Launched in October 2009, Sydney-based Shoes of Prey has been a pioneer of the custom shoe eCommerce space and one of the darlings of the Australian startup scene.
The company was founded by former husband-and-wife team Jodie and Michael Fox, who originally met at law school but separated last year – at least as life partners – together with ex Google software engineer Mike Knapp, initially with $50,000 of their own money.
In June 2012, the trio raised A$3million from a venture capital syndicate in Australia and the US – with an additional A$1.75million raised late last year.
Their idea – apparently unique in October 2009 – was to invite consumers to customise their own shoes using Shoes of Prey’s proprietary web-based 3D design platform, which the company claims offers over four trillion design possibilities. The shoes are then hand-made in China, with delivery in around two weeks.
Although the company keeps its sales data close to its chest as to how many pairs of customised shoes have actually been sold, Shoes of Prey reports over 10million shoes have been designed on the site since launch.
Prices vary pending the customisation details.
The core Shoes of Prey range starts at A$139 for a ballet flat or sandal and reaches $229 for an ankle boot, with add-ons starting at $10 for a bow, ruffle or rosette detail up to $50 for custom leathers, $75 for a personal inscription and $100 for an exclusive designer collaboration.
A number of Australian brands have done Shoes of Prey collabs, include Romance Was Born, Carla Zampatti and New York-based Tome.
The company has taken out a swag of awards, including last year’s Australian Online Retailer of The Year and Store Design of The Year <1200sqm at the World Retail Awards in Paris for their in-store concept boutique that launched at David Jones in early 2013.
In 2011, they ventured into the prescription eyewear sector with a second company called Sneaking Duck, partnering with former Google Australia strategist Marks Capps.
A former banking and finance lawyer turned senior campaign director at The Campaign Palace, the company’s chief creative officer Jodie Fox is a regular on the speaker circuit and indeed will be talking at the Online Retailer & eCommerce Expo conference on Wednesday July 23 at Sydney’s Hordern Pavilion and Royal Hall of Industries.
FELLT caught up with her via Skype during a recent trip to the US.
So you’re in San Francisco at the moment, to raise more capital?
We are looking at raising some more cash on this trip. It’s been an incredibly exciting trip to talk to people about what the future of retail looks like. There seems to be real optimism and confidence in the mass customisation space and we’re really excited about what that could mean, because we obviously see a huge blue sky for what that could be in the future and shoes are just very much the beginning of that.
Just on capital, you were bootstrapped at first, then raised A$3million in 2012. There were a number of reports in July last year about an attempt to raise an additional A$20million. That did not transpire, is that correct?
We actually swapped our strategy out a little bit. We did bootstrap for the first two and a half years and then as we started to get things in line, we realised we needed more funding to turn this business into what it could be. And I think one of the great things at the very beginning was that Mike, Michael and I shared the same idea – that this company should be a very global vision that could shift a paradigm about what it meant for women to shop. That’s a very big vision and it does require capital. So we raised the $3million. And then last year, we started to think towards our Series B. But it was a premature thought because we still had more things to sort out within the business. What we’re doing is incredibly exciting, but very complex as well and it goes all the way, not just from the technology and the way that consumers are able to have their shoe dynamically-visualised, but also, all the way through to [manufacturing]. Everyone’s used to producing thousands of the same thing. We’re asking for thousands of different things, every single time. So that needed some more thinking. We raised an A1 round and that was A$1.75million in November last year. That came from Blackbird Ventures, an Australian venture capital fund. It was formed by Rick Baker, Bill Bartee and Niki Scevak. Bill and Rick have long been involved in our business [both are listed as Shoes of Prey directors since 2012], so we’re really thrilled that they came on board. And another venture capital company here in the States called SherpaVentures.
A big difference obviously between A$1.75million and A$20million
True, but I think at that point in time, it was when we started to turn our minds to A$20million. And I think that you don’t just go and raise $20million. It takes time to form that vision properly and to make sure that you’ve got the proper foundations in play. So we raised the A1 and at this point in time, we’re starting to gear more towards that. But I think it could be another year or so we really go to close a deal like that.
When did Shoes of Prey become profitable?
After two months. That was break even. And then we hit multimillion dollar revenue in under two years.
What is the sales revenue now?
We don’t actually share our revenue figures. It’s a fair question, particularly for someone who is trying to shed light on what the industry looks like. I guess part of it is, there are so many different metrics that you can be measured by, whether it’s revenue, gross profit and things like that. And I suppose we want to share all of our metrics when we’re talking to people who might become investors in our business and paint a full picture. And sometimes when you share revenue, even though it looks good, you don’t get the chance to show… ‘This is what the whole story would look like further down the track’. So I think there’s quite a bit of hesitancy around that. But I must say though, there’s a lot less hesitancy here in the US. And I think culturally, there’s a lot more open dialogue about sharing that sort of information here.
Ballpark then? If it was hitting “multimillion” dollar revenue in under 2 years, is the turnover now more than $5million?
Yes it is.
More than A$10million?
What about growth?
We started out with the three of us in October 2009. We’re now about 60 staff globally, with offices in Tokyo, New York we’re just opening up now, Sydney and China.
In the 12 months prior we grew 200percent.
Is there anything you put down to that specifically?
A bunch of things. Our word of mouth is really powerful. The more that people are hearing about us, the more steam is picking up and the more people are buying from us. I would also say that we’ve gotten our team really aligned and our strategy for execution much more bedded down as well. So I think the company is really starting to come into its own rhythm and when that happens, I think that’s when you start to see really good sustainable growth like that. So I would say it’s a combination of both those two things.
Who is your immediate competition?
Well interestingly, the answer to that changed this morning [July 14th]. One of our competitors here in the US, Milk & Honey, sold to a company in the UK that is another one of our competitors, Upper Street. So we now have just one competitor there. But look, they’re still probably about a tenth the size we are, so we are still confidently leading the market.
Were you the first in this space?
Yes we were, in October 2009.
How long did it take for competitors to emerge afterwards?
Three to four months afterwards. It’s actually totally fine. Of course it’s something you’re very conscious of and there is a certain level of adrenalin that comes along with that, that makes you want to stay at the top and really use that first mover advantage. But I think that in our case, we have such a big job to do, with educating our shoe lovers out there. At the moment, it’s go pick a pair of shoes off up the shelf. We’re encouraging people to have exactly what you want, design it yourself. So I think as there are some more people out there in the market with us, that’s actually a positive thing. To give you an example…. while we don’t see ourselves as a luxury brand, but I’ve got to say I’m really happy that Prada is rolling out their two days in Sydney stores [a made-to-order service – also two days in Melbourne], where they’ll let you design your own shoes. That’s happening in August, I’m definitely going along. A label like that is definitely in a different position to us in the market, but it’s great that they’re doing it, because it’s raising that awareness about ‘There’s a new way to do this’. Prada is quite different to us in innumerable ways, but the fact that they’re looking at this is kind of evidence to what we’re hearing here in Silicon Valley, which is that, ‘Mass customisation is exciting, we’re just waiting for someone to crack it’. And I think Shoes of Prey could do it.
Some of the sportswear brands have been doing this for a while – REEBOK etc
How big could Shoes of Prey be? When you talk to investors, what do you say to them?
I think the sky is the limit because I don’t think Shoes of Prey is just about shoes. I think that Shoes of Prey is a turning of the power of the design reins over to our consumers. I don’t think that designers ever stop being important. Because with consumers, while they want a hand in designing, they will always need designers to be our guiding lights for trends and shapes and things like that. So it’s not that I believe they’re irrelevant in any way. They’re very important. But I do believe that there is this movement towards handing your money over for exactly what you want and at the heart of Shoes of Prey is to give that woman exactly what she wants. And while we started with shoes, there’s handbags, there’s baby shoes, there’s so many thing that we would love to share with her. So I think when I say that I think it could be big…. I guess I’m going to pick something that’s quite mass market – while I see our brand positioning to be a bit more aspirational than that – but it could be the Amazon of women’s fashion.
That’s big– as in world’s largest online retailer big.
I think you have to have a big dream. If you want to get to something that is of that size. And I guess this is partly what I see is the difference between business in the US and business in Australia as well. There’s such an extraordinary optimism here and to say something like that here in the US, that I believe we could be the Amazon of women’s fashion is kind of a dream to be stretched for and it’s really exciting. But to say it in Australia, it feels a bit unbelievable. And it’s my hope that as we have this new crop of tech fashion entrepreneurs coming through the ranks, that that becomes something that we hear and say, ‘Yeah, yeah, that could happen’.
Australia was very late to e-tailing and even in bricks-and-mortar retail we continue to lag behind – something that may now change with David Jones in foreign hands. We’re pretty dozy, really, in so many areas. What’s your perspective on that?
I’m not entirely sure about the cause of it. There have been so many things hypothesised about … the culture… so there was a natural transition to shop online. Also I guess we’re a much smaller population that’s quite isolated, so we tend to have these duopolies that happen in the market, when we’re thinking about department stores and grocery store chains. I think that all of these could be products of what ends up happening in the end, which is there’s almost a little conservatism or hesitation there. And culturally, as well, things like the Tall Poppy Syndrome are probably sitting in there as well.
You worked in advertising for several years, a sector that is renowned for its lack of female representation, with women estimated to account for just three percent of creative directors, for instance. And now you have spent five years in Tech, another sector where there are few women. As an entrepreneurial woman in this space, what’s your take on why there are so few women? Are they taken seriously? In any event, fashion as a subject generally speaking tends not to be taken seriously at all.
It can be a pro and a con. I’m very much the fashion part of our brand, which is probably obvious. I’m the one who loves women’s shoes out of Mike, Michael and myself. But you’re right, it’s not always taken seriously and that voice of the female is not always heard and taken seriously as well. I did a [discussion] panel with [Australia’s sex discrimination commissioner] Elizabeth Broderick recently and she described it as “gender asbestos”. I love this term. She described it so well. It’s this sort of stuff that’s sitting all the way around us and we can’t quite put our finger on it and we don’t know how to stop it. And I think that bias firmly exists. I see even myself perpetuating it in my business sometimes and I just need to be more aware of that because I have an opportunity in a business with no legacy whatsoever to make something that is not going to be about that, but it is so difficult. On the plus side, there are not many women in this area, particularly in Australia. It’s much more so here in the US. That being said, I’ve only met with one female venture capital person over here. In the history of meeting with venture capitalists here in the US in the five years I’ve been in the business, I’ve met with two females who are running their firms or who are prominent within their firms. And in Australia I’ve met one.
How many Shoes of Prey customers are there?
I can’t share that information unfortunately.
What about the sales split in between markets?
The majority of our shoe-loving consumers are still in Australia. Over 40 percent, but below 50percent. Following that, it’s the US, UK and then Japan. They’re our major ones at the moment.
Considering that Australia is still such a major market for you, you’ve obviously only really scratched the surface of this market.
When it comes to culture as well, we’ve got to get in there and make sure that we understand the culture as well, so that we can speak to people in the right way. So it makes sense for me that we’ve got such a big percentage at the moment in Australia, because that’s what we know and understand. And what we need to do is move over to thinking about what those next markets are and what they need for us to be tailored to them.
So what’s the five year plan?
There are big figures sitting out there. Of course we want to be in the hundreds of millions, but I don’t think we’ve firmly put our finger on the exact figure.
You opened a physical retail concept at David Jones last year. How is that going?
It opened in January 2013 and outstripped by a long shot all of the revenue-planning that we’d done for it, in a very positive way and has done the same [since]. And we planned those figures with David Jones as well and just had to keep making them more and more aggressive, because it was outstripping all of our expectations. We had to double our figures by the time we got to end of the year in terms of forecast, because it was doing so well. Another thing I can say is that it’s definitely best in class, in terms of turning a profit. Most stores don’t turn a profit in the first 18 months-two years and we certainly made it.
What kind of sales figures?
I can’t go into figures, I’m sorry.
What are the most popular Shoes of Prey styles? Obviously people customise all the shoes, but is there one killer base shoe that everyone keeps on choosing?
Take a guess.
A gladiator sandal?
I can’t believe it, it’s a black ballet flat.
A black ballet flat is the most popular Shoes of Prey item?
Who knew? Yes, so there’s a black ballet flat. And there’s a three-inch, closed-toe stiletto heel. Both of them in black. My take-out from that is that women actually just want what they want and they want the thing that’s perfect for them. And I think that women are still smart about cost-per-wear. So these women are getting what they’re going to wear every single day, but they’re putting a twist on it.
How do you customise a black ballet flat? Oh wait… you put pussy cat ears and whiskers on it.
[Laughs] And then you get Charlotte Olympia [the British brand, which has a best-selling line of “Kitty” flats]. You can do lots of different things with trimmings and bows and rosettes and things like that. But what we see most commonly, is that people change the colour of the lining in the shoes and put a stamp in there, like their name or an initial. It’s kind of about, ‘Hey I’m really owning this’. Think about shoes that you’ve loved and lost. You know what you want, you know what is going to suit you for every day and often actually there are those perfect basics. We also have a lot of women come to us for their bridal shoes, bridesmaids etc… If you’ve just got this wild design in mind and you can’t possibly get it anywhere else, you know we’re the place for that as well. We see a lot of customers doing that. So yeah, the most popular shoe – a black ballet flat or a black pump.
How far away are you from rolling into the next Shoes of Prey category? Separately, you’ve obviously also launched Sneaking Duck.
Probably the coolest thing we did with Sneaking Duck recently was we released 3D printed glasses frames. One of the tough things about glasses is getting the right-sized frames. Most times you’re going to an optometrist or a glasses store and they’ll pop the frame on you and it doesn’t look too bad. But we can actually print the frame shape that you like to be exactly the right size for you and then fit it with the lenses. And they’re in this super matte material. They look amazing.
How is Sneaking Duck doing?
It’s going well. It’s a totally different business. It’s domestically focussed, in a product that is still considered to be a medical item. And I think people are still in that pattern of, ‘Oh glasses are expensive, I’ll buy a pair once every two years’. We’re probably a little bit early to the world with that idea, so it’s not growing as quickly as Shoes Of Prey, but I have a lot of faith in it.
In order to become the Amazon of women’s fashion, you’re going to need that $20million – and then some.
I think it’s about picking the right moment to raise that. Like I said, it’s incredibly complex. I think it’s probably within this next twelve months that that sort of thing should be happening within our business.
When you go for VC meetings, what impresses them most in your experience?
It’s a massive challenge. The thing with pitching VCs too is, they all have totally different agendas as well. And it’s very much an emotional decision for a VC to get involved. It’s a marriage, for sure. So I think that for us, it’s really sharing what it is that we want to be and that’s probably why you’re catching me in a moment as well, when I’m sharing that massive big vision, because that’s what VCs want to know. They’re like, ‘OK, so if you want to do this, if you want to eventually raise $20million then what’s this big deal that you’re going to spend $20million on?’ So it’s kind of really sharing that vision and what we passionately believe, that this business is solving, in terms of a problem. And often as I said, VCs are usually men, so we sort of need to bring them on that journey of understanding all of these painful points that women face when it comes to shoes. Even though we love shoes so much. It’s the, ‘I can’t walk in that size heel all day long’ or ‘I need the shoes slightly wider because I’ve gotten a bit older and my feet have gotten a bit broader’. There are so many things that go into it. But the thing that honestly is most impressive, when we go into these meetings, is the fact that we are making this work to such a good business. Because noone has really cracked the mass customisation of product yet in fashion. It’s taken us five years and we’re at the point now where this is about to get pretty exciting.
Have there been any offers to buy the business?
No, not yet. I think about that some times and I’m like, I’m pretty sure I’d have an identity crisis if I wasn’t doing this. There’s so much of us, the three co-founders, in this business. My gut feeling for what we can do is, we have a long way to take this before it could be bought for what I know this business could be.
How much of a challenge has managing the hyper-growth period been?
If I’m honest with you, I actually don’t think we’ve probably hit it yet. I think that we are in a position with the business, where we’ve kind of been figuring everything out for the past couple of years. It might sound great that we’ve raised that much capital, so A$4.75million over the past five years. But the fact of the matter is that businesses here in the US that are coming up with an idea are getting funded to go and give their idea a crack with US$6million. So we’ve actually been quite conservative in trying to understand what this is before we go out and say, ‘Hey guys, we’re ready for the big bucks, let’s go and make this work’. I think we’ve still got hyper-growth ahead. I actually think the growth we’ve seen so far has been a sort of good test of a product to say that people care about this enough and it solves a problem important enough to be a big business like we thought it could.