On Sunday morning, Scott Sternberg sent an email to customers of Entireworld, his primary-colored, Instagram-friendly direct-to-consumer line. He was writing about how the spread of the coronavirus was affecting his business, and he was not alone in doing so: seemingly every email list I’d ever unwittingly signed up for, from exercise studios to e-commerce shops to an old chiropractor, had done the same. Most of those emails hewed to a template. Due to the spread of coronavirus, we are altering our schedules/canceling classes/open for business/closed indefinitely.
Sternberg, who honed his marketing voice while running his first label, the cult-loved Band of Outsiders, wrote something slightly different. He led with a selfie: him, in a mint-green version of his brand’s sweatsuits, and his trusty sidekick Zod the dog. And then he got fairly transparent. “There’s the awkward and seemingly trivial question of what a brand does during a time like this,” he noted. “Business as usual with product release emails and sunny IG posts?” That didn’t feel right, he’d decided. But neither did not doing anything. “There’s also the question of what a small business does in a time like this,” he continued. “Entireworld is just that—there’s under 10 of us here making this all happen day to day, without big fancy financial backers supporting us. Our day to day sales are what supports our business and allows us to keep going.”
Since launching the brand nearly two years ago, Sternberg had seen the most success with sweatsuits, primarily on the women’s side—and so, given the broad work-from-home requirements among his customer base, he put them on sale, from Sunday until Tuesday night. I called Scott up to ask about his impulse toward transparency and how he plans on running a direct-to-consumer clothing line in a time of pandemic.
GQ: How are you holding up?
Scott Sternberg: On a personal level, I'm just chilling with Zod and going on socially-distanced hikes with my LA friends as we pretend that that's okay. Which I think it is. And on a business level, it's DEFCON, you know, 5.
So it’s there—it's a mortal threat.
Listen, I'll be as transparent as I've always been about stuff. Of course it is! On all sides of things. And this is something that is not new to us, because we work with factories in China. We're manufacturers; we're a small business. That means that we rely on the supply chain on one end and on consumers on the other end, and on a distribution channel in the middle. We make stuff that has to be made, at high quality, and get to us in a certain amount of time. And then we have a warehouse that has to ship stuff. And then we have customers, who have to buy that stuff. We're not a wholesale business, so we don't get checks from Saks or Nordstrom (for the most part) after we make the stuff. It's our job to sell it. It's our inventory that we own. And we're a business that has been doing great! But doing great in a way that a small business does great. I didn't go after a ton of fancy VC financing for this company, because we're not that type of company. And when something like this happens, you're just incredibly vulnerable.
The vulnerability comes from: we have great investors who really believe in our future, but when the future is a black hole, when it's totally uncertain past a few weeks, maybe months, that source of capital becomes precarious as well. So right now, we have two, three, 15 jobs. But generally we're about: how can we reach our customer and engage them in an honest way, and maintain the same dialogue and voice, and be true to the brand and our values. And in the midst of that, sell some stuff, number one. And on the other end, how can we mitigate expenses and change how we're doing business and make sure to give ourselves as much runway as possible? And give our investors as much confidence as possible that we have a plan to get through this? So that's what we're doing, in real time, all at once.
So when you have a multi-tentacled, touches-every-part-of-the-business issue like this, where do you start trying to deal with it?
To me, it's about taking a breather and looking at it from a 30,000 foot level, and identifying: What can we control here? What do we have control of? And that is creating demand for the product, and communicating with our customers. We're running a big sweatsuit promo right now, which is our best-selling item, especially on the women’s side. We never mark those down, and it really felt like the right thing to do, because everybody's chilling at home. Why not do it in a sweatsuit?
On the other side, what else can we control? To some extent, we're a very, very lean operation. There's not many people that work at Entireworld. So what can we mitigate in terms of expenses? It's those broad points. And then the nuances within all of that are: what are other sources of income? Can we get an SBA loan? [Ed.: a loan from the Small Business Administration.] Can we get extended debt from this line of credit? And then: what are three go-forward plans based on what we hear over the next couple weeks? That's in an effort to mobilize our investors, to get them really behind us.
One of the things you decide you can control is the sweatsuit promo. I was struck by the email you sent—in a sea of cookie-cutter COVID-19 emails, yours felt unusually transparent. What was the impetus behind really leveling with people like that?
There seemed to be no other way around it. My first instinct, as this was all starting to really snowball, was: We have to instigate demand. We have to bring in money. Because we don't have that many expenses we can cut. So what is the carrot we have to dangle? It's the sweats. How do we normally communicate stuff? An IG post and an email to our subscribers. Last Wednesday or Thursday, I went to our art director and said, This is the priority, start thinking about it. Let's get the back-end together, all of that stuff. And right before I went to work, I took a selfie of Zod and I, and thought it was probably the best creative for this. And I thought, I'm just gonna write a letter. I wrote it in five minutes—it wasn't that well thought out. It was exactly what I was feeling. And like with that launch video I did, I truly think the best way to communicate with people is on that level. Because anything else is going to be disingenuous. I don't think anybody wants to hear from a marketing team right now.
This email went out yesterday—has there been a measurable response yet?
Yeah, we had a great, great Sunday. A fantastic Sunday. So from a sales perspective, it was great. And a few nice media folks called and wanted to get my take on why I was so painfully honest with everybody. The sweatsuits are great; it's a great product. So I think it was a well-timed promotion. Hopefully we'll keep it up over the next couple days, and then put our heads down and figure the next one out.
Last time we'd talked, you mentioned Trump's tariffs maybe having an effect on your business because of your production happening in China. So when did you clock the fact that there was a novel coronavirus spreading through the country where you produce your goods?
I was paying attention to it as my sourcing team, who is one person, was paying attention to it, in December. This is major, and it's something beyond what SARS or MERS was, but this has happened before. This isn't new, right? And what's so mind-boggling is that our government wasn't reacting in December by, like, proliferating tests on a level that would allow all of us to be tested right now, so we had some sense of the future and what this bell curve looks like in terms of infections. But yeah, we were thinking about it, of course. Because at first it was like, okay, some shipments are going to be delayed. And then it was like: this is now in South Korea and Japan, where my investors are. And they're all quarantined, so that's gonna slow that stuff down. And eventually it's here, so that hits us on a consumer level. And really pragmatically, our warehouse, which ships our product, they might have to close. So where are you then?
Does the runway for the business shift in a time of crisis like this, or is it something you've budgeted in from the start?
You know, we were in the middle of a round of financing, so it's a particularly precarious time right now.
Do you have a sense of what that span of time is? What this has to look like for you to come out whole?
It shifts on a daily basis, and it depends on so many levers, other than practical day-to-day sales. It depends on how fast we can close this round of financing, basically—it's purely dependent on that. But doing that in the time of cholera [laughs] is not easy.
This might sound like a silly question, but when you're talking about something like a small business loan, have you heard...anything...from...anyone...in a position of authority?
I know, it's so funny. One thing I've realized as I've gotten older, and I'm on my second business, is that you're always looking for, like, dad, or your uncle, or whoever the hell it is, to tell you the answers. Somebody. And that person doesn't really exist. There really obviously is a crisis of leadership right now, in terms of anybody at the top. But SBA loans have existed before. There are SBA disaster loans. Unfortunately, they're not currently available to anyone in Los Angeles County. We already looked into that. But you're navigating this stuff by yourself. That's the reality of the situation.
What is something the layperson might not understand about how a moment like this impacts running a small business like yours?
Listen, we have a set of fixed expenses, and a set of revenue assumptions against those. When any of that doesn't align, and you don't have a reserve of cash to rely upon, that equation goes off the rails really quickly, and you have to make some really quick adjustments. It's really that simple. And if I learned anything from my past business, it's that the earlier you pivot, the more flexibility you have.
The other challenge of Entireworld is: we're about two years in, and in about a year, we'll hit profitability. It was always planned that way. The reason it wasn't from day one is: the customer's getting product that is at the same quality, or higher, in terms fabric and construction, of Band of Outsiders—really, really beautiful Japanese fabrics and yarns and nice stuff—but you're paying a direct-to-consumer price. So our margins, once our quantities get to the point they will in a year, will be great. But right now, they're not quite enough to support the business. We have to rely on outside capital. That was always the plan; that's how you do something like this. So that's really where it's super, super challenging.
Where are you right now in terms of evaluating expenses?
On the marketing level, anything we had planned in terms of potential spending—pop ups, direct mail, any sort of spend that doesn't have a direct return on investment—that gets cut right away. Freelance employees, we have to look at their time, and that focus. Looking at fall: we have goods in development, and we have fabric on order. We're being really conservative about those orders, to make sure we have the cash to pay for them at that time, and that it reflects where the market's gonna be, god knows, at that time. But expenses are tough for us, because, beyond payroll—and it's a pretty lean staff as it is—we're not spending tons of money. We have a pretty cheap office rent, although we're gonna request relief there. It's brutal.
I think I can guess, but what is your work-from-home outfit?
It is a sweatsuit. Today it's a little different—it's a cozy, felted-wool sweater, because all of my sweatsuits are in the wash.
Originally Appeared on GQ