Forever 21 invests in online styling service DailyLook

Dive Brief:

Forever 21 is part of an $8-million investment in DailyLook, a Los Angeles-based apparel subscription service, the Los Angeles Times reported. The retailer is leading the deal but is working with Upfront, a local venture capital fund that was also part of an earlier funding round for DailyLook, according to the report.
The deal has Forever 21 president Alex Ok joining DailyLook’s board, the Times reported.
Neither Forever 21 nor DailyLook immediately returned Retail Dive’s requests for comment.

Dive Insight:

This deal is somewhat incongruous, as it has a fast-fashion retailer investing in an upscale, personal styling service.

DailyLook not only offers more premium brands compared to rival apparel box service Stitch Fix, but also charges more for its services — a $40 styling fee compared to Stitch Fix’s $20, notes Jim Fosina, founder & CEO of Fosina Marketing Group. While Forever 21 is known for its low-priced clothing and on-trend merchandise, the move does fit with its focus on a younger consumer, he said. Plus, DailyLook’s online operations will enable Forever 21, which runs some 600 stores but little e-commerce, key data about sales, he said.

"Rather than building a subscription program from ‘scratch,’ Forever 21 continues to invest in this startup as a way to learn about subscription, leverage data for its stores and fuel retail customers into a model that creates an ongoing annuity business model," he told Retail Dive in an email. "By leveraging subscription-based data into its retail customer profile, the brand can adjust its in-store inventory and also encourage the multi-channel customer to augment subscription shipments with relevant in-store offerings."

But Forever 21 taking on an established service like DailyLook, and bringing to DailyLook its massive scale, doesn’t mean that the work is done for either company. For one thing, customer retention is "essential," according to Fosina. Yet that is also one of the most stubborn issues for subscription services of all types. Nearly 40% of subscribers of any service type cancel, according to research from McKinsey and Co. earlier this year. More than a third cancel in less than three months, and over half cancel within six. Some 45% of replenishment subscribers stay for at least a year. The longest-term rates are found at Amazon Subscribe & Save, Dollar Shave Club, Ipsy, JustFab fashion and Loot Crate, according to McKinsey's report.

"Brands like DailyLook and Forever 21 must build strong and ongoing relationships with their customers via subscription and direct-to-consumer touchpoints — it is not a matter of ‘building the program’ and putting it on autopilot," Fosina said. "Stylists need to have personal shopper connections to their customers in order to build retention. Time will tell as to whether DailyLook can scale in order to manage the Forever 21 influx of customers."