The Startup That Conquered Facebook Sales
In a squat little structure overlooking a highway access road in Lexington, North Carolina, smack in the hilly, pork-loving Piedmont region, a revolution is brewing. There's no sign on the building but a piece of paper taped to the door: LOLLY WOLLY DOODLE, it says, as if in some Southern code. Lolly Wolly Doodle. That's the name of an unassuming online children's clothing company started by Brandi Temple, a likable local mom who had never held a corporate job when she started posting her homemade dresses on the Web five years ago--then managed to seize one of the Holy Grails of online sales.
Over the past year or so, Lolly Wolly Doodle has become the envy of the e-commerce establishment, and the story of this nice lady in Lexington has become something of a viral legend. At a time when big brands are trying (and mostly failing) to harness social media to goose business, the story goes, an unheard-of startup out in the sticks has cracked the code on social commerce. Behind that little piece of paper on the door, it turns out, is a company that says it does more sales on Facebook than any other brand in the world. And outsiders seem to agree.
"I have an e-commerce crush on Lolly Wolly Doodle," says Will Young, the director of Zappos Labs. Young does a lot of public speaking, and he tells the Lolly story every chance he gets. He first heard it at a retail conference in Germany, from an analyst who herself heard it from a venture capitalist in New York. As a rough benchmark for Lolly Wolly Doodle's social success, Young points out that the company has about 900,000 fans on Facebook, whereas Zappos has 1.5 million. "But their business is a tiny fraction of our size," he adds. More important, Temple's fans are delivering: "Lolly," says Young, "has been able to do something that no big brand has been able to do, which is to convince people to actually buy on Facebook."
Lolly Wolly Doodle brought in about $11 million in 2013, and it has roughly doubled its revenue every year since its inception in 2009. It expects revenue to double again this year. Last June, Revolution Growth, a fund started by AOL co-founder Steve Case, invested $20 million in the company, and (of course) aims to make it a multibillion-dollar brand. The size of Case's investment--and a look at how Temple's business will probably evolve--suggests that Lolly has done more than solve the social-commerce conundrum. Along the way, Temple has created an innovative U.S.-based manufacturing process and supply chain that feed off the brand's social-media cues to maximize efficiency. That mechanism seems likely to be adaptable to any number of products and services. Unlikely as it may seem, Temple's company may just represent the beginning of the next e-commerce revolution.
Temple didn't plan on becoming a CEO. "Really, I wanted to be a trophy wife," she says, laughing at her former self. "I wanted to support a great husband and look cute." This strategy led her to marry and have a son in her 20s (the marriage ended in divorce), then to move to Orlando, where she got engaged again and had a daughter with Fran Papasedero, the coach of the Orlando Predators arena football team.
One night, on his way home from a team dinner, Papasedero crashed his car and died, apparently as a result of driving drunk. Temple moved back to Lexington, where her family has lived for generations. Within a few months, she met Will Temple, her current husband, and they combined their two families, Brady Bunch-style (he had a son from a previous relationship). Brandi and Will had a daughter, and life settled into a nice groove, with her as a stay-at-home mom while he made a good living selling bulldozers and other heavy equipment for the construction business.
The company Will worked for thrived during the housing boom of the mid-2000s, but over the course of 2009, the construction business stalled, and the couple watched Will's earnings drop by half. Brandi, meanwhile, had started sewing clothes for her two daughters, who were five years apart, much as her mom and grandmother had done for her. The clothes had a certain ruffled, matchy Southern charm: "I wanted something that was cute for church that didn't cost an arm and a leg, and I wanted to be able to monogram it," she says. "I wanted the kids to look wholesome and look their age." Not the mini-sexpot styles offered by many major brands, in other words. She also refused to pay the $80 charged by specialty boutiques that did stock the right styles.
Temple's parents had never had much money and raised her to be thrifty ("I was born with a silver-plated spoon," as she puts it), so she quickly grew frustrated with the fabric left over after making her daughters' dresses. She figured she could post her finished garments on eBay as samples and offer to make more, on demand, in a size range that would use up all her remnants. The idea worked, and within a few months she found that she couldn't keep up with demand, so she enlisted her family members and friends from church to help with cutting and sewing. She started to show her garments at Junior League events and began to establish a small following for Lolly Wolly Doodle. (About that name: It's a nickname Temple once gave her niece, a twist on the old children's song.)
But Temple isn't one to dabble. "Anything I've ever done, I go over the top," she says. "I can't just pick up a book and start reading it, because I'll stay up all night and keep reading." Despite her best efforts at being a full-time homemaker, she's also a born entrepreneur who had been trying to make and sell things to people since she was a little girl--friendship bracelets, pages from her coloring books. Now, as Will's business dwindled, she started taking Lolly Wolly Doodle seriously.
One day, looking to scale her fledgling business, Temple tried having a company in China that she had found through the website Alibaba make a few dresses based on one of her patterns. When they came in, the dresses weren't perfect--the smocked zebras looked more like cows, and the sewing wasn't up to her standards. Wary of getting bad feedback on eBay, she posted the pieces on Lolly's Facebook page and asked people to comment and leave their email address if they wanted to buy them cheap; she would just send them a PayPal invoice. She had 153 Facebook fans, mostly Junior League contacts.
"I walked away from the computer and came back in like 30 seconds, and all the dresses were gone!" she remembers. That afternoon, she tested a few other designs on Facebook, offering to make them to order, just as she had been doing on eBay. She had never seen anyone sell anything this way (no one had), and didn't really understand how Facebook worked. She never used the social network, personally. But she sold more that first day on the site than she had in the previous month on eBay.
Temple closed her eBay store a few weeks later, and over the next six months, she says, she slept two hours a night and made as many dresses as she could to keep up with the demand. She filled her garage with friends-and-family seamstresses. By day, they would sew dresses and boys' rompers and post them on Facebook and take orders. At night, they would send out invoices and ship product. Everybody pitched in. Will learned to monogram. Brandi's dad would cook a family meal, and everybody would sit around the kitchen working late into the night.
Late in 2010, JCPenney opened the world's first Facebook store from a major retailer--a separate, shoppable tab on its Facebook page--and many other retailers followed suit. So-called F-commerce was hailed as a potential Amazon killer in the press, but nothing happened. Within a year, all those social stores started to quietly shut down. "It was like trying to sell stuff to people while they're hanging out with their friends at the bar," Forrester online retail analyst Sucharita Mulpuru said at the time.
Temple's Facebook business, on the other hand, was thriving. The reason was simple. Because her sales appeared in people's regular News Feeds, alongside posts from their friends, and because buying an item required nothing more than entering a quick comment (with an email address, size, quantity, and customization request) then paying an invoice later, people were able to make impulse purchases. (See, "How a Small-Town Manufacturer Predicts Hits With Facebook".) It was actually the opposite of what Mulpuru said: JCPenney's store wasn't asking people to shop at the bar; it was asking people to leave the bar and go to another tab, whereas Temple was essentially setting up trunk shows in the bar. And thanks to Facebook's network effect, she didn't have to spend a dime on marketing; her customers' comments on the Facebook News Feed showed up on their friends' News Feeds, and the community grew organically.
It wasn't just Facebook that made it a good business. Temple was making each dress to order, so she had virtually no inventory risk. She could also react quickly to customer preferences, tailoring her designs accordingly. And because she was selling her goods directly to consumers, she was able to cut out layers of markups and offer great prices. If a particular dress sold well one day, she would post a similar one the next. This kept the sewing process simple--she didn't have to reinvent her patterns, just riff on them--and eliminated much of the guesswork of merchandising. "When something went crazy, I would go really deep into that style and those colors," she says. "And if it didn't, then forget it. I didn't make it again. We would fill whatever orders we got and move on to something else." Those same dynamics power the business today.
Around mid-2010, though, everything almost ended. Will came home from work one day and said he was about to be laid off. Brandi, meanwhile, says she "hit a wall. I couldn't do another thing. I knew this was a great business, but it was way beyond what I could keep doing in my garage." Her first instinct was to sell the company. She plucked a number out of thin air--a million dollars--because it sounded like a lot of money and would buy the family enough time to get them through Will's unemployment. She called a friend of a friend who was a banker in Charlotte and asked him if he could help line up buyers, and he called back a few days later suggesting she call an investor named Shana Fisher.
Fisher, a New Yorker, had become known for her knack as a deal hunter when she ran mergers and acquisitions for Barry Diller's IAC. She had recently started her own venture capital firm, High Line Venture Partners, and has since been among the earliest investors in MakerBot, Vine, and Pinterest, and other star startups.
"Don't you dare sell this company," Fisher said over the phone, as Temple sat on the floor in the bathroom, trying to shut out the noise of her kids from the next room. "Let me invest, and let's grow this business. You don't realize what you've done."
Temple had never run a business, aside from running a short-lived day spa she had opened in Lexington a few years earlier. Despite having built Lolly from scratch, she had no idea how to place a value on the company. "I was like, 'If you're telling me this is not worth $1 million but maybe $5 million, that's interesting,' " Temple said.
Fisher laughed. "We wouldn't be having this conversation if I thought this company were worth $5 million." If they could keep expanding Lolly's community, it could become a $50 million or $100 million business, she explained (let alone the much larger number Revolution Growth would love to see). Fisher invested $100,000 in the young company, and a few months later helped Temple line up a $1.4 million seed round of financing. Temple moved the operation out of the garage into a 4,000-square-foot former tire warehouse in Lexington and started hiring.
Atown of antique stores and decaying red-brick factories, Lexington is a former textile and manufacturing hub, and it had fallen on hard times. Over the previous 10 years, many of the area's manufacturing jobs had moved to China, and the recession had made things all the worse. Local unemployment hit 14 percent in early 2010.
That fall, Temple answered a knock on the unmarked office door and found an elderly woman standing there. "I don't know what you do in there, but are you hiring?" the woman asked. She was 72 years old, and her name was--almost inevitably--Miss Daisy. Through tears, she explained that her husband had a heart condition and they could no longer afford his medication. "We've lost everything, and I just need a job really bad," she said.
Miss Daisy had never worked as a seamstress and had little or no experience cutting and sewing, but Temple agreed to hire and train her because she needed as many hands as she could get. Word got around Lexington that a new company had jobs, and one after another, people started showing up at the door asking for work. "Person after person, they'd tell the same story," Temple remembers. "I've lost my house, I've lost my car; what can I do?" She hired them all.
Temple tells this story in her bright, pastel-green office in one of the four buildings that now house the company. A 20,000-square-foot former medical-equipment warehouse, the headquarters facility opened in early 2012 after the state of North Carolina agreed to pay for half of the cost of buying and renovating it, to help boost job creation in the region. Manufacturing and design happen here, and next door a smaller building houses the company's photo studio. Across town sits an 80,000-square-foot warehouse and shipping hub. With about 250 employees, Lolly Wolly Doodle is now one of the largest employers in Lexington. At the rate it's growing, it could soon be the largest.
Increasingly, however, Lolly is not a local operation: The fourth location is in New York City, and a cadre of experienced retail and technology hands have climbed aboard, many recruited with the help of Shana Fisher. The COO, Emily Hickey, was a co-founder of the business-networking service Hashable and, earlier, a VP at HotJobs. The former e-commerce chief at Quidsi, the parent company of Diapers.com, now heads up Lolly's New York tech team. Recently, John Singleton, a former JCPenney and Abercrombie & Fitch executive, came on to build better supply chain and manufacturing processes. "Brandi is recruiting some of the very best people in the world," says Donn Davis, the co-founder of Revolution Growth and a member of Lolly's board since his firm's $20 million investment last year. "Most of the time, those people's first reactions are like mine when I heard about the company. It's called what? It's where? It sells what? Then they see what the company is doing, and they say, 'Wait, everybody is talking about trying to figure this out, but you're already doing it.' "
What Temple is really doing, says Davis, is "reinventing apparel much as Dell reinvented the PC industry. It's affordable custom [manufacturing] in real time with little inventory risk." Davis sees Lolly's Facebook commerce as an important tactic that kick-started the company, but it's just that: a tactic. The real innovation is using social media as the starting point for a new e-commerce model that's powered by a social feedback loop.
The cycle works like this: First, the company makes a sample product and puts it up on Facebook or another social platform for sale (the company is expanding to Instagram and will leverage Pinterest and other platforms soon). Then it makes only the sizes that people order, so there's no overstock. The company compares sales of that product with past styles and decides if it's a winner. If it is, two things happen: One, Lolly can mass-produce it and keep some of it on hand for sale on its own site, LollyWollyDoodle.com (even those garments are customizable with monograms and other touches, so customers are always getting something unique). Two, a winning design can become the basis for a new product "pod," an ever-expanding collection built on that template; new iterations might be tweaked with different fabrics or necklines or ruffles, but there's a limited palette of tweaks for any given pod, keeping manufacturing complexity to a minimum.
As the company cycles through this feedback loop, it amasses ever more data about what works, so that it can make smart design decisions and configure its operations accordingly. Social commerce, in other words, is not just about virality but also about predictive analytics. The company introduces about 15 new product SKUs every day, and one of the biggest priorities this year is to finish building custom software that better structures the design and sales data and allows the supply chain, cutting and sewing operations, and warehouse to be reorganized so that each piece of fabric moves through production as efficiently as possible.
If traditional garment manufacturing is a pretty straightforward assembly-line affair, the seamstresses at Lolly work more like short-order cooks in a diner where the menu changes daily. In one room, a dozen people cut fabric according to order tickets that flow through in real time--15 size-2 aqua chevron Charlotte dresses here, a single size-6 salmon Ruffle dress there. On the sewing floor, efficiency comes from how the orders are bundled (not necessarily by garment or size but, because many items share attributes, by the type of sewing required) and minimizing how many people or machines have to touch a garment. That information then informs the design process for new garments. A made-to-order dress now takes two weeks to land on a customer's doorstep; Temple hopes to shave that down to a week.
Hickey, the COO, calls Lolly Wolly Doodle a "fast-fashion" company, referring to the category of retailers, epitomized by the Spanish chain Zara, that constantly refresh their product lines according to trends and sell at low prices, with low margins. Fast fashion is largely immune to the slow seasonal cycles that drive traditional fashion companies--which inevitably have to rely on deep discounts to move unsold inventory--but it requires nimble manufacturing that can take on small product runs and constantly adapt to demand signals. When companies rely on remote mega-factories, they have much less control. "It's no small coincidence that Zara is not made in China," says Forrester's Mulpuru. "It's no coincidence that Lolly Wolly Doodle is made in the U.S."
Well, partly. Lolly Wolly Doodle these days outsources about 30 percent of its manufacturing to China and Latin America, but those garments are all the proven winners that emerge from the U.S.-made small runs that first appear on Facebook and the Lolly site. The Lexington warehouse has racks of premade blanks that were made overseas and await monogramming or other customization before being shipped.
"There's still going to be a level of imprecision in that system," Mulpuru cautions. "There are all kinds of early demand indicators that could be wrong. But your chances of picking a hit are going to be better, and you will have fewer markdowns." She finds it "truly baffling" that more companies haven't "got their heads out of their asses" and adopted a similar model to predict and make hits.
Larger companies may not have caught on yet, but there are certainly Lolly imitators. In early 2012, a San Francisco entrepreneur named Chris Bennett heard Temple's story right around the time he was looking to start a new company. Called Soldsie, Bennett's new technology platform helps other entrepreneurs start businesses based on the Lolly Wolly Doodle model by handling all the order processing for them. "Lolly was really the light bulb moment," for him he admits. "I read an old news story [from a local paper in North Carolina] that said they had generated something like $2 million in revenue based on 30,000 fans, and it was just far more volume than I'd seen anyone do with Facebook." Today, Soldsie has more than 1,000 mostly tiny client companies, but it processes over $1 million in transactions every month, and Bennett says he'll announce partnerships with several "huge" brands this summer.
Lolly, meanwhile, hopes to become a huge brand using the model. Davis, of Revolution Growth, thinks the company has created a template that it can ultimately apply far beyond children's clothes. "Kids' apparel, age 0 to 8, is a $10 billion market," he says. "So the first step is to become the leading company there. And the second step is...to add new brands on top of it that go into other segments." That means men's and women's clothes, home goods, and beyond.
Temple still marvels at how she has arrived at this point. She has "been blessed," she likes to say, and at one point I ask her how much her faith has been a part of Lolly's success story. "It is the story," she says. "That moment I had the idea to put something on Facebook...." She chokes up and has to collect herself. "That idea didn't come from me. God had a purpose in reaching out to build this business. From our missions in Africa to our Moms in a Jam"--two of the company's recent philanthropic efforts--"to the people we employ, it's not about me creating a business. It was about what we could all do together, the pay-it-forward mentality."
The moment hangs there for a second, and she makes a self-deprecating joke about God's sense of humor: Why would He choose her? Then she sits up straight and starts talking about the virtues of a vertically integrated supply chain, how to create authentic interaction on social media, the importance of Hickey, her COO ("She can never leave. I will hunt her down; I'm Southern enough"), quality control in China, her insistence on approving every design before it posts.... "We don't even think about competition," she says. "We are our only competition."
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