London-based womenswear label Boden may be British at heart, but today the US is its biggest market.
The brand, known for its flared and printed dresses, began targeting U.S. consumers in 2002 after receiving 3,000 U.S. orders that year.
By 2007, Boden was generating $50 million in U.S. sales and operated a logistics center in Scranton, Penn. Last year, US sales reached $185 million, accounting for 40 percent of total sales.
Boden may be a transatlantic success story, but they are the exception rather than the norm. For every Boden or Sweaty Betty — a London-based sportswear brand that entered the U.S. in 2013 and was acquired by U.S. footwear manufacturer Wolverine Worldwide in August 2021 for $410 million — there are countless others vying to stand out in the market .
Despite many cultural differences and a common language, there are differences that make it difficult for British brands to penetrate the United States. Moving from an island of approximately 60 million people to a continent-spanning country of over 300 million requires serving more regions and customer types. US shoppers also have plenty of choice, and loyalty is not guaranteed.
The market is not cheap either: opening facilities or partnering with third-party logistics companies in the US may require more capital as goods are shipped further; wage differences can make it more expensive to hire, and the sheer number of competing brands increases online customer acquisition costs.
“It’s easy to get lost in the US,” said Frederic Court, founder of British venture capital firm Felix Capital, which has invested in numerous start-ups in the US, UK and Europe. “The market is so noisy.”
Still, he tries out a new group of British newcomers. With social media, it’s easier to predetermine how a brand might be received in America. In addition, Brexit has made it harder for British brands to operate in Europe, making the US a more attractive proposition.
To break through, new entrants such as start-up Bybi and The Inkey List, which sells skin, hair and scalp care products, have adopted similar strategies to US DTC brands. This includes creating wholesale partnerships to reduce operating costs; slowly investing in online stores to develop direct relationships with customers; and experimenting with marketing channels that US shoppers are more likely to engage with than consumers in their home market.
The power of partnership
Building relationships with established retailers is how UK brands can identify which US regions will drive sales without wasting cash.
For example, skincare brand Bybi partnered with Target in January 2021, sourcing its products from over 1,000 locations. She used her work with Target to find out where her biggest fans were—the coasts, it turned out—and then targeted consumers there on social media and other channels to drive them to the brand’s website. By the end of that year, the US accounted for 50 percent of the company’s annual sales.
The US expansion “was pretty strong at first because we started with a big distribution partnership,” said Dominika Minarovic, co-founder of Bybi.
This is a strategy she has previously used in her home market. Bybi works with multi-brand retailers such as Holland & Barrett and Boots in the UK and Sephora in Europe.
Inkey List also relied on major retailers to debut in the US, just six months after the brand launched in the UK. The cosmetics brand began selling in the US in April 2019 through Sephora.
The partnership with Sephora helped The Inkey List delay the initial costs of entering the US that direct-only brands face, such as setting up local warehouses for quick delivery of products, staffed by employees that can cost at least 20 to 30 percent more than in the UK. The brand did not enable purchases on its own US site until spring 2020, almost a year after US sales began.
“If you have a wholesale interest, it’s pretty easy to get one [the US]said the Court. “It’s a great way to selectively research the market.”
American consumers have more brands to choose from than their UK counterparts, which could make it harder for UK brands to build demand for their DTC channels in the US. To break through, brands have localized their operations and experimented with marketing channels that US customers respond to.
In 2020, DTC The Inkey List sales accounted for less than 10 percent of total revenue. To help boost online sales, the company has hired a local team in the US, including a head of global growth and a customer acquisition marketer, who use the company’s data and market intelligence to better reach buyers.
The brand also began investing in text messaging marketing campaigns in the US last October to create personalized communications with local consumers, alerting them to product launches that suit their specific needs. The company has amassed about a quarter of a million text message subscribers.
“It’s shocking how successful he has been in the US,” said Colette Laxton, co-founder and co-CEO of The Inkey List. “Great Britain [consumer] it’s like, “Hell no, leave me alone.”
Its DTC channels now account for about 16 percent of global revenue, and the US accounts for more than 40 percent of total DTC sales.
Similarly, Bybi invested in a marketing tactic not used in the UK when it started sending single-page ads to prospective US customers in September 2021. This led to a 5 percent increase in traffic to its own brand site, accounting for about 20 percent of its US sales.
And while rising customer acquisition costs could make DTC an increasingly demanding business – much more so than when Boden first entered the market – brands say US shoppers are more open to direct purchases than UK customers, who still rely on retailers to guide their purchasing decisions.
“The UK is quite a traditional retail environment,” said Minarovic. “Bricks and mortar still dominate when it comes to trust and legitimacy.”
Felix Capital is part of a group of investors who jointly own a minority stake in The Business of Fashion. All investors signed shareholder documentation guaranteeing BoF’s complete editorial independence.