British lingerie brand Lounge Underwear has achieved phenomenal growth since its inception, in the living room of co-founders Daniel and Melanie Marsden in 2015.
On track to hit sales of £100 million in the current 2022-23 financial year, the social-first brand has used a purely direct-to-consumer (D2C) ecommerce strategy combined with influencer marketing to propel the brand forward.
But, with the cost-of-living crisis and soaring inflation likely to result in challenging times ahead for many businesses, the entrepreneur couple reveal how a shift in marketing strategy, an omnichannel approach to retail and their new lower-price-point “everyday” collection will help keep the brand on track.
“We will always be an ecommerce-first business,” says Daniel. “But the idea moving forward is to have flagship stores in major cities in the UK and mainland Europe, to serve as a brand piece, where people can purchase, touch and feel the product,” he explains.
And as a social-first ecommerce brand moving into physical retail post-Covid, they’re not alone. British athleisure brand Gymshark is due to open its first bricks-and-mortar store in Regent Street, London, at the start of October, as it looks to engage with its customers in a real-life experience.
But rolling out physical stores comes at a cost, so Marsden says they’ll dip their toes in the waters at first, which could mean experiential pop-ups or brand activations before they commit to a permanent base.
“To be a true global brand, you need a physical presence,” says Melanie. “As a very human and value-driven brand, we want to give people an experience as they step into the space. We want people to walk out of the store having felt emotion and experienced a connection in real life, then have conversations with their friends about it,” she adds.
This new approach to omnichannel retail for the ecommerce brand is partly owing to a shift in marketing strategy, which will focus more on brand awareness rather than just pushing product.
Melanie says: “We are looking at some of the more traditional marketing methods, such as brand awareness pieces and PR. People see us as a social-born brand and, as a business, we have been focused on product within our marketing. But we believe what will really drive growth is switching that dial.
“Product is still important and the way that we communicate to our community, but the focus of our marketing will be what’s the purpose and what are our values. It will be a huge brand-awareness piece,” she adds.
And part of this will be about connecting and communicating with people in different ways, says Daniel. It will be marketing campaigns that focus on driving a message to their community, which isn’t just about buying the product.
But this change of tack is also in response to challenges around social media and digital marketing. “We can’t shout as loudly as we used to be able to through digital and social, due to the algorithm changes,” says Melanie, with content no longer reaching the same number of eyeballs in the same way it once did.
And soaring influencer marketing costs (in some cases 1,000% higher) over the past few years have prompted a rethink for the brand. “Influencers and partners have helped grow our community to 3.2 million on Instagram and to become the biggest underwear brand on TikTok,” says Melanie. “But the way we work with partners will shift going forward.”
She says they will look to influencers who have genuine relationships with Lounge Underwear to become content creators for the brand, so the company would retain ownership of the content.
“The value is in our community’s engagement with the content then, rather than relying on their audience to engage with it,” she says.
Building strong customer relationships has always been intrinsic to the Lounge Underwear from day one, a key factor for successful D2C brands. “Our customers have always received more from the brand than just product,” says Melanie.
She explains: “We are very personal in how we speak to them. I used to spend hours talking to everyone on Instagram when we first launched, so people felt like they’d had a genuine connection.
“It was about building a community, so people felt like they were part of something; we were not just an underwear shop. From our tone of voice, to how we speak with customers and the service we can offer, from next-day delivery to free returns, this still remains true,” she adds.
And serving this community was part of the reason behind creating a new lower-price-point “everyday” collection, which Lounge Underwear has spent the past 18 months developing.
It is due to debut in October and an underwear set will be around 50% cheaper than any currently available from the brand, with a full “foundational offering” on the shelves by April next year.
“We are looking to build out our product offering over the next 3-12 months,” says Daniel, “to build Lounge to be an everyday brand”, which he says will help the business grow and scale.
“To grow and be the global player, we need to compete with competitors and have the foundation of an underwear brand. We will be offering bras separate to bottoms and the ability to buy bundles, with bras from £20 and under, and bottoms from £10 and under, which makes the entry point for the customer a lot more accessible,” he adds.
And although Daniel is quick to point out that the concept was devised long before the current cost-of-living crisis, he admits that the timing is spot-on, as customers’ discretionary income is squeezed by rocketing energy costs and soaring inflation.
The current climate is putting increasing pressure on the D2C business model overall, with rising customer acquisition and shipping costs, supply-chain headaches and a crowded marketplace. Daniel says: “We saw insane growth through Covid but the following 12 months after that were really tricky, as people were venturing out to physical stores.
“We’ve managed to maintain all the customers we acquired through Covid but the cost of acquiring new customers now is a lot higher than it was through that period. It’s been a tricky year but the past couple of months, we’ve been trading really well,” he adds.
However, despite a tough market, he says international sales offer big growth opportunities for the business, with Germany now overtaking the UK as the brand’s biggest market.
“We’re seeing the same spike as we had in the UK, with the work we’re doing on our influencer programme in Germany,” Daniel explains. “They are very receptive to it. We’re expecting north of 100% growth in Germany this current financial year.”
He says 80% of their sales now come from international markets, driven by mainland Europe, the US and Australia. But owing to the lack of competition in Europe, they are leaning more towards Europe, which he says offers “lower hanging fruit”, with markets such as Spain and Italy next on their radar.
With a growing product offering and the “everyday” collections, a shift in marketing strategy and new international markets on the horizon, Lounge Underwear is tackling the challenging winds head on, staying true to its roots as an ecommerce-first brand but also testing new waters with a physical retail push to achieve future growth.