NAADAM Co-Founder Matt Scanlan Talks the Comfort Economy and the Future of Direct-to-Consumer Brands

Founded by college friends Diederik Rijsemus and Matt Scanlan, NAADAM, a responsibly sourced men’s and women’s luxury knitwear brand, was launched in 2013. Their travels to remote parts of Mongolia’s Gobi Desert and the discovery materials development issues from around the world became the inspiration. for the brand.

“We have become friends with local herders and have seen firsthand how traditional cashmere traders and brokers drive up prices and take profits,” Scanlan says. “We have turned since our early days in non-profit work to buying raw cashmere from nomadic herders in the Gobi Desert to stabilize incomes and sell luxury cashmere sweaters at fair prices. .”

Since its inception, NAADAM has been rooted in sustainability with a mission to source and produce the finest fibers in the world while simultaneously preserving the values ​​and lives of their native ranchers. True to its non-profit roots, the brand even launched an NGO to support microeconomic development in the region through vaccination programs and investments in local infrastructure.

NAADAM has a very strong digital presence. But it’s not just a direct-to-consumer brand.

“We were in the wholesale business from the start,” Scanlan tells me. “The thesis was to have a diversified distribution mix to reduce our risk. We have private label, e-commerce and wholesale. Then, two years ago, we introduced retail. While retail has taken a hit with the brand’s stores in New York for obvious reasons, it hasn’t affected the rest of NAADAM’s channels and they still have plans for a 4and quarter thrust for new locations. “We haven’t seen one category defeating the others. In fact, we are expanding our customer base and are considering selling a core product through QVC and HSN to continue to diversify.

Diversity doesn’t just apply to NAADAM’s business model. This also applies to their clientele. “Our client is not just millennials and never has been,” says Scanlan. “Our brand was built in Central America. Our clients are single mothers, stay-at-home moms and dads.

When I ask Scanlan how the pandemic has affected the brand, he tells me day-to-day operations haven’t changed much and his team of 80 is adjusting well to working from home. “Generally the group is doing well, we have made it clear that HR related changes are not part of our ongoing strategy, so at least our team is not feeling the pressures of impending financial insecurity.” It’s the code for everyone to keep their job.

NAADAM even saw an uptick across the board, with the biggest increase coming from e-commerce. “We’re up 200% above where we normally would be,” Scanlan says. “But, we ran out of stock. We design for a year, then follow it. The demand for our product is high, but if we haven’t planned for it, we can’t sustain it. We are very grateful to be in the position in which we find ourselves. But there are a lot of unknowns right now.

One of the reasons Scanlan and Rijsemus believe their brand is doing better than others is that it serves the convenience economy that consumers are looking for both in general and even more so with our “new normal”.

“In light of the pandemic, we are already well positioned to benefit from the residual effects of broader trends in consumer preferences such as sustainability and health and wellness,” says Scanlan. “People have been given more information to make more informed consumer choices and therefore feel more empowered than ever to take control of their own well-being and well-being in all aspects. It ranges from what you eat, how you train, how you supplement your wellness, how you take care of your mental health, and ultimately, in the case of NAADAM, the how you dress. I buy sweatpants, hoodies, blue light blocking glasses, and even get on a skincare routine, which is pretty unusual for me.

The pandemic has also created other changes in consumer behavior. “Fashion has shifted from structured items like jeans or stiff suits to more comfortable and cozy pieces, including activewear, loungewear, and more comfortable pieces in general,” Scanlan tells me. “Other CPG categories including bedding, home decor and skincare, all of which fall under ‘personal care’ have also become priority purchases for consumers nationwide as they spend more time This shift in behavior has positioned some products for success and others for major difficulties. We are fortunate that our products meet consumer demand for low-cost, high-quality loungewear.

NAADAM works with a vertically integrated network or suppliers, most of which are in China. Fortunately, most of them are back online.

“These manufacturers provide agility and transparency, which has allowed us to maintain and even accelerate our production launch schedule during this time,” Scanlan shares. When I ask him if he anticipates a backlash from consumers who choose not to support brands whose materials and manufacturing are based in China, Scanlan tells me: “25% of the world’s goods are made in China and still more in all of Asia. I think consumers understand and appreciate the value of goods produced in this part of the world. We don’t expect any negative feedback at this point and strongly believe in the relationships and partnerships we have developed globally to produce quality products at accessible prices. »

Scanlan approaches business from a unique perspective. Prior to NAADAM, he spent several years at a venture capital firm. “It was my first gig out of college. I worked on a healthcare portfolio. The one thing I learned in that time was that I didn’t want to do this to the rest of my life. The experience made me look for more,” Scanlan tells me. After starting NAADAM, he started investing in other brands again, especially direct-to-consumer brands through his fund. , Magic Hour, with partner Jake Sargent, including True Botanicals, Buffy, Minna, Necessaire, Clare and more.

“It wasn’t until I co-founded NAADAM that I really understood early-stage investing,” Scanlan shares. “After officially stepping into this role, investing in early-stage companies was a seemingly obvious transition. I’ve spent so much time working alongside other founders that providing objective feedback, coupled with strategic capital, was very logical and aligned with the evolution of start-up financing skills.”

As a founder and investor, I ask Scanlan what the future holds for D2C brands looking to cut costs and reallocate resources where they can due to the pandemic. Scanlan responds. “It’s about developing proactive strategies for recovery and future growth. This pandemic will force brands to reassess their business models, identify vulnerabilities to strengthen and build for the future. I think we’ll see brands being much leaner in general, in terms of overhead, marketing budgets, for example, and focusing more on products.

When I ask Scanlan if he had any advice for other D2C brands to navigate the pandemic, he tells me that flexibility and agility are key. “The more companies incur unnecessary overhead, the more difficult it will be to adapt to changing circumstances. Extending cash flow will be crucial. Growth, hiring, and outreach marketing are cost centers that will typically need to be reassessed. Financial discipline is absolutely going to be fundamental for companies that weather the storm and emerge unscathed. »

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