Vera Bradley products

Vera Bradley Turned Off Main Street onto Wall Street, But It Needs To Turn Back

Just about everyone knows Vera Bradley, even if they don’t know its name. Its iconic patterned, brightly-colored quilted handbags, back packs and travel accessories are beloved by people of all ages, from grade-school kids, tweens and teens, college students and sorority sisters, on-the-go young mothers and her middle-aged mom, to grandmothers. It’s a rare fashion brand that crosses all generations and Vera Bradley has done it.

The company was founded in 1982 by stay-at-home moms Barbara Bradley Baekgaard and Patricia Miller and named after Baekgaard’s mother. Baekgaard’s aha moment came at the Atlanta Hartsfield-Jackson Airport when she noticed nobody was carrying anything colorful and fun. That was the inspiration for the company’s first three-piece collection, including a handbag, sports bag and travel duffel bag.

To produce it, the pair got started cutting fabric on a ping-pong table and parceling out kits to local seamstresses to complete. Three years in, their company did $1 million in sales and the pair knew they were onto something big.

Some 37 years later, and after going public in 2010, the founders remain on the company’s Board of Directors, as the company has grown into a lifestyle brand. It has expanded from handbags and travel into fashion and home accessories, along with a growing licensing business to broaden its range and exposure.

Notable in the brand’s licensing arena was a partnership with Crocs, the plastic shoe company, which dropped on July 1 and sold out almost immediately. This summer Starbucks licensed Vera Bradley patterns for Starbucks drinkware and stationery in its Asia locations.

And earlier this year the company partnered with Disney for a Mickey and Friends collection of totes, backpacks, beach towels and throws to be sold exclusively at Vera Bradley’s Disney Springs location. This followed a previous Disney collaboration in 2018, which sold out in four days.

Patterns are the connective tissue

In talking with Rob Wallstrom, CEO and president who joined the company late in 2013 from president Saks Fifth Avenue’s Off Fifth division, he explained how Vera Bradley’s iconic patterns are the company’s secret sauce that connects customers with the brand and builds a community among Vera-Bradley aficionados.

“The patterns elicit an emotional response and brings happiness and individuality that customers crave,” he shares. “And it is also about the values built into the brand and the deeper meanings of happiness and joy.”

“You can tell a person carrying Vera Bradley is going to be generous and warm and someone you’d like to get to know,” Wallstrom continues. “It’s the combination of pattern and ‘tribe’ [referring to Seth Godin’s book Tribes] that is the connective tissue.”

The on-going challenge for the company, as Wallstrom sees it, is how to scale the deeply-felt emotional connection with and between customers. “To build a lifestyle brand, it’s all about filling this emotional space that connects customers. How can we scale that?”

One way the company is pursuing scale is the recent acquisition of 75% of the Pura Vida jewelry company, known for its hand-crafted and highly-collectible line of friendship bracelets. With $68.3 million in sales generated primarily through DTC e-commerce, Pura Vida shares many of the same emotional values as Vera Bradley, defined in the company’s 10K as kindness, ingenuity, thoughtfulness, optimism, tenacity and empathy.

“Pura Vida is a brand that customers love. They love to give it to their friends. It’s a connecting brand, just like Vera Bradley, so they are similar in that way,” Wallstrom says.

Like Vera Bradley, Pura Vida is also a socially-conscious brand. Both support foundations to give back to various causes, and Pura Vida notably employs more than 650 Third-World artisans to craft its jewelry.

In addition to gaining another “connecting brand,” Vera Bradley is also getting digital marketing and social customer engagement expertise in Pura Vida founders Griffin Thall and Paul Goodman, who will remain with the company.

Boasting 44 million visits to its websites and roughly 5.5 million active customers on its house list, Vera Bradley could use a boost on social media, where it claims less than 1.9 million Facebook fans, 420,000 Instagram and 80,000 Twitter followers.

At a crossroads

Since going public in 2010–an inauspicious time in retail–Vera Bradley has had a bumpy ride. Sales peaked in 2013 at $541 million and have been on a steady downward trajectory since, dropping to $416 million in 2019.

The company, however, enjoyed a first quarter 2020 bump of 5.2%, leading Wallstrom to announce that it is progressing nicely in year two of its three-year Vision 20/20 strategic transformation plan.

“The first stage of Vision 20/20 was to restore brand and company health, and we continue to build upon the progress we made in Fiscal 2019. We once again improved the quality of sales in our full-line stores and on verabradley.com by increasing comparable full price selling in these two channels by approximately 20%,” he said in a statement.  

Driving direct-to-consumer sales is a top priority for Wallstrom and his team. And in that, they are accomplishing their goals, with DTC sales growing from $96.1 million in 2010 (33.3% of total sales) to $328 million in 2019 (78.8% sales).

DTC sales are attributed to its 99 full-line Vera Bradley stores, 57 factory outlets selling primarily factory-exclusive styles, its full-line verabradley.com website and an online outlet site launched in 2018.

Yet despite such dramatic growth in its DTC channels, in the past two years those sales have fallen too, down 1% from ’17-’18 and -6.8% from ’18-’19.

But here is the rub. The company has completely flipped-flopped its distribution, going from 33.3% direct/66.6% specialty retail distribution in 2010 to 79% direct/21% retail locations in 2019.

Since 2013, specialty retail distribution has posted double-digit declines year-over-year. It went from a high of $248.6 million in 2013 to $88.1 in 2019.

Vera Bradley revenues by channel
Vera Bradley Revenues by Chanel

What’s more, the make-up of its retailing partners has changed dramatically too, away from specialty independents and towards department stores, including Dillard’s, Macy’s, Belk and Von Maur.

Prior to its public filing, it was carried by 3,300 independent retailers along with just a handful of national retailers. At last reporting, it has only about 1,640 specialty independents and 560 department stores for a total of 2,200 retailing partners.

Admittedly, the company can generate more profits with less direct overhead as is required to service independents, but for a company that proclaims “the specialty retail channel is the heritage of our business and remains important to us,” it makes you wonder how such a personally and emotionally-engaging brand can be successful relying so heavily on the less personal and emotionally-detached customer experiences one finds online or in department stores.

Shop floor perspective

Having gotten the corporate perspective from Wallstrom, I reached out to get a view from the shop floor. What I found were retailers who absolutely love the Vera Bradley company and brand, but don’t feel so much love for the current direction of the company. They feel left behind, like the proverbial date you bring to the dance only to have them leave with somebody else.

“They seem to be going more toward a department store model,” shares Jennifer Martin, owner of Outside and In Shop in Houma, LA., who carried the line since 2009. “I hear them talk about Michael Kors, Coach and Kate Spade as the competition. But that’s not the competition. Vera Bradley started off in a retail ‘mom-and-pop’ store. They are trying to be something they’re not.”

In Martin’s view, Vera Bradly has violated its covenant with stores like hers. The company seems to not understand the ebb and flow of sales in the channel and how introducing new patterns every month, while retiring others at an equally fast clip resulting in specialty stores having to mark down prices accordingly, hurts her business.

“I sold $289k worth of Vera Bradley at my peak in 2012 at 46% margins. But in 2013 I started noticing them retiring patterns that people still were hungry for and with the markdowns, customers got trained that things were going to go on sale quickly. In 2017 I only sold $71k at a 29% margin due to markdowns and last year it was barely $65k,” she shares. At this point the line is still a valuable one for her shop, but getting less so by the day.

Jane Saunders, Top Drawer Fresno, built her store around Vera Bradley starting 12 years ago. “I am married to them [Vera Bradley], but like in any marriage, you have your ups and downs,” she says and continues, “I obviously don’t like the fact that they are competing so hard for customers going direct-to-consumer. The Vera Bradley story and brand was built one person at a time. I’d love it to stay the way it was, but things are going to change. But does it have to change so fast?”

What Saunders feels has changed most is the community spirit that was the heart and soul of the Vera Bradley brand. Without specialty retailers like Saunders and Martin who love the brand, feel passionate about it and want to share the love with their customers, how can the brand move forward?

Try as you might, companies can’t monetize that love remotely. They can’t scale passion through marketing. But top-notch specialty retailers do that. It is how they survive and thrive.

Culture clash

Vera Bradley faces a crisis, as the cultures of big business and small business collide. “Once you go public, there’s a different taskmaster,” shares a former Vera Bradley executive, who left the company several years after its IPO and who worked closely with independents when there. “You are driven by that quarterly number, as opposed what may be best overall for the business.” 

This former executive attributes much of the decline in Vera Bradley’s independent retail outlets to the natural selection process played out as retail has evolved. “I heard retailers talk about how they can’t wait to drop the line, but when it finally came time to drop the line and move on, they were reluctant to do so. They still need the brand in their store. I think there is a love-hate relationship with a lot of retailers and Vera Bradley.”

To help right the ship and restore independents’ passion for the brand and company, Wallstrom and his team need to factor their special needs into the equation. “They brought in people that didn’t have a clue to the specialty business,” this former executive believes.

“Specialty retailers are a special bunch. They make business decisions personally, not like a buyer at Macy’s or Walmart might make. That’s how specialty retailers succeed, by being so touchy-feely and personable with their customers. Vera Bradley from its roots was a very touchy-feely kind of company,” this former executive continues.

Retailers Martin and Saunders and this former Vera Bradley executive all have had warm regards and lasting personal relationships with Rob Wallstrom.

“I absolutely adore him and would do anything for him,” Saunders says and shares how impressed she was when he got back to her in minutes when she had a problem. “I don’t even remember what it was about, but I will never forget how quickly he responded.”

They also have the utmost confidence in his business acumen and professional ability. Cowen’s Oliver Chen, who covers the company, also has a vote of confidence. “We like management’s new and agile efforts to retool the brand for broader and more sustainable customer acceptance,” he wrote in a June 6 report, though he also noted a complex turnaround will likely take some time.

I agree. But I also believe that while “driving full-price selling at VRA’s stores and online,” per Chen, is critical to that turnaround, so too is shoring up its position with independent retailers. I fear without the heart-felt passion for the brand that only specialty independent retailers can provide, it will become just another corporate Michael Kors, Coach or Kate Spade-type company, that may offer customers fashion, but not soul.

Maya Angelou’s famous quote comes immediately to mind. “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

For nearly 40 years Vera Bradley had that feeling. It may have slipped, but it wouldn’t take much to get it back. To lead the company forward, Wallstrom needs to tap the power of his heart, as much as he relies on his business head.

Comments Off on Vera Bradley Turned Off Main Street onto Wall Street, But It Needs To Turn Back