{"id":15357,"date":"2025-02-25T22:00:26","date_gmt":"2025-02-25T22:00:26","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2025\/02\/25\/how-digitally-native-companies-like-rothys-are-growing-profitably-in-a-new-era-for-retail\/"},"modified":"2025-02-25T22:00:26","modified_gmt":"2025-02-25T22:00:26","slug":"how-digitally-native-companies-like-rothys-are-growing-profitably-in-a-new-era-for-retail","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2025\/02\/25\/how-digitally-native-companies-like-rothys-are-growing-profitably-in-a-new-era-for-retail\/","title":{"rendered":"How digitally native companies like Rothy\u2019s are growing profitably in a new era for retail"},"content":{"rendered":"

Direct-to-consumer footwear brand Rothy\u2019s just recorded its best year on record after the company\u00a0<\/strong>appointed retail veteran Jenny Ming, one of the co-founders of Old Navy, as its CEO.\u00a0<\/p>\n

Ming took the helm of the flats maker from co-founder Stephen Hawthornthwaite in January 2024. Under her direction, the company grew sales 17% to $211 million last year, its best volume year since it launched nearly a decade ago.\u00a0<\/p>\n

<\/div>\n

Comparable sales at its stores grew 20% and it posted positive EBITDA for the full year, with margins above 10%.\u00a0<\/p>\n

Rothy\u2019s outperformed the U.S. footwear market, which was flat in 2024 compared with 2023, according to Circana.\u00a0<\/p>\n

Rothy\u2019s growth, which came from an expansion into wholesale and a focus on brick-and-mortar stores, comes as direct-to-consumer darlings find it\u00a0harder than ever\u00a0to survive with the pure-play models that\u00a0once wowed investors\u00a0at the turn of the decade.\u00a0<\/p>\n

Once considered the future of the industry, these online-only businesses are now leaning into the retail fundamentals that have long been the building blocks of emerging brands. Wholesale partnerships are a critical customer acquisition tool, and\u00a0stores still matter.<\/p>\n

As these plucky startups\u00a0contend with the challenges\u00a0that come with an online-only business, the winners are adapting to a new reality where stores, wholesale partnerships and e-commerce all need to be part of the mix to ensure they can operate profitably.\u00a0<\/p>\n

\u201cA lot of people are like, why would you be on Amazon? Because people do a lot of searches on Amazon. If we weren\u2019t there, and they type in Rothy\u2019s, a competitor or somebody else would show up. So why wouldn\u2019t we want to be there?\u201d Ming told CNBC in an interview. \u201cTo me, it\u2019s really thinking a little bit more holistically and broadly. What our customer would want from us is how we approach it \u2026 people shop very different today.\u201d\u00a0<\/p>\n

Channel diversification will never be a panacea for a business that\u2019s inherently broken or doesn\u2019t serve a market need. The footwear industry and specialty retail overall is more competitive than ever, and Rothy\u2019s needs to continue its efforts to diversify, scale and expand into new categories to keep up its performance.<\/p>\n

Soon after Rothy\u2019s launched in 2016, it quickly made a name for itself with its ubiquitous Instagram and Facebook advertisements and an innovative approach on sustainable shoe manufacturing that included using recycled plastic to make machine washable products. By 2019, it was Meghan Markle\u2019s flat of choice and it had developed a\u00a0cult following.\u00a0<\/p>\n

Buoyed by a record year for valuations and 0% interest rates, Brazilian footwear company Alpargatas took a 49.9% stake in Rothy\u2019s in 2021 that resulted in a post-investment valuation of $1 billion.\u00a0<\/p>\n

Rothy\u2019s used the investment to build out a store fleet, but by that time, the company\u2019s growth had stagnated and it was struggling to reach profitability.\u00a0<\/p>\n

\u201cOnce we sort of emerged from the pandemic, you could see a lot of these digitally native brands now sort of saying, OK, now what, right? I need stores. It is so expensive to acquire customers online,\u201d said Dayna Quanbeck, Rothy\u2019s president. \u201d[With] an e-commerce model \u2026 all of your costs are variable, right? Where you really find scale and you really find profitability is where you can leverage your fixed costs, which is stores, really, and wholesale.\u201d<\/p>\n

Ming, who served as Old Navy\u2019s president between 1996 and 2006 and later became the CEO of Charlotte Russe, joined Rothy\u2019s board in 2022 and was later asked to take over as CEO. She said no at first, but later agreed to take the helm after she spent a few months consulting and saw the early innings of a transformation beginning to take shape. She immediately started focusing on improving profitability and generating sales momentum by making sure Rothy\u2019s was selling the types of products that its customers wanted \u2014 and in the places they shopped.\u00a0<\/p>\n

\u201cI literally went line by line \u2026 looking at what we should spend, what we shouldn\u2019t, you know, and rightsize marketing spend. There was things that, you know, we don\u2019t need,\u201d said Ming, citing office plants as one of the first things she cut. \u201cBut the main thing is, driving profitability is really in revenue. You have to be growing your sales in order to really be profitable, right?\u201d\u00a0<\/p>\n

That\u2019s where Rothy\u2019s new selling strategy came in. In 2024, it began testing with a select number of wholesale partners \u2014 Anthopologie, Bloomingdale\u2019s,\u00a0Amazon\u00a0and toward the end of the year, Nordstrom.<\/p>\n

At the same time, it continued growing its store fleet. Now, a business that drew about 99% of its revenue from its website does about 70% of sales online, with the rest balanced between stores and wholesalers. Combining profitable stores with strong wholesale partnerships, Rothy\u2019s has been able to grow sales and become more profitable at the same time.<\/p>\n

\u201cIf we were just digitally native forever and ever, you really just can\u2019t get there with the cost of acquisition, with the cost of, you know, just showing up these days,\u201d said Quanbeck. \u201cHonestly, it\u2019s impossible.\u201d\u00a0<\/p>\n

Looking ahead, Rothy\u2019s is planning to build on its wholesale partnerships and has made stores, along with international expansion, a central part of its strategy.\u00a0<\/p>\n

Quanbeck said it\u2019s hard to sell customers on everything that makes the brand appealing without them being able to see it in person.<\/p>\n

\u201cBut when you can walk into the store and you can see it visually, you have a great customer experience where we can really tell the story,\u201d said Quanbeck \u201cIt\u2019s additive. And we know that the lifetime value of those customers that engage with us IRL is really high.\u201d\u00a0<\/p>\n

Quanbeck and Ming, who are alumni of now-bankrupt Charlotte Russe, know all too well the perils of overexpanding unprofitable store fleets, and said they\u2019re taking a balanced approach to brick-and-mortar. The 26 stores Rothy\u2019s has are small and all are profitable and the company plans to open another eight to 10 doors this year, said Quanbeck.<\/p>\n

Ming said Rothy\u2019s won\u2019t need hundreds of stores, but she\u2019d like to see the fleet grow to 75, or perhaps even 100.\u00a0<\/p>\n

\u201cBut we also want to make sure our wholesale partners is in the picture,\u201d said Ming. \u201cWe\u2019re going to be in [Nordstrom] in March \u2026 they have more stores than we will ever have, so they might be in markets that we might not decide to open a store but then we still have a partner for our customer to shop in.\u201d\u00a0<\/p>\n

When asked if Rothy\u2019s will pursue an initial public offering or look to be acquired, Ming said the business isn\u2019t there yet \u2014 and her team doesn\u2019t need the distraction.<\/p>\n

\u201cWe had a really great year but \u2026 I keep telling the team, one year doesn\u2019t make it a trend,\u201d said Ming. \u201cSo we\u2019re really focused on this year. I think if we have another great year, you know, maybe a year or two, I think then we could really step back and say, \u2018What next?\u2019\u201d<\/p>\n<\/p>\n

This post appeared first on NBC NEWS<\/div>\n","protected":false},"excerpt":{"rendered":"

Direct-to-consumer footwear brand Rothy\u2019s just recorded its best year on record after the company\u00a0appointed retail veteran Jenny Ming, one of the co-founders of Old Navy, as its CEO.\u00a0 Ming took the helm of the flats maker from co-founder Stephen Hawthornthwaite in January 2024. Under her direction, the company grew sales 17% to $211 million last […]<\/p>\n","protected":false},"author":0,"featured_media":15358,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-15357","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/15357","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=15357"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/15357\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/15358"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=15357"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=15357"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=15357"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}