Go Global M&A model featured in just-style
Originally posted, Nov. 6, 2019
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Go Global M&A model puts garment makers at heart of deal Go Global Retail is a brand investment platform with a difference. Led by industry veteran and sourcing expert Jeff Streader, it aims to blow up the traditional transactional supply chain with a vision of building brands in partnership with garment makers as strategic investors – as he exclusively tells just-style. Go Global Retail hit the headlines last month with its plans to buy the ModCloth online fashion and accessories brand from Walmart. But it's at this point that any parallels with traditional private equity deals in the fashion industry begin and end. "We're changing the narrative," Streader explains. "The model that exists in our industry today is transactional, with an arm's length between the buyer and the manufacturer and a lack of transparency between them. "We're blowing it up. We're using our knowledge of the industry to work together as a partnership between the supply chain and the manufacturer and the design team, and differentiate ourselves from a typical private equity firm who only wants a return on investment. "My pitch is this: I will be your partner, we will manage the front; you will be our partner, you will manage the back – and together with the brand we will build a win-win-win arrangement. "I've gone to the garment makers, the textile mills, the footwear manufacturers as strategic investors and embedded them into the formula where they're really part of the success of the brand. And that's the play here. It's a reverse integration of traditional design and supply chains all the way to the consumer. "We're creating one harmonious team to deliver on shared objectives. And the shared objectives are the success of the brand, where the garment maker is a part of that formula as an investor." With over 30-years experience at VF Corp, Kellwood Co, Guess Inc, Billabong and Marlin Equity, Streader has become increasingly disillusioned at the broken workflow in the fashion supply chain. "Pick almost any brand, and the relationship today is where design works in a vacuum and pushes a design package (a tech-pack) to a maker overseas, and that maker comes back with perhaps a sample, and definitely a price. The next step only occurs if the buyer deems that price is good enough. "And so that transaction creates a wall between them, and is based on the fact that the buyer is driven to hit a price point to meet a margin. And that's a bad formula and a bad workflow that exists today. "The dynamic we're blowing up is that the factory overseas is your partner: you are opening your books and showing where you need to be from a cost perspective, and they're working with you to re-engineer the fabric or garment to get there. You're letting the garment maker be your development partner upstream. "We're developing intimacy and transparency between these partners to achieve a common goal. That's the change." Factory partners Streader admits it has been hard work convincing manufacturers to get on board as limited partners in his vision for Go Global since setting up the company three years ago. But today the firm is working with some of the biggest factories in the world, many in China and elsewhere in Asia, "that are interested in this concept as a way to get closer to their customer, where they're not competing for nickels and dimes: it's more about being a true partner the way the industry used to be." He explains: "I've had to teach them about investing into brands. It took time, but I got there. I would say to them: What about if we bought your customer? What if you invest downstream and you invest into brands, retailers? And the response was 'but I'm not a retailer; I don't understand retail.' "And then I would talk about Go Global where we are a group of retail practitioners, we're retailers, we're sourcing experts, we're digital scientists that understand the space. "The idea is that we will oversee the brand or retailer, we will drive change and develop the strategy, assess the management team, we will manage the front and the back – you become an investor, and we give you the opportunity to have the brand's design team and supply chain plugged in to your factory. "They're working with you from the beginning, from concept, and you are no longer a transaction, you are no longer a seller, you are a partner like you used to be ten years ago." Smart decisions Another key part of Go Global's playbook is digital capabilities including artificial intelligence and predictive analytics. "Which means that rather than just placing a purchase order for 3,000 dresses, we can understand if the consumer responded to polka dot dresses in mostly small sizes, and therefore our purchase order to the supplier in China should be skewed towards US sizes 0, 2, 4, 6. "Maybe there's institutional knowledge within a brand's buyer ranks that knows that, but it's better to use big data for predictive analytics to make those smart decisions. "So these are the type of things that Go Global, as a retail practitioner, will do in our execution model. We're focused on the brand, we're focused on the consumer, we're focused on listening to what they want and bringing product that they want, and not just pushing stuff to them that they don't want." Again Streader is keen to emphasize: "We're using our knowledge of the industry to differentiate ourselves from typical private equity firms who have absolutely hammered so many brands because they're over-leveraged with debt." He adds: "The manufacturers – the investors – look at this as a lifeline. It's an opportunity to be more than transactional, it's an opportunity to be a real partner. We're talking about being a part of the whole solution here. That's the difference." As for products, the goal is to work across a whole range of categories. "We're really focused on the consumer vertical, so we're not afraid of looking at adjacent categories to apparel, footwear and accessories such as beauty, and wellness and hard goods related to the industry." The core capabilities of investors will be best aligned with the product needs of the acquisitions. There are also plans to develop the model so that supplier investors not only get to become a part owner in a well-known Western brand – but also have the opportunity to help expand it into China. "We have the levers to do that, maybe not in the first two years, but the plan is to take the brands to China, where the [manufacturer] owner can use their local influence and capabilities to help the brand grow." ModCloth As for its first acquisition ModCloth, the Go Global team is currently "assessing the brand, the competitive landscape, what's broken, what are the price points with manufacturers, what opportunities do we have to optimize the business. "The brand has millions of Pinterest followers, millions of Facebook followers, it has Instagram followers...the brand is ready to be relaunched." The online-only retailer sells quirky, vintage-inspired women's clothing, shoes, handbags and accessories for 18-35 year-old women, and has changed hands for the second time in as many years after being acquired by retail giant Walmart in 2017. While Streader and his team will help to mentor and guide the ModCloth management team, he stresses they will not running the business. "The business needs to run on its own, leveraging the partnership with its investors. We're going to apply a different work stream and a different cost basis to the model, and it's going to be helped by the investor garment maker. The manufacturers are going to tell them 'These are my costs, here's what I can buy the fabric for, here's what I can get in terms of buttons, zippers, thread, interlining. "The management will run the team, Go Global will guide them as a board – and as part of that board are the investor garment makers. This is a beautiful formula." A typical transaction will have a board of around five people: any more is "too many points of view." Sitting on that board will be the brand's CEO, two or three members from Go Global, and the investors – so if there are two investors, they will each have one seat. The latter, "are a part of the strategic long-range planning; they participate in quarterly board meetings, but they're not driving the strategy or making decisions on the brand; they're a part of the conversation." Plans are already in the pipeline for "one to two more deals this year. We will scale as a firm also." Retail dynamic Not surprisingly, Streader is optimistic about the future of retail. "You have to be progressive in your thinking, you have to be dynamic in how you approach the ever-changing consumer, and you have to be willing to evolve with these changing times. "Don't set a five-year plan now and expect to follow that five-year plan. By year three it's no longer relevant. I blame leadership in many of these brands for not having the vision to be as dynamic and nimble and to change with the times. "Brands and retailers that succeed are keeping their finger on the pulse and making investments where they need to be made, and not responding to the squeaking wheel. "There are many ways to approach the consumer: but it has to be about the consumer. Who's our core customer, what does he or she want, and responding in the brand or retail setting, which could be online, brick-and-mortar or pop-ups. Brands that focus on the consumer are going to win if their message and product or service is right." As for Go Global, he remains pragmatic. "This is not a silver bullet, it's not a solution to everything, but it's a win-win for the factory and the brand."