Revolve Group Inc. SWOT and PESTLE Analysis

Strength

1. Targeted consumer base and data-driven merchandising: REVOLVE was founded in 203 to cater to a select group of consumers, mainly young millennial and generation Z women. REVOLVE’S targeted consumer base allows them to provide a better consumer experience compared to other mass market retail stores who serve a wider customer base. One of REVOLVE’s biggest strength is their data-driven merchandising model. They employ data analytics tools to keep up to date with the fast-changing consumer trends and then they curate the product assortment to match the trends and maximize sales and consumer satisfaction. Mass market online retailers are generally slow to react to consumer trends and they only serve a transactional purpose of selling clothes without trying to understand consumer sentiments or offer any original fashion content. REVOLVE uses consumer generated data to customize their sales models every time and even selects only those brands to display which match the interests of the target audience. Due to this unique selection of products that is not found in other online retail stores, REVOLVE has a dedicated consumer base. Consequently, most of their sales happen at full price: 77%(2020), 79%(2019) and 79%(2018).

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Weakness

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Opportunity

1. Increase penetration in beauty segment: The global beauty industry is worth $532 billion as of 2019, with the US being the world’s largest market for beauty, with 20% of the total share. The beauty industry is projected to grow at 5-7% CAGR and reach $800 billion by 2025. The economic phenomenon known as the “Lipstick Effect” ensures that the beauty industry sales remain stable even when the global economy slips into a recessionary phase. The “Lipstick Effect” was first observed during the Second World War. When the economies were weak and incomes fell, consumers still purchased cosmetics despite cutting back on other discretionary purchases. REVOLVE ventured into the beauty segment in 2020 but their assortment is still in its nascent stage compared to more seasoned online beauty retailers. One of the biggest trends in the beauty industry is the demand for natural, clean, and sustainable products. REVOLVE should select brands who make products that meet these criteria to attract a sizeable conscious consumer base. Virtual try-on tools have also become increasingly important for digital retailers to mimic the experience of buying products by trying them on at the store. Increasing representation of different skin tones and shades will also help REVOLVE attract a diverse consumer base and improve the brand image.

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Threat

1. Supply chain disruptions due to COVID-19: The COVID-19 pandemic adversely affected the online retail business as it caused negative repercussions across local, national and global economies. Not just customers, but suppliers and vendors were also affected, and this led to problems in REVOLVE’s supply chains. REVOLVE offers a wide assortment of products through over 850 brands, including 24 private labels. A lot of these third-party brands source their products from China or other countries outside the US. The travel bans and flight bans across the world can severely affect the supply chains of these brands and make their orders get delayed. This will lead to lower product assortments on REVOLVE’s website. Some luxury brands under REVOLVE’s luxury offering FORWARD, decided to stop wholesale distribution and selling through third-party sites like REVOLVE and have started their own e-commerce platform to sell directly to customers. Moreover, REVOLVE also depends on third-party delivery services like FedEx, UPS, USPS, etc. to deliver the merchandise to customers. Government imposed transport bans impacted deliveries and led to cancelled or severely delayed deliveries during the first two waves of the pandemic. If the COVID-19 situation again stirs up a storm in subsequent waves, governments will have no choice but to impose lockdowns again and this may affect deliveries again leading to consumer dissatisfaction.

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Political

1. Ban on marketing and transactions using Chinese social media platforms: Chinese-owned social media platforms like WeChat and Tiktok made their mark on the entire world, gathering millions of downloads and users in a short period of time. REVOLVE, like other fashion retailers, uses these apps to connect with their customers and attract new ones. Their entire advertising and marketing strategy is heavily focused on social media marketing through influencers and hashtags. However, China’s galling relationship with the US puts these operations at risk. In January 5, 2021, the then President Donald Trump issued an order banning transactions or use of Chinese-owned software applications. This included the famous ByteDance app Tiktok and popular mobile wallet, Alipay. While newly elected President Biden issued a new order in June 2021 to replace the previous order, the new US administration continues to have concerns about protecting American citizens and their data from Chinese companies. Some of the apps which were banned were have serious data protection issues and the US Department of Commerce is reviewing them. The department will then serve a notice to the app developers who will have 30 days to comply with the US data protection requirements or face permanent bans. Other countries like India have also banned some of these Chinese apps. If REVOLVE continues to use these apps for their operations, they may face legal action in addition to losing customers.

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Economic

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Social

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Technological

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Legal

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Environmental

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