A few years ago, Reinaldo Moreira’s mother-in-law gave him a gift of beautifully made clothes from luxurious fabrics. Searching the garment for labels, but finding no brand name or garment tags, he asked where they were from. She had bought them from a local factory in Porto, Portugal. This sparked childhood memories of seeing rows of ready-made suits and trying them on in local factories. It also triggered the idea for a new e-commerce platform that allows consumers to buy clothing directly from factories.
Over the past 20 years, nearly 1,000 factories in northern Portugal have developed top quality fabric and garments with a highly experienced workforce for global brands including Tommy Hilfiger and Chloe. In this timeframe, factory owners have had to hire top class engineers and designers to pitch new and novel materials and designs on a weekly or monthly basis to these high-end global brands. This means the in-house design teams are in constant contact with brand design teams and have built up 20 years of expertise, constantly evolving and upgrading their skills and design language, and their command of the newest technologies. At the same time, factories have large quantities of excess, untouched, high-quality fabrics (there is always 3-5% excess material on every brand’s product order). “These manufacturers have everything but a marketplace [to sell their own products,]" Moreira says.
Moreira is an engineer who did his Masters thesis on supply chains, studying Zara, amongst others and working in Portugal at Sonae. He felt he could emulate a marketplace like Farfetch (also hailing from Porto), so why not replace boutiques with independent factories within that business model?
The Springkode e-commerce platform allows manufacturers to sell their products and ship them straight from their factory to the consumer while dealing only with the B2B element of the transaction. Springkode does the rest, including creating the product images and videos, populating the product details and managing the sales and consumer invoicing. They also provide data and analysis to each factory on sales, product performance, recommended pricing (although this is entirely up to the factory) and any trends emerging from sales across the platform as a whole. Springkode has partnered with DHL International, so customer returns are as simple as using one of their thousands of dropoff points globally. Fulfillment is usually 24-48 hours for purchases within Europe—in line with any other online retailer.
A key aim of the platform is transparency, says Moreira. Shoppers on Springkode can see exactly where their product comes from and the factory reveals what the recommended retail price of the product would be if they were buying from one of the brands they work with. Given that the factories on the site work with Sandro, Karl Lagerfeld, and similar upmarket brands, the quality of the products far exceeds what you would find at Zara or Cos for a similar price.
The real benefit of this business model is that it capitalizes on several expensive inefficiencies in the current fashion business model, namely excess materials, factory downtime, complex supply-chains, the oversupply of stock, warehousing and waste disposal. This makes the new business model a winner in sustainability terms, as it utilizes down-time to use up excess materials and offers exclusivity direct to end consumers, with a maximum of 50 pieces made per style. Ostensibly, the case could be made for reselling the 3-5% excess materials, however despite the €50 price-tag per meter, the resale value of such materials B2B is as low as 50 cents per meter, says Moreira, meaning factory owners prefer to hold on to the fabric in case it can be used for a client sample in the future. In reality, much of it eventually ends up in a landfill. Not under Springkode's new business model.
Springkode launched in beta with 3 factories in 2018 and in January this year, it went fully live with 10 factories following a funding round off the back of Websummit in Lisbon. Explaining that the business is not yet profitable (and not due to be for the next two years), Moreira said the business model needs to be optimized first, proving its viability and longevity. Until now, only women's wear is available on the site, however, the first menswear collection is going live in the coming days.
Moreira went on to explain that their biggest sticking point right now is understanding the consumer. They are still trying to figure out the customer persona and how “we should address, and find them” he said. He admits branding and storytelling is a big challenge as they want Springkode it to be an umbrella brand—“a destination.”
Who are their competitors? “We are competing for attention most of the time,” says Moreira. In terms of product competitors, he lists Zara, H&M, Everlane, and Reformation. In terms of market places, Italic is in their realm, “but they are not giving full transparency” he says. “We don’t want you to believe in us” he explained, “we are telling you who you are buying from.”
Good On You has already rated the platform 4 out of 4, citing leftover materials and their fully transparent supply chain as the reason for the high rating. It’s true that their supply chain is incredibly short—in some cases spanning as little as a couple of geographies. With 75% of sales currently in Portugal, followed by Spain, then the U.K., it is difficult to match Springkode in terms of quality, price, and sustainability. This is not fast fashion, and at a price 70% less than products of the same quality in high-end boutiques, it is definitely value for money, but not in a way that is currently luring Gen Z or millennial shoppers.
Firmly in Moreira’s sights is an international factory partnership, which will trigger the next phase of optimization of the platform and the continuing refinement of this new "B2B2C" marketplace.
