Roman Kirsch

Founder & CEO of Lesara

Lesara building a €45m distribution center in Erfurt, Germany

lesaraoffice_bln-3 

Today is a very special day in the history of Lesara - for the first time we are announcing a significant investment,  building our own supply chain: Our team decided to invest more than €45m in developing a state-of-the-art European Distribution Center in Erfurt, Germany. The distribution center is being constructed now and will go live in August 2018.

 

As part of this investment we are looking to hire more than 200 talented team members in a first step until mid of 2018 with the potential to scale up to over 600 employees over the next years.

 

The construction of our own distribution center has been a big decision for us. We never would have expected to launch such an ambitious project so early in our company history, but are therefore even more proud and excited to take on this challenge shortly before the 4th anniversary of our founding.

 

There were 3 main factors that supported our decision of building this distribution center now, and in Erfurt specifically.

 

  1. Our growth & ambition:
    In the last few years we continued to exceed our own plans and ambitions. We have been awarded as the fastest growing tech company in Germany and Europe in 2016. We went from 0 to over 2m active customers, >300 employees and 24 countries. It was clear that we have reached with our value proposition a huge underserved market that continues to demand what we can offer best: In-demand, trending fashion at great prices. So the only reasonable decision was to continue being ambitious and invest into the future sooner than later!

  2. The focus on providing better delivery speed & quality:
    Making customers happy and building great experiences around our customer needs is one of our core beliefs. This also holds true for continuously improving our supply chain and delivery experience. With investments in technology, great employees and machinery, we are going to create one of the finest and innovative distribution centers, providing better experience for our customers all across Europe.

  3. Erfurt as a perfect hub:
    As an international fashion retail business serving customers across 24 countries in Europe, it was important to us to get it right from the very beginning. We wanted a location that has a great geographical proximity to a wide range of countries, that has experience as a hub for best-in-class logistics and supply chain practices and the right talent. We found all of the above and more in Erfurt and were welcomed big time by the local businesses and decision makers.

It is exciting for us to start a new chapter in the Lesara history with the setup of our own distribution center.

 

A big thank you to our operations team that has been working day and night to put the concept together and to all of our partners that have contributed and are continuing to execute alongside us.

 

lesaraoffice_bln-6 

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The story behind quantifying company culture & how this helped us become the fastest growing tech startup in Europe

 

Culture is important - that's for sure. It's one of the first things that you learn in a Business 101 Class but are never actually able to connect the dots unless you are in real life and realize how much of an impact it can have.

I want to share how institutionalizing & quantifying our Lesara culture helped us to scale and become the fastest growing tech company in Europe in 2016.

 

picturelesaraoffice

When we started in late 2013 we were extremely lucky with our very first hires - super smart people that shared our vision and had consistent beliefs about what is important to build a great business.

The very first hires multiplied our mentality & culture: A make-things-happen attitude, Thinking & Doing Big vs getting lost in small details, being bold in content but modest in style. A lot of them are now heading our teams, going 3+ years strong.

Learning #1: The first hires are so important in getting the culture & trajectory of the company right.

However at some point in time the multiplication doesn't work anymore that well - for us this was in 2015 when we reached 100 employees after a bit more than 1 year.

Multiplying ourselves and leading by example just didn't work when you are adding 15+ team members every single month. Especially when a lot of the new hires "import" the work ethics or culture from different companies.

So we did what we thought a tech & data-driven company should be doing: Quantifying culture and measuring what initiatives have the best ROI.

Our Goal is to use data and be as professional about culture as we are about Customer acquisition costs or On-Time-In-Full deliveries for our customers.

Here is what we did:

  1. Culture Code Bible: We formalized & wrote our Culture Code - making it one of the core reading elements for new hires.
  2. Quantification: People only focus on things that can be measured. So we started measuring A LOT! A few examples:

a.) Recruiting Channel Performance: What are the best channels for different positions, what is the Cost per Hire and how much should this position be worth for us. If we can't find a Product Manager for example, but having one would save us $50k in the next quarter, this is what we would be willing to invest to get one onboard.

b.) Funnel Management Optimization: Early on we decided that we would never compromise on hiring. So if you need to hire 15 new team members a month than the only way to keep up the quality is increase the number of applications. We figured for us that the ideal acceptance rate is at 1%. Hence we manage our funnel accordingly and keep investing into more applications if we need to bring in candidates for certain positions

c.) Acceptance rates by Interview Step: Someone being too tough in the interviews and having too few candidates coming into the next rounds? Or the common opposite case? Looking & comparing acceptance rates by interview step by interviewer helps us making the recruiting process consistent, maintain great candidate quality and give dedicated interview trainings to recruiters who have too low/ too high acceptance rates.

d.) Cultural Fit: When interviewing candidates we are not asking about past experiences or having them walk us through their current position. Instead we have specified questions for each value. Smartness? We have our own developed numerical test that everyone needs to accomplish. Structure & logic based decision making?Most of our applicants need to prepare a case and present it in front of our Heads & Directors. This way we make sure to get the best out of the interviews and not waste time walking through irrelevant experiences.

e.) Pay for Cultural Fit: Also our Bonus system is tied to fit with our 7 core values. If you are showing fantastic results but don't respect and contribute to our values you may still end up without a bonus for the quarter.

 

This is just a small list of examples - but you get the idea.

So how did this work out for us so far? The results have been amazing.

  1. Applications: Being smarter about investing into the recruiting funnel helped us to scale applications across our offices in Europe & China to >2.000 per month
  2. Diversity: Part of our culture is also to foster diversity. Quantifying it also helps to walk the talk and not just make it a buzzword. Over 70% of our employees are internationals. 52% of our employees are female. And 55% of our Leadership team is female (C-level, Director & Heads).
  3. Better hiring selection rate: Our hit rate of great hires increased significantly. The % of people that dropped out in the first 6 months after being hired decreased by 40%
  4. Retention rates: A bit early to say for a 3.5 year old business with 300+ employees but what can be said is

-> The employer recommendation rate increased to 90%+

- > We have been awarded as one of the Top 10 Retail businesses to work for in Germany

-> And we have also been awarded as one of the Top 25 companies to work for in Southern China for our office in Guangzhou.

For us it's quite clear: Looking at some of the best & fastest growing companies in the world (and those that are struggling as a comparison) there is a huge correlation between a strong Culture & employee satisfaction and business success.

Learning #2: While culture & values may be different for companies, you would want & need to write them down, share them and make them a core belief.

Keeping a start-up spirit & being an innovative, fast-moving company is not a matter of company age or size, it's a matter of how strong your culture is and how much you investe in it.

The best way to do this for us was to quantify it. Big Time.

 

Roman

 

PS #1: We have decided to share our current Culture Code to help inspire people to invest time & money into their cultures and create more amazing working environments: Here is the link to the Culture Code.

PS #2: If you have questions or comments we are happy to listen & learn. You can write me at roman@lesara.com or the brain child behind our Culture Code bible, our People & Culture Head Julie (julie.goergen@lesara.com)

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Lesara @ Spiegel - what's right and what's not

Today the Spiegel, the most reputable german weekly magazine and one of the most read online portals published an article about our business and how it shapes the world of online retail.

Here is the article in case you haven read it yet: http://www.spiegel.de/wirtschaft/unternehmen/start-up-lesara-wie-der-kleider-shop-die-branche-veraendert-a-1059590.html

Overall the story captures quite well the dramatic changes happening in retail - from huge inventory piles, 12-month-production planning and lots of middle men & mark-ups to data-driven merchandise selection, quick turnaround times and great value for money for latest trends for customers.

However, the whole interview went only for 30 minutes- hence it is normal that not everything has been reflected 100% accurately in the story. 

That's why I wanted to share in full detail what actually is correct & right in the article  and what is not.

What's right:

  • Yes, we do a very data-driven merchandise selection. No subjective selection but based on what people want. This allows us to focus on bestsellers and not offer the products that cannot be sold, avoiding expensive write-offs and waste.
  • Yes, we are working directly together with factories - which is part of the reason why we can be so flexible and deliver great prices and great quality
  • Yes, by being as fast as 2 weeks between selection and go-live of the product we are not only cheaper and better quality then competition, but also provide them faster & earlier than everyone else. 
  • Yes, value-for-money and fast-fashion have been the biggest & most successful retail segment over the past decades - and we believe that this segment is ready to be innovated in the digital world

 

Outdoor photo shoots of Lesara in China

china IMG_5583 Kopie 2 chinaphotostudio

 

What's not right:

  • The article makes the argument that the majority of products sourced in Asia are produced in factories that are either have "inhuman work conditions" or "intoxicate the environment". This statement is a.) very disrespectful to a lot of countries, governments & people and b.) so wrong that I don't know where to start - and hence just want to focus on some of the most obvious & biggest points:
    1. For everyone who has been involved into working with factories it is clear that this is a huge generalization. Practically over 90% of products in the consumer industry are produced in Asia, no matter if value-merchandise or high-end-luxury. And there are good & bad factories in all of those factories, just as there are good places to work in in Europe as well as bad places.
    2. While there are some countries with high labour and social standards, such as China, there are also others where labor conditions are, on a general level, at another standard. This includes places like Bangladesh, Indoensia or Cambodia. That's also one of the reasons we only source from factories in China as the government but also we as a company have better chances to control and check on all partners we work together with.
    3. Unlike many other retailers we are very open about the factories we work together with. We even had a TV team (here is the link to the Documentary) - twice. 
    4. As we have a 50+ team over in our offices in China we can also do make sure that the factories we partner with are run by great entrepreneurs that we like to work together with (and needless to say, that not only comply with national & international rules but actually go above and beyond to attract the best talent in the country).

 

Visiting the Showroom of one of our factories chinaIMG_4719

 

As you see by this post, it is quite important to us that we engage with partners that share the same values & believes as we do. And also that we are quite transparent about who we work with & how. 

It is important to say that the critique is not targeted at us but a general comment the article makes - I just want to point out to the people who did not have the chance to travel to Asia and visit the buzzling cities and factories  that not everything can be generalized and standardized.

-> The most expensive labels that you know produce in the same places as the Primarks & Kiks of this world

-> Factories that are better run and treat their teams way better in contrast to global chains that don't respect their European employees (See the controversies around the workers at the Burger Kings & Lidls in Germany).

-> That getting a product for a really good prices means in our case also that it is better quality than something double the price.

As always in life and business, the answer is more complicated than a simple generalization and sometimes takes more time & effort to fully understand.

At the end of the day it's our job to inform the consumers - and we are super happy to add way more transparency and share the stories, successes & dreams of the partners that we work together with.

By being more efficient and smarter we are confident that we can offer customers better prices, better quality and great trends for amazing fashion & lifestyle.

We believe that we can shape the world of online retail and give people what they want while also reducing waste and high prices caused by middle men.

And we believe that we will create something that makes the lives of many people better at the end of the day.

Best

Roman

 

Part of the Lesara Team in China

china pictures 

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Lesara on TV

Hi Everyone,

this time a short announcement: A camera team followed our company for several weeks to show how we get access to great price points and products across the world.

Here is the trailer to get you excited: Lesara & Galileo

 

The whole documentary airs on Sunday, 19th of July at Pro7

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E-Commerce Trends 2015

After a long period of abstinence I finally found the time to share some of the insights that I have seen & experienced first hand from starting & running Lesara and being able to understand the dynamics and big trends that happen in online retail from my own experiences as well as talking to a lot of founders & CEOs of E-Commerce business around the world.

I collected some of those insights for a presentation held last month in Amsterdam at the Webhelden conference, as part of the celebration of our entry into the Dutch market.

 

The 4 biggest trends I currently see are:

1. Cross-Border-Commerce

2. Vertical Integration

3. Mobile First

4. Leveraging Community

 

So let's start with the obvious one, 1. Cross-Border-Commerce.

The internet has always been about democratizing purchasing decisions and extreme transparency. Best value-for-money and a great customer experience just matter a lot, if the competition is just one click away. Irrespective of what people think about the price consciousness of consumers or about the general decrease in margins: The consumer is king and hence every retailer needs to question himself, how to build a better experience, day-in, day-out.

So while until recently competition was mainly limited to local online retail, consumers have started to realize that they don't need to limit their selection to local retailers - as people base their buying decision on customer reviews, referrals and the presence of the online retailer, a retailer abroad can be just as trustworthy, if not even more trustworthy than a local one. In countries where either a.) English is a well-spoken second language (think Sweden, Netherlands etc.) or b.) who are too small for their own local online retail players cross-border-purchase already now contribute more than 50% of total online sales.

Whereas E-Commerce in general is growing at a healthy rate of 20% in Europe, Cross-Border-Commerce is expected to grow an annaul 43%, from $105bn to >$300bn by 2018.

So for every online retailer: Make sure that you are competitive enough to leverage this for yourself or go under.

 

2. Vertical integration

 

The online retail industry has been mirroring the developments of brick & mortar-shops over the last decades in just a few years.

The first big rise was from companies re-selling other brands with a focus on desktop.
This mirrored the initial successful concept of general stores - however those are the first in the offline business to loose out, most of them already struggling.

The online equivalents of those general resellers are amazon, zalando & others. The challenge with this model is that in a transparent world you need to constantly deliver best value = cheapest price for a comparable product - something that comes only with scale and which amazon has mastered excellently. But which also doesn't leave any room for competition.

The next wave will be all about the biggest segment in offline retail: Vertically integrated discount & fast fashion retailers. These retailers account for over 60% of offline retail and have been slow in embracing online. This is where the $$$bn opportunity is going to lay in over the next few years, as shown by companies such as alibaba, wish.com, lightinthebox and others.

In a digital & transparent world, every middlemen between the factory and the retailer just doesn't make any sense.

At Lesara we always ask ourselves, what our reason to exist is - and the answer comes natural: We provide the quick delivery, marketing, user experience and control supply chain & merchandise quality, whereas the factory produes the merchandise. A perfect combination, that doesn't need any wholesellers or agents in between and which we believe will be the future

Bildschirmfoto 2015-07-13 um 20.28.14

 

3. Mobile first

 

While this has been months, even years in the coming, a lot of companies still see mobile as another, smaller version of the desktop website. A by-product which they do responsive and that's it. 

Just as people first underestimated the wave that would come with online commerce, the same seems to happen with mobile.

In this case emerging markets such as India and China, where mobile penetration was bigger than computer penetration to start with, lead the way: Over 80% of revenue is generated already via mobile and some of the biggest retailers, such as Flipkart or Myntra are even closing down their desktop websites to focus on mobile development (http://time.com/3829150/india-flipkart-tech-e-commerce-website-mobile-app/).

The reason why also European companies also need to think mobile first: The user behavior and experience is a completely different one than on the desktop. People don't read text, they focus on pictures, they browse with their thumbs and not with their mouses, purchases are easier to make, but less cross-selling possible to name a few.

In any case retailers need to understand that the shift from online to mobile will be just as big as from offline to online and hence requires just about the same ressources to master.

Bildschirmfoto 2015-07-13 um 20.54.16

 

4. Leveraging community

What started slowly with Amazon pioneering customer reviews and developed into sharing via facebook or other platforms has accelerated quickly thanks to the ease of sharing via smartphones. Sharing products, websites and news is just a whatsapp-message away - and hence also we see that sharing ratios are 5x as big for mobile devices vs online devices.

 Bildschirmfoto 2015-07-13 um 21.05.57

 

Even more interesting is the increase in user-generated-content, as plenty of retailers start building communities along the way, with Poshmark, Sammydress start adding user pictures to the actual clean product presentations. Sometimes it doesn't need to be picture perfect, but just authentic and real :)

 

 

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