From Tees to Rompers
Utah native Rachel Nilsson was just 19 years old when she started her first clothing company. It was so successful that she couldn’t keep up with production – even after hiring a seamstress to help out. Rachel ended up walking away from the business.
Years later, as a stay-at-home-mom whose family needed financial help (her husband was in graduate school), Rachel decided to sell her kids’ old clothing online. When she noticed that the best-sellers were pieces she had handmade, she had an idea: a baby and toddler romper that could be pulled off from the neck down – instead of having to deal with snaps and a squirming baby. She created a prototype with one of her husband’s old t-shirts and noticed that the elastic and flexibility in the neck made it easy to take off for diaper changes.
Because she didn’t want to have to do the sewing anymore, she signed on with a manufacturing firm in Los Angeles. In a little more than a year’s time, she brought in $792,000 in sales, mostly online. Since she had been doing so well, she needed cash to help fund her inventory costs. With promising sales and a brilliant product in hand, Rachel debuted her company on the 19th episode of Shark Tank’s 7th season.
Her pitch? $200,000 for a 10% stake in her company, Rags to Raches.
Rachel Wows the Sharks
Shark Tank Season 7 Episode 19
Rachel knows her company is doing well and she wants to see it continue to grow, but she’s having trouble deciding whether or not to push into retail as she’s afraid competitors will knock off her design. She’s killing online with a strategy to introduce limited edition designs, and driving her Instagram followers to her website by promoting the limited offerings. She has a healthy profit – $280,000 – with the purchase price of her rompers ranging from $37-$49, and an average production cost between $7 and $10. She tells the Sharks she needs money to pay for inventory costs.
Rags to Raches has had incredible success online, but Rachel keeps changing her mind about whether or not she wants to move into wholesaling with retailers. Mark doesn’t like that she’s so indecisive, so he drops out. It seems that Rachel knows there’s an opportunity to make money by branching out into retail, but she’s (understandably) worried about knockoffs. While she has a strong brand, she’s not protected from competitors trying to copy her concept, and they could do so at a much lower price point, around $19.99 per item.
Daymond puts forth an offer that would allow Rachel to make money by licensing her clothing, but it would involve creating a sub-brand for retailers while continuing to sell her existing brand online. Daymond’s offer is $200,000 for 20% of the business. Lori admits she would have made the same offer as Daymond, but she says that Daymond does it better. She’s out.
Then Kevin and Robert make identical offers that wouldn’t force Rachel to knock off her own brand. Kevin wants to put Rachel’s items on his Something Wonderful platform, which includes mostly wedding and engagement products, but sells to a user base with kids, as well – so Kevin sees an opportunity for her there. Robert has a platform called Tipsy Elves and would like to put her products there. Rachel is familiar with Tipsy Elves and says she follows it. She asks Robert if he’ll accept a 15% stake instead of 20%. After a bit of hesitation and haggling, Rachel and Robert strike a deal at 15%.
It’s not entirely clear why Rachel chose to take Robert’s offer since Tipsy Elves – primarily a holiday apparel company – has only $15 million in annual sales versus Something Wonderful’s half a billion sales every year. It could just be that he was willing to negotiate his equity down by 5%.
Rags to Raches Today
Not even a month after her appearance on Shark Tank in February 2016, Rags to Raches’ sales quintupled. They had so many orders they had to hire a fulfillment company, and more than 100 retailers wanted to sell the rompers.
Curiously, the deal with Robert didn’t actually go through. In the end, none of the partners offered what felt like the right deal for her. Instead, she’s been able to grow her business strictly through word-of-mouth and her highly successful Instagram account, which has over 271,000 followers. (It also doesn’t hurt that huge publications like Forbes, Vogue, People, Us Weekly, and Huffington Post have picked up her story.)
The Rags line has grown to include tees, dresses, and accessories, and there are even products for adults available on the website. In December 2018, a venture capital company put up $1.5 million, and that allowed Rags to move away from an online-only model and get her products into various retail locations. Soon, Nilsson will be able to get closer to her goal of expanding the brand into the national marketplace, especially since Nordstrom now carries Rags items, and she now has a deal with Disney.
Rachel has stuck with her tactic to provide limited quantities of items that are exclusive to the website. That strategy has led to increased engagement on Instagram because followers have to pay attention so they know when to shop for Rags’ unique items. Although Rachel’s appearance on Shark Tank greatly contributed to her exposure, her adept use of Instagram as a sales platform has helped to drive customer loyalty. Followers see the Rags founder as authentic, passionate, and inspiring, and their experience with her products reinforces that she’s selling high quality and fashionable items.
To Rachel’s legions of Instagram followers, there’s also the undeniable pull of a story that could happen to them. She’s a mom – just like them – but she’s also living an increasingly rare version of the American dream. She started with nothing, and now she’s on top of the world. She got there using nothing but her own talent, her own ingenuity, her own creativity and her own dedication to her dreams.
It’s a literal rags-to-riches story, and don’t we all deserve to be so lucky?
Disclaimer: The information provided in this article is strictly informational; SEO Insights is not affiliated with Rags to Raches, SharkTank, or any of its subsidiaries.
