Business Model Breakdowns – Italic.com

What is Italic?

Italic is a Direct to Consumer (D2C) e-commerce company selling high-quality apparel and accessories that are similar in quality to luxury brands like Burberry, Prada & LV at less than 50% of the price.

Business Model: 

Italic is different from a regular e-commerce company.

  • They are a membership-only business with an annual membership of $60.
  • They deliver luxury brand-level quality apparel & accessories at 50% of the cost or less.
  • Italic makes money from the annual membership & the money paid for the products (Men and Women Apparel & Accessories) by the members/customers.

The How?

The way Italic delivers luxury quality products at low prices is by working with the same factories, primarily in Europe that manufactures goods for the luxury brands. This is their secret sauce and the most innovative part of their business.

  • It is a known fact that luxury products have insane margins when compared to regular brands. A Ferrari has to only sell ~3000 cars to make $1B in revenue (assuming 300k USD per Ferrari). While a Honda has to sell to the likes of 36000 cars (assuming an average cost of 25K USD)to make the same revenue.
  • The manufacturing cost of Ray Ban Wayfarers is estimated to be less than 10% of its retail prices. 

It is an interesting way to find a niche product value that Italic is figuring out. 

Positives:

  • Customers get high-quality Products at low prices.
  • Innovative model in e-commerce.
  • The membership model allows italic to predict revenue, reducing the merchandise risk over time.

The offering fits well with “the minimalist consumer” type in the developed economies who are looking for quality & long-lasting vs cheap & disposable products.

Challenges:

  • Market Size: Customers who are interested in luxury brands are interested not just in the quality of the product but also in the brand. It might be a small customer base that is not looking to own the brand but is looking to own a quality product. The price of Italic’s products is still above that of brands like Nike, Zara & H&M.
  • Brand Evolution: It is interesting to see if Italic will emerge as a brand in itself or just stand as a brand less entity serving quality products. 

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