Fubu Sells 'Cool' Online - and Hats, Too

Baldwin Louie — Mon, 08 May 2000 15:00:00 -0700

Fubu cofounder Daymond John has a killer view of midtown Manhattan from his 66th-floor office suite in the Empire State Building. But on a recent Wednesday afternoon, that view was mostly blocked by racks of Fubu's fall 2000 clothing line, which will be featured at an upcoming fashion show. John's gaze never wanders from inside the office where workers buzzing back and forth thrust Fubu fashions - oversized shirts, beefy leather jackets and baggy jeans - into his field of vision, seeking approval.

Fubu - or For Us, By Us - is operating the way a fashion house should on the eve of a big show. It's a pace the typical Internet startup might find exhausting. But it's business as usual for John, a 30-year-old fashion mogul eight years removed from his humble beginnings in Queens, N.Y. A former Red Lobster waiter, John first caught the fancy of the fashion world in 1992 with his hand-sewn knit caps made popular by neighborhood pal and rap star LL Cool J. In the '90s, Fubu became the quintessential street-fashion brand - an invaluable designation in an industry defined by "cool."

Fubu has a homespun mystique, though, that has endeared the brand to professional athletes Kevin Garnett and Terrell Davis, rappers such as Sean "Puffy" Combs, and lately, Hollywood types. In April, Michael Ovitz's Artists Television Group struck a deal with Fubu to coproduce TV shows and music videos. There is also speculation that Fubu will launch a hip-hop record label. Given that Fubu is starting to look a lot like a media company - a notion John dismisses - the Internet seems like the logical centerpiece for Fubu's future.

Yet John is cautious. The company is taking its first steps into e-commerce this week. Fubu.com will feature hats, belts, footwear and women's apparel, some of which will be sold exclusively online. John isn't convinced that e-commerce is the key to transforming the $850 million company into a multibillion-dollar brand.

He can't help seeing obstacles to his e-commerce play. First, retailers still don't look kindly on manufacturers that sell products directly to consumers on their Internet sites. Second, Fubu's core market is urban GenY, the majority of whom are African American, who prefer to touch and try on clothing before making a purchase. "There's a certain I-want-to-shop-this-way [attitude] that you can never take out of people," says John. Still, he adds, e-commerce is worth the effort. "It's a learning experience."

A large segment of the fashion industry shares John's uncertainty. Fubu's larger competitors, including Nautica and Tommy Hilfiger (TOM), have adopted even more conservative approaches. Though their core demographic - teens - hangs out, shops and plays online, neither Nautica nor Hilfiger has staked much of a claim on the Net. You can't buy clothes on Tommy.com, for example, although you can purchase copies of Hilfiger's two books on style there. Levi Strauss has given up on e-commerce altogether. Ralph Lauren and the Gap are the exceptions, investing heavily in e-commerce. But otherwise, the fashion labels aimed at younger generations have used the Web entirely as a marketing outlet, turning their sites into virtual jukeboxes and repositories for old ads. But they've done little online to impact their bottom lines.

ATT (AWE) Wireless' IPO - the biggest in U.S. history - was a huge financial victory for the company. But it's just one step in the telco giant's master plan.

AT&T raked in more than $10.62 billion on the IPO, but that money won't solve all of the company's problems. Like all telecommunications companies, AT&T is desperately trying to turn its aging, outdated networks into a high-speed Internet platform. Soon it will take the wraps off its secretive Internet platform project, code-named OneComm, which would mark the first phase in the creation of a single, unified platform for all AT&T services.

This would be a step toward what has become the Holy Grail of networking: unified messaging. Shane Robinson, the company's new chief scientist, and his team are responsible for tying together e-mail, instant messages, voice-mail and other messaging services. Robinson says he hopes that voice-to-text technology would make it possible for users to get voice-mail via e-mail and vice versa. If AT&T could pull this off, it would become a formidable competitor to Web-based startups such as Onebox that are trying to bring unified messaging to the Internet.

One might think that the telecom industry - the Net's foundation - would be among the most Internet-savvy of businesses. But though you can order cars, books or just about any type of goods and services online, you still can't order phone or data services online. That's mostly because, if you looked under the hood of a big telco like AT&T, you'd see a tangled mess of systems that don't interconnect, that can't talk to each other and that have antiquated customer-support systems.

"(Traditional) networks have evolved for so many years that they are pretty confusing," says Inder Gopal, VP of Internet architecture at AT&T Labs. "They are not modularized, don't have clean interfaces, and customer data is stored in, like, 16 different places."

AT&T's modernization attempt will take years to pull off, but fueled by the new wireless spin-off, it could reshape that tangle of unrelated networks into a coherent whole. The project dates back to 1995, when AT&T brought together a small group of researchers in its research lab to figure out how to drag the company onto the Internet. The group was headed by Dado Vrsalavic, who helped get AT&T WorldNet, the company's dialup Internet service, online. The group came up with an Internet platform called Geoplex - but not long after its completion, the team disbanded.

"The last group of guys AT&T had working on this included a lot of academics who wanted to fix the world," says Hilary Mine, an analyst with Probe Research. "It's great to have big-picture thinkers like that, but then you need someone who can make it work in the real world. My big question for the Geoplex people was always, 'Great, but what's the business model?' "

AT&T thinks that Shane Robinson is the guy who can make it work. Robinson, the president of Internet technology and development for AT&T, comes to AT&T from Cadence, where he was responsible for putting together giant software projects. "This is something that's been percolating within AT&T for a while," he says. "Rather than force [AT&T units] to move to this new platform, we're tailoring it for them."

One drawback to the unified model is certain to be security concerns. "Who controls the data? Where will it reside?" asks Rolf De Vegt, an analyst with Renaissance Worldwide (REGI). "Security-minded companies won't want to give up control to AT&T."

And it will be a long time before AT&T can truly move all its businesses, which range from wireless to phone to data services, to the new Internet platform. The company is still supporting networks that are decades old, and those aren't going away anytime soon.

But a $10 billion IPO should cover a lot of network rehab.

Exactly the opposite is true of Lands' End, the catalog company whose preppy, conservative fashions are favored by suburbanites. Lands' End has ridden an "uncool" brand to a reported $138 million in Web sales for fiscal year 2000 - making it the largest apparel merchant on the Net. It's immune to channel conflicts, but it also has a no-frills site, devoid of pop-culture flash and long on products for sale.

John is taking a different tack and is hedging his e-commerce bets. Fubu.com won't be his only online outlet. He will also sell Fubu goods on Y2G.com, a black news and entertainment portal that Fubu launched as a separate business unit in December. John's unconventional twist: Fubu items will appear alongside apparel by Tommy Hilfiger and Nautica. At least that's what John and his Internet strategist John Copen are planning, although they haven't approached either company yet.

"If Nautica decides they want to move their product to our clientele [through Y2G], we don't have a problem with that," says John. But would a fashion label seriously consider advertising and selling its product on a site backed by a competitor? Neither Nautica nor Tommy Hilfiger would comment by press time.

While most fashion sites use music and videos as a marketing hook, they tend to be pretty lame. Y2G, on the other hand, is a robust portal that caters to Fubu's core demographic with a broad range of content ranging from rap concert reviews to financial columns. (One is titled "Bull %#$&, Wall Street Shouldn't Be Confused With White Street.") John notes that the entertainment content typical of most fashion sites isn't enough to sustain a loyal following. If users can go to a site for everything from insurance policies to information on black colleges - both of which are available on Y2G - then there's a greater chance they'll return, according to John. "We want [Y2G] to be a whole lifestyle. We want you to come in there and find whatever you need."

There's plenty of interest among companies looking to tap into Fubu's cachet as a hip, urban brand. Last month, telecommunications outfit IDT (IDT) took an undisclosed minority investment in Y2G. John says the investment will let Y2G's visitors make local and long-distance phone calls over the Net. John has also started lining up advertisers (Nokia has committed; a deal with Mercedes Benz is in the works).

Y2G has other possibilities, too. The company is looking to parlay its friendships with sports and Hollywood into a site-building business. Copen says it's developing 19 sites for pro athletes, movie directors and entertainers to host them on Y2G. (He would not disclose their identities.) Perhaps to draw celebrity interest in Y2G, John adds he is considering spinning off the venture in an initial public offering. "But this is a bad time to talk about that," he says, alluding to the recent market downturn.

Copen and John are confident they've created another cultural phenomenon with Y2G. John explains that "Y2G" is Ebonics shorthand he coined a few years back to reflect his hopes for a prosperous year 2000. (It's "G as in money," he enthuses.) And, thanks to hip-hop radio stations, the term is sweeping some parts of the country; every time someone mentions the term "Y2G" on air, John sees that as a plug for his site.

"There's so much free advertising out there," says John. "It must be mentioned 3,000 times a day on the radio across the country. We just really have to find a way to tap into that." Then maybe Nautica and Tommy Hilfiger will buy into Fubu's pitch.

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Fubu Sells 'Cool' Online - and Hats, Too