Dive Brief:
- H&M, through its venture capital arm H&M CO:LAB, has invested $13 million in Thread, an e-commerce startup specializing in personalized menswear styling, reported Business of Fashion. H&M led a $22 million Series B funding round for Thread, according to a press release. The total investment in Thread is now over $40 million.
- Thread uses artificial intelligence (AI) and human stylists to make recommendations to its customers for a perfect fit and look, the press release said. Thread will use the new funding to further expand its AI team and develop its brand name. The company has over 1 million users, with 25% of them purchasing all their clothes from Thread, and an average age range from late 20s to early 40s.
- Thread also announced yesterday that it has added 50 new brand partners to its selection of products, per the press release. These include Barbour, Hugo Boss, Levi's and Ted Baker, along with newer labels like Wax London, Kestin Hare and The Workers Club.
Dive Insight:
Large retailers have found that the quickest way to get access to new products and technologies is to invest – and in some cases to accelerate or incubate – in the startups that are creating them. Some of the startups are focused on technology, and others on product. In the case of H&M's investment in Thread, it's both. This is H&M's second such investment this month, following the $20 million it paid for a 1% stake in fintech startup Klarna last week.
Target has been prominent among other retailers cultivating startups, first with its Target + Techstars accelerator, which recently ran its third annual program. It has expanded into wellness and beauty mini accelerators, and just announced a new accelerator for Gen Z entrepreneurs and creators. Target is now working with about half of previous Target + Techstars participants, while another former participant – Blueprint Registry – was recently acquired by David's Bridal.
Amazon conducted its second Alexa Accelerator this year, which is a joint venture of Techstars and the Amazon Alexa Fund. Amazon also recently ran Alexa Dev Days with Intel to expand the virtual assistant's ecosystem. Walmart has its own technology startup incubator called Store No. 8, named in honor of where founder Sam Walton conducted retail experimentation. Earlier this year, Walmart also bought startup Spatialand, a virtual reality platform and content studio, which participated in a program at Store No. 8.
To save on returns while creating more customer satisfaction, other companies are on a quest for the so-called "perfect fit." My Size has "smart tape measure" apps for iOS and Android, called MySizeID. Last year, Teen apparel retailer rue21 launched a visual virtual stylist on Facebook Messenger with artificial intelligence-driven shopping bot provider mode.ai, leveraging Messenger's Chat Extensions feature. Brooks Brothers has an app development platform that includes a Made to Measure program for custom tailoring and alterations.
Founded in 2012, Thread is now focused on selling menswear in the United Kingdom, but plans to expand to the U.S. and Europe, and add women's clothing, reported Drapers. Its competitors include Asos and Mr Porter, but they don't use AI for personalized recommendations, which Thread promotes in weekly emails sent to users. "There are a lot of businesses that are talking about personalization, but there are very few that are actually doing it well," CEO Kieran O'Neill told Drapers. Thread has a 79% compound annual growth rate.
Besides H&M, the latest investment round includes Balderton Capital, Beringea and Forward Partners, with participation by retail investor Maurice Helfgott, and Sebastian Picardo, former deputy president of Lane Crawford, said the press release. Earlier investors included Y Combinator, and former Saks Fifth Avenue President Andrew Jennings, and DeepMind co-founders Demis Hassabis and Mustafa Suleyman. DeepMind Technologies is owned by Alphabet, parent company of Google.
