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Launching a digital fashion brand these days goes something like this: Find your niche, raise a ton of cash from investors, get some fashion press hype, start to grow, and then open a pop-up shop.
Jessica Lee, the 31-year-old founder behind San Francisco-based fashion brand Modern Citizen, cut out a pretty big part of that well-charted path when, in 2014, she started to build her e-commerce business without raising money from venture capitalists (or hiring PR).
Lee chose to bootstrap the operation, raising $250,000 from family and friends and slowly building out the business. She’s spent the last three years developing a brand specializing in minimalist clothing, jewelry, and accessories with an average price point of about $75, all of which looks a little like the very sophisticated offspring of Everlane and Reformation.
Her diligence has paid off. Modern Citizen has developed a small but dedicated following; fashion insiders have even dubbed it Zara’s sort-of rival. Now, after seeing explosive growth for two and a half years straight, Lee is ready to jump into brick and mortar: The company’s first store, holding a sparse assortment of billowing silhouettes in a muted color palette, will open in San Francisco’s Cow Hollow neighborhood next week.
While many clothing brands find themselves struggling through a “retail apocalypse,” Lee says the move makes sense for Modern Citizen; since 2015, it’s been running a showroom from its San Francisco headquarters, and most of its customers said in-person shopping was necessary not just for sizing, but to trust the quality coming from a brand with such low prices.
“A lot of stores that are closing now are the ones I’d classify as the old guards; they open up space for new brands to take people’s hearts,” Lee says. “There’s a revolution happening where digital brands are filling the void. If I don’t shop at Gap anymore, I’m probably going to Everlane for basics. And at this point, you really have to be omnichannel. Online is essential, but you need something in person as well.”
The success story behind Modern Citizen is equal parts good advice, deep research, and intuition on Lee’s part. Prior to founding the company, Lee worked at Gap for six years, doing strategy and business development for the retail giant’s e-commerce division. At Gap, Lee was tasked to study digital businesses for possible acquisitions, and to understand “where young women were shopping when they abandoned old guards and why.”
It was right around the time digital brands like Bonobos were bursting onto the scene with direct-to-consumer models, and part of Lee’s research involved analyzing brands like Nasty Gal and ModCloth. She noticed a very specific formula behind why these companies were taking off the way they were: “Even though, historically, women under 35 were lumped together, shoppers preferred to be targeted as a niche. That was how young, digital brands were developing cult followings. They had a specific type of shopper, and the brand’s style and tone was on-brand for her.”
Lee left Gap in 2014 and began her research, finding that for women like herself — “white-collar professional, college-educated, cares a lot about clothing but doesn’t primarily want to wear work clothes” — the only affordable option was Zara. While certainly an oldie but goodie, Lee said of the mega-brand: “It’s a huge corporation that isn’t too focused on quality, and when you shop there, you feel like one in a million. Zara also turns around hits really fast when some shoppers want something a bit slower, with a curated lens.”
So she decided to launch her company with the aesthetic of Zara, but less trend-driven. She made sure keep things at a low price point, too: “I didn’t want it to mean ‘fashion accessible’ where T-shirts are $130, because that doesn’t represent the majority of women. But I wanted to present the company in a way that felt premium.”
Through introductions from friends like Wen Zhou, the CEO of 3.1 Phillip Lim, Lee was able to ink partnerships with clothing factories in Hong Kong, which is why its prices are so low. While a “Made in China” tag might not have a great reputation, Lee, whose family is from Taiwan, is proud of where her clothes are made. She says shoppers will notice the quality, feel, and attitude of Modern Citizen versus other companies that outsource abroad, and she hopes her company can “humanize China.”
“I never understood the idea of poor quality being associate with ‘made in China,’ probably because of my Chinese heritage, but I do think it’s a cultural bias, a perception I hope can be shifted,” she says. “China has been manufacturing the world’s clothes for the last 100 years. To think about an entire country as having bad quality seems really short-sighted, considering some of the world’s best products are made there.
“Now, even if you wanted to create a product in the US, to do that is so hard because the industry has moved on, but when you go to China, these factories are like Westworld!” she goes on. “They have the most state-of-the-art equipment and the most highly skilled laborers. So we’ve never worked with factories where we felt like we were compromising on quality.”
Lee notes that while a small company like hers can’t afford to issue its own factory audits, the brand only works with manufacturers who are already sourcing to big companies (like 3.1 Phillip Lim), which can vouch for humanitarian compliances. And while Modern Citizen is proud of its Chinese roots, Lee says the company specifically doesn’t manufacture in countries outside of China, like Bangladesh or Vietnam, which she says aren’t “as developed as China, and so it’s where you typically see the most incidents of malpractice.”
Initially, Lee did look to secure outside funding. But, she says candidly, her situation didn’t look very bright “as a young single woman in Silicon Valley.” Mentors like Kirsten Green, the founder and managing director of VC firm Forerunner Ventures, advised her to just start building slowly.
“When you raise venture, there’s the expectation that you spend it to grow faster,” she says. “Instead, we’ve let the brand evolve and incubate.”
Lee basically went through Silicon Valley’s back door, tapping into the area’s solid cohort of women. After connecting with friends at various startups, she put together in-office shopping events at companies like Facebook, Google, Lyft, and One Kings Lane, eventually branching out to Sephora and Deloitte. From there, Modern Citizen developed a strong customer base, and while Lee wouldn’t share exact sales figures with Racked, she did say her business is growing at an annual rate of 300 percent year over year.
While she won’t discount the possibility of taking outside funding in the future, Lee is currently focused on opening her San Francisco store and managing the company’s growth (a new head of merchandising just joined the company from The Line, where he was developing its private label).
As for retail’s current boogie monster — Amazon — Lee isn’t worried. “Amazon will always be best with logistics, and there’s no way a small business like ours can compete with it, but it doesn’t have an emotional connection with customers,” Lee says. “Yes, it does private label, and I’m sure that stuff sells, but do their brands make you feel something? I’m not sure. Customers like brand names for a reason. They go to Everlane to feel modern, to Madewell to feel boho, and to us for that touch of femininity. It comes down to feeling, and that is hard to engineer.”