Founded in 2016, Solihull-based Lounge Underwear is an online retailer of underwear, swimwear and comfort clothing. The business founders are combining an old-school work ethic with modern marketing techniques to build a fast-growing e-commerce brand and generate booming sales.
Lounge Underwear feature at number five on this years’ edition of The Sunday Times Virgin Atlantic Fast Track 100 league table, which ranks Britain’s 100 private companies with the fastest-growing sales over their latest three years.
We spoke with co-founders Daniel Marsden, CEO and Melanie Marsden, Chief Brand Officer.
Can you tell me about the journey your business has been on over the past 12 months?
Dan: As a company we’re coming up to our fifth birthday in March and have seen unprecedented growth over the last four years. When COVID-19 hit in March, it was the start of a fresh financial year for us. Even though it’s a horrible situation, for a company like ours, solely online, it’s like a perfect storm. You’ve got everyone at home on their phones shopping. So we are running at about 350% growth year on year.
We finished last year just short of £14m turnover and we are looking at north of £40m this year. So to scale everything up – from staff and operations – just to get that amount of goods out the door, it’s a completely different game, because the company is three times the size.
Mel: We’ve had huge growth in our headcount and are now up to about 80 people. We’ve recruited just over 25 office staff in this period. Our warehouse recruitment has peaked as well. To have recruited that many new ‘Loungers’ into the team during a pandemic, when working from home, has been a real achievement.
Have you had to adapt your business strategy in recent months?
Dan: Because we have grown so fast each year as it is, we were already planning at the end of the last financial year, stock-wise, for a lot of growth. That meant we already had a lot of manufactured goods on the sea coming in, so that was a blessing in disguise.
Mel: From a brand point of view, it was a case of the creative team looking at how we could adapt our social schedule – in terms of pulling people into our ‘Lounge world’. Because everyone’s going to be at home, everyone’s going to be wanting more comfort than ever before. So it was the perfect way to change the way we spoke to our community and pull them into our website.
Community is at the core of our brand. We have 2.5m followers on Instagram alone – we call them our ‘female family’. Growing through the social media landscape, our community is at the core of all the decisions we make. We can listen to their feedback and react almost immediately as a brand.
Is there anything that didn’t go so well this year?
Dan: You get more problems on the warehouse and distribution side because people there still have to come into the warehouse to work. And implementing safe working and social distancing is more of a challenge.
Mel: There are some decisions you can’t undo. We had a swimwear collection launching in July and we were in the middle of a pandemic where our core audience in the UK were not going on their holidays any more. So it’s things like that where we had to adapt our approach to the launch.
As your business has grown rapidly, where have you seen the biggest growing pains?
Dan: In terms of funding, the company is built on really good foundations. We work with relatively healthy margins and we are direct to consumer, so get a larger portion of the pie. We have grown organically and never had any outside investment. Our cashflow has been OK and operationally it’s all been OK – we have scaled really well and brought good people in.
But finding really good people is probably the biggest issue. If you go back 18 months or a year, it was harder than it is now. If you are looking for people with experience in marketing – paid, social, SEO, and in data, front-end development, back-end development… The tech guys are the hardest – super hard to find.
Is there any advice you could give to others as they look to scale in a similar way?
Dan: In terms of recruitment, this is where the real value of building a culture within the business comes in. For younger people, I don’t think it’s about how much they will be paid. It’s more, what’s the package? What’s the lifestyle? What’s the culture? They are looking for so much more than just money. As clichéd as it sounds, our culture is so family orientated in regards the staff – everyone is really close, good friends. That’s part of what people are looking for – it’s a fulfilment feeling, rather than just getting paid. That’s one massive negative to people working from home – because you can’t create that same culture, the same bonds as when everyone is in-house.
What do you see as the main opportunity for your business’ growth?
Dan: All our marketing is ‘digital first’ and I think we will still go digital first. We do what you would call modern marketing: social media, paid ads and influencer marketing. That’s still the key focus.
One exciting thing about Lounge is that there are very few competitors in our space at the moment. All the massive underwear brands are either going downhill or starting to – because they are archaic, not cool anymore; old-fashioned brands with old-fashioned values. There are only a few cool ones coming up, and they are based in the US.
Mel: We are in position as a young brand to be able to adapt and change our offering quite quickly. If we were older and had bigger collection lines, it would be harder to adapt to new environmentally-conscious customers, for example. We’ve been having a conversation about sustainability for the last 12 to 18 months. It’s a huge conversation – covering everything – our product offering, the fabrics we are using and where those fabrics are sourced from. The goal is to be not carbon neutral, but carbon negative. That’s a big challenge. It’s a big focus for us now and we can make it happen a lot quicker than the older brands. We can pivot.
What do you see as being the main barrier to your business’ growth over the coming 12 months?
Mel: People would be our biggest challenge: due to the rate of scaling up, being able to recruit those technical-specific roles that are needed now in the business. And the rate of scale in terms of our office space. Unlike some companies, we are planning for office space growth.
Dan: Technology as well. This e-commerce space is so new that not all the technology is there to keep up with demand. Our peaks are so high, the technology can struggle to keep up with all the sales orders. Probably in 10 years’ time we will have one complete solution that does everything, but at the moment you have bolt-on on top of bolt-on to make it all work.
We always try to mitigate the problems we face. At the start of COVID-19 when manufacturing shut down in China, to mitigate the risk we partnered with other suppliers in different countries so we don’t have all our eggs in one basket.
What international expansion plans do you have?
Dan: We have eight localised stores – localised websites – for the UK, Australia, the US, Europe as a whole and also for France, Germany, Sweden and the Netherlands. We have seen huge growth in Europe over the last 12 months. Some days our sales are 1,000% up. We have really started to push in France and Germany and seen massive growth. At the start of the year the UK probably accounted for about 45% of sales, but that’s now down to 30% because the other countries are growing so fast. We’re seeing growth across all territories, and that’s why we are such a fast-growing company.
The company is run for growth, not like a lifestyle brand. We want to be the biggest underwear brand in the world. And you have got to break the US to stand a chance of that, so the US will undoubtedly be the main focus for us over the next couple of years.
What advice could you share for other business leaders?
Dan: Work hard and don’t stop. Be persistent and consistent and work harder than everyone else. There’s no golden key for how you’re going to crack it.
Mel: There is something about having an old-school work ethic. And about authenticity – sticking to the values of the business you are trying to build and not getting distracted.
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