Sometimes founders are so heads down in their company, they rarely get a second to lift their heads up and organize their thoughts. So when they do, it is often by chance that they have a moment of clarity in vocalizing what they are trying to do to impact their industry.
I had one of the moments this week when a potential MBA intern pointed me in the direction of an a16z podcast (the Andreessen Horowitz venture series) called “Welcome to the new era of Commerce.” This particular intern loved our business model as she saw it as a perfect example of the idea of ‘pre-commerce’ or pre-ordering.
If MBAs are good at anything, it is slinging some hot nouveau business lingo (not necessarily a bad thing) – but to my amazement, this podcast seemed able to define and put a name to everything my cofounder and I had been trying to explain to investors and the fashion community for the last 12 months – the fact that there is a new guard model for delivering products to customers and it no longer involves inventory commitment.
If you haven’t listened to this podcast, I highly recommend pausing now and spending the next 28 minutes listening to it. Over the course of the podcast, Sonal Chokshi, editorial partner at a16z and former editor of WIRED Opinion, James Beshara, cofounder of Tilt.com, and Jeff Jordan, General Partner at Andreessen Horowitz discuss how pre-commerce is pretty much equal to the concept of pre-ordering where companies (including Tesla) are able to tap into direct to consumer interest (D2C) and discover demand for a product before spending money on product. Companies participating in this pre-commerce are able to disintermediate aggregators (like retailers) and use the data to make more informed purchasing or production (and design) decisions and sell directly to customers all while maintaining a higher margin.*
If you have listened to the podcast, but aren’t familiar with Nineteenth Amendment, I’ll give my elevator pitch. Nineteenth Amendment is a platform to let designers pre-sell garments in19 day intervals and have them made on-demand in the US. This is revolutionary for the fashion industry because 1) it’s a ‘full’ price model, 2) it requires no inventory investment upfront, 3) it allows brands/retailers to understand demand for a good before investment based on real time consumer purchasing and feedback and iterate quickly on product.
Why is this important? This is single handedly the most efficient deployment of capital in the fashion ecosystem to date. It also is the most democratic outlet for artistic expression in an industry that has been streamlined into the same skinny jeans (no offense) season after season. This model can derisk design and also allow a broader scope of design to flourish by presenting it to consumers and helping find product market fit, wherever that may be.
There are tradeoffs of course. Customers have to wait about a month for product. There may be a disconnect in expectations since product is not yet available (and changes during the actual production process may change the product slightly such as different fabric or producers). But as Chokshi of the a16z podcast notes, consumer expectations will change as more and more companies adopt this model. Plus, this model has built in elements of ‘flash sale’ and ‘fear of missing out (FOMO)’ mentality so the allure of exclusivity can win out in the end when the product is ONLY available first through this model.
My cofounder, Amanda, and I met in a program called Startup Institute at the Harvard iLab where we were originally exposed to Lean methodology and the concept for Nineteenth Amendment came out of applying that methodology to the fashion industry – an industry that hasn’t changed in over 100 years. Pre-commerce may not be right for every brand, but Amanda and I are willing to gamble our adult careers that pre-commerce is the way of the future for independent and larger scale brands looking to scale lean. As James Beshara says, pre-commerce is the way to ring “software-type thinking into the real world” and “will be the best way to sell something” in the near future.
Do you believe in the pre-commerce revolution? Leave a message below or email us.
*A side note on margins – the beauty of this model is that, when priced correctly, you can still make money selling an minimums and exponentially increase that as demand increases. See Amazon fashion BoF article for an idea of how this works…