Consider the luxury handbag: made from sumptuous leather, trimmed with sturdy hardware, built to stand the test of time, and finished with the brand’s status-imbuing label. Taken together, these details make the case that such a bag is worth a big investment.
Would this same luxury handbag still be covetable with the label stripped away? Italic, a new startup that sells brandless luxury-quality goods for a fraction of their retail price, is betting on it.
Launching today, Italic is a marketplace that gives shoppers access to factories making products for luxury brands like Celine, Prada, Cartier, Gucci, Louis Vuitton, Christian Louboutin, Givenchy, Coach, Burberry, and Miu Miu. Membership to Italic marketplace will cost $10 a month.
In return, shoppers can buy two items monthly: think a leather tote from a Celine manufacturer for $145 (compared to $3,300 from Celine), glasses from a EssilorLuxottica factory for $70 (the brand’s Rayban frames typically cost $175), a leather jacket from a factory that works with J Brand for $425 (while a leather coat from the brand could run you $990). You can get cashmere scarves from the factory that works with Burberry, or linens from the factory that supplies to the Ritz Carlton and Four Seasons chains for $100.
By giving shoppers access to brandless luxury, without the markup, Italic founder Jeremy Cai calls his startup “the real version of direct to consumer.”
“Both luxury and direct to consumer brands mark their products up, with the former spending money on fancy marketing and the latter giving money to Facebook and Google so shoppers find them, but the factories never see that money,” Cai said a few weeks ago. “Gucci’s markup is 10X. Casper, Allbirds, or whoever, say their prices are lower because they are cutting out the middleman, but they are also a middleman. Italic, on the other hand, gives consumers the ability to buy straight from the world’s best factories, at a factory price.”
Cai says the company was “creating an entire new category of shopping.” His startup arrives at an opportune time, as shoppers are keen on value. Italic is the latest startup to bet on brandless merchandise, banking on the assumption that consumers will want quality over brand names, and are willing to eschew labels if the price is right.
Brandless shopping is about value proposition — and it’s a huge market
Before Italic’s launch, Cai advertised on Facebook by inviting shoppers to sign up to “shop luxury goods straight from the source.” The proposal nabbed Italic a 100,000 person waitlist.
This sort of response underscores Cai’s hunch that shoppers respond to value, even if the products are brandless. It’s a bet that consumer startup Brandless has made as well, with its range of some 350 home goods and food products that are priced at about $3 and have no branding. Brandless co-founders Tina Sharkey and Ido Leffler have gone to great lengths to talk about the future of brandless products, and they’ve received $240 million in funding from SoftBank’s Vision Fund, demonstrating that the brandless concept has huge potential.
The brandless pitch is actually already a booming concept in China, of all places, despite the consumer market being hyper brand conscious. In April 2016, NetEase, the video publishing site of Chinese tech billionaire William Ding, debuted Yanxuan, an e-commerce site for brandless goods. Chinese customers can buy products that come straight from the manufacturers of Ugg, Burberry, and Gucci. The business brought in $1.8 billion in sales last year, and is expected to make $3 billion this year.
Biyao and Xiaomi Mijia Youpin are two other huge, brandless Chinese e-commerce sites, and Cai believes there’s a huge opportunity to capture the American market’s hunger for affordable luxury goods.
Cai may be onto something. In the US, the business of value-driven retailers has, indeed, skyrocketed. The online resale market is booming, with the Real Real, Tradesy, Poshmark, and Thredup making the case that second-hand, a category once relegated to dusty thrift stores, is an appealing entry point for customers. Discount stores like Nordstrom Rack and TJ Maxx have seen a spike in sales, even in the face of declining retail, signaling that shoppers crave value more than ever.
There is, however, the argument to be made that these value-driven companies are thriving in the US because of the big names they carry. The Maxxanistas, after all, flock to their go-to discount retailers because they are hunting for deals from their favorite brand. Which is to say, while Italic’s marketplace model could have huge repercussions on the luxury industry, it will have to prove that shoppers are, indeed, willing to ditch their favorite aspirational luxury brand labels.
How Italic wiggled its way past luxury giants
Cai comes from both the manufacturing and startup world. His family members are Chinese immigrants and Chicago residents who run a car parts manufacturing company, which supplies to Nissan, BMW, and Tesla.
Four years ago, Cai co-founded the HR software startup Fountain, which was incubated in YCombinator. While working with Fortune 500 companies, Cai noticed that brands like Target were turning to private label to nab more profit.
He began to brainstorm a private label business of his own, and decided to target luxury goods. DTC giants had paved the way for online shoppers to try new brands over legacy ones — Casper over Mattress Firm, Away over Samsonite — and he felt that shopping had finally reached a point where “we all realize that the expensive things we buy aren’t actually expensive to make, but expensive to sell.”
Cai, who is based in LA, hit the ground to start Italic last year. He poached employees from Calvin Klein, Armani, and Patagonia, and grew his team to 15, with some settling in Milan and Hong Kong to be closer to the factories.
Through family connections in the manufacturing world, he met with over 200 factories in Italy and China. Cai’s pitch for Italic was that the factories could essentially act as their own brand. They take responsibility for the costs of inventory they create, and for a commission, Italic takes care of the design, marketing, warehousing, and storage fulfillment.
Cai says what initially seemed like a big ask — a yet-to-be-launched startup approaching factories that work with luxury giants like LVMH — didn’t take too much convincing.
“They get to focus on what they’re good at, which is manufacturing high-quality products, but they set their prices and essentially operate with the margins of a brand,” he says.
Ahead of its launch, Italic raised $13 million from investors including Comcast Ventures, Global Founders Capital, Index Ventures, and Ludlow Ventures. Daniel Gulati, a partner at Comcast Ventures, which led the funding round, tells Vox that Italic’s pitch intrigued him because it “democratizes luxury.”
“The days of being able to markup a handbag one thousand percent are coming to an end, because more shoppers are putting an emphasis on value,” Gulati says. “Plenty of legacy luxury brands are losing relevance because when consumers care less about their brand, the value fades.”
Italic’s marketplace is starting with leather goods, home goods, and eyewear. Soon, it will sell skincare (from factories that produce La Prairie products) and athleisure (from the factory that makes clothes for Alo Yoga). Gadgets like electric toothbrushes and luggage are coming too.
On its website, Italic is explicit about where the products come from. The site tells shoppers flat out that they are buying handbags that are “made by in the same factory as Prada” and “creams made from the same ingredients as La Mer.”
While Cai maintains that these statements are “facts” — and can’t get the brand in trouble — it certainly will ruffle feathers. Gulati says Italic has worked extensively with a legal team to make sure the startup’s approach checks out. Luxury brands definitely won’t be happy with the factories working with Cai, but he points out that most of them work with countless brands, which also compete with one another.
“We would never work with a factory that solely relies on one client for their revenue,” he says. “Our factories are huge, well-established ones that have been in the business for 50, 60 years and have over 30,000 employees.”
To steer clear of any copyright infringement, though, all designs created for Italic will be new, and anything that looks remotely similar to a copycat will not be sold.
Gulati is quick to point out that while Italic is keen to capture the attention of customers who crave high-end purchases, luxury goods is not a winner-takes-all kind of market.
“There is, and always be, a place in this world for great brands,” he says. “Italic is more focused on the consumer who cares less about the badge and more about the product they are getting.”
“We are never going to have the Gucci handbag shopper buying a handbag from us,” Cai adds. “But that shopper cares about good-quality leather, and so maybe they will buy a brandless leather jacket from us, or brandless skin care.”