In the span of three years, Linjer has grown into a multimillion dollar online fashion company and it’s turning a healthy profit – a story that stands out in the world of fashion ecommerce, where profitability remains elusive even for established players.
Roman Khan and Jennifer Chong co-founded Linjer with a budget of US$20,000 – half of which went into crafting the company’s first crowdsourcing campaign, including a high-end video which set the tone for the classy brand. Now they turn an annual revenue of over US$10 million.
Linjer’s product was a briefcase – a meticulously designed leather bag, using the best materials in the market, but priced more affordably than top luxury brands.
Its crowdfunding campaign raised about US$190,000, enough to go into production. After that, Khan and Chong set up a new campaign for Linjer’s next product – an equally well-crafted handbag for women. Linjer sells exclusively on its own website.
In a nutshell, according to Khan, this is the business model that led Linjer to success: “Crowdfund every collection launch and be the brand, not a reseller.”
Neither Khan nor Chong, who is a former management consultant, had a formal design education. They were both passionate about style and had specific expectations – the rest, they learned on the go.
“We sent over sketches to the factory; they said this is horrible, we can’t work with that. They then sent over a technical file from one of their clients and said this is how we want it presented. We took that – reverse engineered it,” Khan recalls. “Jenn is brilliant at picking up new tools and processes.”
Of course, it wasn’t all smooth sailing. The first batch of bags actually came out wrong. Khan and Chong had to call every customer personally to apologize for the delay. It was also a financial hit for the young firm, but they were determined to fix the problem and deliver a perfect product.
They changed manufacturers and soon Linjer was ready to add a new line of products, this time watches. Again, it raised the necessary capital to start production through crowdfunding. This campaign scored nearly US$1 million in pre-orders.
The merits of slow growth
The startup hasn’t taken any venture capital and isn’t planning to anytime soon. It was a conscious decision to go the bootstrapping route.
Khan learned about fashion and ecommerce from his time at two ventures launched by Germany’s startup builder Rocket Internet, Zalora and Lazada.
Khan had joined Rocket Internet in its pre-IPO days – when it “did not even have a website, just this logo against a black background,” he recalls – and became part of the firm’s fast-expanding ventures in Asia.
In 2012, Khan was working in Hong Kong’s finance industry and was hired by Rocket’s online fashion site Zalora when it was just a few months old. Later, he moved to various locations in Southeast Asia, eventually becoming Lazada’s CFO in Thailand.
“I really loved it,” says Khan of his time there. “I learned a lot, got to try out a ton of different things.” He also admits to seeing some negatives in the venture-backed ecommerce model, “at Zalora in particular.”
In its fifth year of existence, Zalora quickly grew across Southeast Asian, but is still running losses and has partly retreated from some of its markets. Lazada, launched shortly after Zalora, was acquired by Alibaba last year.
By mid-2014, Khan had quit Lazada to start Linjer. At first, it was only him, with Chong contributing part-time, as she still had a full-time job.
That changed only after the business was more stable. Even then, the team grew slowly.
“It’s just Jenn, three customer experience associates, all part-time and remote, and myself at this point in time,” says Khan.
Linjer’s operations span the globe, with leather suppliers in Italy, and warehousing and fulfillment handled by a third-party logistics firm in Hong Kong.
Life after Facebook
Khan and Chong had been based mostly in Europe in the past years, but are now shifting their focus back to Hong Kong, where they plan to build a small team to enter Linjer’s next phase of growth.
“We’re profitable to the point we can cover our overheads for a team 10 times the current size and a have good enough cash cycle to grow threefold in the next year without external funding,” says Khan. “We want to keep the team lean and small, ideally we stay below 20 in headcount and scale with technology and marketing spend.”
Linjer’s main marketing channels are Facebook and Instagram – the startup sinks a “seven-digit amount” annually into the social network’s ad tools.
This has been working out nicely for the kind of storytelling the brand does, says Khan. “You do what Leonardo DiCapro did in Inception – plant the idea that your product is the best offering and evoke desire in the customer.”
But with more and mega brands utilizing these platforms to run ads, prices are on the rise and smaller players are in danger of getting squeezed out.
“We expect CPM (cost per thousand views of an ad) to double in the next 24 months,” says Khan. “That would essentially put our growth rates at risk.”
Before that becomes a problem, Linjer will have to find new ways to address its audience. Influencer marketing is likely to play a role in this new phase, but Khan isn’t ready to share the details yet.
He thinks there are ample opportunities in the direct-to-consumer ecommerce model, if done right.
Shoes, for example, are tricky, he says. That’s because the operational costs of returns and exchanges are especially high. A shoe, unlike a bag, has to fit perfectly.
Khan’s advice: “If you do something you’re passionate about – you’ll figure it out. Do some basic back of the envelope math – and figure out if the business model fits your needs. Things to check for: Am I passionate about this? Do the economics work? Do I need outside financing, if yes, am I comfortable running a VC-funded startup and what comes with it?”
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