Today’s newsletter features a guest post from Alex Greifeld. She is a growth marketing consultant and the author of DTC Fashion Decoded–a newsletter where she shares proven growth marketing tactics just for fashion brands.
When I worked for a trendy contemporary womenswear brand, one of our most iconic, best-selling styles was also a loss leader. Sometimes brands plan this purposefully, but we had no idea. And it nearly turned a year of record sales growth into a financial loss.
When I started working at this brand, our mandate was to scale the eCommerce channel to make it 50% of the brand’s total sales. Wholesale was the dominant sales channel, and that was reflected in the way we worked internally.
The direction and strategy for each collection came from the design team, which was led by the brand’s co-founder.
Our inventory investments were heavily dictated by the wholesale buy; the eCommerce was too small to hit MoQ’s without wholesale orders in most cases.
Our brand assets–photos and videos of the product–were also dictated by the needs of wholesale.
It was my job to sort through this raw material and find something that would help us scale new customer acquisition via Meta and Google advertising. This could be frustrating, but one season all the stars aligned:
The brand presented oversized faux-fur coats and bomber jackets in jewel toned colors.
Wholesale accounts loved these pieces, so we were able to stock them online. They were the perfect scaling vehicle on Meta because they aligned with a bigger trend that season and the bright colors made them scroll-stopping.
When we launched ads featuring these styles, they became the top performers in our ad account almost immediately. These coats and bombers were our top unit sellers and dollar sellers week after week. And we had record-setting sales that season.
But when we reached the close of the first month (effectively six to seven weeks into that selling season), word came back from finance: we were losing money on almost every sale of these coats.
There were a few critical reasons this was happening:
Because these coats were oversized and made of heavy material, they were much more expensive to ship than the brand’s other products
Because the brand typically didn’t sell outerwear, we didn’t have appropriate shipping boxes on hand. We ran our own warehouse; this was highly improvised at the last minute.
Because we custom-dyed the faux fur, product margin was a few points tighter than our average, and nowhere near our best.
The coats had a purposely oversized fit, which customers didn’t expect from our brand, so return rates were much higher than average. Customers typically wound up ordering two sizes down from their normal size.
These challenges didn’t affect wholesale profitability much–products were shipped in “packs”, in relatively standardized packaging and return rates were lower because people tried on the goods in store.
But for the eCommerce business, these issues were critical. These coats were priced at over $350, so they cleared our free shipping threshold. We paid for every outbound shipment and every return.
We built the eCommerce P&L based on historical averages, and this product didn’t follow any of those rules.
This story highlights a capabilities gap that still plagues fashion, footwear and apparel brands nearly ten years later: when design, merchandising, operations and growth work in silos, potential margin often falls through the cracks.
Now that many fashion brands are leaning on Meta advertising for new customer acquisition and growth, it’s even more critical to treat Meta like its own “sales account”, the same way a brand might treat a major retailer like Nordstrom, Bloomingdales, etc.
“Majors” get special consideration–merchandisers edit the full seasonal assortment based on trends and styles where the buyers have demonstrated prior interest. The brand will sometimes create net-new styles or revise existing ones to please these retailers. And brands will develop dedicated photo and video assets to suit their needs.
Growth on Meta requires the same considerations–merchandise that has good “product-channel fit”, dedicated ad collateral, and a costing structure that can accommodate customer acquisition costs and the variable expenses of eCommerce fulfillment.
In some of the fastest growing online apparel brands, the growth team actually performs a dual role of inventory forecasting, because they have the clearest line of sight into which products will sell.
Here are some actionable tips to avoid your own “faux fur coat disaster”:
Benchmark the unit economics of each new style against the historical averages implied by that year or quarter’s P&L.
Update any P&L-based assumptions used in eCommerce KPI setting quarterly at a minimum. Even better: build data infrastructure that gives the team visibility into sales, product margin and projected contribution margin in real time.
Flag styles that are significantly higher cost. If these are considered key seasonal priorities, strategize cost savings during production and in fulfillment.
If Meta ads are a growth priority for your brand, develop 3-5 “Meta-friendly” styles each season: strong product margins, trend-aligned and forgiving fit (or minimal/no sizing–like socks, wallets or jewelry).
