those from its own site, these economics are still manageable as the brand invests more in the channel.

Harry’s continued movement along this trajectory confirms this hypothesis. In May 2018, Walmart also began selling Harry’s products in 2,200 stores (fewer than half of the mass retailer’s footprint, but still significant for a digitally-native brand), as well as on its ecommerce site. These retailers have also put significant marketing behind Harry’s brands, giving it space that brands normally have to pay a lot of money for. At Target, Harry’s became the number-one brand in non-disposable razors, and soon rose to the number-one position in shave prep, post-shave, face wash and body wash at the retailer, increasing Target’s “wet shave” year-over-year growth by 9% in only 13 weeks. Today, half of Harry’s business is direct and the other half is wholesale.

Forming a holding company gives Harry’s new opportunities for higher margins—as long as it does not invest too heavily in the wholesale channel.

As of now, Harry’s has no owned retail space (its barber-shop-meets-retail store called the Corner Shop, which opened in New York City in 2013, closed this year) limiting its in-store presence purely to wholesale. Although the wide breadth of customers enjoyed by Target and Walmart in particular brings Harry’s in touch with a much larger pool of potential shoppers, it’s not clear how many of these consumers convert to Harry’s subscriptions, which provide the brand with better margins and the ability to reclaim the customer over time. While the brand is currently experiencing strong sales at Target, the move to mass-market retailers reduces Harry’s to just another razor brand in the shaving aisle, which it will have to keep in mind as time goes on so as not to fall victim to the ongoing decline that legacy players like Gillette are currently experiencing. Branching out into new categories is one way to ensure that Harry’s isn’t fully reliant on the shaving market—it also aligns with the company’s long-term goal to be more than just a razor brand.

In 2018, Harry’s also said it was transitioning into a holding company, Harry’s Holdings, spurred by its latest $112 million fundraise in February. The company subsequently debuted its first new brand in October (see more in the What has driven the brand to expand into a holding company or multi-brand platform? section): Flamingo, for women’s razors and blades, shaving cream, wax kits and body lotion, which sells à la carte rather than only via subscription as Harry’s men’s shaving brand originally launched.

Moving forward, it will be interesting to see if and when Flamingo enters wholesale partnerships of its own, or if the holding company decides to broach the owned retail space—if it does, expect both brands to be sold in the same place. These questions will become increasingly relevant as Harry’s creates and invests in new brands that broaden its category reach from shaving to household, wellness, baby and pet products, as well as cosmetics. If all of these brands materialize, Harry’s could eventually build a retail store serving as a modern-day drug store, which sells its own suite of brands exclusively. It would also make sense that all of its future brands launch online first, or at least in tandem with an in-store release, given the holding company’s strengthening expertise in multi-channel strategy.

Ralph Lauren (Traditional, Class I)

As a men’s clothing salesman in the sixties, Ralph Lauren began producing his own line of menswear in 1967, selling wholesale to specialty stores. While he was approached by Bloomingdale’s to sell his ties at the department store, the founder demurred at the retailer’s conditions: to trim the width of the ties and remove the designer’s name from the label. However, Bloomingdale’s reached out a year later, forging Ralph Lauren’s first department store deal in 1968. In an effort to build an exclusive reputation based in style rather than profit, Lauren rejected wholesale business from the men’s chain store Wallach’s, as well as Macy’s. Approached by the suit manufacturer Norman Hilton to design compatible ties and shirts, the designer also refused, seeking to maintain autonomy over his work.

That same year, the founder of Norman Hilton lent Lauren $50,000 to grow his brand (what would be approximately $363,300 today), receiving 50% equity in exchange. In 1971, Ralph Lauren opened the Ralph Lauren Polo Shop, a shop-in-shop at Bloomingdale’s, selling all of his products in one designated area—a revolutionary merchandising scheme at department stores that helped solidify a full Ralph Lauren look.  

After being officially incorporated in 1971—five years after its founding—the company opened its first standalone retail store in Beverly Hills, expanding its lines in the meantime to women’s shirts and then a full-fledged women’s collection. (It did not open a flagship location until 1986 in New York City, 19 years after the company was founded). In 2000, the company launched its direct-to-consumer site,, which became in 2007. The company made $6.2 billion in 2017 revenue, placing it in our Billion-Dollar Brands revenue bucket for 2018.

Wholesale served as the foundation that eventually built the legacy brand Ralph Lauren.

Central to the brand’s expansion was its strategic wholesale partner Bloomingdale’s, which Ralph Lauren utilized as a vehicle to debut new lines and tap into a broad audience. In 1978, for example, Ralph Lauren debuted its first men’s and women’s fragrances at Bloomingdale’s, before introducing them at its own retail store. The company also launched a new brand, American Living, in 2008, which was sold exclusively at JCPenney.

But particularly at the beginning, exercising wholesale relationships poised Ralph Lauren to sell profitably and grow sustainably. It lay the responsibility of acquiring customers on the department stores, while giving Ralph Lauren insights that helped inform product assortment and development, which the founder could spend time perfecting. This freed up the brand’s time and resources to focus on aesthetics and design without having to deal with owned retail, which developed Ralph Lauren into a cultural touchstone of Americana and aspirationality. It also meant that once Ralph Lauren launched its own store in Beverly Hills—and certainly once it opened the doors to its New York City flagship—it had a significantly established customer base of its own.

Ralph Lauren is pivoting more to direct-to-consumer sales as its wholesale customers—mostly department stores—struggle.

Of the legacy and traditional brands studied, Ralph Lauren currently maintains the most robust wholesale strategy. The company wholesales its apparel, accessories and home furnishings—including the luxury Ralph Lauren Collection and Ralph Lauren Purple Label lines—at mostly upscale and mid-tier department stores, as well as specialty stores and golf and pro shops (some of these retailers also sell the brand on their ecommerce sites). In 2018, the company had its products in 12,226 third-party doors, compared to 466 of its own retail stores. Its top three wholesale customers (with Macy’s at the apex) accounted for 19% of total net revenue, or $1.17 billion.

Because Ralph has one foot planted securely in the wholesale door, it must continually expend resources to prop up the channel even as its prospects dim. This is particularly challenging considering the brand’s department store presence since these storefronts are struggling and have turned more heavily to discounting and other forms of promotion in recent years that degrade the Ralph Lauren brand.

In 2016, Ralph Lauren launched its Way Forward Plan and is working to scale back its wholesale business. The next year, it cancelled approximately 25% of its orders at department stores, and began restricting the number of off-price retailers that sell its products. But the company’s wholesale presence is so integral to the company’s financial health that this move contributed to a $511.4 million net revenue decrease in North America in 2017. Despite the financial burden this poses, Ralph needs to pull itself out of the wholesale-heavy hole it dug for itself given stagnating sales at department stores.

Despite creating a strong foundation through wholesale accounts, Ralph Lauren’s current status illuminates the brand erosion and financial woes that come from focusing too heavily on third-party retailers for too long, especially when they come at the expense of digital growth. As they enter wholesale deals of their own, digitally-native brands can learn from Ralph’s mistakes, striking a balance that prioritizes owned channels with higher margins and greater control.

Rimowa (Traditional, Class I)

Rimowa became an established legacy brand selling wholesale, but owning production.

Rimowa was founded as Görtz & Morszeck in 1898 in Cologne, Germany, and renamed Rimowa the 1930s. The brand’s iconic grooved aluminum suitcases first debuted in 1950.

For the majority of its long history, Rimowa sold through a wide range of wholesale channels—from high-end department stores like Selfridges to local luggage shops. It always benefited from owning a factory in Germany and being vertically integrated. Starting in 2008, Rimowa expanded production facilities to new locations in the Czech Republic, Canada, Brazil and the U.S., which produce all elements that comprise its suitcases except for zippers. In 2016, the company made more than $450 million in revenue, placing it in our $251-$500 million revenue bucket for 2018.

Since its acquisition by LVMH, Rimowa has ended its long-term, wholesale-centric retail strategy in favor of direct sales that will help the legacy brand stay afloat in a sea of digitally-native competitors.

In 2016, LVMH acquired 80% of Rimowa for $716 million—the same year that then-24-year-old Alexandre Arnault (LVMH Chairman Bernard Arnault’s son) was appointed co-CEO, sharing the title with Dieter Morszeck, the grandson of one of the company’s founders. Since the merger, the family company has ended almost all of its decades-long wholesale contracts in an effort to bolster its image as exclusive and premium—a move that will drastically alter its distribution strategy as it now pours more resources into direct-to-consumer channels.

This tactic is largely a reaction to digitally-native companies like Away, which competes with Rimowa by offering a significantly lower price point and rejecting wholesale in favor of the direct-to-consumer channel that attracts the younger customers Rimowa wants. Though it’s too early to predict the long-term effects of Rimowa’s digitization efforts, they have already distinguished the luggage brand from other luxury brands in the LVMH umbrella, which, if they have entered the digital space, have only done so in the last few years.

By shifting to direct-to-consumer, Rimowa has found new ways to market its products (specifically with digital storytelling), sell its luggage efficiently, and hone its customer service, which as a luxury brand, can serve as an important differentiator from other down-market luggage brands. Ideally, selling direct-to-consumer will allow Rimowa to integrate its offline and online inventory strategies and win customers over with services like repairs and one-hour delivery, which can define the luxury luggage experience in a modern era.

The company also rebranded in January 2018 (Rimowa’s 120th anniversary), debuting a new logo, monogram, packaging, products and brand voice. The company’s first European ecommerce store went live in June, followed by a U.S. version in September, and a site in Asia. Though the company has actually added more SKUs, its more streamlined presentation online keeps the product assortment clean. Additionally, Rimowa has taken on a flurry of collaborations that bring fresh looks to the brand and its products.

In the midst of Rimowa’s fast-paced rebranding, the company should concentrate on owning more of its retail and rejuvenation efforts to position itself for a new era.

With all of these changes occurring in the past two years, the main concern is that Rimowa may be moving too fast with Arnault at the helm, and that, especially for a legacy brand, it may benefit from pumping the breaks, at least slightly, in order to fashion a trajectory that balances online and offline, as well as infuses a legacy with modern elements, without losing its identity as a family-run, heritage brand. It’s also important for the company to affect as much of these changes as possible in house—its new site, constructed by the advertising agency R/GA rather than LVMH, raises questions about the parent company’s abilities and resources that are needed to succeed online and selling direct-to-consumer and how Rimowa will evolve under its umbrella in the long term. Especially now that the company has severely reduced its wholesale accounts, it may suffer at least short-term financial setback à la Nike.

In addition to its turn to ecommerce, Rimowa must also evolve its owned retail channels. In December 2017, the company opened a store in LA that emulates the luggage carousel and has since rolled out more of these updated formats. It then debuted a new retail concept in June 2018 at some high-end department stores including Le Bon Marché. However, the majority of its 24 existing stores have not been updated since the nineties, and the longer Rimowa waits to address this opportunity, the longer it will drag out its brand renewal efforts.

While it’s refreshing to see a heritage brand craft a new identity instead of relying on nostalgia-infused legacy (Ralph Lauren) or traditional celebrity campaigns (Coach), the bigger issue with Rimowa is whether these changes will resonate with the younger consumers Arnault yearns for, especially considering the premium price tag ($750 on the lowest end) on Rimowa’s products. The company is well-poised to make its (updated) mark on the luggage industry, especially as the travel economy continues to boom, but in terms of sustainability, the more it initiates development through its own resources and expertise, the better of it will be to reap the gains.

Tommy John (Traditional, Class I)

Tommy John prioritized wholesale first and used this foundation to sell direct and digital.

There are also some modern traditional brands that evaded digital channels at launch and instead pursued wholesale channels first. Tommy John, the men’s undergarments brand founded in 2008, struck its first wholesale deal with Neiman Marcus in 2009, followed by Nordstrom soon after. In the span of nine months, the brand grew its wholesale footprint from five to 109 stores. We place Tommy John in the our $101 to $250 million revenue bucket for 2018.

Activating wholesale allowed Tommy John to scale faster, but sustainably, early on. For one, the brand benefited from the predictability; instead of launching a direct-to-consumer site with no insight into potential demand, its wholesale customers offered a predictable revenue stream given the seasonality of their inventory requests. This helped Tommy John meet manufacturing minimums at factories and prevented over- or understocking.

The company also factored many of its wholesale orders to finance a large portion of its early inventory. While factorers can charge brutal interest rates, they will only work with wholesale brands since the purchase order from the retailer is the collateral for the loan—direct-to-consumer businesses, on the other hand, usually have less desirable collateral to factor with. As a result, working capital remains a big issue for digitally-native brands, while Tommy John was able to work around the issue early on.

Entering wholesale first also helped Tommy John understand the inner-workings of its supply chain, which served the company well as it began focusing more on direct sales in 2012 and opened its first brick-and-mortar space—a men’s retail store—in November 2017. Likely, the brand saw it had a stable customer base in its wholesale accounts, but wanted to showcase a fully-owned experience and reap higher margins from direct sales. With its long-standing wholesale relationships, Tommy John had collected a bank of knowledge about margin, cash flow, product development, inventory financing and sell through. So far, this has allowed Tommy John to more skillfully attack its owned retail.

Today, direct online sales are the brand’s fastest-growing channel and percentage of the business. The shift from wholesale to direct-to-consumer works well for the brand—it’s also the opposite path taken by many other digitally-native brands. For Tommy John, opening another channel allows it to acquire new customers that aren’t shopping in department stores, and will potentially convert some wholesale shoppers to make direct ecommerce purchases. This should shield the brand from cannibalizing its own sales, which would be a risk had Tommy John moved in the opposite direction, selling direct-to-consumer-only and later opening wholesale accounts. Down the line, the company’s plan to create more owned retail is something to watch as it will help Tommy John showcase its own personality outside of the external retailers that sell its products. This will reduce the brand’s dependence on wholesale—particularly in the age of shuttering department stores. Sometimes, what gets you to point B isn’t what will get you to point C, especially because the uses of each individual channel change as businesses mature.

Nike (Traditional, Class II)

Nike was founded in 1964 by Bill Bowerman and Phil Knight as Blue Ribbon Sports—a U.S. distributor of the Japanese athletic shoe brand Onitsuka Tiger. After being rejected by sporting goods stores, the founders began selling the shoes out of cars and door-to-door, receiving significant traction among sports teams. The brand was entirely funded by family (an initial $1,000 from Knight’s father, what would be approximately $8,200 today) and bank loans, which were sent to Onitsuka Tiger to produce more sneakers. Once a shipment sold out, the co-founders would take out another loan and order more.

In 2017, Nike made $34.5 billion in revenue, placing it in our Billion-Dollar Brands revenue bucket for 2018.

Nike grew its owned retail footprint and brand by building off of the experience and community it encountered while selling sneakers to running clubs and sports teams.

In 1966, the traditional brand opened its first retail store in Santa Monica, followed by a second location in Oregon in 1967. Then, in 1971, Blue Ribbon Sports started manufacturing its own product line, branded with the name Nike and the swoosh logo we know today (the company was not incorporated as Nike until 1978). That same year, Nike began also wholesaling its products to other retailers. The Santa Monica and Oregon stores remained Nike’s only retail locations in the first ten years, after which, the company sought out specific cities in the U.S. where it anticipated Nike would perform well.

This slow trajectory into owned retail helped Nike build resonance for its brand first, marketing its products across the popular running clubs of the time, and working on other ventures that aligned with its ethos, like Athletics West, a training club for Olympic hopefuls in track and field. In the 1980s, Nike was able to outsell Adidas—formerly, the top-selling athletic shoe brand in the U.S.—for the first time.

In 1990 and 1992, the company opened its first NikeTown retail stores in Portland, Oregon and Chicago, Illinois, respectively, over 20 years after its founding. Similar to the Santa Monica store, which served as a community hub for customers and runners to gather, these NikeTown storefronts sought to combine experience and entertainment, in addition to showcasing the company’s expanding line of athletic sneakers and apparel—a foil to the mail-order catalogs consumers already had access to.

As Nike grew in popularity, it turned to wholesale, which the company is now deserting in order to gain better margins and control over the brand.

As Nike grew, it entered myriad third-party doors, from Foot Locker and Dick’s Sporting Goods to Kohl’s, Sports Authority, City Sports and various department stores. But as time wore on, particularly with the digitization of the consumer sphere, many of these retailers started to lose authority and relevance. Lacking in speciality or differentiation, they began to chip away at the brand image Nike wanted for itself, and reduced Nike’s margins with promotions and off-price sales. Both City Sports and Sports Authority filed for bankruptcy in 2015 and 2016, respectively, pushing Nike to focus more on direct-to-consumer sales via its own site and luxury marketplaces like Farfetch.

Given this retail landscape, which focused too heavily on lower-margin third-party deals, Nike took strides to improve its direct sales strategy. Between 2005 and 2010, the company increased its percentage of direct sales from 4% to 28% of total sales—by 2018, Nike sales to wholesale customers accounted for $23.9 billion in sales while its direct sales—whether on, its app SNKRS, the brand’s big box stores, or its factory stores—accounted for $10.4 billion. This was 69.5% and 30.2% of Nike’s total annual revenue, respectively, though the company’s direct sales have been steadily increasing at a faster rate than wholesale over the past few years: 2016 saw a 16% increase in direct sales, 2017 saw 15%, and 2018 saw another 15%.

In 2017, the company announced plans to reduce its wholesale partnerships from 30,000 doors to just 40 (which it can do thanks to its unique leverage and short-term contracts). In 2018, Nike also began selling its products directly on Amazon—in large part because of an agreement with Amazon to crackdown on the large number of Nike wholesalers and counterfeiters who were already selling Nike items on the ecommerce platform, which helped the brand reclaim sales. Today, a quick search for “Nike” in Amazon’s search bar wields more than 50,000 results, though this includes both Nike’s official Amazon shop and other vendors that wholesale the brand’s products. Nike also stated that in Q4 2017, ecommerce made up more than 90% of its growth.

In alignment with its brand-building in the past, Nike continues to harness the experiential element at its retail stores. Nike Soho, which opened in 2016, includes a customization studio; special, in-house services for members; and a basketball court where shoppers can test out new sneakers. Nike also opened Unlaced, a haven for women sneakerheads, in 2018, both online and in the form of shop-in-shops at select Nike stores, which feature localized product assortments informed by community stylists and creatives.

Taken together, Nike has achieved lasting cultural resonance as a heritage brand, its marketing slogan, “Just Do It” is 30 years old and almost universally known. But core to the company’s ongoing success is its focus on owned retail, be it online or offline. Though the company is maintaining only 0.1% of its formerly 30,000 third-party distribution accounts, the sharp decline provides an explicit foil to Ralph Lauren, which has faced similar problems with lower margins and eroding brand equity, but so far failed to address these issues efficiently. Nike has plans to achieve $50 billion in sales by 2020, which is inextricably tied to its pivot away from wholesale.

Moving forward, Nike may choose to bring more of its supply chain under its own belt; the company currently owns no factories, though it handles design, research and development and marketing independently. In any case, it is positioning itself to succeed, building on experiential retail, wielding control over ecommerce and maintaining cultural relevance, even as the consumer industry absorbs tectonic shifts. As Nike’s evolution illustrates, any channel can turn into a problem if it’s overused, and the company is now rebalancing everything as it and other brands should.

Fenty Beauty (Traditional, Class III)

Fenty Beauty, founded in September 2017 as a collaboration between Rihanna—who serves as co-designer—and Kendo, Sephora’s brand incubator, launched with 40 shades of foundation, making headlines as one of the most inclusive cosmetics brands ever. (Though Rihanna does not hold full equity ownership in Fenty, she owns the trademark for her name and collects royalties on Fenty’s products.) In addition to this product inclusivity, Fenty’s retail strategy and Sephora’s scale also made the brand broadly accessible to shoppers. It sold the brand directly via, but simultaneously entered traditional channels: Sephora stores and This further bolstered Fenty’s mission of providing greater access to underserved consumers. The brand made $72 million in its first month, placing it in our $501 to $1 billion revenue bucket for 2018.

Fenty pursued wholesale and direct from the get go, promoting inclusivity through both product assortment and access.

Fenty’s debut and trajectory is much more ambitious than most nascent brands. This is made possible by Kendo and Sephora, both owned by LVMH, which, in 2016, invested an estimated $10 million for Kendo to create Fenty. Moving forward, both Kendo and Sephora continue to provide Fenty with financial, distributional and operational expertise and support, and Rihanna will bring her design- and aesthetic-minded toolkit, in addition to a massive following of fans and consumers alike.

In utilizing these resources, Fenty shows the power of launching with a multi-brand strategy. This not only brought Fenty face-to-face with customers at 1,600 of Sephora’s 2,300 stores (69.5% of the beauty retailer’s locations), but also allowed the brand to stock for more than four months of inventory in advance, without having to worry about cash flow or costly production minimums. This has served as an additional way to broaden access to the brand, setting it apart from scarcity-driven celebrity brands like Kylie Cosmetics, which favor the flagship model but intentionally produce swallow inventories in order to exploit FOMO and sell out.

Fenty’s codependence on Rihanna, Kendo and Sephora also means that the brand does not have to address many of the existential questions that other celebrity brands face. While Kylie Jenner maintains 100% equity in Kylie Cosmetics, giving her more control over her brand than Rihanna exerts over Fenty, the valuation of Jenner’s brand is soaring, making it more difficult if Jenner sought to sell it later on. On the other hand, Fenty, as a product of a partnership between Rihanna and Kendo, opened immediate and seamless access to Sephora from the beginning, which would likely remain in place regardless of Rihanna’s status. Additionally, Kylie Cosmetics’ recent foray into Ulta Beauty suggests that a direct-to-consumer-only strategy can only hold out for so long, a complication Fenty has avoided by going direct-to-consumer and wholesale simultaneously.