Lofty Valuations for Profitable D2C E-Commerce Players Heyday and Vuori

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According to the US Department of Commerce, e-commerce sales in the US grew 14.7% to $870 billion in 2021. The global e-commerce sales are expected to grow at 14.7% from 2020-2027. The industry is attracting a slew of entrepreneurs looking to cash in on this growth, resulting in the creation of several unicorn players.

Heyday’s Offerings

One such player is San Francisco-based Heyday that was set up by Adam Gerchen and Sebastian Rymarz. The company boasts of being a platform pioneering a marketplace-native approach to e-commerce brand building. Essentially, Heyday buys, and then grows direct-to-consumer (D2C) merchants and brands that have found initial traction by leveraging the Amazon marketplace.

Heyday targets small and midsize merchants and brands on Amazon who do not have the capital or the resources required to scale their businesses to the next level of growth. Heyday has built technology that evaluates these merchants and identifies the ones that its technology and leaders think will fare best. It then buys these companies, and their intellectual property to scale them to the next level. During the process, Heyday leverages tech tools to manage marketing and sales analytics, production and distribution, and retail channels, thus driving efficiencies along the way.

Heyday does not disclose the names of the brands that it now manages. But the company has almost 15 brands, some of whom are getting ready to sell at big box stores like Target.

Heyday is not the only player in this space. It competes with several players including Thrasio, which was recently valued at $5 billion; Razor Group, which was valued at $1 billion, Perch, Heroes, Suma Brands and many more. Thrasio is one of the biggest players in the space with revenues of more than $1 billion and a portfolio of over 200 brands. Heyday claims that it differentiates itself from the rest of the crowd by focusing on quality, instead of the quantity of the brands.

Heyday’s Financials

Heyday had annual revenue rate of over $200 million and was EBITDA positive in 2021.

It is estimated to have raised $800 million in funding so far. Its last round of funding was held in November last year when it raised $555 million at a valuation of over a billion dollars. Investors in the round included The Raine Group, Premji Invest, General Catalyst, Victory Park Capital, and Khosla Ventures.

Vuori’s Offerings

Vuoris is another e-commerce player that recently joined the Unicorn club. Founded in 2015 by Joe Kudla, California-based Vuori is an apparel company that creates clothing that can be worn for a workout and to an errand. Joe wanted to design clothes that men could wear from one context to another. Since most athleisure brands were focused on women’s wear, he decided to focus on apparel for men. He wanted to make these products sustainably and under ethical manufacturing conditions.

The company’s first bestseller was a pair of men’s shorts for yoga. The shorts were a big hit, and allowed the company the runway needed to approach big retailers. Soon after successful pilot programs at REI and Nordstrom, Vuori was launched in stores nationwide.

Unlike other D2C brands that market themselves everywhere, Vuori was very specific about the retailers that they worked with. They were placing their products only with select wholesale partners to complement their online strategy. Now, the company has plans on opening over 100 stores of its own, compared with nearly a dozen today. Vuori believes in the right mix of online and offline retail models, and values sales per square foot as an important metric for its business. Its competitors include brands like Lululemon, Athleta, and other athleisure brands of big box stores. The company has also expanded into women’s wear and is now looking forward to international expansion. It aspires to become a household name in 20 years from now.

Vuori’s Financials

Vuori has been profitable since 2017 and claims that revenue has been growing at 250% annually since inception. Its profitability is attributed to Joe’s fiscal discipline, and his background as a CPA. He has always been mindful of profits and since his initial round of funding was relatively small, he knew he had to be profitable from the get-go if he wanted to grow his business.

The company recently raised $400 million at a valuation of $4 billion. In 2019, the company was valued at $200 million after raising $45 million. For the first four years of its existence, Vuori relied only on a $2.5 million friends and family round. Vuori’s profitability is a refreshing change from the list of retailers such as Warby Parker, Casper, Allbirds, who have all been reporting consistent losses, and have seen their valuations tumble.

Both Heyday and Vuori have achieved lofty valuations. They do not disclose their detailed financial information. I would like them to be more open about their financials, and usage metrics, to support these valuations. Though, I do believe that given their profitability, they may stand a better chance than many others at managing to sustain these valuations.

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