Mansur Gavriel Case Study: 2012–2019

As Web Smith put it so succinctly, successful brands ride waves, or higher level macro trends in the economy and in popular culture. Mansur Gavriel is a brand that seemed to capitalize on two sets of waves — both the last gasp of the traditional fashion gatekeeping system, and the rise of Instagram brands and drops.

But in September 2019, the privately-owned brand sold a majority stake to a private equity firm. A privately-owned brand handing over majority control to an institutional entity like a PE firm indicates one of two things:

  • The only way the brand could raise outside capital was to cede decision-making authority, because every investor who performed diligence either saw a mess lurking just below the surface or didn’t trust the founders to work within the corporate finance framework.
  • The two creative-minded co-founders wanted to sell out. PE targets a return of 2.5x within 5–7 years, and the founders wanted to hand over control to someone who could deliver that return on their remaining equity so they could retire and ball out (or move on to the next thing).

Because it was reported that Mansur was seeking a minority investment a year prior to the sale, and because most founder-creatives are obsessed with control and creative freedom, the first scenario above is more likely.

How did Mansur Gavriel go from a rocket ship to a turnaround case in under a decade? I am going to explore that question through the lens of the brand’s merchandising strategy which, more than marketing or distribution, determines the fate of all fashion brands.

How We Got Here

The Mansur Gavriel brand was developed by two creatives with broad experience — Rachel Mansur and Floriana Gavriel — who joined forces under a united aesthetic banner after a chance meeting at a concert. They worked for two years on developing the design and sourcing strategy for the brand’s launch, and went to market in 2012 with two styles: a drawstring bucket bag and a top handle tote bag (called the Bucket Bag and Tote Bag respectively, and still sold in many iterations today).

The product filled what was then a major hole in the market. Prices for traditional designer handbags had crept up from the 1990’s through the 2010’s, rarely coming in under four figures for even the smallest models. Brands that served the “contemporary” price point in the handbag market were mostly providing lower-priced versions of the most popular designs offered by European luxury houses, but a savvy consumer could peg them for knockoffs and wouldn’t be caught dead wearing them. This was around the time when Reed Krakoff was let go from Coach for failing to pivot away from that strategy before the market did.

Mansur Gavriel offered two handbag shapes that were distinct without being trendy, constructed with high quality materials and techniques at priced between $400 -1000. The Business of Fashion dubbed the bucket bag the “Post-Recession It Bag”.

Because the brand launched just a year after Facebook acquired Instagram for $1 billion in 2012, the founders needed to lean on fashion’s traditional gatekeepers to get both attention and distribution. Capsule trade show, the bi-costal boutique Steven Alan, and then-blogger Garance Dore were all critical to Mansur Gavriel reaching critical mass.

For the next two years, the bags sold out consistently. For this reason, Mansur Gavriel had the brand power required to upend the traditional wholesale/brand agreement and demand that wholesale accounts front the money to fund the production of their orders.

Servicing wholesale orders is the riskiest and most capital-intensive part of an apparel or accessories brand’s business. There is a 3–6 month gap between the date a brand pays to produce a wholesale order and the date it is delivered and paid for by the wholesaler. The brand needs to fund the development of its next collection within that time frame. Sometimes the wholesaler will go under before delivery or receive the goods and refuse to pay, just because they can.

Because Mansur Gavriel wasn’t forced to tie up capital in this process, they were able to invest in other activities that would contribute to growth. In 2015, that translated to a New York Fashion Week presentation and increased investment in campaign shoots.

The brand’s accessible price point, limited inventory drops, and bold, graphic appearance allowed it to ride the growing wave of the Instagram brand (their e-commerce business launched in 2014).

At this point the founders were confronted with fashion’s eternal “hot item problem”: how does a brand maintain growth after producing a hit product that crosses over into the cultural zeitgeist and drives a ton of low-cost customer acquisition? Their answer seemed to be category expansion, which was executed at the following rapid pace:

  • 2015: Women’s footwear collection launched
  • Fall 2017: Women’s Ready to Wear collection launched
  • May 2018: Men’s Ready to Wear collection launched

During this time, additional handbag styles and colorways were introduced. But by 2014–15, other brands rushed into the market niche that Mansur Gavriel had created, and started to iterate into sub-niches within it. The brand also expanded its wholesale distribution; the original “hot item” styles stopped selling out immediately, and some began to go on markdown occasionally.

That brings us to the present day, when (as of December 28, 2019), the brand is running a “Sale on Sale” promotion on its website, something that would have been unthinkable three to four years ago.

Merchandising Analysis

Assortment

You can learn a lot about the way a brand views its product assortment from the main navigation architecture on its website. Mansur Gavriel’s head categories are Bags, Shoes and Ready To Wear (clothing). The men’s collection is a sub-item beneath each of these head categories, usually listed all the way at the bottom. This tells me that Mansur Gavriel is still driving the majority of its business from bags and shoes, and that the men’s launch has failed to gain traction.

You can also get a sense of which product categories are gaining traction by looking into category adoption by major wholesale partners. With the caveat that this analysis was limited to ecommerce, the majority of Mansur Gavriel’s wholesale partners do not carry the women’s Ready to Wear line (exceptions are Shopbop, Nordstrom and SSENSE). I couldn’t find the men’s product carried anywhere online except for MansurGavriel.com.

Based on the timing of the Ready to Wear launches and the timing of the brand’s fundraising process, it would be fair to conclude that these launches were distractions that diverted mental and financial resources and forced the brand to seek outside funding.

Of all Mansur Gavriel’s product categories, handbag production has the lowest level of complexity. Footwear sits in the middle (a high number of sizes drives inventory planning complexity), and women’s apparel is the most complicated. Complexity is driven by fit and the number of components and processes that go into the final product. The more variables are in play, the greater the probability that the factory is going to muck something up, especially when some variables are dependent.

Ironically, there is an inverse relationship between production complexity and the potential return on the “research and development” investment that it takes to bring a single product to market. The research and development process in fashion includes sourcing fabric, creating a pattern, refining fit, and tweaking production details like seam finishing and trims.

A successful handbag or shoe style has a much longer lifespan than a successful apparel style, and it is easier to extend the lifespan each season with new materials and colors. This is the reason that ready to wear is considered a loss leader for many luxury businesses, and it is also the reason that an apparel-driven business requires a strong partnership between design and merchandising to survive in the long run.

Pricing

Pricing literally determines your customer base: both who can afford what you’re selling (as in, who literally has enough disposable income to buy it), and who values your product in line with its price.

A simple (but time consuming) way to determine a brand’s pricing strategy is to navigate to each category page on the brand’s eCommerce site, sort it by price, and count how many styles fall into each price bucket. Note — you can also do this using a software package like R, or pay for a business intelligence service like Edited. Using that approach, I determined the primary price points for each of Mansur Gavriel’s major product categories:

  • Handbags: $500–699 (59% of the full price assortment)
  • Footwear: $300–499 (77% of the full price assortment)
  • Women’s Ready to Wear: $700–999 (54% of the full price assortment)

The assortment in each category is clumped pretty heavily into a single two hundred dollar price band. If this was done consciously, it indicates that Mansur Gavriel is honing in on a very specific target customer who typically spends between $300–500 on a pair of shoes, $500–700 on a handbag and $700–1,000 on an item of clothing.

Pricing gut check number one: can you picture this woman in your head? Have you seen her at the supermarket, or out shopping? Based on my experience and observation, this pricing strategy doesn’t align with most consumers’ behavior. A handbag is typically the most expensive part of a woman’s outfit, and represents the upper limit of what she is comfortable with spending. Launching ready to wear at an advanced contemporary price point (with some pieces crossing over to the low end of designer) doesn’t align with the type of customer who bought into the brand via handbags and footwear.

This is probably what happened:

  • The brand saw successful adoption of new handbag and shoe styles. Although sales did not approach the frenzy of the initial brand launch, they were still strong.
  • The brand did not consider if these product launches were driving new customer acquisition or cross-shopping from existing customers. Based on the brand’s marketing approach, 45–60% of annual sales were probably coming from returning customers.
  • The brand developed an anecdotal customer profile of a woman who typically purchased from luxury labels, but purchased Mansur Gavriel because it was a good value, and never qualified it with research, a customer survey, or customer interviews.
  • The brand launched RTW to appeal to their imaginary target customer, using the success of other launches as confirmation that the approach was the right one. They invested in an inventory position similar to a new shoe or bag launch.
  • On launch day…nothing happened. Most of the shoe and handbag customers couldn’t afford the RTW price point, or didn’t feel comfortable with it.

Competition

Consumers today are more well-informed than ever. A brand’s product and pricing strategy is splashed across the internet for all to see. When a successful product niche is identified, competitors will try to hone in from above and from below.

There are three forces eating away at Mansur Gavriel’s positioning as a more affordable it-bag sitting at the $500–699 price point:

  1. Status Micro Bags: Looking at the $500–699 price offering across several multi-brand sites, I saw many European heritage luxury brands creeping down into this price point with small leather goods disguised as bags. These include wristlets and wallets attached to shoulder straps. The Mansur Gavriel customer who purchased a bucket bag because she absolutely could not afford a bag from Gucci, Valentino, etc. is now being served here.
  2. Lower Priced Competitors: There aren’t a ton of brands competing with Mansur Gavriel directly in the $500–699 price point, but many have recently emerged just below in the $300–499 range. These brands include Danse Lente and Staud, who have emerged as the “It Bag” brands of the Instagram-first era. The Mansur Gavriel customer who saw that brand as an aspirational purchase may be served here with something she finds more affordable.
  3. Macro Trends: the US handbag market has been in decline for the past two years, making it harder for brands to maintain or grow sales. There are fewer overarching mega trends; “it” styles emerge amongst smaller pockets of consumers and have less staying power.

Path Forward

Mansur Gavriel’s merchandising strategies and struggles illustrate why it is so difficult for fashion brands to have staying power without a strong brand identity and mature direct to consumer business. White space in the fashion market is quickly crowded as soon as it is identified, and trends don’t drive the same sustained growth they once did.

To meet or exceed that 2.5x exit goal, Mansur Gavriel needs to stabilize its brand platform and merchandising strategy to create a strong foundation for its next phase, which should be a focus on minting EBITDA from a core segment of customers as opposed to rocket ship growth.

These are the two areas I would focus on:

Evolving From “My Vision” To “My Customer”

The “hot item problem” tricks founder-creatives into thinking that customers are buying into their vision when, in fact, their vision happened to align with the zeitgeist at just the right time. The result in a direct business is a customer file full of people that the founder-creative thinks they understand, when in reality, past success doesn’t guarantee future performance.

To position Mansur Gavriel for profitable growth, the path of least resistance is to work with what you’ve got in the customer file, because new customer acquisition is more expensive than reactivation. These are some of the things I would investigate to determine the best way forward:

Overall health of the customer file — does the last 12 month active customer base provide a good foundation for growth?

  • Has the rolling 12 month average of active customers been going up or down over the past 3–4 years? How are the segments above are contributing to the trend?

Acquisition sources — are the acquisition drivers in the assortment diverse and evolving or consolidated and stagnant?

  • What products have been driving first time customer purchases over the past 1–3 years?
  • How diverse is the product set driving acquisition? The top 5 products each year are driving what % of customer acquisition each year?

Price & Product Elasticity — are customers finding something else they want to buy within the assortment?

  • What are the high, medium and low price bands within the customer file? How many customers primarily shop within each price band? Do they cross shop?
  • To what extent are customers shopping across product categories, and to what extent is that cross-shopping bounded by price?

This analysis will provide a snapshot of existing customer purchasing behavior and help to determine if the brand has some segment of a loyal audience with full price potential. This would allow me to form a hypothesis on what type of merchandise would appeal to them and help avoid any future pricing missteps.

The next step is layering on demographic and psychographic data to truly understand what makes these customers tick. Depending on the amount of time and money available, this process may be limited to a customer survey, or as robust as purchasing demographic data from a provider like Epsilon and running a broader survey through a third party service. Felicia’s guide on how to develop these insights is excellent .

The outcome of this work is a picture of what your core customer likes and doesn’t like, and is willing and able to purchase. It might turn out that Mansur Gavriel’s most loyal customers value things that are no longer aligned with the brand in its current iteration. That would require a difficult decision — either repositioning the brand, or repositioning the customer base (i.e. acquiring an entirely new set of customers).

Evolving From Visual Identity to Brand Platform

When fashion was a wholesale-driven business, developing a strong visual identity for a brand was sufficient. Wholesale partners and press controlled the narrative.

In the current retail climate, visual identity is easier to copy and remix than ever before. It is no longer a differentiator. Pretty pictures may stop a consumer mid-scroll, but a deeper narrative is required to build a long-term connection that outlasts the initial like or clickthrough.

Mansur Gavriel needs to stand for something greater than a set of attributes describing its products or a consistent visual language. If you’re selling something other than basic food, clothing, shelter, your customer is buying to make themselves feel good. Part of understanding the customer is understanding what makes him or her feel good. The brand’s core customer needs to drive this narrative.

At a high level, the brand platform should outline the following:

  • Who is the target customer?
  • What does she value?
  • How does our product offering serve our customer, align with her values and make her feel good?
  • Why can we do this better than anyone else?

Postscript

You may say that this process sounds pretty formulaic for a fashion brand, which is supposed to be all about creativity and “vision”. But creative outcomes are better with a framework or some set of constraints. I say this from experience, as someone who once worked as and completely identified as a creative. Creativity needs a framework to thrive, and all businesses need to consistently serve a customer to thrive.

If you’ve made it all the way here, congratulations! And if you have any questions, or want to see the full data sets from my merchandising analysis, shoot me an email at greifelda [at] gmail.

Sources I drew on for the brand history portion of this post: Link 1, Link 2, Link 3

If you enjoyed this piece, you’ll really enjoy my bi-monthly newsletter covering digital marketing & retail strategy. Sign up here.

I used to design mom jeans (really). Now I help build bridges between quants and creatives and write about the future of retail.