How Gymshark has scaled like a tech company
Alastair Barlow examines the success story of the British fitness clothing brand Gymshark.
I often write about screw-ups: Jamie Oliver, Patisserie Valerie, HMV, Theranos, Marks & Spencer, Pizza Express, Heinz, etc. After all, we learn most from mistakes – and learning from other people’s mean we can hopefully avoid making them ourselves.
However, this time I want to write about a company that’s doing things well, a company that has an inspiring story, and hopefully one we can also learn just as much from - Gymshark.
Gymshark caught my eye in the Sunday Times Rich List 2020 in May. Its founder, Ben Francis, was number six on the Young Rich List with a self-made fortune of £138m, just one place below Ed Sheeran (£200m) and a couple of places above Daniel Radcliffe (£94m). Francis was only 27 when he appeared on the list.
Despite this, I’m willing to bet some readers have never heard of Gymshark. If not, it’s a fitness apparel and accessories brand, manufacturer and online retailer based in the United Kingdom that targets millennial and Gen-Z gym-goers. Gymshark revenues more resemble a tech company than a clothing brand: in their most recently filed annual accounts, the fitness apparel company reached £176m (in only a few short years) and boasts current revenues of $300m.
So rather than a story of what went wrong, this is a story of what’s going right. I hope you take as much from this as the screw-ups I’ve mentioned before!
Source: Gymshark annual accounts
So, where did this £200m business come from? Well, like all good stories, it started in a garage. In 2012, Francis was a full-time university student at Aston University. In between his studies and job delivering pizzas, he’d either be in the gym or working on Gymshark.
The business actually started by selling supplements via a drop-ship model, a relatively low-cost way to start an ecommerce business without holding inventory. As soon as someone clicks on your website, it sends the fulfilment details to the drop-shipper, who then delivers on your behalf. Essentially, you are a marketing company.
Once he had some money from this, he spent £1,000 on a sewing machine and screen printer, learnt to stitch and sold made-to-order t-shirts from his garage. When Gymshark’s revenue reached £250,000 Francis quit his job as a pizza delivery driver and dropped out of university to focus on Gymshark full-time. A bet that’s certainly paid off!
In 2016, the company was named the UK’s fastest growing in The Sunday Times Fast Track 100 and in 2019 was ranked No. 1 in The Sunday Times International Track 200 Awards.
There are some uncanny parallel’s to Daymond John’s FUBU story (now investor on Shark Tank – the US equivalent to Dragon’s Den), albeit modern-day social media platforms replace word of mouth and hip-hop videos that propelled FUBU forward.
Some of the similarities include learning to sew from family members, working in a part-time food outlet while starting the brand, selling to a niche audience, drawing in friends and starting with screen-printed t-shirts. And in both cases, it was a trade show that really got things going.
While Peter Drucker may (or may not) have said “culture eats strategy for breakfast”, he didn’t mean strategy was unimportant, rather a powerful and empowering culture was a surer route to organisational success. I think it’s safe to say both are present and in equal measures at Gymshark. But what I really want to focus on here is their strategy and how they grew a product-based business so quickly, from nothing.
A customer-focused strategy
Back in 2012, influencer marketing was only just getting started and it was the best way for Gymshark to compete against the big boys. The brand is very focused on its target market of 16-24-year olds and have always driven interest in its product through social media platforms such as Instagram, YouTube and TikTok.
Early on they partnered with key people in the fitness industry, paying them to promote Gymshark to their online followers. This content helped fuel the brand by sharing it with their audiences, but it also created great content for Gymshark to utilise themselves.
They further invested in influencers, as they created lines for them which further enables them to connect with an influencer’s followers while increasing conversions from their social traffic.
Experiential and nimble
While good e-commerce brands connect and develop relationships with their customers online, the better ones are complementing this by creating offline experiences. Gymshark stopped doing tradeshows and instead transitioned to creating their own pop-up shops. These shops enable Gymshark to create similar experiences like they used to at tradeshows while bringing their team of athletes to meet fans face-to-face.
And of course, the huge advantage of being an online-only DTC brand is that they’ve been able to remain nimble and react quickly to market changes. Being online and popping up stores means they’ve not weighed down by high operating costs of expensive high-street stores.
Metrics that count
They say, “revenue is vanity, profit is sanity and cash is king.” The same can be said for some other categories of metrics. Many companies chase follower numbers, but engagement is much more important to Gymshark than just the volume of followers. Engagement ultimately buys from you and so directing a strategy towards engagement rather than volume has been their approach; through building lasting online relationships with the people who promote their products and taking a long-term approach with the athletes they work with.
An infrastructure for growth
Building a team
To begin with, Francis was involved in everything to do with the business; designing logos, creating products, designing how the website looks and how the drop-shipping system worked. He would arrange all the expos and be fully involved in the customer experience. And rightly so, that’s how you gain valuable customer feedback to continually iterate the business. In his first 2 years, he would pride himself that he could do any job better than anyone else. It’s an exciting stage of a business, particularly for a creator. However, having the maturity to realise this created a bottleneck and a single point of failure, he realised it was no longer feasible to continue like this with his growth ambitions.
In his words, one of the most fundamental points in Gymshark history was the need to employ people better than he was. This is the first step. The second step is to actually implement and ‘let go’.
Finance function expertise
One area that is often more complex than others is the Finance function. I’ve seen a number of fast-growth companies that are supported by a young (read relatively inexperienced) CFO that doesn’t look far enough ahead at where the business is going to fully support it (just look at the Heinz share price fall!).
Gymshark, on the other hand, seems to have really got that one nailed. They hired Philip Daw, former Daw White Murrall senior partner of nearly three decades as their CFO. Daw was appointed CFO in April 2019, having worked with the business since 2015 when revenues were ‘just’ £9m. Meaning he already had experience with Gymshark so there was an element of continuity in the finance function.
This is a pivotal moment for a business that’s outsourced its finance function; when and how to change the finance operating model to become more appropriate for size, complexity and ambitions. It’s hard for an accounting firm to give up fees but knowing your own limitations is important for your team, your client and your reputation.
A well-controlled finance function is important in any business, but a business that is growing at the pace Gymshark is absolutely vital. Equally, balancing that with delivering the insight they need to make the right decisions on a daily basis is fundamental, so the processes also need to be as slick as possible. All things you would expect a veteran finance expert to bring – a smart move from the Gymshark team.
CEO vs CBO
As well as the realisation of no longer being able to do everything, there is also a point when someone else can do what you have been doing but better. A founder may have taken the business from an idea to a £1m or even £10m business, but that doesn’t necessarily mean they have the skills or passion to lead the business to £100m revenue or more. At Gymshark, Francis decided to keep doing the things that excited him and to find others to help the brand to continue to grow at a fast pace.
While still majority owner, Francis is no longer Gymshark CEO; he decided the role requirements didn’t suit what he was looking for and so hired Steve Hewitt into that role while he took over as Chief Brand Officer. This means he can focus on what’s coming tomorrow leaving Hewitt to focus on today. Play to your strengths and your passion, hire others to do a better job than you.
It wouldn’t be one of my articles without identifying something in the business. While this is an incredible success story and definitely a celebration of adopting leading practices at the right time, I can’t help but wonder how and why Gymshark went from £103m revenue in 2018 with an operating profit of £18m to making only an additional £1m in operating profit from a further £73m revenue! That’s a lot of hard work for only another £1m operating profit.
Looking at the financials, gross profit took a hit as did distribution costs relative to revenue. This could have been a ramp-up in international sales taking effect and higher costs to ship internationally. The pains of growing a business internationally! Overall, this is a Great British success story and for me an inspiration to see a challenger brand doing so well.
One of the major take-aways from this story is about building a robust foundation early on to grow into; whether that’s people, processes or technology. It’s so important to get the balance right and not have other functions try to play catch up with sales, as ultimately that will stifle growth, innovation, creativity and value.
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Alastair is founder and Chief Dreamer at flinder. flinder provides accounting, consulting and rich real-time management information for growing businesses. As well as his work with fast-growth businesses and transforming finance functions, he writes for AccountingWeb in a monthly column, sits on the ACCA Practitioner's Panel Network and was...