Islamic Lifestyle

INTERVIEW-Haute Elan reveals new growth strategy to manufacture, acquire start-ups

| 18 May, 2017 | Interview
Shalini Seth, White Paper Media
INTERVIEW-Haute Elan reveals new growth strategy to manufacture, acquire start-ups
Photo: Haute Elan founder and CEO Romanna Bint-Abubaker

Fresh from hosting London Modest Fashion Week in February, Romanna Bint-Abubaker, founder and CEO of Haute Elan, tells Salaam Gateway in an exclusive interview that she has expanded her business strategy to include acquisitions and manufacturing.

London-based modest fashion e-tailer Haute Elan has been wooing investors since it set up shop in 2013. Last July it received $1 million in seed funding from a Singapore investor and it’s currently closing what it calls a ‘Seed+ Round’ of $2 million.

Abubaker, a former investment banker and lawyer, compares her business model to that of French luxury giant LVMH, which brings brands from across the world under its corporate umbrella.

She also likens her business verticals – Haute Elan for luxury fashion and Modlist.co to take modest fashion into the mainstream – to U.S.-based PopSugar and ShopStyle, which reside under one holding company. ShopStyle, says Abubaker, lists hand-picked sellers, “Amazon-style”, and provides them with a transaction platform. The site was acquired in February this year from PopSugar by Rakuten subsidiary Ebates, with the two announcing their “content commerce partnership” to drive traffic to fashion merchants.

At Haute Elan, business is evolving, too. The year has seen the company move away from what it described as “a lean business model with no inventory held.” It plans to set up manufacturing and continue to acquire smaller brands, and this year it also transcended its virtual walls to also promote the nascent and niche modest fashion sector on the ground.

In February Haute Elan hosted a modest fashion week that coincided with the British Fashion Council’s official London Fashion Week (LFW), albeit sans any official tie-up. Held at the iconic Saatchi Gallery, London Modest Fashion Week (LMFW) was positioned in the mix of the global fashion industry’s important LFW, which attracts 5,000 guests, including press and buyers from over 49 countries.

Following on the heels of last September’s New York Fashion Week, when modest fashion designer Anniesa Hasibuan presented the first all-hijab runway show to global accolades, LMFW gained unprecedented coverage from mainstream media. Everyone from the Daily Mail to The Telegraph, The Guardian, Huffington Post and Buzzfeed filed style columns on the event, complete with runway pics. Strikingly, the conversation had made a distinctive shift from the politics of veils and burkinis to how the high street may interpret velvet palazzos and flared jumpsuits.

For Abubaker, LMFW made a perceptible impact beyond the modest fashion bubble: “After LMFW, international press has become more focused on the industry. They are realising that there are serious players like us in the market,” she said.

Quickly, she turns back to the business at hand. "There needs to be more investment."

BREAKING UP A FRAGMENTED MARKET

According to Abubaker, accurate modest fashion market sizing remains difficult due to the fragmented nature of the sector, which largely comprises micro-, small- and medium-sized enterprises (MSMEs) catering to a universe of consumers around the world.

“Anyone can open an e-commerce site. There are so many people transacting across borders. There are a lot of smaller start-ups who own the brands and they will not give the true figures. We need to demonstrate the true sales volume to calculate the revenue of modest fashion,” said Abubaker.

Current estimates of market size are based on all clothing bought by the growing population of Muslims around the world, which is forecast to reach 2.76 billion by 2050. According to the State of the Global Islamic Economy Report 2016-2017, Muslim expenditure on clothing is expected to reach $368 billion by 2021, from an estimated $243 billion in 2015, which is equivalent to 11 percent of the overall global clothing spend of $2.2 trillion. Revenues from modest fashion clothing purchased by Muslim women were estimated at $44 billion in 2015.

INVESTOR APPETITE FOR MODEST FASHION MULTI-BRAND E-COMMERCE PLATFORMS

Modanisa, Turkey, established 2010: Modanisa’s first two rounds of funding came from Istanbul-based Aslanoba Capital, the VC firm in charge of Turkish angel investor Hasan Aslanoba’s early stage investments. According to Turkish press, they were for $1 million in February 2013 and $2 million in November 2013. In February 2015 Aslanoba and Saudi-based STC Ventures (whose anchor investor is Saudi Telecom) announced a $5 million investment. STC returned in March 2017, alongside Dubai’s Wamda Capital, for investment of an undisclosed amount.

HijUP, Indonesia, established 2011: In 2015 HijUP won two rounds of seed funding, the first of an undisclosed amount from Silicon Valley’s 500 Startups and Fenox as well as Indonesia’s Skystar Capital, and the second a seven-figure sum also from 500 Startups and Fenox as well as new investor Emtek, Indonesia’s largest media group.

GROWTH STRATEGY

Haute Elan’s growth strategy is opportunity-based and involves creating both supply and demand. After it raised $1 million in seed funding last July to launch Modlist.co, which curates collections from brands such as Uniqlo, Mango, Joseph and Gucci, the company opened a pop-up store in the swanky London borough of Chelsea, with plans to take it to a permanent location within the year. Already the store has some 20 brands including Mimpikita and Neelofar from Malaysia, Runway Bahrain, Sadoq from the Netherlands, and Foulard by Sara Rayess.

“The physical store is important to offer a truly multi-channel experience. It allows you to connect with the customer and create the dialogue that online does not allow you to do,” Abubaker said.

To better use and convert this approach into sales, marketing is going to be the biggest focus for Haute Elan and would account for 40 percent of revenue in year one. Customer acquisition and ensuring a top-notch mobile experience are part of this year’s plans. “The future is mobile and [lies in] ensuring the experience is not hindered by the nature of the device,” Abubaker said.

“Money will be spent on building strong operational teams, products and customer acquisition. The most important thing for us is to scale so there are more products as supply increases. These are our three core areas,” she added.

BUILDING INVENTORY

Matching supply to keep up with the demand that may be generated by aggressive marketing is a challenge the business is preparing to meet via pre-funding collections by the designers it’s working with, stocking high street brands, and by setting up manufacturing and back-end operations in India.

“We have so many designers starting up who have much to offer in terms of diversity, however, none of the designers are able to scale. They are young entrepreneurs operating on 20-30 pieces per style at best,” said Abubaker.

“We are trying to generate a million hits on the website in a day. Even with 1 percent conversion it won’t suffice for the volumes that we’re creating. Soon you will be able to shop Zara, Mango and Uniqlo with us. We had to do that because of inventory issues. We need to add inventory,” she added.

ACQUIRING START-UPS

The new strategy also includes acquiring select brands as the business moves to consolidate the fragmented modest fashion landscape. “We prefer young start-ups. For instance, we have [acquired] Sakura Malaysia and Modestly Wrapped, a modest fashion marketplace from the UK founded by Charley Hafiz,” said Abubaker.

“Sakura made the decision to break the fragmented market and join Haute Elan, other brands like JKB Argent have done the same with their focus being freed to be on creativity and product innovation. The Millionaire Hair Mist by founder Jas Braich has since risen to be one of our top selling brands,” she added.

This also translates into manufacturing Haute Elan’s own branded inventory with local partners in Asia, which is Abubaker’s current focus region. “If we want to gather size we need a local partner in the region given the major differences in the e-commerce ecosphere. We are in negotiations to acquire an Indonesian platform,” she said without revealing any names.

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