I LOVE UGLY Case study Publication

I LOVE UGLY Introduction I Love Ugly (ILU), founded by Valentin Ozich in 2008 while doing graphic design at university, is a well known menswear clothing brand that uses Online media to develop its market and to sell its clothing product. It is based in New Zealand, but also sells into Australia and the United States. The brand is synonymous with the idea to inspire people to achieve there aspirations and live a better life, this brand supports that. ILU current goal is to be the best menswear brand in New Zealand, Australia, and the United States.

Throughout this case study I will give an in depth review into the brands business journey, the story behind the brand (from the founder himself) and explain the fundamentals that helped the business succeed and the challenges that the company has faced in order to be where it is today. It’s almost like the story of its rise re-enforces the brand message. I am very interested in branding clothing and have my own version that I am working on, so this study assists in my personal goals, helping me to understand the ins and outs along with how to tackle challenges to the best of my ability. Valentin is an inspirational person who is prepared to share how his business works and communicates effectively so there is a lot to learn for any aspiring business person.

When I first heard of I Love Ugly, I thought the brands intention was that ugly is not always the be all and end all. As I looked further into it I was exposed to the backstory for the brand, I came to agree that life is a roller coaster, it has its ups and down and if we aspire with goals and push through you will come out as a better person, and accomplish things with new abilities that you would have never thought you had. From ugly to beautiful. ILU helps to portray a lifestyle brand that pushes for personal development, self improvement and inspires their customers to achieve there aspirations.

VALUES ILU has values beyond providing a consistently high quality product at a fair price, that include giving value before the sale, through sharing their story, creating meaningful connections with the challenges to overcome to live an inspired life, then after the sale through retaining customers by being transparent, and supporting them. ILU also has values of providing an innovative product and creating scarcity by limiting access to product. As a fashion brand they have value of pushing boundaries of what is acceptable in terms of marketing and design.

Subtle messages embedded in their product shows the value of creating a personal experience for their customers.

THE STORY Valentin seems to have a gift for communication as well as an acute understanding of what is trendy and stands out from the crowd, this really helped ILU in its early stages of it’s growth.

Valentin had a very unique and a creative desire to step outside of the box, taking a passion project he had been manifesting using the words ‘I Love Ugly’. This project starting with ‘I love ugly’ journeyed through a different mediums before landing as a upmarket premium classic menswear label. Always holding a solid vision, and a strong ambition Valentin started pushing out screen printing of his illustrations onto T-shirts from his mother in laws home. Valentin’s entrepreneurial spirit and humble desire to start a business came from watching his dads drive and passion – where his dad started from the ground up as an immigrant from Croatia, self employed, creating an orchard which grew it into a successful wine company. This helped to drive Valentin’s desire as it had rubbed off on him since a young age to start his own thing. Putting the hard yards in, Valentin found himself up till all hours of the morning trying to find better, more effective ways to fund and produce the best T-shirts he could, this led him to find work with a blank T-shirt company as a T-shirt picker. He watched closely over his then boss, questioning what he was doing, like a mentor, allowing him to grow his knowledge around the materials, key attributes, production, output and better product sources through talking with business partners and successful customers. Eventually this leading Valentin to start selling his shirts on Trade Me, the move which led to significant gains on his label’s popularity, using this launchpad he furthered his production to boutiques, wholesalers, Facebook and his own official website.

In 2009 he decided to jump into his own store after he had recently been picked up by ‘ASOS’ a UK based website that added ILU into their boutique range. With a $20,000 order from ASOS, Valentin decided to through his heart and soul into this new business, wanting to open his own boutique store.

Unsure what to call it since ‘I Love Ugly’ wasn’t properly established yet at that time, he decided to call it ‘The broken Puppet’. To gain recognition and attention to this new start up shop, Valentin thought to import international brands in which he wanted to align his T-shirt label with. Importing brands such as ‘Norse Projects’, ‘Parra’ and a few more, whilst including his ‘I Love Ugly’ label. He quickly found ILU to be his biggest sales brand within his shop because people loved the meaning, the story, the price tag and the fact that the product was different. Slowly starting to recognize what it takes to take his clothing to the next level Valentin shut his shop, found a business partner with expertise in business and worked along side him to open the first official ‘ILU’ store in MT Eden, November of 2011, followed with Newmarket and then Wellington. By this time Valentin, along with his business partner had moved production from local factories to China, to allow for lower, more affordable prices and better margins.

This is when the brand really started to peak as traffic was coming in from all ends, the wholesale companies, the stores and Online, with a notable number of customers coming from the U.S. With the ambitious mindset Valentin made his move and set up stores in Los Angeles, Melbourne and Sydney with big dreams to go further a field internationally. With the sudden success of the business, Valentin started getting carried away and caught the opening bug and this was where the cracks started to show, and in 2017 the business found itself struggling as the internal systems and processes hadn’t kept up with the growth. Valentin had to buy out his business partner and found himself having to shut down all the wholesalers, all the distributions, all international stores and all but one store in NZ to gain back the control and bank funding needed to keep the business on its feet. Late 2018 Ozich started reinventing ‘I Love Ugly’ from the ground up for the rebirth of the business, making it very clear to him self that he would stick to an Online business model/platform.

BUSINESS MODEL CANVAS...

Key Partners

Key resources

ASOS (3rd party retail - access to UK market) Fabric suppliers Chinese factories (Manufacturing) Bank (Funding and foreign exchange) Warehouses (Store product ready to ship) Payments providers PayPal, visa. Apple pay (needed for web sales) Media companies (To promote story & Product) Mentors (To help ILU know what to do) Customers Logistics (To get product from China to warehouse to customer) Landlords For leased premises (3 in Auckland, Wellington) Key staff Operations manager Production manager Creative director Digital CX Accountant

Revenue Streams

Creative marketing specialist To establish market and retain customers and develop brand.

Product design specialist To implement the personalized features in clothing crucial to value proposition.

Operational specialist To pull the logistics dependencies together.

Registered trademark “I LOVE UGLY”.

Advertising Social media, SMS, email and ILU website.

Good terms with suppliers to minimize funding costs.

Banks Bank loans for funding gap between production and sales.

Schedules To meet factory planning, advertising campaign deadlines for collections.

BUSINESS MO

Online Sale of clothing / collections Online – main form of income with up to 70% of all sales.

Customers pay Online using apple pay, PayPal, credit card.

Prices can be adjusted quickly with Online sales depending on how demand pans out.

No revenue from long tail relationship building on platforms like podcasts.

In Store Sales of clothing in store - customers are paying for clothing as well as de-risk their purchases by trying garments on.

Sales of clothing in store via third party outlets – receipt of revenue is delayed – in some cases on 45 day terms – not ideal compared to other income streams.

Customer Relationship Customer segments Behavior Risk takers – celebrity focus – will lead wearing new styles innovative designs.

Mainstream – will follow fashion trends which is most important for revenue.

Region - USA – biggest volume.

- AUS - NZ

Celebrities / Events Customer segment – risk takers / celebrity – relationship is one of promoting each other ILU promotes Oddisee / Oddisee promotes ILU, events (some in store) with celebrity Online Marketing Use of email and SMS to advance product releases/collections Web, Instagram, Facebook promote ILU to customers with story, pictures / access to first product releases Regional Drops Integrated with manufacturing planning cycles so that each collection has NZ summer range at same time US winter range available on site.

Value proposition ILU states “to fill a gap in market for classic menswear with a contemporary twist catering for 18-30 year olds at a fair price sold Online” The value this brings to customers is: - Newness – monthly collections releases rather than seasonal like other brands.

- Consistency / high quality.

- Design – create personalized messages in clothing.

- Accessibility – restrict this outside web (only certain stores can sell) - Innovation – Zespri style pants innovating on utility of clothing.

- Transparency – in communication with customers with good and bad.

- Value beyond product – engaging with customers about the greater cause – becoming the better you – podcasts on things like interview with Beauden Barret to how to make 1 million dollars selling clothing.

- Range – beanies, watches, pants, tops, - ILU’s fashion range is large.

- Pushing boundaries of what’s acceptable – using social media.

- Customers want to belong to ILU because it is cool new community that makes you feel special to join.

Key Activity Production Screen printing Manufacturing garments

Design clothing Market Services Podcasts Blogs

ODEL CANVAS

Cost Structure

(Most important costs ranked in order most expensive to least variable costs) Production Manufacturing product in bulk in China Designing / trials / dip tests / new product prior to manufacture in NZ Distributing product (manufactured product shipped to NZ then distributed within NZ or off to AU and US) Funding costs - working capital – pay manufacturing before production starts / receive Retail revenue from third party outlets after sales made Retail sales from shops - can sell higher priced items as Foreign exchange risk as China paid in USD customers can try on and create physical contacts with Payments platforms e.g. PayPal, visa etc. customers to develop brand eg. Events at stores.

Fixed costs Online Web sales B2C – direct to customer – email/SMS/ILU website Salaries of ILU team Web sales B2B – to warehouses for retail outlets – these stores Funding costs – fixed banks loans Leases on stores are hand picked and limited to enhance brand and create scarcity (Costs and revenue disconnect is de-risked by (The channels are integrated by the marketing specialist/digital monthly collection releases so ILU stays very close to market segments during short sales CX and operational teams so that the brand is enhanced and cycles and can quickly adjust – as opposed to supply is managed to meet orders. quarterly / seasonal cycles.

Marketing costs are viewed as equal cost spread across all Variable costs make up the bulk of all costs and channels therefore: so the business is very cost driven with smaller Most profitable is B2C as the margins and volume is highest margins needing to move large volumes to (cost lowest) generate profit.

Retail shops - overhead in shop leases compromises profit.

There is risk in the manufacture prior to sell model B2B have poor funding arrangements as ILU receives money well after delivery, and so creates lot of complexity to manage as the collection or part thereof may not sell well.

Economies of scale so fixed costs can be spread funding, as well as lower margins as need to lock-in some if more sales made.) profit for retailers.)

Channels

BEHIND THE BRAND Rather than pursuing traditional channels with warehousing product and using wholesalers and retailers to move stock, since 2017, ILU has implemented an innovative approach where they create/ develop their market Online and sell most of the product Online, with just a few physical stores fully devoted to the ILU branded clothing. This innovative approach pivoted off challenges faced where they failed to combine Online, wholesale and retail methods of distribution, as each approach required different infrastructure forcing ILU to lose focus and capital to run dry servicing multiple channels. The challenges forcing the business into near bankruptcy by 2017.

Rather than ‘hiding’ this story of near failure, ILU has embraced the learning opportunities, capitalizing on the ‘story’ to further the brand message about aspiring to be the better you. Using their website, Instagram, Facebook and podcasts ILU engages with its customers to share things from how to setup a clothing brand to managing your wellbeing during challenging times, also things like what to focus on (and not focus on) to be successful and the mental and physical wellbeing aspects relating to being a better person. Valentin also shares book recommendations, campaigns along with articles around his experiences and podcasts on his ups and downs, hardships, history, and motivating talks with other inspirational influencer’s under the spotlight. The importance of marketing non product content alongside their primary consumer products is that it allows the brand to engage building a better relationship and rapport with the customer beyond just the product. Through all these avenues ILU made this process very possible for themselves as V said ‘he like to look at themselves ‘as a media company’, a voice giving back to the customers rather than just a clothing company, not just selling product.’

CONTINUED...

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These are all feasible ways to grow there community and constantly attract more new customers with creative, freethinking mindsets. But as much as this is important to I Love Uglies successes and growth around the business they know that long tail valued content isn’t going to make them money and are very aware that it would not keep them afloat if that was all they relied on, being the reason they are most focused on there product marketing and margins, marketing product is critical as it is the brands fundamental stepping stone to their successes within their product sales. This marketing strategy is used in many ways within businesses but is established especially well within this brand. A book by Gary Vee titled ‘Jab, Jab, Jab, Right Hook’ is the perfect representation of this, referring it to ‘give value, give value, give value, give value and then ask them to buy the product’ explaining it in a very simple term. This marketing strategy is very effective when used by the right team and under the right circumstances which I believe ILU have pulled off to the best of their ability.

Particularly special to ILU is the goal, the founder describes “to be a company that would be missed if it no longer existed”, based on creating a devoted community around inspiring people to aspire to their goals and teaching them how, being dressed in ILU is to be part of that movement.

This is at the core of the brand.

An example of this is used in subtle messages embedded throughout their brand and within their product showing the values that ILU resonate with.

“This is for the freethinkers, the curious beings that swim up stream, who see possibilities not problems, that learn from the past, live by the present and create the future, ....”

- Valentin Ozich

THIS IS FOR THE ARTISTS WHO SEE THEIR CLOTHING AS AN EXTENSION OF THEIR CANVAS FOR THE CREATIVE WHO DARES TO STAND OUT FROM THE CROWD FOR THE DESIGNER WHO STRIVES TO MAKE A STATEMENT FOR THE MUSICIANS WHOSE STYLE INFLUENCES THEIR MELODIES THIS IS FOE THE CUSTOMER THAT DEFIES THE CONVENTIONAL FOR ALL THOSE WHO ASPIRE TO INSPIRE.

REFERENCES Campbell, P. (2020, October 23). Meet I Love Ugly | fashion . Newmarket. https://newmarket.co.nz/i-love-ugly/ B. (2021). Summary of Jab, Jab, Jab, Right Hook: How to Tell Your Story in a Noisy Social World by Gary Vaynerchuk . Independently Published.

Ozich, V. (2019, September 4). About Us . I Love Ugly NZ. https://www.iloveugly.co.nz/pages/about-us iloveuglyvideo. (2019, December 23). 018 - Start To Finish: How We Design And Market Our Products [Video]. YouTube. https://www.youtube.com/watch?v=VB2YmZn_Glc&list=PLhhefUBG9o9PIHV0YeKnp4qzFe 6tKrV-Y&index=15 Rood, F. (2019, December 19). HOW TO MAKE A MILLION DOLLARS SELLING CLOTHES. I Love Ugly NZ. https://www.iloveugly.co.nz/blogs/theblog/how-to-make-a-million-dollars-selling-clothes