Retail Revolution   //   April 5, 2022

How Centric Brands is investing in digital via its DTC brand Favorite Daughter

Apparel portfolio Centric Brands is starting to invest more in e-commerce after launching its own digitally-native brand, Favorite Daughter, a couple of years ago.

Traditionally, Centric Brands has driven sales via brick-and-mortar sales from its owned brands like Hudson Denim and Hervé Léger, as well as through licensing deals with companies like Steve Madden and Izod. However, early into the pandemic when most retail stores shuttered, Centric Brands realized it needed to find a way to diversify its channel mix and expand e-commerce sales.

As a result, in 2020 the company launched its first direct-to-consumer apparel and denim, brand Favorite Daughter through a joint partnership with influencers and sisters Sara and Erin Foster. Now, Centric is further diving into online commerce by further investing in Favorite Daughter and launching new digitally-focused tools across its portfolio of other brands.

Centric Brands’ group president Suzy Biszantz explained that during 2020 and 2021, the company realized the importance of a strong digital platform alongside its brick-and-mortar investments. Favorite Daughter — the company’s first online-only brand — could help to kickstart that strategy.

“We had real diversity in our brands… but we also wanted diversity in the channels,” said Biszantz. “[Favorite Daughter] would be a great learning opportunity for our whole platform, having our first digitally-native brand in the portfolio. There would be so much that we would learn in the launch process that would benefit our platform and also the company.”

Erin and Sarah Foster were tapped for the joint venture after previously partnering with Centric Brands’ Joe Jeans for a denim and sweater capsule collection. The sisters have about 1.2 million followers on Instagram and serve as creative heads for dating service Bumble.

Centric Brands’ svp of marketing and business development Jennifer Stender Hawkins said influencer partnerships like the one between Joe’s Jeans and the Fosters highlighted the power of e-commerce.

“But [these partnerships] really scaled online, they weren’t really blockbusters, candidly, in store,” said Hawkins. “The challenge for us was, how do we scale a business like that, that can be continual?”

The joint-venture structure was also new for Centric Brands, which more traditionally had total control over its brands or worked with partners with licensing deals. “It’s really [the Fosters’] brand, and we’re behind the scenes, powering and managing that growth,” said Biszantz. “That is a new structure for us in the men’s and women’s platform.”

“This brings a different product category to our portfolio, it brings a different business model and different challenges in distribution,” said Biszantz. “But it also catches the brand as it’s starting, and we can be partners in growing that brand over time.”

Hawkins and Biszantz added that already having in-house production and logistics teams helped Centric Brands scale Favorite Daughter more quickly than a digital startup, for example. “We saw how powerful Instagram and now TikTok are at empowering e-commerce,” said Hawkins. “It was important for us to figure out how can we do that at scale by using our platform, and it is harder to do that with some of the legacy brands. But we already have everything in place, and it’s not like this is a startup.”

The influencer partnership also helped. Both Foster sisters regularly post about Favorite Daughter on their own accounts. Favorite Daughter’s brand Instagram now has 61,000 followers, and the brand just launched an owned TikTok account last month.

While the online fame of its co-creators is certainly helpful, Hawkins said that one goal for Favorite Daughter is to grow the brand beyond the Fosters’ social media influence. “Right now, a majority of the sales are people who know and love Erin and Sarah,” said Hawkins. “[We want to expand to] where you have the influence of that creator behind you, but also with a name that could eventually transcend the Creator.”

To do so, the company first invested in a series of pop-up stores located in the lobby of four Graduate Hotels in October and November. In December, moreover, the brand opened its first boutique in Beverly Hills.

Favorite Daughter, said Biszantz, could serve as a case study for the company’s future investments in online and creator-driven brands. Nora Kleinewillinghoefer, a principal at research firm Kearney, said that a more traditional retail business launching with a direct-to-consumer model can work well, provided that a heritage company bring in the right team to launch it.

“It’s a really great way to incubate capabilities that you can then share across your portfolio,” said Kleinewillinghoefer. “It is really dependent on the right talent in place, so that you can bring those experiences and the learnings from other brands who’ve done it well.”

A newfound focus on digital commerce

Alongside investments in Favorite Daughter, Hawkins said Centric Brands has been investing in a suite of technology over the past 18 months to increase digital sales at other Centric portfolio brands like Joe’s Jeans. This has primarily centered around getting all owned portfolio brands on the same “tech stack” or e-commerce platforms. Hawkins said this alignment has come from one brand testing a new platform or provider then rolling out or not rolling out the tech portfolio-wide after a pilot. This keeps contracts for services relatively low priced for each individual brand, as they are scaled across the portfolio.

“At this point, we have really great third-party partners across the board that are growing or that are fueling significant growth,” said Hawkins.

Centric Brands has also been rolling out new omnichannel features over the past year and a half to connect stores to these new revamped brand sites. The company has rolled out new services like buy online and ship to store. Across the portfolio, Centric has also shifted marketing away from email towards SMS phone messaging.

Kleinewillinghoefer said e-commerce will continue to be key for more traditional brands, even in a post-pandemic where brick-and-mortar shopping is more popular.

“For the more traditional brick-and-mortar brands, if they don’t embrace e-commerce at this time, they’re going to find themselves at a significant disadvantage,” said Kleinewillinghoefer. “From a growth perspective, digital is where everybody’s investing today. Even if they have a more mature portfolio of consumers that they’re targeting, those consumers have adopted technology.”