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Good morning! It's Friday, October 27th. Today’s post looks at how Kim Kardashian’s star power fuels her $4B clothing company, Skims, that’s expected to generate $750M this year!

THE FEATURE

SKIMS– Kim Kardashian’s $4B Clothing Company

Love them or hate them, the Kardashians are the most famous reality television stars on the planet and head a multi-billion-dollar empire.

There’s Kylie Cosmetics, worth $1.2B, and Kourtney Kardashian’s nutritional gummy brand Lemme, worth $3.2B.

However, Kim’s clothing line, Skims, reigns supreme with its latest valuation of $4B!

So, What’s the Business?

The company’s initial launch in 2019 was rough. Her original brand name was Kimono, which sparked a massive controversy and accusations of cultural appropriation.

It didn’t take long for her to rebrand the company as Skims, an obviously better messaging match for her trademark line of shapewear and undergarments made to match any skin tone. Essentially, Kim is selling consumers the dream to look and feel the way she does with shapewear that compliments their bodies.

That dream certainly resonated with consumers, and Kim’s star power made the company an instant success. When Skims launched, there was so much website traffic that it crashed the site, resulting in a one-hour launch delay before they sold out and generated $2M in sales within just a few minutes.

Plenty of companies founded by celebrities have initial buzz but no real staying power. This isn’t the case with Skims, which has seen exponential growth since its 2019 launch:

• 2020: 145M in revenue

• 2021: $275M in revenue

• 2022: $400M in revenue

• 2023: $750M in revenue (projected)

Hundreds of millions of dollars in revenue is impressive, but Skims’ success is even crazier when put into context. In 2018, the global shapewear market was only worth $2B. Since Skims now has a $4B valuation. That means Kim not only monopolized this clothing sector but grew it substantially.

How They Win:

Create False Scarcity

Skims operates on a drop model, adding new collections (drops) weekly. These drops usually contain 20,000 to 200,000 units.

The goal of selling “small” quantities is to sell out and create buzz for the next drop. This creates a perception of scarcity that drives loyal Skim customers to continually check and refresh the online store to secure limited-edition items.

The Transition to Offline Retail

Most digitally native stores are slow to transition into offline retail, if at all. These e-commerce brands don’t appreciate that 85.2% of retail sales in the US still come from brick-and-mortar stores even after the pandemic.

Five months after launching, Skims partnered with Nordstrom (which generated major headlines and over 2 billion media impressions). Skims also looked to bolster the perceived value of its products through a partnership with designer brand Fendi in 2021.

When Skims partnered with Fendi, it deployed the same scarcity tactic it uses in its online store. The first drop contained limited edition items such as $1,100 leggings and a $2,950 jacket. Skims products are usually priced comparably with brands like Lululemon, but Kim Kardashian’s fans will pay just about anything for limited-edition clothing drops.

Key Observations

With the advent of social media, it’s easier than ever to use celebrity star power to create demand for various products.

There’s nothing new about shapewear– Spanx popularized its usage nearly two decades ago. However, what is new is that Kim Kardashian has her own shapewear line and promotes it on her Instagram page with 364M followers.

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