REVOLVE Goes Public

The IPO that just confirmed the influencer revolution and the power of Instagram.

REVOLVE Team Outside the NYSE; Image Courtesy of REVOLVE

REVOLVE is an online fashion retailer that caters to Millennial and Gen Z women with a curated selection of apparel, footwear, and accessories. Known for their exclusive events and elaborate displays, REVOLVE has spared no expense creating a lifestyle brand that young women aspire to be a part of. Working with a network of over 3,500 influencers, REVOLVE markets to a large audience primarily through Instagram. While it seems relatively difficult to place a return on investment (or ROI) on the impact influencers, REVOLVE's IPO just proved that influencer marketing works.

“The fact that people even have to question the legitimacy of the strategy already sets them up to be a little bit behind." -REVOLVE Chief Brand Officer Raissa Gerona on the legitimization of influencer marketing

In an interview with Fashionista, Chief Brand Officer Raissa Gerona discussed REVOLVE's influencer-based marketing strategy. Gerona attributes REVOLVE's "global fan base" to the power of their influencers, and claims that pioneering this marketing strategy has kept REVOVLE "ahead of the game."

For millions of people, following fashion and lifestyle influencers on Instagram is a constant source of inspiration for how to fill their closets. I, for one, follow a wide gamut of fellow influencers that have certainly redirected my shopping habits. Needless to say, influencer marketing works. However, from a business perspective, measuring the ROI of an influencer seems like a gray area. How can a business accurately measure how much revenue an influencer contributes from their posts? Questions like these determine a firm's willingness to use influencers, the monetary value they place on influencer marketing, and their trust in Instagram as a marketing platform.

Why REVOLVE's IPO Confirms the Success of Influencer Marketing

So, why does REVOVE's influencer marketing strategy matter in the midst of going public? Since going public, REVOLVE's stock has done tremendously well. After its first day of trading, the firm had a market capitalization of $1.47B. (Market capitalization, or market cap, denotes the total value of all of a firm's outstanding stock. It allows for investors to understand a firm's equity value.) Since its IPO, REVOLVE's market cap has grown to over $2.8B (as of June 18th). This shows that the market has placed a higher value on the firm itself and believes in REVOLVE's business. To take this one step further, this also means that investors are increasingly confident that REVOLVE's business strategies are successful today and will continue to be successful tomorrow. Therefore, this growth implies that the concept of influencer marketing is being supported not just by millions of Instagram followers, but by investors, too.

Why Influencer Marketing Matters Today

The fashion industry is tremendously saturated. In other words, there are seemingly infinite amounts of clothing companies, new brands you've never heard of, and influencers who are telling you who to follow and what to buy. So, in this saturated market, how do you stand out? Marketing.

REVOLVE is a company that has spent millions on their marketing efforts. Several times a year, REVOLVE pays for influencers to accompany them along international getaways where influencers have seemingly endless opportunities to flood your feed with photos of them dressed in REVOLVE's finest. The firm also invests in exclusive events, such as #REVOLVEfestival, where hundreds of influencers and supermodels attend an invite-only music festival featuring the likes of Chance the Rapper, Tyga, SZA, Travis Scott, and many other people your parents have never heard of. While a pricey investment, it is events like these that earn REVOLVE its A-list reputation.

Kendall Jenner at #REVOLVEfest; Image Courtesy of Forbes

Danielle Berstein (@weworewhat) at #REVOLVEfest; Image Courtesy of We Wore What

Camila Coelho (@camilacoelho) at #REVOLVEfest; Image Courtesy of www.camilacoelho.com

Taking a look at REVOLVE's financial statements, in just 2017 alone, the firm spent $55,476,000 on marketing expenses (I pulled these numbers from its S-1 form filed under the SEC). That is up 42% from 2016 where the firm spent $39,000,000. As REVOLVE increases the amounts of exclusive events, elaborate displays, and its ever-growing network of influencers, its marketing expenses are sure to grow along with it. But, this is the price retailers pay for competing in such a saturated market. Listed as one of the risk factors to potential investors in the S-1 form, REVOLVE sited that, "Our industry is highly competitive and if we do not compete effectively our operating results could be adversely affected." In other words, REVOLVE acknowledges that there are lots of players in the retail game and that their marketing efforts are what keeps them afloat in this saturated space.

The Takeaway

We live in an age where Instagram is the next big marketing platform for retailers. REVOLVE's initiative to use a wide and global network of influencers has proven successful not only by the numbers on their balance sheet, but also by the market's response since going public. REVOLVE is spending a lot of money on their marketing efforts, but not without good reason: aggressive marketing tactics are what will continue to sustain the brand's success.