Shark Tank: 12 Finalists Dazzle In BIG IdeaBounce Contest

Team Name: Pareto

BIG IndeaBounce 2022 finalist

Concept: Pareto is a direct-to-consumer, women’s apparel brand that makes the best version of the clothing you actually wear using our industry-leading, farm-to-closet supply chain.

Challenge: Pareto was born from a frustration with the retail industry’s focus on more – more product, more often. And for what? The focus on more is creating a lose, lose, lose situation. For women. For brands. For the environment.

WOMEN are wearing 20% of their closets, 80% of the time, wasting time and money sifting through endless new product. According to the Business of Fashion and McKinsey’s 2019 State of Fashion report, the average person buys 60% more clothing today compared to 15 years ago.

At the same time, BRANDS are producing double what they did 20 years ago, while struggling to move through inventory profitably (for example, Allbirds recently went public without ever being profitable). Coordinating eight plus seasons of new launches per year, planning endless promotions to move through inventory, distributing inventory to an ever-growing store footprint, etc. is proving challenging to do profitably.

All the while, the ENVIRONMENT is suffering, with 40M+ tons of textile waste added to landfills every year. The industry contributes to an estimated 10% of global carbon emissions, and the need for constant newness at a low cost comes at the expense of low pay and horrible working conditions (for example, forced labor on the cotton farms in Xinjiang, China)

How can the retail industry continue to operate this way when all three stakeholders are losing? We’ve set out to define the new normal. We’ve set out to show the world the power of fewer, more purposeful – for women, brands, and the environment.

Solution: At Pareto, we’re challenging the need for more in the retail industry. Pareto is a direct-to-consumer, women’s apparel brand that makes the best version of the clothing you actually wear. We obsess over identifying the pieces that should be in the core of every woman’s closet – the pieces she’ll reach for day after day, year after year, no matter the trends of the season. Then, one piece at a time, we perfect every detail. Each piece fits well, is extremely versatile, will last for years, and is made responsibly. We launched in August 2020 and have four pieces in the market (t-shirt dress, crewneck sweater, tank top, field jacket).

This all is made possible by our domestic, traceable, farm-to-closet supply chain. From the cotton farmers in Texas to the seamstresses in California, we work directly with every hand that touches our product. Most apparel brands only have visibility into the last stage (i.e., their cut & sew factory). Working directly with every partner is the only way to make the best product quality decisions and most responsible decisions. Think farm-to-table becomes farm-to-closet.

Our approach is defining a new normal for the industry – one where all stakeholders win. WOMEN spend less time searching and more time living. We (as a BRAND) simplify our operating model to what truly matters – making amazing product while building a profitable business. The ENVIRONMENT can stop paying the price, as we address “sustainability” holistically, tackling both how clothing is made and the quantity of clothing made.

Market: While the brand has proven to have broad appeal across ages and backgrounds, our primary target market at this time is women, ages 23-35, living in urban or suburban areas, college educated, and earning >$50K per year. We estimate our target audience spends ~$10B on apparel each year (which is growing at a rate of ~2-3% / year). This is based on an estimated 8.3M women in the US spending ~$1.2K on clothing per year. Our target market will continue to grow as we expand into men’s, children’s, and international markets.

Within our target market, we are seeing four key customer archetypes (outlined below). In the near-term, we are doubling down on the mission-seeker archetype in order to be efficient and effective with our marketing efforts.

1) THE MINIMALIST: She wants to reduce her closet to only what she wears on a regular basis (e.g., ~30 items)
2) THE TIME CONSTRAINED WORKING WOMAN: She works long hours and is passionate about progressing her career. She wants to look nice and feel confident in her wardrobe, while minimizing time spent shopping and energy spent getting ready in the morning
3) THE MISSION-SEEKER: She supports brands with missions that are disrupting the status quo. She wants to take steps to being a more responsible consumer
4) THE FASHIONISTA: She enjoys the hunt to find unique pieces, using fashion as a form of self-expression. At the same time, she recognizes that she needs core pieces that she can easily style with her more unique items

Competition: We make the best version of the clothing you actually wear – pieces that fit well, are versatile, last for years, and are made responsibly. While there are brands that are trying to tackle different parts of this vision (e.g., Reformation, Cuyana, Everlane), their long-term potential is limited because they do not have a fully traceable supply chain.

Our key differentiator is our farm-to-closet supply chain. This means we work directly with our partners at every stage – the cotton farm, spinning mill, fabric knitter / weaver, dye house, and cut & sew factory.

How is this different? Due to how fragmented and worldwide apparel supply chains are, most brands only have visibility into the last stage (their cut & sew factory).

Why is it valuable? Only being able to control decisions at 1 of 5 stages has vast negative product implications – unknown quality decisions, undisclosed working conditions, and untrackable environmental impact. Working directly with every partner, we’re able to make the best decisions at every stage. For example, from a quality perspective, we control elements like the length of the cotton fiber which impacts fabric strength and the stitches per inch which impact garment durability. From a social perspective, we ensure elements like our factories having fair pay and safe working conditions. From an environmental perspective, we ensure elements like our dye houses having high wastewater treatment standards.

Consumers today understand the importance of farm-to-table with food. The apparel industry will be next.

Value Creation: Since launching in August 2020, we’ve built a game-changing farm-to-closet supply chain from scratch, launched four incredible products (t-shirt dress, crewneck sweater, tank top, and field jacket), and built a community of amazing women looking to simplify their wardrobes and lives. During this time, we’ve proven that we have a competitively advantageous revenue model (driven by high customer lifetime value and broad customer appeal) and a sustainable cost structure (driven by low SG&A costs and higher than average gross margins).

A little over one year into the business, we’ve…
Generated ~$50k in revenue with limited inventory, $0 spent on customer acquisition, and $0 of outside capital
Shipped orders to a diverse set of women across 40+ states
Cultivated a highly loyal community, with over 30% of customers making 2+ orders
Experienced tremendous customer satisfaction, with a return rate of <5%, an average post-purchase product rating of 9/10, and raving five-star reviews
Achieved a gross margin of 40% across products with a clear path to 50% as we scale inventory buys
Built a network of amazing, domestic suppliers who are all-in on helping us advance our mission

From day one, we’ve committed to building the brand in a way that will drive sustainable, profitable growth, while making a dramatic impact on how the retail industry impacts our planet and people. We are extremely confident in our early indicators of success and are ready to pour gas on the fire and grow.

Team: Olivia and Jessica are the co-founders and owners of Pareto. We met 8 years ago as students at Washington University in St. Louis. We are so excited to be applying for this fantastic grant at our alma mater. Our diverse retail experiences across the P&L and deep love for the industry make us uniquely qualified to build a timeless brand of the future.

We are total retail nerds. In high school, we worked on the floor as store managers. In college, we worked in-house for brands and retailers like Madewell, Band of Outsiders, and Target. After graduation, we spent a combined 7+ years at McKinsey serving 15+ retail brands across functional topics (e.g., merchandising, digital marketing, pricing).

Jessica’s Background:
– Current MBA candidate at Stanford Graduate School of Business (Class of ‘23)
– Retail consulting at McKinsey, with a focus on digital marketing and tech-enabled retail experiences
– Planning and Finance at General Mills, J. Crew, and Band of Outsiders
– Co-founder and CFO of The Bear-y Sweet Shoppe, a pay-by weight candy store on the WashU campus
– Sales associate at Madewell and Brandy Melville
– Pareto Responsibilities: Product Development and Supply Chain, Finance, Website

Olivia’s Background:
– Consumer investing at PearlRock Partners (subsidiary of 84.51 / Kroger)
– Retail consulting at McKinsey, with a focus on using data & analytics to improve marketing and merchandising decisions
– Merchandising at Target
– Pareto Responsibilities: Marketing, Data & Analytics, Customer Service

We complement our small but mighty team with subject matter experts (e.g., legal, product design) and contractors.

VOTE FOR Team Pareto HERE

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