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Veteran web-only apparel brand ScotteVest tests a new crowdfunding strategy

July 1, 2015 03:35 PM
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Crowdfunding isn’t just for startups anymore.

ScotteVest Inc., which has been selling gadget-friendly apparel direct to consumers online for 14 years, rolled out a campaign on online crowdfunding platform Indiegogo last week. It’s looking to raise $30,000 for its Ultimate Pocket Fleece, a jacket with 19 hidden pockets built to fit such travel accessories and gadgets as tablets, passports and smartphones. The campaign has raised nearly $15,000 as of July 1, at 11 a.m. Central time.

Founder Scott Jordan says he’s testing the crowdfunding model to see if it can be an effective way to increase exposure to its brand, lower costs and reduce inventory risks.

“The problem with the direct-to-consumer model is I have no idea how many units to order,” he says. “If I knew what the customer wanted in advance in terms of sizing breakdowns, it would make a huge difference to my business. If this is successful, it can fundamentally change how consumer brands bring a product to the market.”

If ScotteVest, No. 809 in the Internet Retailer 2015 Second 500 Guide, can beat its goal in a big way and raise $600,000 for its new fleece jacket, the merchant may run similar campaigns on every new product, Jordan says. It would essentially amount to the e-retailer offering consumers the chance to pre-order a product before launch, similar to what Apple Inc. does when it rolls out a new iPhone or iPad.

Accepting pre-orders would enable ScotteVest to ship purchases directly to the customer from its manufacturing facility in China. The process would save the e-retailer 10% to 30% on each item, as it could phase out its pick-pack-and-ship operation in Chicago.

Some ScotteVest customers have raised concerns on the merchant’s Facebook page about the strategy. One fan wrote last week, “I love your brand, and own a few SCOTTEVEST products, but why is a $million+ company using IndieGoGo to raise funds for a new product? It seems you could come up with the R&D funds without going the crowd-funding route.”

A ScotteVest staffer replied: “Although we are looking to ‘raise funds for a new product’ before it launches, that is not our main goal of the IndieGoGo campaign. As a company that truly values customer feedback, we are looking to gauge customer interest surrounding the Ultimate Pocket Fleece before we add it to the SCOTTeVEST product line.”

Crowdfunding is most often used by startup companies to help bring a new product to market. Kickstarter.com and Indiegogo.com allow entrepreneurs to solicit small amounts of cash from consumers, who, in return for their investment, receive one of the first products to roll off the production line if the fundraising goal is ultimately met.

Crowdfunding also is a way for companies to raise capital to get their business going without giving up equity. Indiegogo and Kickstarter make money by charging a 4% or 5% fee on all campaign funds raised.

This isn’t the first time Jordan has tested a novel way to raise funds for his business. He appeared on the hit ABC television show “Shark Tank” in 2012 to pitch the patent licensing side of his business called TEC-Technology Enabled Clothing. He asked for a $500,000 investment in exchange for 15% equity in its business. Ultimately, Jordan did not come to a deal with the sharks, as they wanted a piece of Jordan’s ScotteVest e-commerce business that he wasn’t willing to give it up.

 

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