{"id":7508,"date":"2015-12-09T23:29:12","date_gmt":"2015-12-10T04:29:12","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/bonobos-hybridizing-the-digital-and-physical-shopping-experience\/"},"modified":"2015-12-09T23:30:45","modified_gmt":"2015-12-10T04:30:45","slug":"bonobos-hybridizing-the-digital-and-physical-shopping-experience","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/bonobos-hybridizing-the-digital-and-physical-shopping-experience\/","title":{"rendered":"Bonobos: Hybridizing the Digital and Physical Shopping Experience"},"content":{"rendered":"

Introduction<\/strong><\/h2>\n

Bonobos is an apparel retailer that predominantly sells business-casual trousers to male millennials via ecommerce.\u00a0 Conceived at Stanford Business School in 2006, the brand has rapidly gained traction in the US and expanded in subsequent years to offer shirts, ties, swimwear, outerwear, suits and accessories.\u00a0 In the coming year, the Company is on track to make over $100mm in annual gross revenue! [1]<\/p>\n

The core of Bonobos\u2019s business model is simple \u2013 targeting male millennial shoppers with a value proposition of great-fitting apparel and maximum convenience during the shopping experience at an affordable price.\u00a0 The CEO of the Company presented the following equation for male utility that defines the value proposition of the business [2].<\/p>\n

\"bonobos_shopping_1\"<\/a><\/p>\n

Business Model<\/strong><\/h2>\n

The Right Fit:\u00a0 <\/strong>During their time at Stanford GSB, the founders of Bonobos realized there was a market inefficiency in men\u2019s apparel.\u00a0 The current landscape of pants was dominated by skinny Euro-cuts and baggy pleated styles (referred to as \u201cKhaki Diaper Butts\u201d by employees of the Company) that rarely fit the physique of many young adults [3]. \u00a0To address this void, Bonobos crafted contemporary designs to cater to this underserved demographic.\u00a0 The Company was also willing to frequently go the extra mile to ensure the customers found the perfect pair of pants.\u00a0 Fit was often a key determinant for male shoppers in developing loyalty to the brand.\u00a0 As a result, Bonobos believed that focusing on this aspect of the product would lead to financial success due to repeated purchases from loyal customers.<\/p>\n

Convenience:\u00a0 <\/strong>In the denominator of the \u201cMale Shopping Utility\u201d equation are the criteria of time and hassle.\u00a0 Unsurprisingly, men typically do not derive enjoyment from the process of shopping for new clothes.\u00a0 Many young male adults view the process of having to find the right fit and style of clothing through multiple visits to different retail establishments to be a harrowing experience.\u00a0 Bonobos aims to create a shopping experience that is quick, painless, and stress-free with a healthy dose of hand-holding.<\/p>\n

Operating Model<\/strong><\/h2>\n

With the challenge of appeasing the young male shopper, the Company has developed several distinct components to its operating model to achieve this goal.<\/p>\n

Hassle-Free Service:<\/u><\/strong> \u00a0Bonobos has tailored its operations to ensure maximum convenience during the shopping experience.\u00a0 At its core, Bonobos\u2019s ecommerce platform allows men to avoid the need to physically visit a brick-and-mortar retailer to buy clothes.\u00a0 Bonobos has also invested heavily in customer service.\u00a0 As stated by CEO Andy Dunn,\u00a0\u201cthe key to overcoming resistance to buying apparel online is to make the experience fun and convenient\u201d [4] For all of its products, the Company sacrifices a percentage of gross margin to offer free and fast shipping and the ability to return merchandise at any time.\u00a0 To complement this, they have created a sizable customer service group\u2013 fondly referred to as \u201cninjas\u201d – that are empowered to do whatever is necessary to assist customers in every step of the purchasing process.\u00a0 Each Ninja is given a full-scale handbook to learn the Bonobos culture and best-practices for building brand loyalty [5].<\/p>\n

\"the-bonobos-ninjas-handbook-to-customer-service-1-638\"<\/a><\/p>\n

Vertical Integration:<\/u><\/strong>\u00a0 To build a sustainable model that provides quality product and high-touch customer service at an affordable price, the Company relies on a vertically integrated organizational structure.\u00a0 Bonobos exclusively sells product through its own branded ecommerce website, controls its own manufacturing process in Portugal with onsite quality control, and operates its own distribution hub in greater New York for delivering merchandise.\u00a0 Through this process, Bonobos is able to avoid selling wholesale to a 3rd<\/sup> party in the value chain, and can thus retain margins on its product.\u00a0 However, Bonobos has made slight compromises to this model in the recent past.\u00a0 In 2012, the Company signed a distribution deal with Nordstrom.\u00a0 In this case, product is sold to Nordstrom for a lower wholesale price in exchange for the increased distribution and awareness that the retailer provides [6].<\/p>\n

Guideshops:<\/u><\/strong> Perhaps the most unique aspect of Bonobos\u2019s operating model is the decision to pursue the Warby Parker approach of opening physical showrooms to complement the ecommerce platform.\u00a0 These stores, referred to as \u201cguideshops,\u201d do not carry physical inventory but allow customers to inspect and wear samples to find the perfect fit and style.\u00a0 The store experience typically involves an appointment with a Bonobos \u201cninja\u201d who greets the customer at the door with a beer and provides one-on-one fitting and fashion advice.\u00a0 These shops further enhance the value proposition of convenience by removing the greatest pain point with ecommerce retail.\u00a0 Namely, consumers are able to evaluate product fit and feel before purchasing the apparel online.\u00a0 Moreover, without inventory, the Company can operate smaller and more profitable stores by saving on rent and inventory holdings costs.\u00a0 At one point, Bonobos had five guideshops that generated $1,000 in retail sales per square foot per year — only Tiffany’s, Apple and Lululemon exceeded or matched that performance [7].<\/p>\n