SMALL BUSINESS GROWTH   |   6 minute read

How Bonobos went from DNVB startup to $310m acquisition success

It was 2007 and Stanford Business School students Andy Dunn and Brian Spaly had one thing on their minds: pants.

What had started as an MBA project of Spaly’s soon turned into a singular mission to design the ideal pair of men’s pants that did away with all the usual trappings of boring menswear: “diaper butt,” the flappy pouch of material under the derriere, and the illusion of clown shoes caused by tapered-leg slacks. 

Not all growth is created equal.
That’s why we created Masters of Commerce.

Receive expertly curated tips, news and insights to grow your business, direct to your inbox.

Subscribe now!

Dunn had so much faith in Spaly’s business idea, that he cashed in his 401k to build a website – bonobos.com – and raised a round of angel investments from venture capitalists and Stanford lecturers. Meanwhile, Spaly had canceled a planned trip to Brazil to track down suitable fabric and a pattern maker for his curved-waistband pants design in California. Bonobos Classic Pants

Photo courtesy: Bonobos

As Dunn describes to Coveteur, his obsession with online consumer culture, coupled with Spaly’s love of great-fitting pants, offered the perfect recipe for success:

I’d spent my years [at Stanford] absolutely falling in love with the culture around the consumer internet in Silicon Valley… then Brian came along with these great-fitting pants. I was like, ‘Wait a second. Maybe this is the internet-driven company I’ve been looking for, but in a really new way where we would actually sell and tell stories and have great service with a physical product.’”

Not long after Dunn secured seed funding and launched the eCommerce store, he found himself picking, packing, and shipping 400 pairs of pants from his New York City apartment. Within six months, the company had grown to five employees and held a $1 million net revenue run rate.Andy Dunn Bonobos

Photo Courtesy: Fast Company

A pioneer in retail eCommerce

What makes Bonobo so remarkable is that the business flourished at a time when digital-first retail brands were virtually non-existent. Dunn explains:

Not to be self-aggrandizing, but in 2007 that was a very contrarian and new idea. This was pre–Casper and pre–Warby Parker, pre–Everlane, pre–Dollar Shave Club; pre-everything that is what I call digitally native brands.”

Dunn coined the term DNVB, short for Digitally Native Vertical Brands, to describe the influx of businesses that followed Bonobos’ ethos of being “maniacally focused on the customer experience and interacting, transacting, and story-telling to consumers primarily on the web.” 

By fall 2011, Spaly had left Bonobos to move on to another business venture while Dunn had been busy expanding the company’s range to include suits, dress shirts, outerwear, and tailored pieces. 

In response to customers’ requests to “try before they buy”, in 2012 he also spearheaded the opening of the first Guide Shop, a brick-and-mortar store in New York where people could browse and try on clothing as part of a “one-to-one” customer experience.Bonobos Guide Shop

Unlike most physical stores, the Guide Shop was designed to be completely stock-free except for the floor stock. For Dunn, this decision was based on two insights: one “brain-dead simple” and one “totally revolutionary”:

Guys still want to touch, feel and try on clothes. The part that was revolutionary was that they didn’t need to walk out with the product. Everyone in our industry had told us that instant gratification was so important. If we could do the fulfillment for the customer instead of asking them to walk out with bags, we could flip something that people thought of as a benefit and position it as a burden. 

Why do you want to do your own fulfillment when we can do it for you? Why don’t you instead go back to work? Go to dinner! Go the gym. Take your wife on a date. Your clothes will show up at your office or at your home the next day.”

Having no stock was also a wise move from a cost perspective. Without inventory, Bonobo’s stores could be small, saving money on rent, and obviate the need to calculate and manage inventory turnover at every store location.

 For the following five years, Dunn and the team at Bonobos focused primarily on growing the showrooming concept, opening more than 50 additional Guide Shops around the US. 

Then, in 2017, the company announced it was being acquired by Walmart for $310 million, who would continue selling Bonobos’ range via its eCommerce store and Walmart’s Jets.com subsidiary.

Inside Bonobos Guide shop

Photo courtesy: Bonobos

Since the acquisition, Dunn says he has inherited different brands and businesses that have taken him away from his role at Bonobos, but he’s not resting on his laurels. 

You sell your business and you don't think you'll work as hard," Dunn told Inc., "but I'm working harder – just without the stress of wondering if we will make payroll." 

Key takeaways from Bonobos’ success story

Customer experience is everything: Described as “maniacal” about customer experience, Bonobos puts the customer first at virtually every juncture, providing a “one-to-one” customer experience in-store and employing a team of “Ninjas” solely dedicated to online customer service. 

Smart inventory management is critical: By having inventory-free physical stores, Bonobos can keep holding and turnover costs low, enabling them to expand rapidly without having to bear the typically huge financial burden associated with brick-and-mortar stores. 

Innovation and success go hand in hand: The showroom concept is virtually unheard of for clothing brands, but taking a leap of faith has enabled Bonobos to provide a better customer experience and maximize cost efficiencies.

TradeGecko is a powerful platform for managing your eCommerce business

Cut through the mediocre and start a free trial today 

Start my free trial now