{"id":655,"date":"2015-12-02T19:07:34","date_gmt":"2015-12-03T00:07:34","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/bonobos-a-better-fitting-model-for-a-better-fitting-pant\/"},"modified":"2015-12-02T19:08:05","modified_gmt":"2015-12-03T00:08:05","slug":"bonobos-a-better-fitting-model-for-a-better-fitting-pant","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/bonobos-a-better-fitting-model-for-a-better-fitting-pant\/","title":{"rendered":"Bonobos: A Better Fitting Model for a Better Fitting Pant"},"content":{"rendered":"

The Business Model <\/u><\/strong><\/p>\n

Bonobos\u2019s core business model is nothing new. Bonobos, basically, sells pants to men.<\/p>\n

Creating Value through The Perfect Pair of Pants<\/em><\/strong><\/p>\n

But there has to be a reason those pants are growing so fast, with annual revenue growing from $9.5mm in 2010 to $69.3mm in 2013 (implied revenue of $300mm for 2015)[1]<\/a> and 250,000 customer purchases in the last 12 months.[2]<\/a> Bonobo\u2019s seems to be giving the male shopper something he didn\u2019t have before: the perfect pant. Bonobos launched in 2007 with a single pair of corduroys. Today Bonobos sells 140 pant options and 230 shirt choices[3]<\/a>, in addition to formal wear, swimsuits, and golf clothes, all with an emphasis on fit.<\/p>\n

 <\/p>\n

\"Pants\"<\/a><\/p>\n

Source: Bonobos<\/p>\n

Bonobos creates value for the customer in another way- the shopping experience. In 2011, Bonobos opened a \u201cguideshop\u201d[4]<\/a> \u2013 a showroom which held no inventory (just one size of each model), but would allow customers to try on clothing items within the store, and then with the help of an agent complete their order via the e-commerce site.<\/p>\n

The guideshop experience aligns perfectly with Bonobo\u2019s target demographic, who shop for clothes on average of once\/twice per year[5]<\/a>, and would prefer a shopping experience during which they can receive fashion consultancy and fitting from a professional, and then leave the store without having to carry it with them.<\/p>\n

\"Guideshop\"<\/a><\/p>\n

Source: Racked.com<\/p>\n

All of the above factors create value for Bonobo\u2019s target customer, and people are willing to pay for it. The average price of a Bonobo\u2019s men\u2019s pant is about $100.[6]<\/a><\/p>\n

The Operating Model <\/u><\/strong><\/p>\n

Imagine walking into a store where nothing was for sale. That\u2019s the model Bonobos is using, and the model 895,800 retail establishments in the US are not <\/em>using.[7]<\/a><\/p>\n

Check Out The Experience Here<\/a><\/p>\n

Bonobo\u2019s operating model, a hybrid<\/u> between a pure play e-commerce and brick and mortar, aligns perfectly with their business model. As a retailer, Bonobos reaps almost all the scalability benefits of a pure play e-commerce sites, and avoids the common operational difficulties associated with maintaining retail outlets.<\/p>\n

How Bonobos Captures the Benefits of E-Commerce\u2026<\/u><\/strong><\/p>\n

Margins <\/em><\/strong>Online sales are simply more profitable, with industry gross margins of 70% versus wholesale margins of approximately 35%.[8]<\/a> Furthermore, they can control the brand experience with the end user, without having to worry about relying on retailers to present the brand\u2019s overall experience.<\/p>\n

Data Ownership<\/em><\/strong> Bonobos owns its own data. By selling only digitally, Bonobos receives 100% of customer data. The availability of this data can feed back into continuing business operations, and help Bonobos drive future decisions on designing, procurement, and marketing.\u00a0<\/em><\/strong><\/p>\n

Inventory Management <\/em><\/strong>Without pressure to stock multiple retail outlets, Bonobos has full flexibility to manage inventory from procurement to direct customer. There are significant financial advantages to this model, with lower working capital needs for the company, and much less unused inventory.<\/p>\n

Employees \/ Fixed Costs <\/em><\/strong>By maintaining only 19 guideshops[9]<\/a>, Bonobos is able to run a lean team as well maintain low store maintenance costs. Bonobos cost per store is lower than a traditional retailer, which would have to employ more sales people, a full cashier system, and spend time and resources on restocking. The result is exponentially higher sales per person and per square foot than the traditional retail model.<\/p>\n

\u2026But Also Brick and Mortar<\/u><\/strong><\/p>\n

Marketing <\/em><\/strong>Beyond driving sales, the guideshop serves as an important way to improve brand recognition for Bonobos, particularly in metropolitan areas. Strategic placement of guideshops guides traffic to Bonobos\u2019s site.<\/p>\n

Better Customers\/Fewer Returns<\/em><\/strong> Order values in guideshops are double what they are online[10]<\/a>, with customers less likely to return products and more likely to repeat transactions. By attracting stickier customers through a good shopping experience, Bonobos is building a stable and continuing source of revenue for the long term.<\/p>\n

Relationships with Customers<\/em><\/strong> While e-commerce is, in many ways, the future of shopping, people still care about feeling and touching their products before purchasing, and that remains true for clothing.[11]<\/a> By maintaining physical presence, Bonobos also doesn\u2019t leave the interpersonal <\/em>component out of the model. Stores matter as a way for employees to understand the consumer, have boots on the ground to relay changing purchasing habits and trends back to the design department, and contribute to the longevity and growth of the business model.<\/p>\n

\"Spongebob\"<\/a><\/p>\n

Sources:<\/strong><\/p>\n

[1]<\/a> Yang, Marshall. \u201cBonobos Revenue, Growth, and Projection,\u201d <http:\/\/www.marshallyang.com\/post\/67264612451\/bonobos-revenue-growth-and-projection\u201d<\/p>\n

[2]<\/a> Feloni, Richard. Business Insider. \u201cAfter 8 Years and $128 Million Raised, The Clock is Ticking for \u2026 Bonobos\u201d. <http:\/\/www.businessinsider.com\/how-bonobos-is-maturing-into-a-major-brand-2015-8<\/a>><\/p>\n

[3]<\/a> Lieber, Chavie. \u201cBonobos and the Brotherhood of the Flattering Pants\u201d. < http:\/\/www.racked.com\/2015\/6\/11\/8762431\/bonobos-andy-dunn><\/p>\n

[4]<\/a> Feloni, Richard. Business Insider. \u201cAfter 8 Years and $128 Million Raised, The Clock is Ticking for \u2026 Bonobos\u201d. <http:\/\/www.businessinsider.com\/how-bonobos-is-maturing-into-a-major-brand-2015-8<\/a>><\/p>\n

[5]<\/a> Feloni, Richard. Business Insider. \u201cAfter 8 Years and $128 Million Raised, The Clock is Ticking for \u2026 Bonobos\u201d. <http:\/\/www.businessinsider.com\/how-bonobos-is-maturing-into-a-major-brand-2015-8<\/a>><\/p>\n

[6]<\/a> Bonobos website.<\/p>\n

[7]<\/a> St. John, Oliver. USA Today. \u201cBonobos Opens Stores that Don\u2019t Sell Anything\u201d <http:\/\/www.usatoday.com\/story\/money\/business\/2013\/03\/12\/savvy-small-business-bonobos-pants\/1916885\/<\/a>><\/p>\n

[8]<\/a> Fubini David, Joshua Margolis, Kerry Herman. \u201cSusie Mulder at NIC+ZOE\u201d. 性视界 Business School.<\/p>\n

[9]<\/a> Feloni, Richard. Business Insider. \u201cAfter 8 Years and $128 Million Raised, The Clock is Ticking for \u2026 Bonobos\u201d. <http:\/\/www.businessinsider.com\/how-bonobos-is-maturing-into-a-major-brand-2015-8<\/a>><\/p>\n

[10]<\/a> Chen, Joy. \u201cReinventing Retail: ABonobos Case Study\u201d. <http:\/\/cargocollective.com\/joychen\/Reinventing-Retail-A-Bonobos-Case-Study><\/p>\n

[11]<\/a> Chen, Joy. \u201cReinventing Retail: ABonobos Case Study\u201d. <http:\/\/cargocollective.com\/joychen\/Reinventing-Retail-A-Bonobos-Case-Study><\/p>\n","protected":false},"excerpt":{"rendered":"

How Bonobos is capturing the best of both worlds as it straddles the line between digital and physical retailing. <\/p>\n","protected":false},"author":567,"featured_media":656,"comment_status":"open","ping_status":"closed","template":"","categories":[171,170,173,49,172,133,16],"class_list":["post-655","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-bonobos","category-brickandmortar","category-digitalretailing","category-e-commerce","category-inventory","category-operational-alignment","category-retail"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\nBonobos: A Better Fitting Model for a Better Fitting Pant - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/bonobos-a-better-fitting-model-for-a-better-fitting-pant\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bonobos: A Better Fitting Model for a Better Fitting Pant - 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