Lively is a direct-to-consumer lingerie startup founded by former Victoria's Secret exec Michelle Cordeiro Grant in April 2016. It's taking the industry by storm with $35 bras.
If Michelle Cordeiro Grant learned one crucial lesson from her five-year stint at Victoria's Secret, it was that discounting doesn't pay off.
Cordeiro Grant, 37, is the brains behind the direct-to-consumer lingerie startup Lively, which launched in April 2016 and is taking the industry by storm with its $35 bras.
So far, the company has raised $8.5 million in funding from investors including GGV Capital, a growth fund that has also backed Slack and Airbnb.
Its bras come in a mix of styles, from bralettes and t-shirt bras to push-up bras and plunge bras, in 26 different sizes. It also recently branched out into swimwear and created a fragrance for women. All these products have set prices: bikinis cost $45, a one-piece costs $65, and its fragrance costs $55.
Its bread and butter is still bras, however, and it prides itself on offering an innovative style that is somewhere between lingerie and athleisure, which the brand has coined "leisurée."
The Lively brand was built on social media. New products were created based on feedback from its Instagram and Facebook followers.
Cordeiro Grant refers to these people as her "community," and the brand is built around their opinions, something that Victoria's Secret lacks, she said.
"Les Wexner [longtime CEO of L Brands, the parent company of Victoria's Secret] was really amazing at teaching us the power of brand storytelling and cohesiveness," Cordeiro Grant said. "What I thought was lacking was the idea of community."
The community is also a reason why the company will never offer markdowns.
"We don't do sales, we don't do markdowns," Cordeiro Grant said. "Our pricing is simple."
Lively doesn't advertise its prices outright. Customers would only find them once they click through the website.
The goal is to build a cult following of customers who want to shop the brand long-term rather than be lured in by discounts in the short term.
"If you have women that love your brand for what it stands for and they are so enamored by the price, they share and shout that for you," she said. "The flipside of that is [there could be] customers that only come to you for the price, and only come back to you for deals."
In the past, Wexner has been vocal about the fact that heavy discounting was an error.
"We abused our brands at Victoria's Secret by promoting endlessly and endlessly," Wexner told Fortune in November 2016. "It's a familiar lament, and it's difficult to wean shoppers off of coupons and deals, deals, deals."
But America's best-known lingerie chain is by no means alone here — discounting is an industry-wide issue.
Ralph Lauren, Michael Kors, and VF Corp - the parent company of brands such as North Face and Timberland - have all said that they want to scale back on discounts and in doing so, will be retreating from off-price and department stores.
In August, Ralph Lauren CEO Patrice Louvet said that discounting was damaging to the brand and its profit margins. He said shoppers would only spend money on "exciting" apparel, and "exciting isn't selling a generic product with more and more discounting."
Cordeiro Grant uses Ralph Lauren as an example of why she built Lively to avoid discounting.
"In the '90s, Ralph Lauren was huge, and when you put on his polo shirt you felt something. Now with markdowns, sales, and dilutions, brands have really lost their brand equity," she said.
By not following trends and instead sticking to core products that outlive each season, Lively's products don't have as much pressure to be discounted at the end of the season to clear stock.
"We are not hell-bent on blowing up in the fourth quarter, and we're not sweating over Black Friday," Cordeiro Grant said. The business model aims to be more consistent.
To prevent any excess inventory, which could be vulnerable to markdowns, new products are rolled out in small batches. And since its supplier is an investor, Lively has more flexibility to use a "read and react" process, she said.
Cordeiro Grant is so adamant that the company will never offer markdowns, she says that in any case when a markdown could happen, the bras would instead be donated to a nonprofit.
"We would rather give a product back to the community in its full-price state than have it go through those channels of distribution and have it end up in a bin," she said.
Lively is now testing pop-up locations around the US and working out how to launch into physical retail. For the moment, it's in a test phase and willing to try whatever it can, and that's one of its biggest advantages.
"Victoria's Secret is the Titanic on the ocean, the most beautiful ship, but when it comes time to take a turn, it takes forever. We are a seagull in the water — we can hit waves, we can flex, and dive," she said.