One minute you’re a virtuous and apparently successful company out to make the world a better place. The next, no less than Bernie Sanders is calling your business decisions “morally unacceptable.” That’s the whipsaw moment being experienced by Everlane, one of the more prominent “mission-driven” startups in recent memory. And it’s a telling example of the perils of the mission-driven strategy, particularly as companies are forced into crisis mode.
For consumer retail brands, and maybe startups, in particular, having a mission that transcends maximizing profits is a useful tool to attract employees as well as customers. Who doesn’t want to work for a company whose purpose goes beyond selling more than stuff? And who doesn’t want to purchase something that makes them feel like they are doing something good for the world?
But what happens when profits evaporate? What happens when consumers, employees, and even erstwhile presidential candidates start critiquing your every frantic move through the lens of your highfalutin “mission”? And if you can’t uphold that “mission” when it really counts, how much of a strategic misfire was declaring it in the first place?
If you spend a lot of time boasting about your high standards, people are going to hold you to them.
When Everlane launched in 2010 as a direct-to-consumer online clothing retailer — its first funding round was $1.1 million, with investors, including VC firm Kleiner Perkins — its point of differentiation wasn’t really its product line. It sold T-shirts and other basics, in the tradition of The Gap or Uniqlo. The brand twist was “radical transparency” around the way its products are made — sharing details about costs, factories, materials, production methods: lots of information to make shoppers feel good about the ethical standing of their new purchases. The double twist was that this transparency allegedly proved you were being charged a fair price, with none of the greedhead markups of traditional retail. That’s what made the transparency so radical.
The theory was that this mission would make the Everlane brand more appealing, particularly to younger consumers. “The world is moving to this place where it’s about the choices you make,” founder and CEO Michael Preysman, then 26, explained in 2012 talking up the cost savings in online selling. Later he opened brick-and-mortar locations, too. In 2016, Business Insider reported the company was worth $250 million, partly because it “wears its ethics on its knit sleeve.”
The company rolled out a sprawling array of products, often limited-edition runs, with hype that sparked waiting lists. Along the way, it picked up customers who probably didn’t know much about the “mission.” (Like me: Full disclosure, I’m not in Everlane’s target demo, but I’ve bought a few basics from the company, most of which were fine.) By 2018, Fast Company reported that the Everlane was “profitable, according to the company, with sales doubling annually for the past three years.” A year ago, the publication again featured the company, this time going deep on its commitment to eradicate “all virgin plastic from the company’s supply chain, stores, and offices by 2021.”
Then the long economic boom that had been wind at Everlane’s back came to a screeching halt with the arrival of Covid-19 this year. In March, it laid off a big chunk of its customer service team — which had already been making negative noises and was in the process of trying to form a union. In all, Everlane laid off or furloughed 290 people. Thus Sanders (or at least his Twitter handle) accused the company of “using this health and economic crisis to union bust.”
Now, Everlane was hardly alone in this. Millions of workers have been laid off in a variety of fields; retail has been particularly hard hit with massive enterprises like Macy’s and The Gap laying off or furloughing thousands, as stores remained closed; startup players like Rent the Runway and Away added to the spiraling layoff count. But of course, the company that infused its brand with the promise of “radical transparency” was bound to get special scrutiny. If you spend a lot of time boasting about your high standards, people are going to hold you to them.
Preysman tweeted back at Sanders, denying the union was an issue, and pointing out that, among other things, the company had been forced to close its physical stores and that “We are not profitable and do not have a cash balance.” It was “the hardest decision we’ve ever made,” and aimed at “doing everything we can to retain our team and survive.”
Given that Everlane’s business still skewed heavily digital — and it certainly has continued to sell aggressively online — it seemed surprising that its financial situation turned so dire so quickly. (The company declined my interview request.) Its funding details aren’t public, but the company had reportedly raised $18 million by the time of its $250 million valuation in 2016, and according to Pitchbook raised another $26 million in 2017. Did its prior performance depend so much on a boomy economy that it left no room for any cash runway at all, putting the company on death’s door in a matter of weeks? Does Everlane’s pious, mission-driven, supposedly transparent business model actually work?
This is the question that our current economic disaster is testing. How, exactly, do the mission and the business model at a “mission-driven” company connect?
Things get dicey in that Everlane middle ground when the mission feels like a flashy feature that is maybe not all that supportable.
One answer is that the two are inextricably linked: the mission is the business. For example, consider Patreon, a platform used by “creatives” to solicit donations from supporters and fans. It’s no surprise that it has lately attracted lots of creator newcomers — 50,000 of them in March, according to a spokesperson. But the company also reported “new patron growth” (its measurement of the supporter/patron side of the equation) of 36%. “An unusually large number of fans are subscribing to creators on Patreon,” a post on the company’s blog said. This is obviously good news for Patreon, which makes money by extracting a percentage of “patron” contributions. And it shows how a mission can, in fact, align with business despite, or even because of, an economic shockwave. “Patrons are really rising to the occasion,” the company’s CEO told Yahoo Finance. (For now, at least.)
The other answer is that mission, however worthy, isn’t really driving the business. It’s more akin to an extra, glow-y attraction in good times — and, in tougher times, an onerous challenge that the business has added to the already difficult problems of attracting customers and making money.
This can work. Patagonia is one of the most fearlessly ideological companies around — it has literally sued the president to advance its point of view about preserving the natural world. But it is also a highly profitable $1 billion-a-year company with a six-decade-plus track record of surviving good times and bad, pro-environmental stances intact. It’s also a proven outdoor-gear brand commanding premium prices, even among discriminating consumers who may not care about its mission. So there was no crisis when, in mid-March, it announced it would close its retail locations and its website (and warehouse facilities) while it retooled operations — but keep paying employees. (It has since restarted online sales, but the Covid-19 update on its site noted: “As always, we encourage you to buy only what you need, buy local when possible, and repair what you already own.”) The company has, so far, evidently stuck to paying employees.
Things get dicey in that Everlane middle ground when the mission feels like a flashy feature that is maybe not all that supportable. It’s true that people want, in the broadest sense, to help improve the world. And they’ll accept the idea that buying a certain mission-driven product or service brand can be a form of “helping.” What they won’t accept is perceived hypocrisy: A brand that fails to walk its own talk, especially when times get tough. Suddenly, that “mission” just looks like marketing.