Menswear Moves “Forever Forward” with Rhone

Speaker 1:
Welcome to Cowen Insights, a space that brings leading thinkers together to share insights and ideas, shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.
Oliver Chen:
Hi, thank you for joining us. My name is Oliver Chen. I'm Cowen's retail, new platforms and luxury analyst. We're excited that you tuned into our retail visionaries podcast series, where we will discuss the future of retail and luxury with key industry and thought leaders. Today I'm joined by Nate Checketts, the co-founder and CEO of Rhone. Rhone is a premium men's activewear and lifestyle apparel brand. The company was founded in 2014 and has a global presence through stores and online channels. Today we'll discuss trends in the men's performance and lifestyle market in this dynamic environment. I wear Rhone pants and shirts, and I've been a really excited and loyal customer of this product. Nate Checketts is the CEO and co-founder of Rhone.
Prior to Rhone, Nate worked for and consulted with some of the biggest tech and entertainment properties, including Cisco, the NFL, Legends, FanVisions, Sportradar, and he serves on the board of Baritone. Nate's also an avid entrepreneur who founded and launched four companies before the age of 30, including Rhone and Mangia Technologies whose patents were later acquired by the San Francisco 49ers. He graduated from Brigham Young University with a BA in finance. Nate, thanks for joining us today.
Nate Checketts:
Thanks. So, it's great to be on.
Oliver Chen:
So, Nate, why did you found Rhone and how is Rhone differentiated from other men's performance brands?
Nate Checketts:
Yeah, well, I think that they kind of go hand in hand. We came up with the idea for Rhone back in 2012, 2011. And what happened is, it was the holiday time, and my mom has always had a long standing history of getting everyone in our family a pair of pajamas for Christmas. That's kind of like her go-to gift. And this particular holiday season, she was shopping with my new sister-in-law who is from Canada. And she wanted to introduce my mom to Lululemon. And so, they were walking into the store and quickly found something for all the girls in the family, and then saw that they had a little men's section kind of off to the side and got all the guys a pair of sweatpants. And so, Christmas morning comes opening the gifts, I'm like, "Thanks, mom, appreciate, appreciate the sweatpants."
And my brother-in-law, who kind of looked at me, was like, "I can't, I just can't wear this brand. I like can't get excited about it. You know, they predominately make women's yoga clothes and, you know, look at the packaging, you know, just doesn't speak to me." And I was less sensitive to it, so I didn't have any issue with it. But then, fast forward a couple months, I was working at the NFL, as you had mentioned in the intro. And we had a big event coming up that we were in partnership with Budweiser, and Budweiser had sent some Lululemon product for the women of the event and some Nike product for the men. And it kind of started this conversation and I was like, oh, but I have some Lululemon sweatpants. They make men's products. And the guy next to me said, "Well, do you buy your underwear at Victoria's Secret?"
So it started me on this journey of understanding and analyzing the activewear market. And what I found is that the majority of men were buying their activewear from brands that were predominantly distributed through wholesale markets. These are the Nike, Under Armor, Reebok, Adidas of the world. So largely wholesale distributed and all very similarly priced from a price index standpoint. And then, you had this kind of huge growth in the activewear category that was predominantly the women's segment, largely directly distributed to customer either via retail or e-com, and usually at a 40% price premium to these larger players. And when we looked for a men's equivalent who is wholly focused on men's, who is wholly focused on kind of premium fabrication and direct distribution, we couldn't find a single player in the space.
So, that was our original thesis is that there was a ton of white space. Three big macro trends driving that: premiumization, direct distribution, and then kind of activewear in general. As people understood what keeps them active, they would find a uniform to match it. Since we launched, there's been a number of men's brands that have kind of launched into that segment. And what has made us different is that we have stayed completely true to our original thesis of focusing on premium quality, direct distribution, and a product uniform that would match people's lifestyles of today.
Oliver Chen:
Nate, you've really developed your community presence as well with Responsible Rhone and Forever Forward. Could you speak to those efforts and how it fits into the brand promise?
Nate Checketts:
Yeah, so the central focus for us, it took us a while to figure out how to articulate this the right way, is around men's mental health in particular. So that's kind of the area that we have honed in and focused on, but there are kind of sub-segments of that. And one of the areas that we focus a lot on is what you mentioned in terms of Responsible Roan. You hear nowadays about brands being sustainable, and, unfortunately, it is largely a marketing tactic because most of what we do in the world of consumer is not sustainable. It's not sustainable to take product or fabric, no matter where it comes from or how it's sourced, ship it across the world to a different factory, to then add in buttons and trims and zippers, to then ship it to a warehouse, to then ship it to the end consumer.
And so this idea of sustainability is largely a myth and Patagonia founder Yvon Chouinard was famous for saying, "We're not sustainable. We are responsible." And that's the tagline that we've adopted. We can do things in a better way than they've been done historically, and all of those things matter. We can certainly invest in things like carbon offset programs to offset the carbon footprint that we make. But the first step is to analyze every part of the supply chain and say, "Can we use more sustainably sourced fabrics? Can we use more sustainably sourced buttons and trims and zippers? Can we think about getting our supply chain closer together so that we're not creating waste by shipping things from here to there? Can we use more sustainably and ECO sourced packaging? And can we do that in a way that doesn't sacrifice quality and performance?" Because just like it's been proven in the electric car market, there's not a large enough consumer appetite for substandard products in favor of sustainability or kind of ecological friendliness.
And so, we hold ourselves to a standard that everything that we do has to meet certain performance criteria. And so, that's what we focus on. And we call it this idea of responsibility, that we need to be responsible at every part of the chain, and we can focus on telling that story versus this idea of sustainability, because we also find that it's daunting to the consumer. If customers think that my only choice is to be sustainable or not sustainable, either I'm composting everything that I do, I'm driving electric cars, and I'm wearing a hemp based organic cotton, or I'm not, that's a terrible choice. All of us can be more responsible in terms of how we think about our impact to the environment and that matters down to the everyday choice that we make. So that's why we focus on those kinds of things.
Oliver Chen:
Nate, what about innovation? Innovation's so important for activewear, whether that be fabrics, fit, and technology around performance. How do you approach innovation and how do you perpetuate it?
Nate Checketts:
I agree with you. Innovation is really important, but when we got started, one of the big questions was on wearables and how wearables would be integrated into fabric. And I've always taken the position that wearables do not have a place inside the fabric of clothing for lots of reasons. One, because there's already better solutions that are sustained. And I had the privilege of working on the Next Generation Stats project at the NFL, where we focused on creating chips that would sit on the players to track everything from acceleration, to impact, to health and safety data. And so, for me, innovation is what enhances the lifestyle of the consumer without distracting from it. And so, that's why we've developed proprietary solutions like cold fusion which is by far, from every standard, the most effective at fighting odor inside your clothing and the adherence rate in terms of kind of the fallout. Every time you wash a piece of clothing or a garment in general, it gets less effective at fighting odor and bacteria because of the treatments that are used.
But cold fusion after a hundred washes is still 98 plus percent effective at fighting odor, and it's non-toxic and eco-friendly in which most textile technologies cannot say that. So those are the areas of emphasis that we focus on and really kind of pushing the bounds. And then also on the lifestyle side, we've really started to build a very successful lifestyle business, but we do it by focusing on textile innovation, so that if you're in a workplace setting, for example, we make one, I think the absolute, most comfortable dress shirt on the market. It's made out of an Italian fabric, and there's only a couple of companies in the world that can use this fabric, and the other companies are luxury companies that charge over 500 Euros a shirt. So we use this incredible, beautiful Italian fabric, but it moves with you. You can sweat in it, the wrinkles actually evaporate using your own body's heat. So when I think about innovation, that's what I think of is just having the clothing almost fade into the background so that you can focus on living your life, whatever that means for you.
Oliver Chen:
So, Nate, what about lifestyle? And you mentioning lifestyle, who is your target audience and what's happening with your assortment over time, and how are people thinking about this integration of activewear, and work, and dawn to dusk, and versatility?
Nate Checketts:
Yeah, it's really an exciting time, I think, to be alive from a wardrobe and clothing standpoint because the requirements and standards of yesterday are really starting to disappear, and COVID has accelerated that. Before 10, 15 years ago, men in particular would segment their closet by end activity. So this is what I can wear to the office. This is what I can wear to the gym. This is what I can wear when I'm going out with my friends on the weekends. This might be what I wear to a formal occasion. And for many of us, and for the majority of our target demo, that has really collapsed into mostly a single category. If you exclude formal for a second, what our demographic tends to be wearing for Zoom calls, for work from home, and even in a back to office environment, it tends to be performance driven, lifestyle clothing.
Now, I think people have used the term athleisure for a long time, but, to me, athleisure was created to make it look like you're wearing activewear, but that you're actually lounging. And so you're not using it to work out, to sweat in it, to do those kinds of things. And it's one of the reasons why I really hate that term because I think it's a misnomer for what we do.
So, we call ourselves a performance lifestyle brand. And what that means is that we will make stuff that is comfortable enough for a boardroom, or excuse me, looks appropriate enough for a boardroom in terms of its fit, in terms of how it sits on the body, in terms of the styling and the details and the quality of the product. But, if you were to take that same product and go put it through the most punishing workout, it would hold up. One of our best-selling polos is actually one of my favorite shirts to go for long runs in because of the way it wicks sweat away, because of how comfortable it is on the body, but we test everything. And so when we think about this idea of lifestyle, everything we do is rooted in technology innovation and performance.
Oliver Chen:
Nate, who is your target audience, and how have you seen this evolve, and what are your thoughts about product extensions? I've seen your assortment grow and expand over time, and it's been exciting to watch.
Nate Checketts:
Yeah, so our core audience is really kind of 25 to 50 year old male, who is high household income. About 85% of our customers fall into the top two brackets of household income, and it's because this is a customer who knows and understands quality and expects that level of quality and is willing to pay for it. And so, what we have done is rather than kind of extending the product to fit additional target demos, we've kind of zeroed in and said this is our customer, let's make sure that we can offer them everything they need so that this customer only needs one brand to shop at for the majority of their clothing. And so we've extended that. We launched a collection that we call essentials where we make underwear, undershirts, socks, kind of premium basics that the customer can rely on, but basics based on the amount of investment and technology and superiority that we felt were in the products.
We just felt like you couldn't call it a basic 'cause it's not. It was anything but basic. So we called that line essentials. We've expanded into outerwear. We've done some interesting collaborations in terms of blazers. And we have some really exciting things coming in terms of the limited edition runs product that we're excited to launch later this year. We do think about kind of extending the category, but still trying to meet our target demo. There's certainly pushes and we get a lot of inbound communication from people wanting this to go into women's, to expand other categories into lower price categories. But today we've remained pretty laser focused on who we're trying to serve.
Oliver Chen:
Nate, what about stores? You know, we believe in bricks plus clicks here at Cowen, and I've toured some of your stores, which do a great job with visual merchandising. How do you enter digital plus physical? And what's your vision for that going forward?
Nate Checketts:
Yeah, I think it's really important. And you and I have always seen eye to eye on this, which is physical stores are become a physical manifestation of the brand, and a customer better understands who you are when they can see and interact with you in person. How does the store lay? Can I touch the fabric? Can I try on the fabric? How do the store associates greet and meet me? What are the other services that are added on? What's the experience when I'm in a Rhone store versus just a regular store? And we think that it has the added benefit of being a highly profitable channel. It's interesting, a lot of digitally native entrepreneurs who have founded companies online only, we tend to convince ourselves that we're smarter than a prior generation, and that's simply not true.
The modality with which people shop has changed from percentage basis, but there are still a big percent of the population that still want to shop in person, and we'd be foolish to abandon that. It might have gone from 75% the apparel market to sub 50%. It's still an important segment. And we have found that customers who shop with us in person first have higher LTVs than our digital only customers, or even our digital first customers. So it's a powerful way to introduce the brand. We plan to continue to expand our brick and mortar presence, although we're not going to be overly aggressive about it, we're going to be very selective about where we show up, making sure it's the right place for our customer. And that we're really laser focused on the deals that we make, that we know we're going to make money going into a center versus convincing ourselves that it's simply a marketing opportunity,
Oliver Chen:
Nate, on LTV to CAC and customer acquisition cost, as well as customer lifetime value. What are your main strategies there in terms of bringing in new customers and keeping on engaging your existing?
Nate Checketts:
I think our mindset has really shifted over the last 12 to 24 months in this regard because, historically, when you're growing really quickly, all you're thinking about is new customer growth, new customer growth acquisition, and that's certainly really important for us, but what we have spent a lot more time on recently is how do we take care of the amazing, great customers that we have today? How do we over-serve them so they never want to go somewhere else? We've already spent money acquiring these customers. It's far less expensive to get that customer to spend more or to continue to spend with us than it is to convince someone to try something for the first time. And so that is our priority, is taking care of our existing customers, giving them a great customer experience, going over the top to make sure we serve them and that they have a positive experience.
And then, second to that is engaging in performance marketing strategies to drive high return on ad spend. And the interesting thing about that is it's always changing. So the moment I could tell you we've figured that out would be the moment we've arrived at the wrong place, because every three to six months, if we're not focused deeply on our attribution modeling, we will miss and we'll get lazy. And we'll spend too much on one channel and miss an exciting new opportunity. So we have some guard rails that we've put in place to help us there. One of the main things that we do is we use a third-party attribution model for all of our performance spend, and that really helps us to measure each channel on an independent basis versus having that channel give us the metrics on their own. Some of these larger channels, everybody's spending on Facebook and Google, if you use their own attribution modeling, which is the last touch attribution, you'd be convinced that you're making a higher return than you might actually be.
So by using a third-party independent attribution model, that helps keep you sane in how you make those decisions about where to distribute your dollars.
Oliver Chen:
Thank you for that. And Nate, what about the pandemic? And what have been some of your key learnings, surprises, and how you've responded to this environment?
Nate Checketts:
Yeah. The pandemic has been a challenge, I think, for a lot of retail and apparel companies. And I think we're really fortunate, and I won't say that it's out of complete strategy, but we're fortunate to be in the position that we are. First of all, our main channel has always been our own digital channel and that accelerated during COVID. Our team has always known how to work with remote and digital tools, so we transitioned into a work from home environment seamlessly overnight. And our customer started to spend more time doing the kinds of things that we outfit them for, so they wanted to buy more products. And then, new customers were searching for these types of products to fit this new lifestyle, and rather than being kind of an active brand trying to do lifestyle, or a lifestyle brand trying to do active, we've been here all along.
This is the only product we make is strictly in this performance lifestyle category. So, we felt really fortunate in that regard from a pandemic standpoint, and it was definitely a boost for us. The challenges that we face were much more on managing the supply chain, managing product inventory mix, understanding where the customer was going, how long certain tales and activities were going to last. And I would tell you that it made us much sharper as an organization at predicting inventory, buys, widening our distribution or, excuse me, our supplier network, so that we had better options to bring products in. And we also really enhanced our team in the process where we brought in some really great senior talent to help us as we go forward.
Oliver Chen:
Nate, inventory flow is a key principle of retail at large. How do you think about that, and test reading and reacting, and where do you see opportunities for your supply chain going forward?
Nate Checketts:
Yeah, it is. You hear all the time when you come into the business, and not having come in from the world of retail or apparel I heard it over and over again as I was starting, remember inventory kills retail businesses. And I didn't appreciate that intel really some of the outer years at Rhone. As we started to grow quickly and the number of the amount of inventory that we amassed started to, if we were off by a couple percentage points, it started to matter a lot more. Whereas historically, we just always sold out of everything. And so it also matters particularly if you have a robust wholesale channel and we've been fortunate that we've been kind of the top men's partner for Peloton through the pandemic and a really fast growing business with Nordstrom and Equinox.
And even though that's, by far the minority of our overall channel mix, if you miss on your wholesale inventory, it penalizes you twice as much. So we've learned some really good internal lessons and strategies about that, staying disciplined while still being able to take chances. We've also really relied on some great partners in terms of our supplier network, who are now willing to take chances with us, who are willing to make things at smaller minimums for us to test and try and decide how to dive back into certain products. We've used shared fabric across certain styles. So one of our best-selling tops is our rain t-shirt. If you haven't tried it, you need to, I'm convinced it's by far the best training top on the market, but we've extended that fabric into other styles and silhouettes. Our customer knows it, our customer loves that fabric, and it makes us more nimble and flexible in terms of how we dev and grow that inventory.
Oliver Chen:
Nate, which part of the job has been the most fun for you? And do you have any concluding remarks as well?
Nate Checketts:
Yeah, boy, I think the most fun for me is really building out the team and the culture inside the company. That's what I enjoy the most is I love spending time with our team. It's where I get excited and energized. And what I would say in terms of concluding remarks is building anything is hard. I think when you're not in an industry, you convince yourself that, oh, that doesn't seem that hard. Or I wish that I had that kind of business. I've thought that many times in the world of apparel. I wish I only sold a widget that came in one size and one color, versus every single product we make comes in multiple colors and multiple sizes. Every industry has a complexity to it, and it really just matters how you decide to go after it. And so, I've been very fortunate and grateful for the opportunity I've had to build Rhone. And I think we're really still at the very early stages of where this company and this brand can go.
Oliver Chen:
Thanks, Nate, it's been great to see this journey with product, innovation, brand, and a really strong sense of purpose. So thanks for spending time with us, Nate.
Speaker 1:
Thanks for joining us. Stay tuned for the next episode of Cowen Insights.

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