It's no secret that retailers mark up their products by eight or 10 times what it costs to produce them. But no one has really done anything about it--until now, that is.
Enter Everlane, an online retailer that sells its line of minimalist clothing and accessories (think simple white T-shirts and leather tote bags) directly to consumers at a markup of just double what it costs to produce. Beyond peddling the latest in affordable fashion, however, Everlane practices "radical transparency," which means that in addition to price and thread count, Everlane shoppers will see the care instructions, the height of the model pictured, and the product's origins. Here's the 50-cent tour of the factory behind Everlane's $60 Seed Stitch U-Neck sweater:
We make our Seed Stitch sweaters in Dongguan, China, in a small, three-story sweater manufacturing facility that employs just 120 people. The small scale of the operation allows the factory to consistently deliver top-notch knits.
By exposing its own production and pricing process, Everlane hopes to strike a cord with consumers who want more information, from how free their free-range chickens are to the amount of water wasted in the production of their yogurt.
"It's a good story," says Jack Plunkett, a retail analyst at Plunkett Research in Houston. "I think they have the opportunity to make it compelling if they are really delivering great merchandise at a great price."
Behind the Brand
But the main appeal of Everlane isn't necessarily its business model. It's the founder, says Brian Sugar, CEO of media company Popsugar and an Everlane investor. "Michael Preysman is like the Woody Allen of entrepreneurs," he says. "I've seen this level of talent before, and at such a young age it's amazing to watch and mentor, as well as learn from myself."
Preysman is also neurotic (in a good way), says Sugar.
Take, for example, the company's now wildly popular Box Cut Tee shirt. As Preysman tells it, the $15 shirt's history starts out more like a tragedy. A production snafu resulted in about 12,000 men's Pocket T-shirts that were two inches too short. Rather than scrap the lot, Preysman opted to package them as women's Box Cut Tees.
That quick decision saved the shirts. "I don't know if it was smart," says Preysman. "Definitely an 'oh, shit' move, though."
On a Mission
Preysman wasn't always so fashion forward. He studied computer engineering and economics before landing a job in private equity. But, he says, "three years in, I realized for me that being an investor and merely watching how things are done wasn't what I wanted to do in life. I really loved building things."
Paired with his conviction that clothing in America was, overall, a rip-off, Preysman packed up his apartment in Manhattan's East Village in 2010 and moved west to start Everlane. "I think that commitment to both quality and transparency is a breath of fresh air," he says.
So far, it turns out, consumers agree. Sales have grown 200 percent in 2014 over 2013, the company plans to add 30 additional staffers by the end of the year, and it just opened a design office in New York City. Everlane has also raised $5 million in venture and angel funding from Maveron and Khosla Ventures, among others.
"We don't think about [Everlane] as a fashion company; we think about it as a lifestyle company," says Preysman. "Fashion is just the beginning."