Rhone.com aims to take Lululemon Athletica Inc’s men’s business head on, says Chip Malt, vice president of marketing and analytics for the retailer, which began selling direct to consumers online in early 2014.
The Rhone brand, which now also sells via select Bloomingdale’s department stores and REI stores and in all 71 Equinox gyms across the United States, says its online sales grew approximately 300% in both 2015 and 2016. Bloomingdale’s is owned by Macy’s Inc., No. 6 in the 2016 Internet Retailer Top 500 Guide, REI is No. 74 and Lululemon is 96.
Currently Rhone is focusing heavily on its direct e-retail business, Malt says. “E-commerce is the focus for our growth right now,” he says. Rhone.com has implemented an analytics program and more recently an inventory management system to help it manage and continue to grow its burgeoning e-commerce business.
In January 2016, Rhone began using analytics vendor RJMetrics, which was purchased by Magento Commerce in August and renamed Magento Analytics. Since using the service Rhone.com’s conversion rate has grown by 40%, Malt says. Magento Analytics helps the brand by connecting all its historical order information and helping Rhone better interpret how different customers interact and shop with the brand, he says. “It helps us see where in the customer lifecycle consumers purchase various SKUs,” Malt says. For example, with Magento Analytics, he can see that many shoppers will wait until their third purchase from Rhone to order pricier outerwear such as a vest or a jacket.
The retailer also is using Magento to help direct Facebook advertising by determining the items most frequently and repeatedly purchased by customers.
“Now we not only know what people are most often buying first, but what has the most repeat purchases, and we are using that in our marketing and advertising and on Facebook,” Malt says. For example its tank tops and Mako brand of shorts are some of the most popular repeat purchases, so Rhone markets those items in ads on the web.
Rhone, which employs about 22 people, six of whom work in e-commerce operations, runs its e-retail site on the Shopify Plus e-commerce platform that Shopify Inc. introduced in November 2014 as a cloud-based e-commerce platform designed for larger merchants. When Plus launched, the platform fee was $1,000 a month. However, the vendor recently announced it is charging merchants with annual online revenue of up to $10 million $2,000 a month for Shopify Plus, while merchants with annual sales greater than $10 million will be charged based on their gross merchandise value. The move is a response to “the evolving size, scope and complexity of Plus Merchants,” a Shopify Plus spokeswoman says. Malt says Rhone is sticking with Shopify despite the price hike.
“It’s a little bit more of a cost for us,” Malt says, but he likes that Shopify offers many add-ons via its app store that can be easily integrated into its platform. “For instance, before we put in development work and time to custom-build a feature ourselves, we can try it with a third-party app from the app store for, say, $99 per month,” Malt says. Rhone can then decide if it wants to invest in developing a custom version. Rhone has used the app store to test a loyalty program, a discount module and to test variations of back-end product feeds. It also tested a returns management tool via the app store and then went on to develop its own custom return management tool.
Rhone recently signed on with vendor Fuse for inventory management and demand forecasting. Fuse helps small and medium-sized businesses determine how much inventory to buy and prompts retailers with warnings when SKUs are running low so they don’t run out of stock.
“A big pain point for us is that we are young, so we lack historical data,” Malt says. “We could be doing $3,000 a day in sales and then a Wall Street Journal article hits about us and suddenly we do $25,000. Fuse helps us work though those issues so we are not impacted by edge cases as much. For a company our size and that is growing as fast as us, inventory management is huge. Our first few years we sold out of core products. We are working with Fuse so that doesn’t happen.”
It’s too early to share metrics, Malt says, but Fuse is an “integral part” of Rhone’s inventory forecasting.
Fuse takes Rhone’s order and inventory history and helps adjust for seasonality and other details such as product name changes. “For example, we would have a ‘fire engine red’ one season and a ‘fiery red’ the next season that were pretty much identical,” Malt says. Instead of treating all variations of the colors as separate SKUs, Fuse can see they are similar and use last season’s similar color to forecast demand. “Inventory management can make or break a company,” Malt says. “Companies can have too much product and be forced to do liquidation sales or not have enough and miss out on big sales opportunities.”
Rhone plans to double its technology spending in the coming year, Malt says. And there’s no shortage of vendors wanting to do business with the retailer. “We get a salesperson reaching out to us at least once a day offering us a free demo or trial of their product,” he says.
For such trials, Malt says he looks for vendors that allow Rhone to test the service with its own data, not dummy data from the vendor. “We like having our own data to really test how a system is going to work for us,” he says.