Have any of you heard of Cabi in the context of retailing? No, I thought not. Yet this retailer has been making waves over the past few years in terms of its business model and its impact in the very competitive fashion sector.
I came across this operation recently and thought it would be interesting to review their approach within the context of overall retail strategy.
In essence it is a mixture of the “old and the new”.
In many ways it is similar to our old friend Avon. It started the concept of recruiting people to sell its products “door-to-door”. Each person recruited to Avon build up a clientele over time and made money by being paid commission on each sales generated. It still has the biggest global salesforce in terms of numbers: most of their sellers are part-time. It still survives despite the vicissitudes and storms taking place in global retailing.
Cabi is also similar to Tubberware. This retailer made its name by encouraging its representatives to use their own homes or to visit homes to organise a Tubberware party. In this case the host provides food and refreshment and people who attend are exposed to the range of products on offer and are encouraged to make purchases.
Let us look more closely at Cabi.
It was founded in 2002 by Carol Anderson and a small number of her friends. She was a designer and was constantly frustrated by the lack of (in her view) information about the latest fashions and styles for busy career women like herself. Due to the time-poor nature of their lifestyle she sought a more “user-friendly” shopping experience. This proved to be the genesis of the Cabi concept. She and her band of friends put together a range of fashion designs to appeal to “career-oriented” females. Its basic proposition was that it was a “company for women, by women”. A number of sellers referred to as “stylists” were recruited to sell and showcase the range of fashion items.
Like Avon and Tubberware it was based on the stylists hosting events in their homes where friends and “friends-friends” would be invited to a social evening where the latest fashions would be displayed and the stylist would provide styling tips and advice and appraise attendees of the latest trends.
At a more strategic level it also provided a clear opportunity for the stylists to build up their own business and generate a good income in the process. This is highlighted by statistics from 2017 which indicated that many of the stylists made around $250,000 a year from their efforts. From becoming part-time stylists who earned a “top-up income to support their main job, many have now become successful operators in their own right.
It is a good example of multi-level marketing, where stylists are encouraged to recruit more stylists from their network of family and friends.
Stylists are required to purchase the season’s complete line of sample items for around $2,500. They use these samples to sell across the different product categories. Cabi’s motto is that “you’re in business for yourself: not by yourself”.
Three income streams are there for the stylists. Firstly they can earn up to thirty-three per cent commission on each item sold. They can also earn commission on the sales of women that they have personally recruited into the team. They can also sell off the past season’s sample line (valued at $10,000). The typical stylist makes around $3,500 from such sales. This more than covers the $2,500 that is required to purchase the new season’s sales.
The statistics from 2017 indicate that the average income across all of the stylists is around $30,000. Over 70% of the stylists have a second job.
Cabi targets mainly women over forty. The US woman in this category is not necessarily a trend-setter in the sense that they buy the latest fashion. However they want to be on trend and see benefits from valuing the stylists as advisors, mentors and influencers
Cabi claims that it has a very high retention rate; quoting a figure of 86%. They suggest that this is a strong endorsement of the success of the model. For instance in similar direct selling retailers such as Avon, the retention rate can be as low as 25%.
Fielding criticism of the multi-level marketing approach, Cabi states that it does not provide bonuses and discounts to stylists to incentivise them to recruit. It also claims that it does not employ arbitrary benchmarks or targets for stylists to move up the ranks.
In order to work on the social nature of the interactions between stylists and customers, Cabi uses storytelling as a critical part of the strategy. This reinforces the ethos of Cabi: that it is rooted in human connection and personal experience. Women share their experiences: much of which revolves around achieving a balance between a business career schedule with home and family. The stylists, in addition to selling, are also expected to deliver on a strong and positive experience for their customers.
In terms of international expansion Cabi has moved into the Canadian market and more recently into the UK. In January 2019 it sponsored the “Design for Bigger Things” women’s conference in London. Senior management felt that this was a perfect fit in terms of projecting Cabi’s image in this market.
Cabi sees their stylists – also referred to the “personal development team” as over 2,500 “pop-up” boutiques in the home. Over 1,500 hostesses work closely with the stylists to create and shape the experience.
Cabi also provides small business loans to women in developing countries who want to establish their own businesses.
It has become the largest social selling women’s designer companyy.
The Cabi shopper can also make use of its online magazine called “The Notion”. They can browse the collections and get the latest opinions on outfit ideas and tips for matching their purchases from season to season. They can then go to their stylist’s personal website to make the purchases.
So what can we say about this business model?
Firstly it challenges the concentration of “out with the old and in with the new”. It has combined the essence of the Avon and Tubberware value proposition and embraced the online and social dimensions of the new retail environment.
Secondly it has embraced social media side of marketing communications and has developed its own website. Whether this could lead to potential conflict or not is problematic, particularly if shoppers want to purchase merchandise directly from the website. This could lead to problems with the stylists.
Thirdly it places great emphasis on building social and human relationships with their clientele. This provides customers with a degree of personalisation that is hard to replicate via online e-tail operators. This would appear to be in line with current trends, where some people value the “high touch” approach.
Where will it go from here? Let’s see.