The husband and wife behind Zaggora used social media to build a hot activewear brand

May 21, 2013 7:08 pm

A start-up that is fit for purpose

By James Pickford

©Charlie Bibby

Image matters: when deciding who should be the public face of the company, Malcolm and Dessislava Bell calculated that a female entrepreneur would generate more publicity

It was while road-testing the 21st prototype of her brainchild in the gym that Dessislava Bell realised she had made a breakthrough. “I lost a couple of inches off my waist in two weeks,” she says. Mrs Bell had alighted on an idea that, at first glance, holds little consumer appeal: skin-tight women’s exercise shorts designed to retain so much body heat that the wearer breaks into profuse, free-flowing sweat. Prompted by the effect of heat on physical performance and the fashion for high-sweat Bikram yoga, she spent months researching heat-inducing fabrics and design on the internet. The buying public appears to have reacted with anything but distaste to the calorie-burning “HotPants” produced by Zaggora, the London-based company founded by Mrs Bell, a 28-year-old former investment banker at JPMorganChase, and her husband Malcolm, an ex-investment manager.Ten weeks after launching in 2011, Zaggora had taken 100,000 orders, propelling revenues to £10.7m in the first year of trading. Since then, the company, with 30 employees in London and another 70 worldwide, has sold 650,000 products in 126 countries.

Social media played a crucial role in its rapid development. Working from the couple’s living room sofa in July 2011, the 31-year-old Mr Bell ordered a batch of 500 hotpants, then combed Twitter for female exercise enthusiasts and bloggers who might accept a free sample in return for a review on Zaggora’s Facebook page. “Two hundred pairs just disappeared and we never heard from them again,” says Mr Bell, who is chief executive, while his Bulgarian-born wife holds the posts of chief financial and procurement officer. “But the feedback from those who did post a review was overwhelmingly positive.” Their Facebook page now has more than 400,000 fans.

While the internet-based marketing strategy, which was primarily motivated by a lack of start-up funds, paid dividends, its success also led to the company’s first big problem. Two months after launch, the couple realised they had sold 50,000 units they did not have in stock – and the website promised a five-day delivery when they had no hope of sourcing in less than six weeks. “Demand just took off and we couldn’t keep up. We thought we were going to go bust,” says Mr Bell at the company’s offices just off London’s Tottenham Court Road.

The Bells on building a start-up

On Facebook: “We set out to create a community where people can come and make an informed decision. With Facebook you can see these are real people with real lives and real friends who aren’t connected to the company – and people can ask them questions totally informally.”
On patents: “We chose to trademark rather than wait for a patent. By taking the patent route you straightaway disclose what’s in your product, making it extremely easy for copycats to come along. You then have to spend the entire time defending your business legally.”

On bank lending: “We have no bank funding and no debt. No bank would give us a loan, even though we spoke to a dozen or more lenders. We’ve had two or three cash crunches, but a surge in demand always got us out of it.”
On rapid-fire hiring: “The only way we could hire people quickly enough at first was to forget about hiring experts or channel specialists but to take temps from agencies – fresh graduates. But for every job spec we put out we had about 300 CVs, so we could pick and choose.”

On government help: “We’ve taken no government offers of help. Philosophically we have never wanted to have help from anyone. This is something we’ve always wanted to do on our own.

They decided to offer customers the choice of a refund or a longer wait for the next batch. “Ninety per cent of customers agreed to wait rather than ask for their money back. That was a landmark moment.”

A less lethal but pressing dilemma arose over who should be the public face of the company. The couple decided to project Mrs Bell, calculating that a young, female entrepreneur would maximise press interest. “We saw the look of horror on some women’s faces when they saw me and we realised woman-to-woman was probably better,” says Mr Bell.

Zaggora has gained plaudits for its social media strategy but Mr Bell is self-effacing about certain aspects. “For all this chat about us being a social business, our main website is not social at all. All we’ve done is build a really raving Facebook page,” he says.

The company uses a cheap, off-the-shelf ecommerce system to take orders on the site but links readers to Facebook and Twitter for the social side. “After 5m visits we still only pay $200 a month for web hosting,” he says.

A wholesale revamp is planned for later this year which will allow users to customise products or host fitness challenges with their friends. The relaunch was part of a decision to put the brakes on unfettered growth with a view to building a solid base in supply, IT and fulfilment. But it is a point on which the couple initially disagreed. “The slowdown was Dessi’s idea. I really wanted to go for it,” says Mr Bell, adding that the policy left 2012 revenues flat on the previous year. “In the end it was clear it was much better to build an infrastructure that would allow us to grow.”

For a high-growth internet retailer, supply is critical. Mrs Bell found their first supplier, a Taiwanese fabric maker, by searching on Alibaba.com, the Chinese ecommerce site. As the scale of demand became clear, the Bells persuaded him to invest in a bespoke production line, bringing more reliability as well as bigger volumes. Zaggora accounts for 90 per cent of his order book even as it has diversified to larger suppliers.

Zaggora has made inroads into the US – 51 per cent of its sales are made there against 15 per cent in the UK and 13 per cent in France – and is in talks with Equinox, a US gym group with 60 facilities, with a view to a marketing partnership. The company’s US distribution centre will also come online this month.

The Bells own 90 per cent of the business and are not aiming for an imminent sale. An injection of venture capital would be useful for a marketing boost but they are unhappy with the idea of losing control. “We don’t need it and it’s risky. We don’t want someone coming on board and taking over,” says Mr Bell.

The couple have also taken a leaf out of the book of Mr Bell’s former industry – family office management – by domiciling Zaggora’s operations in Malta, an offshore financial centre. He says it is “much more tax-efficient when selling to 120 countries”, and asked if the coruscating criticism being levelled at companies such as Apple, Google, Starbucks and Amazon over tax avoidance should give him pause, he is combative. “If you look at companies like Starbucks, they employ 96,000 people in the UK. You can’t hide that,” he says. “But 85 per cent of our sales are abroad.”

The couple point out that the Malta team adds value to the business by managing the licensing of their trademarks. “It’s not just a nameplate,” says Mr Bell.

The Bells, who met as students at the London School of Economics, are expecting their first child in October. But Mrs Bell says she will remain fully committed to the business. “The baby will be in the office,” she quips.

In fact, the arrival of Baby Bell has prompted her to consider another line of business: maternity gymwear. “When you become pregnant, there’s no one catering for pregnant women who want to keep exercising,” she says with indignation. “We always need to be looking at niches that other people aren’t targeting.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

One Response to The husband and wife behind Zaggora used social media to build a hot activewear brand

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