Goodbye for Nau

It is with a heavy heart (though FAR from a discouraged one) that I share with you, and I am sure I am not the first, that Nau, Portland based sustainable retailer, announced on Friday, May 2nd, just 14 months after launching the business, that they will be ceasing operations. Read below for more details from the Oregonian.

May 2, 2008:

Portland-based retailer Nau closes after 14 months

“Shortly before noon on Friday, the Portland company posted on its Web site a statement, ‘Goodbye for Nau,’ indicating it was ceasing operations. In near indignant language, company officials blamed its failure not on its ambitious business plan but on tight U.S. credit markets

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‘At this time, investors are loath to invest in anything; especially, it appears, a company like Nau that has the audacity to challenge conventional paradigms of what a business should be,’ the statement said.

Industry experts and local venture capitalists said the company also suffered from a flawed business model and possibly missteps along the way. Nau’s plans, mostly rooted in the name of environmental stewardship, ate through lots of cash, required an ambitious rollout of stores and relied on consumers to change their shopping habits, critics said.

Its closure casts a pall on Portland’s drive to be a leader in sustainable business practices, something Nau had come to symbolize nationally.

‘It’s not a good day for Oregon, actually, said Mike Edwards, former CEO of Portland-based apparel retailer Lucy Activewear. ‘Portland is the activewear apparel capital globally. A lot of new companies are moving in to take advantage of that labor pool. We don’t need to scare them.’

In an interview, Nau vice president for marketing Ian Yolles declined to say how much Nau fell short of its fundraising goals. The closure will eventually put 60 people at Nau’s headquarters in the Pearl District out of work. It also employs 35 in its five stores, which include one opened less than two weeks ago in Los Angeles.

‘It doesn’t mean the ideas we’re associated with are unattainable and it doesn’t mean they aren’t important,’ Yolles said. ‘There’s an urgency for businesses to operate in a way that demonstrates leadership to a sustainable future. But it is a very sad day.’

Yolles declined requests to allow a photographer at its headquarters or Tualatin store.

Nau was founded in 2005 with an all-star management team and board who’d cut their teeth at such established brands as Marmot Mountain, Nike, Patagonia Inc. and Adidas. The company aimed to design and sell clothing made from renewable materials, such as recycled polyester and merino wool, for use both actively outdoors and fashionably out at night.

Its sleek clothing and timeless color palate drew praise on blogs and from local apparel designers. Its green ethic extended to its store interiors, which feature displays made from reclaimed wood and dressing rooms with curtains made from recycled material.

Nau’s green goals and plans to give 5 percent of sales to consumer-selected charities garnered much attention in the media, including Time magazine. Chief Executive Chris Van Dyke and co-founder Eric Reynolds were invited to speak to executives at PepsiCo Inc. and Procter & Gamble and to students at the nation’s top business schools.

But it took $35 million of capital to get through its first year of sales. As it struggled to find new investors, it cut back its planned number of store openings this year from 20 to five. On Thursday, Yolles said, its board decided to shut the company down. Van Dyke did not respond to a request for an interview.

The business had its share of skeptics from the start, not only within the apparel industry but among potential investors.

Nau’s muted branding within its stores and on its apparel limited its recognition among consumers. Its Web site also at times suffered from technical glitches that slowed the shopping experience for consumers. Its clothing was expensive — a pair of jeans cost $138.

By practice, Nau also kept little inventory in its stores, meaning customers often had to have their product shipped to them from a distribution facility, albeit at a 10 percent discount. That fit Nau’s concept for a smaller, lower-cost store footprint. But some retail experts say it didn’t fit U.S. consumer tastes.

‘Apparel is something people have an emotional connection to,’ said Ken Barker, former apparel director at Adidas America Inc. and president of Portland-based venture capital firm Meriwether Capital Partners. ‘When they purchase it, they want to walk out the door with it.’

Nau planned to open 140 stores by 2010, a number that Adidas or Nike ‘probably couldn’t have opened . . . in the amount of time Nau was suggesting,’ said David Howitt, another former Adidas executive now partnering with Barker. ‘It takes a lot of time to find the right real estate, negotiate the terms and get them set up.’

Friday’s closure prompted Marylhurst University to cancel its Economics of Sustainability business networking breakfast May 10, where Van Dyke was to give the keynote speech. The company also is the subject of a short documentary scheduled to air at 9 p.m. Tuesday on the Sundance Channel.”

May 4, 2008: Nau is mourned and scorned as it closes

“As bargain hunters descend on Nau stores and its website, we check the Web for reaction to the Portland company’s demise. Treehugger laments its passing as does Mavericks at Work and Outside magazine’s blog. Word Changing called it ‘the best kind of failure: a smart, creative, energized bunch of people who saw something wrong with the world, thought they saw how to do something better instead, and went for it with everything they had.’

One Nau employee, grateful for his opportunity with the company, nonetheless questions how management handled the closure. Carissa Wodehouse opines on why Nau failed at EcoMetro, citing a line of clothing in ‘forest green, mud brown and a dirty cream. And then they charged 3 times the average for it, consistently marking everything down by 40% after a few months on a beautiful-but-absurdly-large Flash website. … (Nau’s) photos were always of pretty people in the outdoor world, but the prices belonged in urban boutiques. Their Portland store was even in the massive suburban Bridgeport Place mall, alongside stores like Pottery Barn and Anthropologie.’ Murketing thinks it got overhyped.”

Everyone has an opinion here, and some are pretty aggressive. What’s your take? Mine? I think there were a lot of factors involved here, making it impossible to pinpoint any one. There are economics, politics, goals, objectives, overhead, profit margins, growth models, consumer habits, and so many other factors to be taken into account. It was a valiant effort to be sure, and I commend every one that was involved for their creativity, effort and vision. I think the important thing to take away from Nau’s experience is the old saying, “nothing lost, nothing gained. Conventional (read: non-sustainable/green) business models fail every day for various reasons. There are lessons to be learned here, and they are NOT that ’sustainable’ business is impossible. Far from it. Greenloop is here, and we are far from alone. While we do not have $35 million in backing, we’re growing and we plan to keep it up.