Up, up, and Away: the luggage upstart taking on industry giants

02 Jul Up, up, and Away: the luggage upstart taking on industry giants

On my recent vacation to Italy, I played a little game: Whenever I was passing time, drinking a macchiato at a café or resting my feet after a day at a museum, I tried to spot luggage made by Away, a brand that launched just two and half years back.

It didn’t take long–they were everywhere. The wheeled hard-shell suitcases have rounded edges and horizontal grooves and come in some eye-popping colors. In Verona, I noticed an elderly gentleman pulling a dark green one. In Florence, tourists had black, white, red, and yellow Away cases in tow. Back home, the Atlanta airport had so many that I lost count. And even in my local Tallahassee, Fla. airport,  I noticed a young woman wheeling a blush pink Away cheerfully covered in stickers of hearts and dogs.

Given that Away didn’t even exist before 2015, the results of my surveying mission were impressive. The 30-year-old founders behind the brand, Steph Korey and Jen Rubio, met as co-workers at Warby Parker, where Korey ran the supply chain and Rubio was head of social media. They quickly bonded over their mutual love of travel and their struggle to find an affordable suitcase that didn’t easily fall apart. (I noticed several poor travelers schlepping broken luggage on my recent vacation; it wasn’t pretty.)

It seemed to the pair that you could either drop $1,000 for an indestructible Rimowa suitcase, or buy a $100 one whose wheels would eventually give way—but there wasn’t a more affordable yet durable option in-between.

“Nobody we knew really loved their luggage,” Rubio says. “That seemed strange to us. There wasn’t a brand that really spoke to consumers, or that they felt loyal toward.”

They saw an opportunity to break into the $32 billion luggage business with a direct-to-consumer online brand millennial consumers would embrace. Given their complementary skill set in operations and branding, they decided to quit their jobs and founded Away with just four employees in a small New York office.  They raised $2.5 million in seed funding from investors like Forerunner Ventures and Accel partners and  spent a year building Away, with Korey as CEO and Rubio president and chief brand officer.

RELATED: Why heritage brand Rimowa thinks you need a $1,000 suitcase

In January 2016, they launched with one product, a hard-shell carry-on suitcase in four colors. It was priced at $225 (which, for reference, is about half the price of Tumi, on par with Samsonite and double American Tourister) and came with a lifetime guarantee. Success came quickly with 300,000 suitcases sold the first year. The cofounders say they are already turning a profit, a remarkable feat for a fast-growing, venture-backed startup.

“The whole game changes when you become profitable,” says Daniel Gulati, partner at Comcast Ventures, which contributed to Away’s recent $50 million Series C funding round. “Away’s business model is, by definition, viable and sustainable. I can’t think of one high profile VC failure where the startup was actually turning a profit.”

Away they go

It’s hard to capture how fast Away is scaling. The brand is making inroads in Europe, setting up a dedicated team, creating call centers, and launching marketing campaigns in London, Berlin, Paris, Milan, and Copenhagen.

It has partnered with dozens of collaborators, like celebrities Rashida Jones and Karlie Kloss, the NBA and even the movie Minions, on limited-edition suitcases—introducing Away to consumers of varying ages. Its product line now has larger luggage ($275-$295),  garment sleeves ($65), and other pieces that sell online and from its new brick-and-mortar stores in New York, Los Angeles, San Francisco, and Austin, with six more to come this year.

If that wasn’t enough on the startup’s plate, Away dived head first into becoming a media company with    a print magazine and podcast series focused on travel. The whopping $50 million it just raised comes with its opening 56,000-square-foot headquarters in New York’s Soho, where it expects to expand to 249 employees in five years.

This head spinning growth begs the questions: What’s the secret to Away’s success—and can it continue to scale at this fast clip to keep pace with the expectations of investors, who have now poured $81 million into the company?

There are some inherent challenges to selling luggage on the internet. This was  made obvious when Raden and Bluesmart–startups that launched around the same time as Away–recently ceased operations, leaving investor out millions of dollars.

It’s expensive for digitally-native brands to build awareness and gain customers. Brands spend millions of dollars on Facebook and Instagram ads. In Away’s case, it also advertises on billboards, TV, and even TSA security trays.

And while a successful online fashion brand, like Everlane or Allbirds, can sell new items to a customer season after season, luggage companies are limited in terms of how much they can sell their customer: If Away does its job right and makes a solid suitcase, a customer should only need one in their lifetime—or at least every decade.

The economics of selling luggage online are tricky. Take it from Josh Udashkin, Raden’s founder. “If you’re lucky, you’re able to sell your customer a checked bag in addition to the carry-on,” he told me, when discussing the demise of his company. “But how many suitcases can urban millennials possibly store in their tiny apartments? Since you’re limited in terms of how much you can sell existing customers, you spend all your time trying to market to more and more consumers: It’s a never-ending cycle.”

Larry Lein, a former Tumi executive who just launched his own luggage startup called ROAM, points out that Raden and Bluesmart had other problems besides profitability. Both brands emphasized their tech features, like GPS tracking, digital weighing, and phone charging, which Lein believes customers didn’t really care about. And they were crippled when airlines banned built-in batteries in suitcases for safety reasons.

“Do travelers really need to fill their bags with heavy electronics to track their bags, when airlines are already offering bag tracking on their apps?” Lein wrote in an email. “The problem that these startups had was that they were offering a package of benefits that a broad range of consumers ultimately didn’t want.”

Luggage as fashion statement

Strong unit economics is something Away’s founders built into their business model, Korey says, and the brand doesn’t need to keep selling the same  customer more products to turn a profit. “One thing we are very intentional about is building a product and marketing system that allowed us to be profitable on the very first order,” Korey says. “So, for us, it didn’t matter if the customer was ever going to come back and buy something else from us. That was something we very intentionally built as the financial foundation of this business.”

But make no mistake: Away is not resting on its laurels. The has developed what it calls a “travel uniform” consisting of all the products a person would need on a trip—everything from toiletry bags—to packing squares and garment bags that fit into suitcases. The intention is to outfit the customer with a full set of Away gear. “Throwing out other travel predocts is a really fun opportunity for our customers to re-engage with us,” she says. “So even though we were economically profitable on the first order, we’re seeing a lot of repeat purchases on top of that.”

Lein believes these millennial-focused brands have changed the way that customers relate to their suitcase. It’s not just something to put your stuff in—it’s a fashion statement. “The notion that luggage is a durable commodity that only needs to be purchased when it wears out is an outdated concept,” he says. “Travel accessories … are a reflection of the traveler’s personality every bit as much as his or her suit, shoes, or watch.”

Away is hoping that loyalty to their brand will turn its customers into fans of its media properties—its magazine, Here, and podcast, Flight Mode—and open consistent new revenue streams beyond e-commerce sale. The glossy high-end mag is professionally edited with travel pieces s and photo essays and retails for $10 online. Brands like Glossier, Malin+Goetz, and La Colombe have all taken out full page ads in the magazine. A recent story about Sri Lanka was sponsored by Cathay Pacific—keeping with the kind of monetization strategy of other media companies.

The sky’s the limit

“The way we looked at it, we just wanted to tell stories,” Rubio  says of its media moves. “The worst-case scenario was that we would have a really cool brand swap, and the best-case scenarios was that it would become its own revenue generating part of the business, through advertisers. And what we’ve seen is that it is bringing in revenue, so it’s something  we’ll continue to build out.”

It’s all in keeping with the original goal Korey and Rubio had of creating a brand with buzz that resonated with adventurous millennials who loved to travel. “When we were fundraising, we walked out of a lot of investor offices being told no one cares about luggage, which was true,” Korey recalls. “At the time, the industry was so outdated. Prominent companies in the luggage space had been around for a long time and hadn’t given thought about millennials as a potential audience.”

There were some luxury brands, like Louis Vuitton and Rimowa, that tried to capture the romance of travel, but they were too expensive. Established brands like Samsonite and American Tourister tended to focus on functionality. Away’s founders saw this as a massive missed opportunity.

“We’ve seen millennials shift their purchasing power from things to experiences, which means they’re inherently traveling more,” Rubio says. “Older companies didn’t pick up on this.”

With the new influx of $50 million, Away is poised to become even more of a household name. Investor Daniel Gulati, who has been pumping cash into the brand from the beginning, believes Away’s potential market is far bigger than it seemed just two years ago. The United States represents only about 20% of the total number of potential consumers around the world who are keen to travel and can afford a $225 suitcase. Hence the shift to sales in Europe and, one day perhaps, Asia.

What has set Away apart from competing are those plans by Korey and Rubio to be more than a quality a luggage maker but to be a travel platform, Gulati continues. “It was very clear that they started with a blank slate when it came to the physical product,” he says. “They were really interested in following the customer, asking them what they want, and building them what they would buy. When you think about bookings, trip management, and hotel stays, there’s a lot that Away could do now that they have built this trusted aspirational brand.”

Korey and Rubio have more busy days ahead and will feel the pressure to live up to investor growth timelines and revenue expectations. For now, it seems that for Away, the sky’s the limit.

Source: Fast Company