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With traditional department stores struggling, the mutual fund giant Fidelity is placing a bet on a young company it must think could one day challenge the legacy retail players.
Fidelity Investments has led a $65 million investment in Spring, a three-year-old e-commerce startup that sells clothes from 2,000 clothing brands through its mobile app and website. Spring has now raised around $100 million in total.
Existing investors Groupe Arnault, Thrive Capital and Box Group also put new money into the company. Groupe Arnault is the investment arm of luxury fashion conglomerate LVMH, while Box Group is the venture firm started by Spring co-founder and chairman David Tisch.
Items for sale on Spring range from men’s Levi’s jeans on sale for $20 to $1,110 women’s Gucci loafers — and everything between. Half the orders on Spring come through the mobile website or app.
Part of the bet Spring is making is that millennial shoppers — its average customer is 28 — want to shop for clothing online like their parents did in malls or department stores: With low-priced and high-priced brands co-mingled in one location.
“Consumers don’t have another destination where they can shop all of their favorite brands in one place,” CEO Alan Tisch said in an interview.
On average, Spring customers spend around $150 per order, which helps the economics of offering free shipping and returns. Brands are responsible for shipping orders and taking returns, but Spring subsidizes some shipping costs and handles customer service.
The company expects 2017 gross sales well north of $100 million. Spring generates revenue by taking, on average, a cut of between 15 percent and 20 percent of each order.
The startup is playing in an increasingly crowded space. Companies like Stitch Fix are trying to supplant department stores by shipping a personalized selection of apparel to customer doors.
Amazon is also making a variety of moves to aggregate fashion brands into one spot, though it is still primarily known as a seller of commodity goods.
Several European online fashion marketplaces are taking a more focused approach to building a digital department store, by focusing on high-end shoppers. Among them are Net-a-Porter — which sold in 2015 to its competitor Yoox — as well as Farfetch. LVMH is also working on its own multi-brand shopping site and app, which is expected to launch in the next month.
“I think it’s amazing to see them embrace more of their digital future,” Tisch said, when asked how he feels about one his investors — LVMH — building its own version of an online department store. “But we are in very different markets, primarily because of our price point.”
For Spring, long-term success may hinge on how well it puts the right selection of clothing in front of the right shopper — bringing the moments of discovery of shopping in the physical world to an online storefront. Many e-commerce players have tried and failed to deliver a comparable experience.
Today, the breadth of Spring’s selection is both an advantage and a curse. You have a good chance of finding something you like if you search for it, but you can also become overwhelmed. Tisch says the company is investing heavily in using browsing and shopping data to make it less work.
“We think of Spring as delivering your most personal shopping experience,” he said.
This article originally appeared on Recode.net.
