Xcel Brands Inc. today is launching a new digitized business model for Longaberger, transforming the traditional multi-level platform of the artisanal and handcrafted home decor business it acquired in 2019, into a state-of-the-art, peer-to-peer social commerce community with expanded home and lifestyle categories.
“The plan is to become the largest social commerce community in the world,” chairman and CEO Robert D’Loren said in an exclusive interview. “This could be a $1 billion platform in five years. This can be replicated throughout the world. That’s the goal. ”
It’s a bold statement, given that none of Xcel’s existing brands, which include Isaac Mizrahi, Judith Ripka, Halston, and C. Wonder, have reached that metric yet.
“The math is interesting,” D’Loren said. “The average member stylist historically generated about $6,000 in sales per year. That stylist could have six or seven people working under them, doing $6,000. With 20,000 people, $120 million would be generated, and 100,000 people would be a $600 million business.”
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D’Loren said he spent the last five years “really trying to figure out how to create social commerce. No doubt, there’s significant competition, with Wayfair W +5.8%, Sur La Table and Restoration Hardware.”
There’s also social commerce marketplace giants such as Etsy, which in 2019 posted $4.97 billion in gross merchandise sales, and Poshmark’s $2 billion payout to its seller community in September.
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The key to scaling Longaberger will be the army of home and life stylists D’Loren hopes to hire. They’ll be equipped with personalized digital storefronts with SMART web technology in the form of a personalized marketplace that quickly connects to their social media accounts.
“We’ve been able to bring back 3,500 participants, and it’s growing fast,” D’Loren said of the sales associates. “The retail, hospitality and restaurant industries have so many people out of work.”
The home and life stylists are members of the communities in which they live, and D’Loren is counting on them to expand Longaberger’s fan and consumer base.
“They’re friends and family,” he said. “They know you, and they know how you live. Before we bought the company, ‘super’ home and life stylists were making annual incomes of over $1 million per year. You can see where this could be an opportunity for the record number of 51 million newly unemployed to channel their inner entrepreneur.”
Longaberger’s sales program was designed with a minimal investment for stylists and a transparent platform. For an annual fee of $49, the program offers 20% marketing compensation for all sales, 20% discount on self-purchases, and 5% override on the sales of new stylists recruited to join an existing stylist’s team.
“The difference is our customer acquisition process,” D’Loren said. “We’re not out there bidding for Google search words and we’re not hiring influencers to talk about and promote our product. Our influencers are our stylists.
“Our competitors have low of 12%-15% to 25% customer acquisition charges,” D’Loren added. “We’re relying on the community to bring the customer base to Longaberger, not digital platforms like Facebook and Instagram.”
Founded in the early 1970s by Dave Longaberger, the family-run company produced sturdy, aesthetically-pleasing handmade maple wood baskets, such as its iconic picnic model. Baskets in weathered seaside shades are designed for toting, serving and organizing, and holding bread, cake or trash.
Xcel is moving Longaberger into new product categories such as tabletop, flatware, linens and furniture, which D’Loren describes as a cross between Restoration Hardware and Crate & Barrel.
“We have a wine club coming,” he said. “We’ll have a bridal registry. Home has become tied to wellness. We recognize that if we take care of ourself a little better, our quality of life can be better. We’ve added skincare and wellness items that are meaningful. There’s close to 800 stock-keeping units on the site. That happened in the last three months.”
The site also offers products from Friends of Longaberger, such as Dockside Market’s lemony bundt cakes, Moser Glass cake stands, fine jewelry by Judith Ripka, and Gibson and Dehn home fragrance candles.
At its height, Longaberger posted $1.3 billion in sales and and counted 8,000 employees at its Newark, Ohio headquarters, which was designed to look like one of its baskets. The founding family in 2011 sold the company to a private equity firm. Longaberger filed for Chapter 11 bankruptcy protection in 2016. Xcel owns and manages the Longaberger brand through its controlling interest in Longaberger Licensing LLC.
“The challenge was the supply chains weren’t fast enough,” said D’Loren said of Longaberger’s decline. “By time the products hit the store, the influencers weren’t interested.”
Because Xcel is a media and consumer products company, involved in the design, production, marketing, wholesale and direct-to-consumer sale of its brands, it views the business through the lens of entertainment.
“Underwriting intellectual properties was a whole new business model,” D’Loren said of Xcel, which launched in 2011. “We saw Longaberger as a chance to disrupt the multi-level marketing business with the commerce and social media that didn’t exist when I sat on the board in 2006.”
D’Loren said he’s looking beyond the MCNs [multi channel networks] that produce episodic short shows embedded with products. “It just wasn’t working,” he said of MCNs. “Tik Tok, we think, is the way to do it. We think this is social commerce, people coming together for a social purpose.”
The Xcel CEO is tapping into a marketing and entertainment braintrust that includes Michael Francis, former chief marketing officer of Target, who has been a consultant to Walmart, and Jim Fielding, cofounder of ThenWhat.
“Think about life,” he said. “We each go down our own individual path every day. What we have in common, is that we begin at home, where we’re the most comfortable. We want make life at home the best that it can be, and give our customers more free time. If [our stylists] can do that through social media, we’ll give everyone what they want, when they want it.”