OEN Member NewsSseko Designs shifts to direct sales for ethical fashion brand (Portland Business Journal)

In 2014, just as Sseko Designs was closing a seed round and gearing up for two major national television appearances, founders Liz and Ben Bohannon pitched an experiment to the board of directors.

The Bohannons — founders of the socially conscious Portland-based fashion brand — wanted to test out a new sales channel: instead of focusing all-in on wholesale, they wanted to introduce a direct sales model to the business.

“I thought the board was going to carry us on their shoulders,” recalls Ben Bohannon of the moments after the pitch.

That turned out to be wishful thinking. Instead, the room turned silent.

“One of the guys that usually calls in remotely, coughs, and said, ‘You guys know this is terrible timing to start a new channel?’,” he said.

It wasn’t the reaction they’d hoped for or expected, but the Bohannons persisted. They conducted their direct sales experiment through 2015 — without the blessing of the board.

It was an inauspicious start for a test that would prove hugely successful and change the company’s trajectory. After testing the waters in 2015, Sseko felt so confident in the direct sales strategy that in 2016 it abandoned wholesale, a gamble considering it represented 65 percent of the company’s sales.

“It was a terrifying decision in a lot of ways,” Ben Bohannon said.

But Sseko has always been a business that bucked tradition in favor of reaching its ultimate goal to do well in the world. The latest gamble worked: Sseko now has a network of more than 600 sales partners — it refers to them as “fellows” — selling its product line, which includes apparel, Ethiopia-made leather bags, Uganda-made sandals and other footwear.

The company doesn’t disclose revenue, but the Bohannons said they expect sales to grow by 50 percent this year while likely breaking even.

The Sseko story
The Sseko story begins in 2008 when Liz Bohannon was living in Ugandan capital Kampala and working for a youth development organization. She witnessed firsthand the cycle of poverty as the education ambitions of many young women derailed before her eyes. She saw an opportunity to help young women earn money for education by manufacturing footwear.

That idea became Sseko, which means laughter in Luganda. The company owns a factory in Uganda that employs 50 women. Many of them are working in the nine-month gap between high school and college to save money for tuition. Half of the salary earned by each woman goes into a college savings account that is not accessible until tuition is due. The company matches that savings 300 percent through a scholarship for those employees.

To date, the company has helped send 103 women to school. Sseko also employs women who are not pursuing education but offers a stable, dignifying and fair wage.

When the company launched in 2011, it sold product on its website and through independent retail stores through traditional wholesale.

“Our vision and our hope is we will fundamentally change the way business is done in America,” Ben Bohannon said. “I really believe purpose will drive value in the new economy.”

That change, however, is slow. And by following the traditional wholesale channel, Sseko wasn’t moving as fast as the Bohannons wanted.

At the same time, people were falling in love with the brand and emailing the company about getting involved. The team started to look at how to harness that excitement and eventually landed on direct sales, in which the company distributes its product through a network of partners who sell directly to the community.

According to the Direct Selling Association, there are 18.6 million people participating in direct sales nationwide and 74 percent of them are women. Of those sellers, 37 percent are millennials and 34 percent are Gen X, two desirable demographics. Last year, there was $35 billion in retail sales through direct selling.

Sseko still sells through its own website, but sales are now driven by an army of 650 partners, or “fellows,” who spread the Sseko story and sell the products within their own community. Those sales can be through social media or in-person trunk shows. The fellows can recruit others to join their team and make commission on team member sales.

“We are seeing the gig economy and influencer marketing converging around a better way to do direct sales,” Bohannon said. “For us, we loved it because it allows us to maximize our impact for the business and the brand not just in East Africa but here in the U.S.”

Through the direct sales, Sseko gives its fellows an opportunity to be entrepreneurs and build their own business.

But unlike other direct sales companies, the top sellers don’t win a car or vacation from Sseko — they get a trip to Uganda to meet the women in the factory. Ben Bohannon said this has a dual purpose: fellows see what their work means to the women in the factory, and the Ugandan women see how their work is affecting the lives of the fellows.

“We are trying to turn the (paradigm) on its head. It’s not just about people in the U.S. doing good for people living somewhere else in the world,” he said. “It’s one team building each other up.”

Expanding network
The company closed on a Series A funding round last month, the size of which it declined to disclose. The round was led by Ohio-based Break Trail Ventures, but included a dozen other new backers, including the Portland Seed Fund and several Oregon angels who provided the company with its first taste of local funding.

Portland Seed Fund Partner Jenn Lynch noted the firm was attracted to Sseko not only for its unique apparel brand, but the sales channels.

“It has the direct-to-consumer (aspect) we are excited about, but with a direct-selling model,” she said. “That is something that has less VC traction but definitely has consumer traction.”

The capital infusion will be used to build out Sseko’s technology platform to help onboard and train new fellows. In July alone, the company brought on 100 new fellows, so it needs better tools to accommodate a significantly larger sales network. The company will also offer more training for its sellers.

Shifting the model has also led to more sales. The company’s top-selling fellow was one of the first people to sign up — she now has 100 people under her and generates $500,000 revenue for the company. When that fellow started, she made more money for Sseko in a month than its average wholesale customer did in a year, Bohannon said.

Those kinds of numbers finally got the board excited about the new model.

The company is also building out partnerships with other fair trade manufacturers as it expands its product line. Sseko partners with groups in places like Ethiopia, Peru and soon India for items that are specialty products in those countries, such as leather work from Ethiopia and textiles in India.

As Sseko has grown, its team is evaluating taking its scholarship program to another high school in Uganda or bringing the model to one of its partner manufacturers.

“We are always asking what more can you do as a company to ultimately influence and make the world a better place,” Ben Bohannon said.

Source: www.bizjournals.com