Betabrand: Wearing Product Development on its Sleeve
Crowdsourcing product design and feedback to drive innovation in a rapidly evolving retail landscape
Traditional retail is dead. Long gone is the need for physical store fronts, savant fashion designers, and seasonal collections. The retail landscape is changing at a rapid pace as traditional brick and mortar stores and designer-led brands lose ground to digitally native brands and fast fashion companies such as Zara and H&M. As Millennials continue to grow as a portion of discretionary spending, the generation’s demands for speed, convenience, and customization will serve as key determinants of the winners and losers of the industry2.
Betabrand, an online clothing retailer, has completely upended the traditional definition of ‘product development’. The linchpin of strategy is “open innovation”, which allows the company to test the marketability of designs prior to production10. Through a combination of in-house creations and designs submitted by individuals via an online platform, Betabrand seeks to rapidly and accurately address evolving consumer apparel and accessory demands10. Open innovation gives Betabrand a key competitive advantage in the highly saturated retail industry and management’s ability to capitalize on this innovation in product development will be key to the company’s future success.
Source: Betabrand 
Crowdsourcing innovation allows Betabrand to eliminate many of the greatest risks and costs associated with traditional retail brands. Obsolete inventory is a major pain point for traditional retailers as SKUs that do not sell well don’t turn on the physical or virtual shelves and companies are forced to adopt deep discounting or write-off unsalable inventory6. Betabrand seeks to reduce the quantity of obsolete inventory by soliciting consumer feedback on product designs prior to the production of physical goods. In doing so, Betabrand can immediately scrap designs that do not gain traction with consumers, confidently produce fashion forward product designs that traditional retailers would shy away from for risk of low market adoption, and play into Millennials’ desire for customization in the production process1,9. Rapid consumer feedback also drives Betabrand’s fast production cycle from idea generation to distribution, allowing the company to compete in a market of condensing production timelines led by fast fashion brands such as Zara5. Lastly, the company’s sourcing of designs from individuals around the world greatly expands the funnel of products ideas and places the company much closer to consumers on the buying journey.
Betabrand management is focused on open innovation as it is the foundation of the company’s business model. In the short-term, the company is building out the product portfolio beyond apparel and enhancing user participation. The business model is only as strong as the feedback loop Betabrand receives from designers and customers; therefore, a focus on keeping individuals engaged via the platform is critical for proper functioning. The company is refining the their 3D virtual product renderings to give consumers the most accurate perspective on the proposed product and increase the accuracy of received feedback7. Betabrand is also actively condensing production cycles to deliver product as rapid speed of response to the market is becoming “table stakes” in the retail industry7. Over the long term, Betabrand is focused on increasing lifetime value of customers through driving repeat business of both purchasers and feedback contributors and building a strong online “community” 8. As consumer preferences change, the company must continuously produce items to entice individuals to return to the platform.
Management must continue to refine how they combine this open innovation platform with the advantages of traditional retailers and technology companies entering the retail space. Betabrand currently operates one brick and mortar store and must develop a robust plan for scaling in an industry in which digital brands struggle to scale to the size of traditional retailers3. Physical stores may reduce the speed with which Betabrand can bring a product to market and may minimize the elimination of obsolete inventory, two significant advantages of the digital open innovation platform; therefore, management must devote significant attention to the cadence and method by which they continue to expand. In addition, in an increasingly crowded space with large players such as Amazon generating vast amounts of consumer data to drive production decisions, Betabrand must continue to strengthen their consumer-driven platform to source and evaluate ideas and address target users through their channels of choice (e.g., social media). Management must focus on building a community in which consumers are enticed to remain loyal and establish unique perspectives on design to continue to differentiate themselves from other retailers’ predictive algorithms.
The retail industry is ripe for innovative companies to steal share from traditional designer-led, slow to market brands. Can Betabrand’s open innovation platform scale and strengthen to compete against powerful data-driven producers such as Amazon as well as fast fashion giants such as Zara? What barriers, if any, exist for others to adopt the same crowdsourcing model and how can Betabrand garner loyalty among a generation known for its brand promiscuity4?
 Apparel Magazine. (2018). Betabrand Takes Crowdfunding to the Max. [online] Available at: https://apparelmag.com/betabrand-takes-crowdfunding-max.
 Boston Consulting Group (2012). The Millennial Consumer: Debunking Stereotypes. [online] Available at: https://www.bcg.com/documents/file103894.pdf.
 Dennis, S. (2018). Pure-Play E-commerce’s Scaling Woes Continue. [online] Forbes. Available at: https://www.forbes.com/sites/stevendennis/2018/11/09/pure-play-e-commerces-scaling-woes-continue/#3f3540f156fa.
 McKinsey & Company. (2018). The new battleground for marketing-led growth. [online] Available at: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/the-new-battleground-for-marketing-led-growth.
Predicting Consumer Tastes with Big Data at Gap. (2018). Harvard Business School.
 Recer, H. (2018). Op-Ed | The Cost of Dead Inventory: Retail’s Dirty Little Secret. [online] The Business of Fashion. Available at: https://www.businessoffashion.com/articles/opinion/the-cost-of-dead-inventory-retails-dirty-little-secret.
 Retail Dive. (2018). Betabrand uses 3D tech to take designs to fruition in 5 days. [online] Available at: https://www.retaildive.com/news/betabrand-uses-3d-tech-to-take-designs-to-fruition-in-5-days/518676/.
 Sailthru.com. (2018). [online] Available at: https://www.sailthru.com/wp-content/uploads/2016/06/BetabrandCustomerSuccess.pdf?x11401.
 UNC Kenan-Flagler. (2018). Crowdsourcing startup gives fashion industry a new look. [online] Available at: https://www.kenan-flagler.unc.edu/news/2017/01/Chris%20Lindland.
 www.betabrand.com. (2018). Betabrand | Crowdfunded Clothing | A Global Community Of Collaborators. [online] Available at: https://www.betabrand.com/.
Student comments on Betabrand: Wearing Product Development on its Sleeve
One thing I find concerning is the changing consumer preferences in fashion that may not align with product design lead times imposed by Betabrand’s crowdsourced method. Even e-commerce consumers typically turn to online retail when they want to purchase something that is already fashionable and they won’t know in advance what a season’s trends will be in order to provide “advance” feedback. The investment from a consumer to provide input to Betabrand then wait for a product design doesn’t align with my concept of millennial buying behavior.
A popular trend nowadays for improving customer loyalty is gamification. Through points systems, levels and a little competition, other companies are motivating their user base to remain on the platform. This could be an interesting approach for a company like Betabrand that depends on user feedback. This, however, could come at the cost of diversity of opinion. By creating certain environment, users with similar preferences will be attracted to the company, creating a specific “style” of clothing that may not be what the company is trying to achieve. On the other side, it could help define a customer segment and create an identity that doesn’t appeal to everyone, but that it is very attractive for those that it does.
In my opinion, Betabrand can compete with the likes of giants such as Amazon and Zara. One of the interesting dichotomies I see in the consumer market is the struggle to be edgy and new while also not crossing the line of being too mainstream. Betabrand is well positioned as a first mover in crowd sourcing so I think they can walk the line very well and potentially win the hearts of consumers.
I agree with you that in order to scale, Betabrand will need to be strategic in its method of distribution. On this point, I would argue that although physical distribution reduces speed of bringing a product to market, there are a number of advantages that has to be considered. Physical stores help increase brand awareness, and lend a certain credibility to the brand. It would also lower the barrier to purchase in terms of increasing product observability and triability.
As Betabrand continue to expand to more and more countries, I would also suggest that they tailor their product offering based on region specific preferences. They are receiving clothing design and consumer data from all around the world, and they should leverage this databank going forward.
Very interesting article! While reading this article, a few thoughts came to mind. First, one of the key participants in this crowdsourcing model is the designer. As the company tries to scale and compete with other retailers and Amazon, it will be interesting to see if Betabrand will be able to attract a diverse set of designers to their community and continue to receive product ideas that consumers are excited about. It would be interesting to know how Betabrand is compensating the designers for their clothing designs and if this will be enough to keep them contributing ideas to the site as opposed to finding work with other brands and retailers. Additionally, when I originally read this post, I had a similar thought as Jane Harvard (above comment) that Betabrand’s online community may fall into group think and vote on clothing of a similar style. However, I took a look at the Betabrand site and was actually very surprised at the range of different designs on the site. This site definitely does not cater to one style of dressing. After seeing the wide variety of styles on the site, I worry that it may be difficult for Betabrand to garner loyalty among consumers. Given most consumers have their own “style”, I worry that Betabrand may have trouble attracting a loyal consumer base given that the site does not seem to be a “one stop shop” for consumers but rather a site for consumers to order one or two items. In order to enhance the consumer experience on the site and increase loyalty, Betabrand may want to consider adding in some filters on the site so consumers can easily filter for clothing in their “style” whether it is preppy, punk, modern, classic, etc.
Super interesting article! What Betabrand is doing is very cool. One concern I have is around the true predictability of consumer feedback in fashion. I feel as though new fashion trends usually push the envelope a bit, and that consumers have an initial distaste but then get caught up in the fad as it gains popularity. I would worry that while Betabrand is protecting itself from bad product decisions, they are also missing out on some hits due to this process. For example for movies, regular consumer reactions to scripts/pitches usually have little correlation to how successful the content ends up being, and some of the biggest hits actually got really bad initial feedback.
To answer your question about competition, in order to survive I think Betabrand needs to quickly build its brand image with its core customers. This involves raising awareness, getting lucky with hit items for the next few seasons, and providing more distribution through brick and mortar stores. There’s very few barriers to entry for this business model and Zara and others will definitely incorporate it if they see its success. The only way to protect Betabrand is to build loyalty with both customers and their feedback providers.
I first heard about Betabrand years ago…and I’ve barely heard about them since. It doesn’t seem like their brand has gotten bigger, but I am happy to see that they are still very much alive and kicking. They were an early adopter of this crowdsourced product development process and I really like it. However, I don’t think they’re big enough to compete with fast fashion brands like Zara. They just don’t have the scale to match, and to be honest the crowdsource model seems slow in comparison to Zara copying the latest trend off the runway and producing it out of their factories barely a couple weeks later. I do think they strike a chord with a particular niche of millennials who do appreciate getting to give input on their product line and it is those millennials who form their loyal customer base and will keep them alive in the long run.. or until the next cool crowdsourcing company comes along!