Bye for Nau

When I first announced here that I was restarting my efforts in the ethical clothing arena, I mentioned Nau as an inspiration, having read about them in an issue of Fast Company.

The news this week, of course, is that Nau have called it a day (more here and here).

Check over the fold for my further thoughts on Nau’s farewell.

My first response was disappointment – it’s sad to see a company you admire so much closing it’s doors (a quick review of my del.icio.us feed demonstrates my level of interest).

The Nau website notice of the closure says:

“[Nau] set out to show the world that business can be a force for positive social and environmental change. Although our current financial obstacles have proven to be insurmountable, it does not mean the ideas associated with Nau are unattainable. Nau was merely one attempt to express a larger idea that was around before us and will survive long after. It remains as urgent as ever for businesses to take the lead in creating a sustainable future for humans and the planet. We, as individuals and as members of a grander collective of the change-minded, look forward to continuing that journey.

It certainly inspired me to make am attempt, on the other side of the world. So my second response was “man, it’s even more important that I make this work” because we need more and more examples of successful sustainable businesses to demonstrate that it is feasible, possible and profitable.

No proof

No doubt some will point to Nau’s experience as “proof” that sustainable fashion won’t work. It had some high-profile names and a chunk of cash to get it off the ground, with a vision of becoming a significant player in the retail space.

I think that’s unfair though – I’m fairly confident they would have succeeded too, had the investment environment not been so bleak at the moment due to the “credit crunch”.

Nau’s strategy

As someone that expects to seek investment to get my own ideas off the ground, it’s important for me to look at this event with open eyes – asking what can I learn from Nau’s closure, and how can I demonstrate to potential investors why my venture is different – why it will succeed where an enterprise like Nau has not.

A couple of key points about Nau’s strategy (as I understand it from the public sources I’ve read):

  • New sustainable fabrics made from advanced materials, requiring significant design investment, but also increasing the cost of the source materials significantly;
  • The “webfront” idea in an effort to reduce retail overheads etc. with über-sustainable fitout (down to custom made recycled cardboard mannequins!)
  • Nau eschewed wholesaling instead focusing on a pure retail play (something that I’m still considering, but certainly food for thought)
  • Plans for rapid retail expansion, requiring significant investment, to counter the low gross-margins (reported to be 72% gross, which is a lot less than typical retail margins that exceed 100%)

Nau had 60+ employees, and reportedly churned through USD$34 million in cash over 14 months of operation.

What’s different?

I’m not comparing my vision with Nau’s – it’s nothing on the scale of Nau (although I am inspired by their ambition!). But in terms of some of the differences: I’m looking to create a small scale venture that can grow organically, though still fairly quickly – testing ideas in the retail and product space with a much lower cash burn rate.

The business will also focus, at least initially (I’d love to expand that over time), on established, “tried and true” fabrics and textiles – esp. organic cotton.

I am a great admirer of the work Nau did in this area, and I think the industry will benefit from their efforts. But that work came at a cost – some suppliers reportedly weren’t even making money on the fabrics they were selling to Nau, using them as a loss-leader and R&D exercise.

Using organic cotton does increase the garment cost, but not so much as to impact margins quite as extensively as Nau experienced.

I also expect that wholesaling will make up at least part of the sales mix. Even based on the preliminary work I’ve done on budget estimates, it’s clear that a multi-channel approach (incl. online, wholesaling and retailing) will be required. While the business can’t rely on wholesaling alone, I think it will be an important revenue stream for the business.

Lastly, the business won’t be dependent on rapid retail growth (more a longer-term franchise model), nor on extensive fitouts (Nau’s sustainable webfronts were amazing in this regard) – looking to reduce costs by using recycled and reclaimed materials while maintaining a stylish, attractive and locally authentic vibe.

All in all these approaches require far less capital than the rapid growth, high-tech approach of Nau. Hopefully these differences, and other aspects of the business plan (once it’s ready) will be strong enough to get over the hurdle for investors to take on the venture.

But perhaps it will be just a little bit harder without a leading light like Nau to point to to bolster my case.