I wanted to highlight the brand Khaite for two reasons:
- It is one of the most successful fashion brands founded in the last decade.
- It was able to successfully run the traditional fashion marketing playbook where many other brands have failed.
But Khaite has a secret: it actually started out as a high end basics brand before evolving into a full-fledged designer lifestyle brand. So essentially, this brand did the impossible: raise prices over time and become more desirable.
Before we get into it, I want to thank this week's sponsor: Layers. Layers is the first AI search & merchandising tool built exclusively for Shopify Plus. Faster, smarter, and more modular than the legacy tools, for a fraction of the price.
Layers has an exclusive offer for my readers: get your first 30 days free! No seat limits, No usage caps.
I know that many brands reading this lean on the SILIBI Meta Ads-focused strategy. But I occasionally like to highlight brands that break almost every rule in that playbook as food for thought.
Eventually, your brand will tap out SILIBI. When that happens, studying brands like KHAITE can help you brainstorm your next move.
Khaite 101
Khaite was founded in 2016 by Catherine Holstein, a California native and graduate of the Parsons school of design.
Holstein followed the familiar “success sequence” of many of the biggest names in American fashion. Barneys purchased pieces from her Parsons thesis collection, providing a launch platform for her brand. After four years in business, she closed shop and started consulting for established NY-based brands like Gap and Vera Wang.
She launched Khaite in 2016 with what was then a novel premise: creating elevated basics that were quality enough to style with designer pieces, but (relatively) affordable enough to wear multiple times a week without fear.
Khate received startup capital from Assembled Brands, a brand incubator that initially focused on fashion and luxury brands, but has since pivoted to CPG. Assembled Brands was a majority shareholder, giving the Khaite more operational structure and financial discipline vs the average fashion startup.
Lesson: Fashion founders that go straight from design school to entrepreneur frequently flame out for a reason. Design gets industry press, but solid brand positioning and fiscal and operational discipline help brands survive for the long haul.
***
What does every fashion brand have in common, regardless of price point? Your site visitors won't convert if they can't find the products they're looking for.
That's why site search and category filtering capabilities are critical. But Shopify's "out of the box" search and filtering are shockingly bad. It's one of the top reasons fashion brands hesitate to sell on Shopify.
So, how do 9-figure brands with thousands of SKUs like Rainbow manage to scale on Shopify? They use Layers to enhance their site with best in class product search and merchandising capabilities.
Layers lets you deliver AI-powered sort orders and lightning-fast visual discovery on the front end, without synonym spreadsheets, ranking rules, or manual merchandising on the back end.
Brands that use Layers have cut bounce rates, reduced “no result” searches by 30% and cut site merchandising costs. It's up to 60% less expensive than the legacy search & merchandising tools, while providing even more functionality.
Get your first 30 days of Layers completely free. No seat limits, No usage caps.
***
Denim & Cashmere = Bread & Butter
Denim and cashmere knits were the foundation of Kahite’s merchandising strategy. Holstein worked across price points, from mass (Gap) to luxury (Elder Statesman, Vera Wang).
In her work with buyers and merchandisers, she realized that denim and knits were the foundations of most women' s wardrobes. So that’s where Khaite decided to focus.
In 2016, fashion was almost five years into the “streetwear” trend cycle. Designer denim was simply “meh” product with a logo or branding slapped on it. Most designer ready to wear took a cue from Gucci–loud, easily identifiable runway looks with obvious branding.
Khate provided an alternative. You could say that the brand was one of the pioneers of “quiet luxury”. In 2020 their AUR for denim was $350-500 and their AUR for cashmere knits was $1,500-1,700.
Prices have risen since then, but Khaite remains priced at least 20-30% below European luxury brands–high for the average consumer, but (relatively) a good value for the money.
This merchandising strategy helped the brand make inroads with retail partners and start driving high sell-throughs immediately. Denim and cashmere were the tip of the spear, and their strong performance increased retailers’ appetites to expand into other RTW categories.
Lesson: Successful brands start by identifying and designing into white space in the market. That could mean Meta’s in-market demand, or it could mean a shrewd understanding of the multibrand retail landscape.
The Katie Holmes Moment
If you’ve been a fashion industry follower for a while (or just a celebrity gossip enthusiast), you’ve probably seen this photo of Katie Holmes:
This photo went viral when it was taken in 2019. Katie Holmes was wearing a matching cashmere bralette and cardigan from KHAITE. The sweater sold out everywhere almost instantly, and the brand scaled up the assortment in multiple colors.
Katie Holmes claimed that she purchased both pieces herself. So this might be a true moment of serendipity. But it supports something I believe: once a brand finds product-market fit and starts generating semi-predictable cash flow, it should start investing some time and money in brand marketing and “moonshot” attempts.
This moment launched KHAITE into the public discussion. Before this moment, it was an insider favorite–exclusively known by women who regularly shopped high end multibrand retail.
After this moment, it became a brand discussed by folks who would probably never afford it. That cultural awareness and “heat” is critical to becoming a status symbol.
Lesson: You can’t build brand heat and desirability without creating marketing touchpoints IRL. “Brand” is about what a given label means to an individual’s social circle. That said, you can’t engineer virality. But good product and broader distribution increases your shots on goal.
Brand Evolution, PE Investment & Channel Expansion
Khaite did not stage a runway show until 2019. That was the pivot point when the brand started to raise prices and put more of a focus on the full spectrum of RTW categories vs focusing primarily on denim and knits.
That move was successful; in 2023 Khaite received a $150 million investment from growth PE firm Stripes, in exchange for 80% of the business. Since then, the brand expanded its accessories line, launched eyewear and opened one new owned retail location each year.
The mass adoption of “quiet luxury” has only helped Khaite’s growth, even as the brand itself has started to move beyond it. It’s become one of the “holy trinity” of brands lusted after by Substack fashion bloggers (the others being The Row and Toteme).
The brand’s core customer–wealthy, fashion-focused women between 40 and 55 years old–are buying into the lifestyle, purchasing head-to-toe looks. The brand has also driven mass interest with some hit handbag and footwear styles.
Lesson: Successful product line expansion is one part market timing, one part consumer good will, and one part savvy merchandising. Although Khaite’s founder has the creative, runway-driven impulse, she is a merchant at heart. That, along with the fiscal discipline provided by Khaite’s majority investors, has helped the brand walk the tightrope between inspiration and operations.
Could You Make Khaite Happen Today?
My take? Maybe! But it wouldn’t start with “quiet luxury” positioning. That aesthetic has taken over the fashion market, as has the idea of “designer quality at 20-30% lower pricing”.
The next Khaite will probably come from the mind of another savvy merchant who can identify the pieces that the high end consumer wants, but isn’t finding.
According to Rachel Tashjian, many of these women find that “designer” clothing is woefully overpriced, even at the Khaite level, and even though they can afford it. But the options that sit below the Khaite price point are often boring or quotidian.
Maybe the next market opportunity is clothing with designer-level creativity at a true contemporary price point. But rising commodity and labor costs, as well as US tariff drama, make that a challenging proposition for a creative entrepreneur.
All this has the makings of a true white space opportunity–something that the average MBA would be too afraid to take on. I’m excited to see what develops…
Sources:
https://www.nytimes.com/2023/02/16/style/khaite-cool-girl-catherine-holstein.html
https://www.voguebusiness.com/companies/khaite-buzzy-rise-fuelled-by-luxurys-old-and-new-playbooks-katie-holmes-new-york
https://www.ft.com/content/5bcec86b-8f77-498f-a4c7-e71f8724a939
https://www.nytimes.com/2023/02/16/style/khaite-cool-girl-catherine-holstein.html