Figs’ Strategy & Growth: 8 Keys to its Success
Who would have thought a business selling scrubs could be so lucrative? Clearly the founders of Figs, which launched in 2013, did. Before Figs there weren’t many options for bringing your fashion sense to work unless you were taking the time to style yourself. But enter Figs with clothing so well tailored you don’t have to sacrifice style for function. With Figs’ more than 1.5 million customers clearly this was an unmet need in the market.
But Figs’ growth and success is about more than stylish high waisted skinny fit scrubs. If you take a closer look you will see that the retailer has taken a page from the playbooks of other successful direct to consumer retailers and has captured the hearts and minds of customers in the process. If you are curious about the growth and success of Figs then consider these eight keys to its success.
1. Turn a commodity into a brand. Figs, like Starbucks, took a commoditized product and turned it into a premium brand. For Starbucks the product is coffee and for Figs its apparel for healthcare practitioners. For a long time, the standard uniform for a healthcare practitioner was a pair of baggy undifferentiated scrubs. Nurses and doctors didn’t need to be stylish while at work, or did they? But one day Figs co-founder and co-CEO Heather Hasson, who had worked in the fashion industry saw a friend of hers, a nurse, wearing a pair of baggy scrubs. Hasson thought surely there was a more fashionable alternative.
Hasson then went shopping to see what she could find for her friend and was surprised more trendy apparel for healthcare professionals did not exist. That’s when she decided to tailor her friend’s scrubs making them more aesthetically pleasing. Hasson then began tailoring scrubs for others as her friend’s look became coveted by her co-workers.
From that small beginning Figs, was born. From there Hasson and her co-CEO and co-Founder Trina Spears started selling Figs scrubs out of the trunk of a car in front of hospitals. The clothing was a hit with healthcare professionals encouraging the duo to move the business off the streets and into a direct to consumer business.
2. Disrupt the way people shop. Like Warby Parker who changed the way consumers purchased prescription eyeglasses Figs disrupted the way healthcare apparel is bought. Prior to Figs healthcare practitioners typically bought their work attire from medical supply stores. But Figs saw an opportunity to sell clothing directly to consumers online using a model Warby Parker made popular when it launched in 2010.
3. Have a mission that resonates with consumers. Warby Parker like many successful direct to consumer retailers is mission driven. The prescription eyeglass retailer started with a goal to give away one pair of glasses for each pair of glasses its customers have purchased and has donated more than eight million pairs of eyeglasses since inception. Figs has also had a similar program and so far has donated more than 500,000 pairs of scrubs to healthcare workers across the globe. Whether its Allbirds or Warby Parker many of the successful direct to consumer businesses over the past decade have had a deep focus on corporate social responsibility.
4. Get consumers to pay a premium. Like Starbucks, a more premium priced product is part of Figs’ strategy. The price of traditional scrubs can retail for as low as $10 while prices at Figs start at $38 for a top and an entire uniform can start at $86. Premium pricing if the product does what it is supposed to do can create an air of exclusivity that attracts more customers to a brand. If you work in healthcare and there are more options for what you can wear to work then the price of Figs clothing may signal its scrubs are of superior quality. That added with the brand’s stylish look says Figs is worth the investment.
It’s like paying more to buy bottled water. Tap water and a bottle of Evian are functionally the same but with Evian sourcing its water from the French Alps as well as Evian’s elevated packaging its customers don’t mind paying more.
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5. Leverage social media. Next up in Figs’ direct to consumer playbook is social media. Before Figs got its start healthcare apparel companies were not using social media to market to customers. Figs changed that by using its social media channels to market Figs like a lifestyle brand, often drawing comparisons to lululemon. “They introduced a brand nobody had ever heard of, but we live in an [apparel] industry that is disrupted every day. And it’s never been easier with the rise of social media and influencers,” said Brian Weitman, chief executive of STC-QST, a supplier of apparel components to clothing and scrubs makers. “It started from scratch saying, ‘hey, you know, we’re not a uniform company. We’re a fashion company that designs great products that function for your work.’” The Figs aesthetic also makes it clear that you don’t have to only wear its scrubs to work but while running errands, to lunch or even while lounging at home.
Fig has over 250 brand ambassadors which are compensated with free scrubs. “All of our ambassadors are medical professionals, not professional influencers who earn a living by posting selfies,” said Trina Spear, co-CEO and co-founder of Figs. “They are real doctors and nurses who work 12 or even 16-hour shifts.” One of Figs ambassador, Sarah Flanagan, a nurse in Florida, said Figs sends her a pair of scrubs every month and she only has to make one post on social media per month.
The growth of Figs has also coincided with more and more medical professionals from dermatologists to dentists posting about their lives on social media, becoming influencers in their own right.
6. Make high quality merchandise. If you purchase clothing from Figs you may quickly realize they aren’t like the scrubs you are used to. Figs has invested several years into developing proprietary fabrics that are anti-odor, anti-wrinkle, moisture-wicking and stretchy. Figs also focuses on comfort ensuring its apparel is much more comfortable than scrubs from other brands. Maybe the company Figs is really trying to be like is lululemon which is a lifestyle brand with a history of making apparel from technically advanced material. The combination of style, performance, fit and premium pricing is working for both of these companies.
7. Tap into a large and fast growing market. The market for apparel for healthcare practitioners is large and growing. There are 20,000 healthcare practitioners in the United States and on average they spend $570 per year on clothing for work. In Figs’ IPO prospectus it wrote: "due to frequent wear, healthcare apparel continuously needs to be replenished, resulting in highly predictable, recurring demand for such products."
Over a 36 year career the average healthcare practitioner will spend $20,000 on clothing for work. Add to this the fact that the medical clothing market globally is expected to reach $140 billion by 2028 up from $86.2 billion in 2020 and you can see why investors are eager to buy Figs stock, giving the company a valuation of over $4 billion.
8. Focus on profitable growth. Another reason investors are bullish on Figs is because unlike other digitally native retailers like Warby Parker or Allbirds Figs is profitable. After many years of operating losses, Figs was profitable in 2020 earning $57.9 million on revenues of $263.1 million. Figs’ 2020 revenues were up 138% from 2019 and in Figs’ most recent quarter sales were up 33.7% to reach $102.7 million.
Cowen analyst John Kernan has said Figs has performed well by "creating a category in which healthcare workers have a brand to rally around." Kernan believes Figs has an "enormous" long-term opportunity for both cash flow and growth. "Investors see a huge total addressable market and a differentiated management team that has a competitive advantage," Kernan said. "They're digitally enabled and clearly the authentic brand in this space with the best connections with consumers in a market that should be quite large."