Interview With Larry Birnbaum: CEO of Luxury E-commerce Startup ShopWorn
There’s no doubt that the pandemic has accelerated the adoption of digital solutions and one of them is the growing prevalence of e-commerce. Increasingly, many of us are more comfortable with shopping online rather than in traditional brick-and-mortar stores, partly due to the restrictions implemented by governments but also because it is more convenient to do so while not losing the same service experience offered in stores.
The global pandemic has definitely altered consumers’ spending habits while also accelerated the growth of e-commerce across the globe. Along with the change in spending habits, where consumers are getting more comfortable with shopping online, they are also more conscious of what they spend on. Coupled with the rise in the spending power of Gen Z and Millennials across Asia, this new group of spenders are willing to part with their money to buy luxury goods as a mark of their status in society.
Poised to cater to the burgeoning demand for luxury goods, companies like ShopWorn are ready to take on the challenge with zest. Ahead is an exclusive interview with its CEO, Larry Birnbaum on how he manages to scale up his company to be one of the up-and-coming businesses to watch.
Tell us about your first steps in the industry?
I started my entrepreneurial career in the early days of E-bay, purchasing past season designer clothing from major retailers and reselling them on the site. Fortune Magazine found out about my business and featured me as an E-bay success story. A luxury industry veteran saw this article and called me up to say I was in the wrong business. “You should be selling watches, not raincoats,” he said. Within a few months, we went from selling clothing to watches. From 2000 to 2015, I sold over $100 million in Swiss watches on E-bay.
What led you to create ShopWorn?
I was in a business dinner in August 2015 with some luxury industry veterans. One of them spoke about all of the inventory he had remaining at the end of every season and how there wasn’t a clear way to sell them, especially with new products being released for the current season. This is what I’d call the light bulb moment.
There’s always going to be instances where luxury boutiques have an overflow of inventory that wasn’t sold. Add in world events – such as COVID-19 or political instability or an economic crisis– and these instances multiply. In order to remain relevant to their customers, boutiques have to bring in the latest styles, regardless of whether past seasons products are gathering dust on their shelves.
ShopWorn was born out of this proverbial “inventory problem.” The term “shopworn” has long been used to define products that have been in-store, handled by staff or potential customers, but have never been sold. What we do at ShopWorn is take this inventory off the hands of brands or their authorised retailers and sell these past season merchandise on our site at substantial savings. Because these items may be one or more years old, we can’t call them new. But because they’ve never actually belonged to a customer, they aren’t pre-owned either. Shopworn is that middle ground between new and pre-owned, where every customer that buys from us is guaranteed to be the first to own their new item.
What have been the latest industry trends on the luxury second hand online market?
The second-hand market is so fraught with allegations of fake products and lawsuits from brands like Chanel who don’t appreciate sites that claim they have authentic Chanel products when Chanel has never authenticated them. The second hand online market is a great avenue for people to sell their own unwanted items, but quite frankly, you’re dealing with “buyer beware.”
We’ve always been mindful of this from day one with ShopWorn. Our business model is designed so we can always guarantee 100% authenticity because we only get our products directly from brands or their authorised retailers. Customers never have to question whether the handbag they bought from us is fake or whether a luxury watch from us has been refurbished with unauthorised parts.
It’s this business model that’s helping us see tremendous growth over the past six years. We’re currently on track to hit $80 million in sales by 2025. Part of our growth can be attributed to the Asian appetite for luxury. We’re seeing a lot of “revenge shopping” coming through our ShopWorn Asia platform as Asian customers find our site and take advantage of being able to get guaranteed authentic luxury items at incredible prices. Even with all of our items being past season, our Asian customers don’t care, especially since when it comes to jewellery, watches, handbags and other accessories, the design changes from year to year is often too subtle to notice.
Based on how much traffic we’re getting from the APAC region, the biggest trend we’re seeing is ShopWorn becoming the go-to destination for Asian customers to get their luxury fix.
In the face of COVID-19, what are the industry opportunities and challenges?
COVID-19 has been an unfortunate global tragedy that has ultimately shaken the retail industry in unexpected ways. For years, people have spoken about a coming “retail apocalypse.” The pandemic fast-tracked this apocalypse in ways that left many brands and retailers unprepared.
For ShopWorn, the pandemic pushed our growth faster than our initial planning. In February 2020, the team came together to rewrite our projections for the year, lowering our expectations and preparing to buckle down and do our best to weather the coronavirus fallout. But as with everything surrounding COVID-19, we discovered we didn’t fully understand where this pandemic would lead.
Instead of the small gains calculated by the revised projections, we exceeded our original 2020 projections by 40% month over month throughout 2020, starting in March when China lifted its lockdown. The Chinese consumers’ thirst for luxury retail therapy helped propel us into the APAC region. We had not planned for it this year, yet the Asian consumer demand for guaranteed authentic luxury products at accessible prices made it happen.
COVID-19 created a glut of unsold inventory across multiple categories as many retail stores closed their doors, creating another unexpected opportunity for us. While we have been steadily growing our brand relationships outside the watch industry, the pandemic has created new relationships with brands in other luxury accessories categories. Where ShopWorn was once 80% watches, our product mix has become increasingly diverse as we work with more jewellery, eyewear, writing instruments and leather goods brands in solving their unsold inventory problem.
What are your key initiatives for the success of the business and what is your greatest accomplishment?
When ShopWorn was first born, it was conceived as a “watches only” website. Thankfully, I quickly realised there was more to life than just watches. Within a few months of launch, we pivoted the business model, first adding jewellery, then expanding into writing instruments and leather goods. We added sunglasses in 2020.
This pivot was one of the best decisions I’ve made as the expansion has enabled us to increase our customer base. Where 80% of our customers were men at our launch, now women make up 39% of our customer base. According to statistics, women make more than 85% of consumer purchases and influence 95% of all goods and services purchased. Having more women discover ShopWorn has been the priority for us since we expanded our product categories.
Another decision I made that’s led to our growing success was opening ShopWorn Asia. Sometimes, companies see trends in their business that show customers are coming from areas where they never expected. It’s easy to just let those customers continue buying as they’ve always done without making a targeted effort to make things more convenient for them, and much harder to decide you need a footprint in that country. I made the hard decision to have a physical presence in Hong Kong, and that has paid off nicely.
From a personal perspective, one of the things I’m most proud of is my employee retention and our ability to attract smart and talented people to the ShopWorn family. I’m excited to have former Google Hong Kong Managing Director, Philip Chan, leading our ShopWorn Asia office, and a former Vice President of Neiman Marcus as part of our merchandising team.
My success is directly tied to the wonderful people that work with me. We are a family, and my team knows I care about their wellbeing. They love the company as much as I do and show it in their actions.
As Henry Ford says, “coming together is a beginning, keeping together is progress, and working together is success.”
Tell us your most difficult moment as CEO and head of ShopWorn? Were there ever any easy moments in being a CEO?
Every day offers a challenge that I must resolve as we continue towards the ambitious goals I have for the company. Some challenges are easy – like one of our best customers who will only speak to me to make her large purchases, and I then have to free up my schedule so I can have a delightful conversation with her to help her decide what she’s going to buy next. Others are harder – like knowing when to take a risk in investing in a new market and trusting your gut that you’re making the right decision.
What’s next for the business in the near future? Where do you see ShopWorn in 3 years?
Opening ShopWorn Asia was only the beginning of our international expansion. In the next three years, we are planning for a greater presence in countries where we already have buying offices, such as Italy and Switzerland.
We are also currently building relationships with suppliers in Australia, Spain, France and Germany — all countries that may very well host future ShopWorn satellite offices within the next five years.
How important are Asia and Asian consumers for you?
Asia is extremely important to us, as I’ve mentioned earlier. The Asian consumer is why I made the decision to open our Hong Kong satellite so we can service APAC customers more directly. The satellite is staffed with native language speakers, able to answer customer questions during traditional business hours. Customer service is at the backbone of ShopWorn and being able to attend to the needs of Asian consumers to meet their expectations of a luxury experience is paramount to us.
Any specificities related to Asian consumers? How did you adapt ShopWorn to deal with such specificities?
Every country has different manners of doing business. That’s always the challenge in cross border commerce. There’s been so much we’ve had to learn from legal requirements to marketing and communications restrictions. We would have been foolish to try to do all of this on our own. Having Philip Chan on our team, with his past experience leading Google Hong Kong, has made navigating the waters much easier. We continue to learn about the Asian customer, which brands they like, how they like to communicate with businesses and we continue adapting along the way.
We updated the ShopWorn Asia site to offer popular payment methods as UnionPay, Alipay and WeChat Pay. And integrated SF Express to provide competitively priced direct shipping to major Asian cities. We’ve also opened a flagship store on TMall Global and will soon have flagships stores on other major Asian virtual marketplaces, including Shopee, Lazada, and Global JD.
What is your concept of the ideal experience for an online customer?
For us, the ideal customer experience starts even before the customer arrives on our site. We ensure we have the best products that meet their ever-evolving luxury demands, at the best price with the guarantee of authenticity. When the customer finally arrives on our site, we are there for them to answer any of their questions in real time. If a customer wants to see what an item will look like on a person, someone on our team will put it on and send a picture. We’ve now started offering video chats with our customers so they can see their intended purchase in real time.
Once they make their purchase, our service still doesn’t end. We stay in touch with our customers, making sure they love their purchase and being ready to begin the customer experience process again with them when they want more.
ShopWorn is in the relationship business, and for us, our customers and our brand and retail partners are our most important relationships.
If you were to name one mentor who has inspired you along your life, who would that be?
My father. He is the first person to show me what being a good businessman is all about. An entrepreneur all of his life, he taught me the value of honesty, integrity, trust and above all, customer service, in succeeding in business. It’s his influence that has allowed me to attract the right people to work at ShopWorn. Everyone on my team holds these values dear to them, and my father taught me how to immediately recognize these traits in people.
For more information, please visit ShopWorn’s official website here.