The Next Closet: Success Factors for Industry Disruption

 

I would think about a girl or woman living in small town like Baarn where there is only one local second-hand store with a very limited selection,” explains co-founder Thalita van Ogtrop, describing the inspiration behind the luxury second-hand resale platform The Next Closet. “What we did was innovate a market which is now almost entirely run by brick and mortar thrift shops, all very nice but totally dispersed in terms of how they run and how they work. Accessibility and empowerment were really attractive concepts for us when thinking about retail.”

So began The Next Closet, an online platform dedicated to reselling second-hand luxury items. It started over a decade ago inside an Amsterdam design agency, where Thalita and co-founder Lieke Pijpers discovered a passion for sustainability practices in new developing business concepts, especially within corporates. One summer, a friend told them about how the resale retail market was booming in France and the US,and despite neither having a background in fashion, they were compelled by how it seemed to actively solve a large social challenge. Five years ago, together with a small team, they started up inside an anti-squatter’s building in Amsterdam-Oost to create the business model for what is now The Next Closet, one that continues to grow and feature elements of all the scaling success factors.

The Scaling Success Factors cover the intrinsic dynamics that create potential for growth in any enterprise. Our research on hundreds of fast-growing companies has given us an implicit understanding of which ones will go beyond the first valley of death, and which features are vital within each company to grow toward making outsized impact. Small and mighty, The Next Closet has created a business elements from each facet of our scale-up success factor model.

 

Great Business

Our ‘big hairy audacious goal’ is to make second-hand fashion the #1 choice,” Thalita tells us from their headquarters in the heart of Amsterdam Oud-West. “Fast-fashion is both trend-sensitive and of such bad quality, so what we created was a new alternative without having to go the activist route of preaching and scolding.” The platform is unique in that gives second-hand clothing a luxurious, appealing, and commercial quality. They also aspire to change consumer behavior in a way that informs them of making smarter purchasing choices – “what we aim for is that the young buyer will be deterred from buying the latest H&M t-shirt expressly because it has no resale value.”

 

Riding Waves

Fashion is currently the second most pollutant industry in the world. The numbers are staggering: the textile economy is projected to use two Earths’ worth of resources. Today, 87% of the 53 million tonnes of clothing produced are incinerated or dumped in landfills. While consumers are becoming more aware of the impact of their choices, they often struggle to balance style and sustainability. “We now have a little green leaf next to all the sustainable brands featured on our website, to inform buyers on what sustainable brands they are when they want to buy something new. We measure the impact of their choice by calculating how much you contributed to saving an X number of liters of water, or trees, or CO2. We’re improving it further by redesigning our sustainable mission with infographics and educating people in a positive way about their impact by buying quality new and reselling it later. This for us is storytelling,” Thalita explains. Not only do they empower consumers through positive nudges, they also are testing ways to directly collaborate with brands. “Together with the help of ScaleUpNation, we are piloting a retail partnership with brands where retailers can outsource their material, and we resell it so it becomes part of a healthy loop.”

Adherence to the cause abides by strict rules: the website allows no fur or exotic leather, nor can users sell fast-fashion brands. Instead, more environmentally effective fashion houses like Stella McCartney, Reformation, and Vivienne Westwood are promoted to create positive solutions for effective change.

Lean Ops

In the beginning, TNC only had a premium service offering, which meant users could send their items to the headquarters and the team would handle the entire process of cleaning, photographing, running authenticity checks, uploading, and shipping each piece. It was designed to test whether there was enough demand and need in the Dutch luxury market for such a business. With the flyaway success of the first trial run, they scaled their model as a Do-It-Yourself platform, allowing users to photograph and upload the items themselves. They also developed an ambassador program with 40 promoters who spoke out on the value of TNC and the resale industry, which they credit to successfully financing their first -and most vital- crowdfunding campaign. The full DIY model kicked off soon after.

Learning Velocity

Thalita comes from a background in business and marketing, and Lieke studied engineering at TU Delft, so both were exceptionally green to the retail industry. Lieke was able to take over the tech side and customer journey flows, while Thalita focused on the marketing and communications aspects. “We really experienced the learning by doing – we had no idea what an online marketplace would entail. So much was about logistics, providers, shipping, and about keeping lean and not having the means, so we really focused each decision on whether it was a key priority for scaling.” In true entrepreneurial spirit, they attribute a lot of their success to their inexperience, as well as being limited in resources and keeping exceptional focus on the most pressing matters. “At first, we met with a lot of founders and grilled them about metrics, platforms, must-knows, platform strategy, so many things. They were super insightful, but the real leaps began as we incorporated growth-hacking methodology. Doing rapid test sprints took us to a whole new level of increased learning. We look back every year and say to ourselves, ‘how could we have possibly not known then what we know now?’”

Access to Finance

TNC recently got funded which makes their total investment 3,5 million euros. Given that all scale-ups are going through investment rounds, we wanted to probe on what was most significant to achieve the funding: business model or triple bottom line? “We got money because of the business model itself. Having a sustainable mission was a nice-to-have addendum, but not the reason. One of our mentors that is deep in the fashion industry told us that having a social mission was not going to get us in the door – the product itself had to be sexy, commercial, and appealing. So, in the beginning, we were more about fashion and less on storytelling, just to get the attention of the crowd and our name out there. As we go into a redesign, we will emphasize our impact and mission much harder.” However, among a group of investors from the industries of e-commerce, and media, the one fund focusing on sustainability businesses in the Noord Holland, PDENH, doubled their last round. Maybe doing good does pay back.

Thalita closes our talk by sharing an inspiring anecdote from a conversation with Prins Constantijn van Oranje: “I was telling him how bad it is that people are not aware of their footprint and are not changing their behaviors enough, and his advice was, don’t to wait for behavior change. Just let technology make it easily accessible and guided toward your purpose, because people don’t want to go on holiday less, or sacrifice their lifestyle. They need to be aided toward the simplicity that technology can offer. That was quite eye-opening for me: just make it really easy.”

Read more about the State of Fashion in this report.

Learn more about ScaleUpNation and its programs here.

Photo credit: Anne Timmer