What You Can Learn About Ecommerce From Used Wedding Dresses

What You Can Learn About Ecommerce From Used Wedding Dresses
Image credit: Shark Tank

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Editor’s Note: This series examining the deals presented on the popular ABC television show Shark Tank through the eyes of a venture-capital investor.

The stand-out pitch from week ten of this season’s Shark Tank was for Nearly NewlyWed, an online retailer of used wedding dresses. The founder, Jackie Courtney, sells used, high-end wedding dresses on consignment, like a Marchsea Bridal dress that retails for $11,000 at $3,800, and guarantees to buy it back for $1,900. The site promises to make dresses available to brides for around 20% less than the retail price if she sells it back after the wedding. Nearly NewlyWed targets a 30-40% margin on the dress sale.

Courtney was previously a fashion publicist. Press coverage generated her initial traffic and sales, but social referral via Facebook is now her biggest traffic driver. The business has only been open for 30 days and has sold four of their first 30 dresses in inventory. They just added another 60 dresses to inventory, sourcing them from brides and stylists. They are working on distribution deals with retailers who are seeing a surge in women trying to sell their dress back after their wedding day. 

Courtney sought $35,000 for 10% of the company. Four of the sharks passed. One said it was too early, two didn't think that there was a big market for used wedding gowns, and one thought that there was no scalability to the PR driven approach. Only Kevin O'Leary made an offer to invest. He said that it was a bet on the entrepreneur, but for that bet, he needed to see 40% of the company for $35,000 to invest -- Courtney declined. 

What You Can Learn About E-Commence From Used Wedding Dresses
image credit: Nearly Newlywed

This is a company that is in an adjacent space to many venture-backed e-commerce companies, ranging from Rent The Runway (designer dress rental) to Weddington Way  (bridesmaid dresses) to the Real Real (designer consignment flash sales). The key issue for any ecommerce company is understanding lifetime value of the product and the customer acquisition cost.

Related: Is Your Website Ready for Cyber Monday?

Although Nearly NewlyWed is very new, I think that there is something to the business. Hoping for the best for their marriages, lets assume that customers will only buy one gown from Nearly NewlyWed. If we take the bottom end of her ranges for price and margin, at a $2,000 average sales price, assuming a 30% margin, she has $600 of lifetime value to play with. Her customer acquisition to date has been through PR. But I suspect that even at her high price point, she can get customer acquisition costs down into the $100-200 range through online channels. That gives her a lot of room to cover overhead. If she can continue with her capital-light approach of taking gowns on consignment, I think that there are real legs to the business idea.

As the old saying goes though, retail is detail. All businesses require strong execution, but this is particularly true in e-commerce. The real question is whether Courtney has the operational expertise in the three core ecommerce functions of merchandising, marketing and operations, or if she can attract it to her company. Right now it is just her, so it is too early to tell, but this was one of the most interesting companies that I've seen pitch on Sharktank. 

Courtney was right to turn down O'Leary's offer, 40% is too much equity to give up at this stage. She can probably continue to expand inventory (which should increased conversion rate and sales) by herself without any additional capital. She can clearly keep driving PR and social traffic, and should start to experiment with paid acquisition channels at relatively low cost. And since the initial volume is low, she can fulfill out of her apartment for a while. If she sees promising results after a couple of quarters of this approach, she should be able to raise a small seed round from individual investors or small funds to take it to the next level.

Related: Shark Tank's Daymond John on Thinking Big

To read about the other three pitches on Friday’s Shark Tank, go to the Lightspeed Venture blog

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