I helped Jess research a piece for the Dobbin blog, about why they chose to launch their fashion line as e-commerce only, rather than selling through department stores and boutiques. I’m cross-posting it here as it’s a great illustration of the power of disintermediation; in almost any industry, leveraging the power of the web to cut out middle-men leads to happier customers getting better stuff at better prices while companies make more money in the process. It’s something I’ve long appreciated in theory, but was struck by anew after diving through chain retailers’ annual 10-k’s, and calculating how little of the price of a piece of clothing actually goes into making that clothing in a traditional business model.

Behind the Scenes Dobbin: Why We Sell Online Only

When we launched Dobbin, we decided to sell our line exclusively via e-commerce.  In many ways, it would have been easier for us to sell through boutiques and department stores.  We wouldn’t have had to worry as much about finding customers, or take on the financial risk of producing clothing without a known buyer.  But had we sold through a retailer, they would have needed to mark up our Dobbin pieces 2.3-2.5 times from what they are listed as on our site today, so that they could make a profit.

We decided to go the harder route of selling via e-commerce because we wanted to produce the best, highest quality goods we could, without charging customers $300-$500. We wanted to keep prices at or below a fair $200 for luxury clothing, and we wanted to be in direct touch with our customers so that we could learn about what worked and what didn’t for women all over the country.

These lower prices mean that that we’re spending a higher percentage of the price on fabric and the fit process, while taking a lower profit margin than many of our peers.  We feel it’s worth it long term, as we think we can grow more by give our customers real value than by simply maximizing short-term profits.

Recently, we pored through the public financial filings of a major womenswear brand, to figure out what percentage of their dresses’ prices were actually paying for the dresses, and what percentage was covering overhead like store rents, sales staffs, and large corporate infrastructures. Here’s what we discovered.

Consider our Belle Ponte Dress (on the left), and a similar-looking ponte dress the chain store sells (on the right):

The dresses are priced equivalently, yet Dobbin puts more than five times as much of that purchase price into the dress itself.

Not surprisingly, the Dobbin dress is much higher quality than the chain store dress – we use the best fabric available on the market (ours is typically $18-$30/yd where theirs is typically $3-$8/yd), has a better fit (we spend more time and money fitting our pieces locally as opposed to outsourcing the design and fit process to overseas factories), and has better construction (we produce locally in the same NYC factories as Thakoon, Rachel Roy and Theory, while theirs is produced overseas). Still, despite the smaller investment in the product itself, the chain store needs to mark up the price of their dress by more than $100 to cover their pricy overhead.

By the same token, consider dresses that are priced much lower than ours at discount chains and mass retailers. Those retailers typically use incredibly inexpensive fabric (under $5/yd), outsource the fit process and sewing overseas (often getting sub-par fit and construction as a result), yet still mark their goods up quite a bit (even on a dress that’s $50 or less) meaning that you’re getting even less for your money.

Of course, some other high-end womenswear brands use the same luxury fabrics that Dobbin does, shopping at the same Italian mills. They even manufacture side-by-side with Dobbin in the same New York factories.

Consider again our Belle Ponte Dress (left), and a similar designer ponte dress (right):

In this case, the other high-end designer’s dress is equally well made – the same fabrics, the same factories. But the difference in price is large — our dress is $168 versus their dress at $425. Like the chain store dress, we just don’t think you get what you pay for here.

The difference in retail price occurs in the wholesale process. When high-end designers sell their designs to department stores and to boutiques, they sell them at a wholesale price. This wholesale price provides the designer with a small profit margin above the cost of the goods. Again, we’re similar to these designers here; we make a small profit above the cost of the goods. But things change when stores buy wholesale goods. Department stores and boutiques take the wholesale price and mark it up the aforementioned 2.3 to 2.5 times BEYOND the wholesale price. So now, the consumer is paying for both the designer’s overhead and markup AND the retailer’s overhead and markup. We don’t think that’s fair and that’s why we chose to avoid the wholesale path.

Launching a new fashion brand is tough; launching it online only is even tougher. We don’t have the same exposure as a brand sold as stores all over the country or as a mass/chain retailer with hundreds or thousands of stores.  But we believe that selling directly via e-commerce is a worthy approach to take. We are dedicated to providing our customers with higher quality designs, luxury fabrics, better fit, and made in the USA production at fair prices that don’t include huge markup. If you have any questions about this post, we’d love to chat. Email us anytime at hello@dobbinclothing.com.

So there you have it. I think this is pretty awesome, and not just because my wife is CEO. While I don’t wear the line myself [in public], they’ve received amazingly positive feedback from a slew of women who do, and a large percentage of their customers in these first two seasons have even already come back to place additional orders. If you’re curious, it seems that the clothes really do speak for themselves, and they offer free shipping both ways so you can give them a try.

Saturday

08:00-14:00: Teaching classes at [CrossFit NYC](http://www.crossfitnyc.com).

15:00-18:00: Presenting on a biohacking panel alongside the founder of [Genspace](http://www.genspace.org/).

20:00-0:00: Welcome party for [Om](http://www.gigaom.com) at [Matt’s](http://ma.tt/) place.

0:00-4:00 Late-night deal-structuring with [Naval](http://startupboy.com/) at the [Experimental Cocktail Club](http://ny.eater.com/archives/2012/05/the_experimental_cocktail_club_now_open_on_the_les.php).

Sunday

10:00-6:00 Up to Connecticut to scout Greenwich and Westport pop-up-shop locations for [Dobbin](http://www.dobbinclothing.com).

7:30-10:00 Rehearsal with new jazz quintet.

I’ll rest when I’m dead, it seems.

A few weeks back, Jess and I headed off to City Center to see a performance of Pipe Dream, a little-known Rogers & Hammerstein musical based on an equally little-known Steinbeck Novella, Sweet Thursday.

The play itself is kind of a mess – little plot, pointless characters, ridiculous dialogue. But the music, like any Rogers and Hammerstein music, is excellent, in a wind comes sweeping down the plain kind of a way.

The highlight – to me, at least – was that the orchestra was staged up on risers behind the actors, in full view. Mainly, I enjoyed the show as a chance to listen to and watch a truly excellent group of musicians at work. And, in particular, I enjoyed listening to and watching Tony Kadleck, the lead trumpet in the orchestra, of whom I’ve been a long-standing fan. I mean, check out this discography! I gushed about his playing during intermission, and then again after the show, until Jess rolled her eyes and started ignoring me.

So, cut to now, a few weeks later, and I somehow get tapped to play trumpet myself in a fundraiser for music education in NYC schools. The organizer of the event sends along a packet of music that we’ll be playing, as well as a roster of the musicians they’ve roped in. I recognize a bunch of the names, as it seems all the other players are professionals. Still, clearly due to poor judgement on the organizers’ parts, I’m playing second trumpet, ahead of two Broadway players.

Playing first: Tony Kadleck.

Time to practice.

Sounds familiar.

In the past few weeks, the film and tech worlds have been dueling over the pending Stop Online Piracy Act, HR 3261, which hugely increases the rights of copyright holders in preventing online piracy. Given that I’ve lived on both sides of that debate, it’s been an interesting fight to watch.

In my estimation, the tech crowd’s right that SOPA is a terrible piece of legislation. It’s full of impractical, draconian measures that will unintentionally yet severely cripple the entire internet.

And the tech crowd is also right that the movie studios’ approach to distribution in general is badly out of date. Ideas like windowing – releasing a movie sequentially across theatrical, VOD, DVD, and then digitally, rather than simultaneously on all those mediums – no longer make sense in light of how people prefer to consume media in today’s world. A film should be available on your iPhone at the same point it’s available in theaters, not six months later.

But I’m more than a bit surprised by how quickly tech people seem to be jumping from those two points to morally justifying the illegal downloading of films. I’ll be honest: I steal movies. But I think of it as ‘stealing’ them, and do it only when I can’t download and pay for them legitimately. Whereas the otherwise usually reasonable Fred Wilson, for example, apparently went off the hook just hearing that same copyright infringement referred to as ‘theft’. And it’s not just a matter of terminology: discussion on Fred’s post went on for nearly 500 comments, largely echoing the idea that the solution to movie piracy is to simply let people legally download any movie for free.

In light of that, it’s ironic that a great short piece by Maciej Ceglowski, founder of social bookmarking site Pinboard, has also been making the rounds. In it, Maciej points out that web services with no business model rarely stick around for long. By their very nature, free tools become increasingly impractical to maintain the more popular they become.

So it’s odd that people don’t see a similar problem with not paying for movies. Perhaps that’s because movies are often made for budgets in the tens and even hundreds of millions of dollars. While Maciej jokingly disclaims his post with “I run a paid bookmarking site. Every morning I wake up and dive into my vault of golden coins,” some of those movie budget millions do indeed go to paying a small number of people enough to actually fill gold coin vaults. But those movie stars’ salaries typically make up only a small percentage of a film’s overall budget – the vast majority instead ends up, as they say in the film world, ‘on the screen’. It pays modest salaries to an army of people, and covers a slew of logistical and technical costs, all of which go directly into making a movie a certain length, scale, and quality. In other words, reducing the amount of money a movie makes therefore necessarily reduces the amount of movie that gets made.

Sure, SOPA is a piece of crap, and the film industry’s entire model is badly broken. But that doesn’t mean that movie piracy isn’t a real problem for anyone who loves, or works on, films.

Holy f***ing s**t.