Cleverly targets global opportunity

Cleverly Laundry is not your average Perth business. Far from it.

The business was set up by two entrepreneurs working from a small office in Cottesloe.

It is incorporated in London, its products are manufactured in Portugal, and they are distributed from New York.

That structure reflects the ambitions of Cleverly’s two founders, Amelia McPhee and Roshana Lewis.

They were not content setting up a Western Australian business that could expand interstate. Nor was their goal an Australian business that could grow into other countries.

From the outset, their goal was global, and they have put in place a business structure and strategy to support that ambitious target.

It’s still early days in their business journey, but their experience provides plenty of lessons for others with lofty aspirations.

That includes the way in which they selected their target market: towels and sheets.

“We want to create the first global towels and sheets brand,” Ms Lewis told Business News.

It’s a market segment that many people may not find exciting but the Cleverly founders see it otherwise.

Globally, it’s a very large industry: the market for bedding and bath linen is worth an estimated $US120 billion.

Its highly fragmented, with no dominant global brands, which opens an opportunity.

Ms McPhee said the industry had also been characterised by a lack of innovation and a sameness about its advertising and branding.

“We especially want to attract people who never cared about towels or sheets, the people who brands in the market have so far ignored,” she said.

D2C retail

The two founders are trained as architects but met nearly a decade ago while working in the art world.

They spent many hours discussing trends in retailing, in particular the rapid growth in ‘direct to consumer’ vertical retailing (D2C), where companies create their own products for sale over the internet.

“We looked at how retail was changing, especially in Europe and North America,” Ms McPhee said.

“That’s how Cleverly started.” The founders have carefully studied the experience of D2C brands around the world.

These include Warby Parker, which has shaken up the eyewear market by selling quality glasses and contact lenses at a much lower price than traditional retailers.

Another success is Casper Sleep Inc, which popularised the mattress-in-a-box concept.

Similarly, Away has made big inroads into the global travel industry with its innovative luggage.

A notable home-grown Australian example is Koala, which sells mattresses and household furniture online.

“We take the tools and the innovation from that but add more,” Ms Lewis said.

The direct-to-consumer trend made it possible to deliver much better value.

“We’ve seen the failure of some department stores and the demise of the retail experience in those stores,” Ms Lewis said.

“We can deliver a high-quality product at a fraction of the cost by cutting out the middleman.”

Ms McPhee said the two founders had spent years working on the concept, travelling overseas to study first-hand what was happening in the US and Europe.

“We wanted to be there and feed off the energy of what was happening in those markets,” she said.

This included meeting with venture capital investors in London, New York, San Francisco and Texas, who were bankrolling many of the fast-growing D2C brands in the US.

Cleverly has conducted multiple capital raisings to support its growth, raising several million dollars, and the founders anticipate more in future.

Ms McPhee said one of their goals was to ensure they had financial flexibility.

“We don’t want to become beholden to the capital treadmill, where we are under constant pressure to raise more capital to fund the business.”

Many of the investors in their business have been advisers and mentors, who have bought into the Cleverly story, literally and figuratively.

Investors in Cleverly include Jon Stewart (left), Howard Cearns (centre) and Tim Day (right), who have also been advisers and mentors.

One of the first people they approached was Jon Stewart, who had overseen the $1.8 billion sale of ASX-listed company Aurora Oil & Gas.

They spoke to him in 2016 when Mr Stewart, who had chaired Aurora, was putting together his next venture, Australis Oil & Gas.

“We approached him for mentoring,” Ms Lewis said.

“We wanted to learn how to structure a share register, including for the possibility of an eventual exit.

“He’d just done that, with a very successful sale.”

Mr Stewart showed a high level of interest in Cleverly and its founders’ ideas.

“He was curious,” Ms McPhee said.

“And he was interested to learn about the changes in the retail world.”

Mr Stewart introduced them to another successful business executive, Howard Cearns.

As one of the founders of Little Creatures Brewing in 2000, Mr Cearns helped to revolutionise the beer industry in Australia.

Little Creatures introduced the now-ubiquitous pale ale to the Australian market. “He changed the way people think about beer and how they consume it,” Ms McPhee said.

“They got Little Creatures into the best restaurants in Australia at the time, by winning over chefs with the totally unique taste of their beer.”

Ms McPhee said they wanted to tap into his astute marketing mind.

“We wanted to know how to get the customer who doesn’t know that, after trying Cleverly, they will think very differently about towels and sheets and ultimately care deeply about them,” she said.

An example is corporate adviser Tim Day, who is renowned for his casual dress code while advising Perth’s top business leaders on takeover deals and capital raisings.

“He’s the perfect example of a customer who previously didn’t give a damn about towels and sheets,” Ms Lewis said.

Mr Day provided a connection to another influential investor, Tidal Ventures general partner Andrea Kowalski, who had been an active investor in the D2C sector in the US.

“Tim called Andrea in New York to ask her thoughts on Cleverly Laundry,” Ms McPhee said.

“So, we had a venture capitalist in New York doing due diligence for Tim in Perth.”

The due diligence must have been a success because both Ms Kowalski and Mr Day became investors in Cleverly.

With an eye to Cleverly’s next stage of development, Ms McPhee said the relationship with Ms Kowalski was invaluable.

“That will be very important when we target venture capital funding,” she said.

“Andrea can help us negotiate with VCs there and navigate what can be complex term sheets.”

Other investors include cousins Guy and Scott Bailey, whose diverse business interests have included the Rottnest Express ferries.

They have brought knowledge of international manufacturing and distribution.

Corporate adviser Lee Bowers, who runs Perth firm Fivemark Partners, is another key player.

Formerly with Macquarie Bank, Mr Bowers is best known for his work with listed mining and exploration companies.

The founders went to Mr Bowers originally for advice on refining a pitch deck for investor presentations.

“He became interested in what we were doing, and Lee always contributed a new, valuable angle to our ideas,” Ms Lewis said.

Mr Bowers has subsequently invested and is in the process of joining the company’s board as a non-executive director.

Ms Lewis said building relationships has always been an important part of the founders’ approach to business.

“We have never made cold calls and it was never random,” she said.

“There has always been a strategic connection via another shareholder or key people working with us [who] have expressed an interest to invest.

“Our global positioning meant that bringing in global investors was important.”

Cleverly products

Cleverly has a small and simple product range.

The business started with classic white sheets; rather than come up with new colours and designs every season, they are focused on evergreen style.

“We want to make it easy,” Ms McPhee said.

“For a lot of people there is too much choice, it’s hard work to find what they want or need.”

Ms McPhee recounts the experience of a friend who is an investment banker in London.

“He was like lots of guys, he needs to buy sheets and towels and didn’t know where to go,” she said.

“He ended up getting his mum to buy them.”

Cleverly focuses instead on quality: superfine cotton that is chemical free and sustainably sourced and produced.

The sheets were followed by bath towels, which are designed to get better with use.

“It’s the parts you do see and, importantly, don’t see, that make all the difference in use,” Ms McPhee said.

Cleverly has broadened its product lines to include terry towelling bath robes and casual cotton housewear, including shorts and shirts that can be worn around the house or as pyjamas.

“We’re passionate about our products,” Ms McPhee added.

“We took a long time to develop a differentiated product.”

The early preparations for the business included spending time in Portugal, building relationships with the manufacturers.

“Nobody went to the factories to talk to the chemists and the engineers,” Ms Lewis said.

“We did that. They thought we were very unusual.”

Cleverly is focused on sustainable sourcing and harvesting of its cotton, which is supplied by certified growers globally.

“We wanted to tackle that from the very beginning,” Ms Lewis told Business News.

They actively specify cottons that are certified as ethically and sustainably sourced.

In addition, they are focused on full traceability of their vertical supply chain, from the cotton fields to the finished product.

Cleverly is almost 100 per cent plastic free: there is zero plastic in the packaging and labelling, with the exception being recycled plastic buttons on the casual wear.

Ms Lewis said she was working closely with Cleverly’s manufacturers towards a zero-inventory model, to level supply and demand and avoid unnecessary waste.

“Just-in-time inventory and zero inventory are real and achievable,” she said.

“Our team in Portugal was part of the process behind [apparel company] Zara achieving this.”

Marketing

One of Cleverly’s first big breaks came in 2017 when Hollywood star Alexander Skarsgård was photographed in W magazine wearing one of their bath robes.

The fashion shoot was directed by Edward Enninful, who has gone on to become editor-in-chief of British Vogue.

It delivered a big publicity boost and came as a pleasant surprise to the founders.

Cleverly got some good press when Alexander Skarsgård was photographed in W magazine wearing one of their bath robes. Photo: Alasdair McLellan

“We didn’t know, we weren’t involved,” Ms McPhee said.

Since then, Cleverly has been featured in The New York Times, US Vogue, GQ and Condé Nast Traveler, to name a few publications.

With this kind of free publicity, the company has been very judicious in the amount of money it has needed to spend on marketing.

“Our focus has been to build a global brand organically, with earned credibility and authenticity,” Ms McPhee said.

“That will enable Cleverly to meet a customer who will be loyal, be an advocate, and spread the word.”

Cleverly has also partnered with a number of global online fashion retailers.

It was the first towel brand to be stocked by Mr Porter, which describes itself as the world’s leading online destination for men’s style.

“We were the first bath towels on Mr Porter,” Ms McPhee said.

“They were fascinated and believed in our thesis around towels being better positioned next to shaving and sports gear, rather than candles and home decor.”

Cleverly was later approached by online retailers Matches and Ssense.

“These partnerships are part of our marketing strategy, they provide a lot of visibility in the US, Canada and the UK,” Ms McPhee said.

The company plans to maintain these partnerships while increasing its focus on direct sales, which can deliver a better profit margin.

While Cleverly’s products are equally relevant for men and women, the founders made a conscious decision early on to start with the male market as a way to test out their thesis on their toughest customers.

Their experience tells them that women will adopt brands initially designed for men, but the reverse rarely, if ever, happens.

“Ralph Lauren is a powerful example of a brand that started out selling to men and from there successfully expanded to women,” Ms Lewis said.

Looking ahead, Cleverly is determined to avoid the fate of many D2C businesses that achieved early success but were unable to sustain it.

“They had rapid growth but hit a wall,” Ms Lewis said.

“Their customer acquisition was via online marketing.

“If you spend more you can attract more customers.

“But they failed to deliver quality and brand loyalty, they failed to deliver on what they said.

“Their continual customer acquisition costs eroded a path to profitability.”

Ms Lewis believes many of these companies were established by business school graduates who developed a business model but did not understand product, retailing or branding.

“We took it slowly to prove out a thesis.”