The Style Club
DEAL
EPISODE SUMMARY
🕓 Air Date: November 4, 2016
Asking For:
$500,000 for 20%
Investor:
Mark Cuban
Deal:
$500,000 for 22%
PRODUCT SUMMARY
Style Club is the first multi-platform, young shopping network, offering a unique shopping experience through videos, an app, and major retail stores, with a focus on trendy fashion items like the "Babe hat."
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Background Story
Style Club, based in Pittsburgh, P.A., is a cutting-edge fashion business founded by Hilary. With a background deeply rooted in video content creation, Hilary embarked on the venture just a year ago, recognizing the shifting dynamics in the shopping behavior of the younger consumer. Her journey began with the creation of engaging video content, leveraging the power of social media and mobile shopping trends. Hilary’s vision materialized into the Style Club, the first multi-platform, young shopping network.
The concept revolves around providing a unique shopping experience for the social-media generation, blending fashion and technology seamlessly. The company’s headquarters in Pittsburgh speaks to its origins and connection to a city with a growing reputation for innovation. The Style Club’s approach is distinctive, incorporating super-hot music videos featuring style influencers on their website. The fusion of entertainment and shopping aims to redefine the traditional retail experience. The emergence of the Babe hat as a flagship product exemplifies Hilary’s keen understanding of current trends and her ability to translate them into successful, marketable items.
Within the span of a year, Style Club achieved a significant milestone by securing a partnership with major retailer Urban Outfitters. The exclusive deal speaks to the brand’s rapid rise and the strong social following it garnered, including collaborations with bloggers and celebrities. Hilary’s one-year journey from content creation to securing deals with influential retailers underscores the dynamism and adaptability that defines both the founder and the Style Club brand.
The Product
Style Club offers a diverse array of trendy fashion items, with its flagship product being the highly popular “Babe hat.” The shopping experience is multi-faceted, allowing customers to engage through the website, app, and major retail stores like Urban Outfitters.
The Babe hat, a standout accessory, is not just a fashion statement but a symbol of empowerment for the modern woman. Priced at $60, this stylish hat has become the top seller for Style Club, contributing significantly to the company’s impressive $400,000 in sales within three to four months.
The product’s appeal lies in its representation of contemporary trends and the brand’s ability to stay attuned to online fashion culture. The Babe hat, in particular, stands out in a crowded market, reflecting the company’s commitment to identifying and capitalizing on emerging fashion preferences.
While the exclusivity agreement with Urban Outfitters limits direct online sales currently, the company has plans to expand its direct-to-consumer channel through its app. The one-click shopping feature on the app makes it easy for users to access and purchase Style Club items seamlessly.
How It Went
The company’s position before Shark Tank
Style Club has demonstrated robust performance since its inception, achieving impressive sales figures of $400,000 within just three to four months. The company’s health is marked by its strategic partnership with major retailer Urban Outfitters, where its products are exclusively available. This collaboration has propelled Style Club into all Urban Outfitters stores, showcasing its prominence in the competitive fashion retail market.
The exclusivity agreement, while providing a significant boost, also presents a potential risk due to the lack of diversification. Currently, the majority of sales are through Urban Outfitters, emphasizing the need for a balanced approach to secure the company’s long-term stability. Style Club’s success is attributed to its strong social media presence and collaborations with influencers, including bloggers and celebrities, amassing over 200,000 followers. This social following has translated into considerable sales, with plans to expand the direct-to-consumer channel through the company’s app.
Profits and losses have not been explicitly detailed, but the company’s trajectory, on track for $1.2 million in the current year, suggests positive financial performance. With purchase orders secured until summer 2017, Style Club is positioned for continued growth. The company’s structure and available capital indicate a commitment to expansion, with a focus on building out the online channel and strengthening the direct-to-consumer segment.
The Negotiations:
The negotiations for Style Club on “Shark Tank” were dynamic and impactful, showcasing the company’s potential and the sharks’ varying perspectives on its future. Hilary entered seeking $500,000 for a 20% equity stake in her company. Mark Cuban emerged as the sole shark to make an offer, proposing $500,000 for a slightly higher equity stake of 22%. However, Cuban’s offer came with a unique twist—a line of credit structured at an 8% discount, earmarked for financing the company’s inventory needs. This demonstrated Cuban’s strategic understanding of Style Club’s requirements, particularly in the fast-paced and inventory-intensive fashion industry.
Daymond John also expressed interest in Style Club, offering $500,000 for 33 1/3% equity. However, Hilary chose to accept Mark Cuban’s offer, as it aligned more closely with the company’s immediate financial needs and growth strategy. The negotiation revealed concerns about the exclusivity agreement with Urban Outfitters and the potential risks associated with relying on a single channel for sales. Kevin O’Leary, known for his financial pragmatism, raised concerns about the lack of diversification and ultimately opted out, citing the risk involved.
The negotiation process underscored the importance of strategic financing and expertise for a rapidly growing startup like Style Club. Mark Cuban’s offer, combining financial support with a discounted line of credit, positioned him as the ideal partner to help Style Club navigate the challenges of the fashion industry while capitalizing on its current momentum. The deal was successfully closed, marking a significant milestone for Style Club and highlighting the importance of aligning with a shark who could provide not just capital but also valuable strategic insights.
