Italic’s Direct-From-Manufacturer Model Does What D2C Never Could

Italic is more than just a new retail experience. Offering products directly from manufacturers in exchange for an annual membership, Italic is fostering a different kind of relationship between consumer and brand. Two years into the brand’s journey, founder Jeremy Cai’s vision is only getting bigger.

Direct-to-consumer brands have been refining their craft since the dot-com bubble of the late ‘90s. Some have become household names, while others have faded into obscurity. What unites them all is a pledge to deliver quality at a better price by cutting out retailers.

More than 20 years into the direct-to-consumer journey, the D2C playbook has become more akin to a bible: follow these steps and you’ll be selling out in no time. It’s why so many D2C brands look and feel the same, what Bloomberg describes as “blands.”

And as long as the formula works, the cycle will continue. At least until a new brand comes in to shake things up and offer a new way of thinking.

Enter Italic.

Jeremy Cai, Founder & CEO, Italic

Founded by Jeremy Cai in 2018, Italic doesn’t outright reject the direct-to-consumer model but it does succeed in doing what no D2C brand has managed thus far: truly removing the middleman in order to pass the savings on to the consumer. A graphic on the company’s About page illustrates the model best.

From his home office in Park City, Utah, Jeremy explains Italic’s value proposition. “The idea was to empower manufacturers to become merchants of their own by building Italic as something akin to a private label as a service.”

It’s a compelling argument, one whose foundation is reflected in Italic’s business model. Italic makes little to no money on any product sold. Instead, a membership fee, currently priced at $120 per year, allows customers access to over 1,000 items that are often priced at half the cost of D2C brands and a quarter of the cost of luxury brands.

An Italic dutch oven is available to members for $60. That’s compared to $100 from Staub and $335 from Le Creuset. Its fan-favorite 7-piece knife set, produced by the same manufacturer as Zwilling and WMF, is listed at $80. That same set would cost $155 from Material and $350 from Wustof.

Years from now when there’s a number of imitators, it’ll be easy to look back and wonder why no one thought of it before. To hear it from Jeremy, it’s because there are few people as close to the manufacturing industry as him and his family.

“The idea was to empower manufacturers to become merchants of their own by building Italic as something akin to a private label as a service.”

Italic's Marco Leather Baseball Jacket, produced in the same factory as Alexander Wang, J Brand & Frame. Priced at $250, compared to $995 at Vince.

Like Mother, Like Son

Jeremy’s mother and uncle, immigrants from China, started a manufacturing business over 40 years ago, creating parts for car manufacturers such as Nissan and, more recently, Tesla. He saw first hand the ups and downs of the business, what he describes as “one of the worst, lowest margin, most competitive industries you can be in,” noting the razor-thin margins and dependence on consumer demand.

Close to the business for so many years, learning the ins and outs of the entire supply chain, Jeremy realized whoever owns the inventory owns the upside of the product. He uses a shirt to illustrate the point. “Let’s say a shirt costs you $16 to produce. You’re going to sell it to a brand for $20. The brand is going to sell it for three or five times that cost.”

Italic's Interval Short Sleeve Tee, produced in the same factory as Alo Yoga, Vilebrequin & Giorgio Armani. Priced at $25, compared to $68 at Lululemon.

Entrepreneurialism running in the family, the concept for Italic began to come into focus, envisioning Italic as something more than just another label. Although Jeremy understands the value brands offer consumers—customer support, product design, payment orchestration and operational fulfillment—he felt Italic could align its own incentives with those of the manufacturer, providing them higher yield on existing production capacity so their own business wouldn’t have to change.

Instead the big shift occurs on the side of the customer. Because Italic isn’t taking home whopping margins, it’s offering consumers products at cost. It’s what direct-to-consumer promised all along. The irony is that because the term “direct-to-consumer” carries echoes of made-up words and marketable “disruption” stories, the phrase “direct-from-manufacturer” might be more appropriate.

Italic's Miles Carry-On Luggage, produced in the same factory as Lanvin, Raden & Samsonite. Priced at $100, compared to $875 at Tumi.

Manufacturers Play Ball…Slowly

In Italic’s first year of business, Jeremy circled the globe many times over, flying from Asia to Italy to the United States and back again, seeking manufacturers open to Italic’s unusual pitch.

“We met with over 150 manufacturers and only, like, two said ‘yes.’” Like any resilient entrepreneur, he wasn’t discouraged. In fact, he understood it. “Manufacturers are risk-averse and they’re putting their own financial capital at risk in the form of inventory for the first time ever—and they’re betting on this random Western upstart to do it.”

Within a year Italic had enough manufacturers on board. The second year was dedicated to getting logistics up and running. Unlike most brands, Italic was set up as a network of 3PLs, giving it the ability to churn out products at a remarkable rate, unburdened by the need to put inventory capital at risk.

At the same time manufacturers started buying into the Italic vision, Jeremy and his team continued to focus on the underlying business model.

An assortment of Italic wallets & pouches, produced in the same factory as Prada & Miu Miu.

Monetization Through Membership

Beginning with the assumption that what matters most to consumers is quality and price, Italic got to work on its membership model. “If we monetize through membership, which is essentially a software product with near 100% margin, that affords us the ability to take a loss or basically break even on all the product purchases. The result is that we get to deliver much more value to a customer than if we decided to take margin on every single product.”

Like the history of direct-to-consumer, Jeremy acknowledges that the traditional business model is not bad—capitalism has thrived on this simple premise for centuries—but that it does lead to challenging, unsustainable practices.

“If we monetize through membership, that affords us the ability to take a loss or break even on all product purchases. The result is we get to deliver much more value to a customer.”

“When you’re selling products at a markup, the two things that you always incentivize for are: 1. What is the highest price point I can sell at? And 2. What is the lowest cost I can buy this product for? If you play that out long term, it’s not good for the manufacturer and it’s not good for the customer.”

The impact of this decision and the model built around it is difficult to overstate. Because Italic doesn’t monetize products, it can lower prices depending on volume. In some cases, Italic even takes a loss, like in the case of its much talked-about candles, believing the value of its model can be more than the archaic relationship between manufacturer, brand and customer. “If we can deliver consistent value to a member over and over for the course of their lifecycle with us, we can retain them for years to come.”

Italic's Soy Scented Candle. Produced by the same manufacturer of Hermes and Vera Wang candles, Italic initially took a loss on these candles.

A Brand That’s More Than a Brand But Also Not a Brand

Despite representing an evolution of the D2C model and cutting out the middleman for good, the contradiction at the center of Italic is the awareness that Italic, like any consumer-facing company, is a brand. The difference is that instead of looking to the Caspers and Warby Parkers of the world, Jeremy and his team are studying the masterstrokes of the brands that are with us wherever we go: Spotify, Netflix, Uber, Airbnb.

All images on the Italic website, whether product shots or featuring models, are presented with restraint. The registration process is seamless. Reviews from actual customers speak to the efficacy of the price-to-quality relationship. It’s all in service of getting best-in-class product to the end consumer with as few obstacles as possible. The same way Uber can get you into a car in minutes or the way Airbnb facilitates unforgettable experiences.

Italic's Marta Leather Motorcycle Jacket, produced in the same factory as Alexander Wang, J Brand & Frame.

“When you book an Uber, you don’t think of the driving as being an Uber employee but you think of the service as being Uber. Same with Airbnb. You don’t think of the listings as Airbnb properties but you think of the overall experience as Airbnb.”

This no-fuss approach to branding, although perfect for the everyday consumer, has its limits, something Jeremy readily accepts. “If you’re going to buy a Prada bag, you’re going to buy a Prada bag.”

This positioning gives Italic the freedom to carve out its own lane, unconcerned with the splashy color palettes of D2C brands or the celebrity-filled campaigns of luxury labels.

It’s the perfect backbone for a brand that’s all about stepping back and letting the products take center stage.

If It Ain’t Broke, Don’t Fix It (But Make It More Accessible)

Italic launched bags, bedding and scarves in November 2018. While it’s common practice for new brands to focus on one product category and go after it mercilessly, Italic, like everything else it does, takes a different approach. One that feels much more authentic in its banality.

“In the case of bedding, there is no design. It’s just size and material. For scarves, it’s the same thing, just colorways. In the case of bags, you could pay over a thousand dollars for a bag that costs less than a hundred bucks to make. In all cases, the customer is saving a whole lot of money by shopping straight from the source. It’s all in service of reinforcing the value prop.”

Home goods are one of Italic's most popular product categories.

Since those first few products went live a year and a half ago, Italic has added hundreds of SKUs to its digital pages across dozens of products. At the center of its product expansion strategy is the consumer. Members can submit products requests via Typeform in minutes. This feature alone has led to some of Italic’s most successful products to date, including a dumbbell set and kettlebells launched mid-pandemic.

And just like members help inform the products Italic carries, the products Italic carries helps bring in new members. The more members that join the platform, the more leverage Italic has to convince new manufacturers to join as merchants. The more manufacturers Italic has in their wheelhouse, the more products they can offer.

It’s a self-fulfilling prophecy that benefits every part of the supply chain, each supporting the other in a delicate balancing act that has the potential to upend what it means to be a brand in the 21st century.

Italic's Aura Racerback Bra, produced in the same factory as Alo Yoga, Vilebrequin & Giorgio Armani. Priced at $22, compared to $62 at Alo Yoga.

Think Bigger

If Jeremy’s dreams for Italic pan out, there won’t be any need to discuss the company as an evolution of direct-to-consumer. That’s because the ultimate vision for Italic would catapult it past the predefined conventions of D2C brands and into the universe of everyday life. “We’re trying to build the next-generation everything store, following the footsteps of Costco and Amazon, and even Sears and Walmart back in the day.”

Italic isn’t waging a war on the unfulfilled promises of brands in the Age of eCommerce. D2C companies should continue to offer consumers niche products dressed up as design objects. Fashion houses should never veer off course in their mission to define what luxury means.

For everyone else, there’s Italic.