Founded by college friends Diederik Rijsemus and Matt Scanlan, NAADAM, a responsibly sourced men’s and women’s luxury knitwear brand, launched in 2013. Their travels to remote parts of the Mongolian Gobi Desert and seeing the issues of developing materials from around the world became the inspiration for the brand.
“We became friends with the local herders and saw first-hand how traditional cashmere traders and brokers drive up prices and take the profits,” explains Scanlan. “We turned from our start in non-profit work to buying raw cashmere from nomadic herders in the Gobi Desert in order to stabilize incomes and sell luxury cashmere sweaters at fair prices.”
Since their inception, NAADAM has been rooted in sustainability with a mission to source and produce the world’s finest fibers while simultaneously preserving the values and lives of their native herders. Sticking close to their non-profit roots, the brand even launched an NGO to support microeconomic development in the region through vaccination programs and local infrastructure investments.
NAADAM has a very strong digital presence. But they aren’t simply a direct-to-consumer brand.
“We were in wholesale from the beginning,” Scanlan tells me. “The thesis was to have a diversified distribution mix to reduce our risk. We private label, have e-commerce, and wholesale. Then two years ago we introduced retail.” While retail has taken a hit with the brand’s stores in New York City for obvious reasons, it hasn’t affected the rest of NAADAM’s channels and they still have plans for a 4th quarter push for new locations. “We haven’t seen one category take down the rest. In fact, we are widening our customer base and exploring selling a commodity product through QVC and HSN to continue to diversify.”
Diversity doesn’t just apply to NAADAM’s business model. It also applies to their customer base. “Our customer isn’t just the millennial and it never was,” explains Scanlan. “Our brand was built in middle America. Our customers are single moms, stay at home moms, and dads.”
When I ask Scanlan how the pandemic has affected the brand he tells me that the day-to-day operations haven’t changed much and that his team of 80 are adjusting nicely to working from home. “Generally, the group has been doing well, we have made it clear that HR related changes are not part of our on-going strategy, so that at the very least our team does not feel the pressures of pending financial insecurity.” That’s code for everyone is keeping their jobs.
NAADAM has even seen an uptick across the board, with the biggest increase coming through e-commerce. “We are up 200% above where we would normally be,” says Scanlan. “But, we have been running out of inventory. We design for a year out and then we track it. The demand for our product is high, but if we haven’t planned for it we can’t sustain it. We are very grateful to be in the position we are in. But there are a lot of unknowns currently.”
One of the reasons Scanlan and Rijsemus feel their brand is fairing better than others is because it serves the economy of comfort consumers are seeking both in general and even more so with our “new normal”.
“In light of the pandemic, we’re already positioned to benefit from the residual effects of larger trends in consumer preferences such as sustainability and health & wellness,” explains Scanlan. “People have been given more information to make more informed consumer choices and thus feel more empowered than ever to take control of their own wellness and well-being in all aspects. That’s from what you eat, to how you work out, how you supplement your wellness, how you take care of your mental health and ultimately in NAADAM’s case, how you dress. I am buying lounge pants, hoodies, blue light glasses, and I am even on a skincare routine, which is pretty out of character for me.”
The pandemic also has created other shifts in consumer behavior. “Fashion has shifted from structured items like stiff jeans or suits to more comfortable and cozy pieces including athleisure, loungewear and more comfortable pieces in general,” Scanlan tells me. “Other CPG categories including bedding, home decor and skincare, all of which fall within ‘self-care’ have also become top-of-mind purchases for consumers around the country since they’re spending more time at home. This change in behavior has positioned some products for success and others for major difficulties. We are in the fortunate position that our products have matched consumer demand for low-cost, high-quality loungewear.”
NAADAM works with a vertically integrated network or suppliers most of which are in China. Fortunately, most of them are back online.
“These manufacturers provide nimbleness and transparency, which has allowed us to maintain and even speed up our production launch schedule during this time,” shares Scanlan. When I ask him if foresees any backlash from consumers who choose not to support brands with materials and manufacturing based in China, Scanlan tells me, “25% of the world’s goods are manufactured in China and even more across all of Asia. I think consumers understand and appreciate the value of goods produced in this part of the world. We don’t expect backlash from it at this point and believe strongly in the relationships and partnerships we have developed globally to produce quality product at accessible prices.”
Scanlan approaches business from a unique perspective. Prior to NAADAM, he spent several years at a venture capital firm. “It was my first gig out of college. I worked on a healthcare portfolio. The only thing I learned in that time was that is that I didn’t want to do that for the rest of my life. The experience got me searching for more,” Scanlan tells me. After launching NAADAM, he got back into investing into other brands—specifically direct-to-consumer brands through his fund, Magic Hour, with partner Jake Sargent including True Botanicals, Buffy, Minna, Necessaire, Clare and more.
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“It wasn’t until co-founding NAADAM that I really understood early stage investing,” shares Scanlan. “After moving into that role formally, investing in early stage business was a seemingly obvious transition. I spent so much time working alongside other founders that providing objective feedback, coupled with strategic capital, was very logical and matched an evolving start-up finance skillset.”
With being both a founder and an investor, I ask Scanlan what the future holds for D2C brands that are looking to cut costs and reallocate resources where they can due to the pandemic. Scanlan responds. “It’s about crafting proactive strategies for recovery and future growth. This pandemic will force brands to reevaluate their business models, identify vulnerabilities to strengthen, and build for the future. I think we’ll see brands being a lot leaner in general, in terms of overhead spending, marketing budgets, for instance, and hone in more on product.”
When I ask Scanlan if he had any tips for other D2C brands to navigate the pandemic he explains to me that flexibility and nimbleness are the keys. “The more unnecessary overhead that businesses are carrying, the harder it will be to adapt to changing circumstances. Extending cash flow will be crucial. Growth, hiring, and awareness marketing are cost centers that generally will need to be reassessed. Financial discipline is absolutely going to be foundational to businesses that weather the storm and emerge unscathed.”
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