Virtual clothes: Ukrainian women created a successful company selling non-existent outfits

Founded by Daria Shapovalova and Natalya Modenov, DressX has grown over the years into the world's largest digital clothing store and is now worth millions of dollars. Edition "Economic truth" told the story of the startup's success.

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In early July 2021, a startup founded by two Ukrainian women Dress X attracted the attention of Western venture funds and received $ 2 million in investments.

We are talking about an online store, the innovation of which lies in the creation and sale of virtual clothing.

In just a year of operation, its assortment has grown from 35 to 1500 positions, making it the world's largest digital clothing store with a capitalization of $ 6- $ 15 million.

How DressX was created, what is the business model behind this business, and how Gen Z behavior contributes to it.

Who are the founders

DressX startup in August 2020 was launched by Ukrainian women Daria Shapovalova and Natalya Modenova, who have been associated with the fashion world since their youth.

After graduating from the Institute of Journalism of the Kiev National University. Tarasa Shevchenko from Kiev Shapovalova went to work on television and immediately, in 2007, became the host of the author's program "Fashion Week with Daria Shapovalova" at the TRC "Kiev", which she hosted for seven years.

In the field of fashion, she was interested in the business of the fashion industry, and that is what she was trying to cover in her program.

“At the age of 18, I launched a program, and at 25 I realized that I wanted to leave television, I was more interested in other activities in the field of fashion,” says the 34-year-old entrepreneur.

In 2014, she focused on the development of the Kiev Fashion project, which she founded in 10 together with Natalia Modenova and the Top-2010 magazine. Then Kiev Fashion was the brand under which the company of Daria and Natalia held fashion weeks.

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There, Ukrainian designers presented new collections to participants in the fashion industry, in particular to buyers who form an assortment of stores, famous and wealthy people who follow trends in the fashion world, and specialized media.

Darya Shapovalova's Kiev Fashion development was helped by the connections that she established while working on television with influential representatives of the domestic and foreign fashion industry. Shows were funded by sponsors, and designers paid fees to participate in shows.

Kiev Fashion quickly became popular in Ukraine and abroad. A year later, Mercedes-Benz became a permanent sponsor of the events, thanks to which the fashion week was renamed Mercedes-Benz Fashion Days Kiev. This name, like the sponsorship from the automaker, lasted six years.

During its existence, the project has received the status of the largest fashion week in Eastern Europe.

In 2014, after the annexation of Crimea and the war in the East, the country was gripped by a crisis. He did not bypass the fashion industry either.

People were afraid to invest in Ukrainian designers, so Daria and Natalya created another, this time an international company, More Dash, to sell collections of Ukrainian designers abroad.

“We became profitable very quickly. It seems to me that More Dash was never unprofitable because we clearly understood our market niche and helped designers with business processes,” recalls Daria.

“While developing the company, I read a lot and followed what was happening in the world. Subsequently, I realized that all innovations occur in the field of technology, so I wanted to get additional education,” she says.

Shapovalova applied to Hult International Business School and received an MBA grant at the San Francisco branch of the school. After three years of training, she stayed in the United States and began building her next company.

Startup creation

DressX helps solve the main problem of the fashion industry - overproduction.

From almost every new collection, world designers sell only 40% of clothes, the remaining 60% are given to stock stores in three months. If the clothes are not bought within two years, they throw them away or take them to third world countries.

In recent years, Gen Z (people born in 1997-2010) have been regularly posting content on Instagram and TikTok with a different look. Creation of images requires new clothes and accessories.

“I realized that the world has a huge problem of overproduction of goods, which is strongly connected with people’s desire to produce new content: videos, photos, talk about themselves. We're wearing clothes in all the photos. At the same time, more and more people, especially generation Z, see part of their lives on Instagram and TikTok,” explains Shapovalova.

Back in 2018, Daria and Natalia, who also moved to the United States, registered a company in Los Angeles to operate two experimental clothing stores.

In the store, you can buy clothes, rent them for $ 25- $ 30, or make professional content: short videos or professional photos.

One such store was located on the main shopping street of Los Angeles, Melrose Avenue, and the other was in the Beverly Hills area.

A year later, the startup received $ 100 of "angel investments" (private venture capital investments at the early stage of the startup's development), which were received within a year and a half.

The stores were performing well, so in December 2019 the founders began developing a business plan that would scale with hundreds of stores in the United States. However, these plans were drastically changed in February 2020 by COVID-19.

“In America, everything closed on the same day. Everything was very serious. I realized that we need to do the same, just not offline. People will not go anywhere, and how long this will last is unknown. We realized that if what we were selling resulted in photos and videos, then we had to do everything digitally. That is, without any clothes at all,” she notes.

What DressX makes money on

In early 2020, Yulia Krasnienko, ex-marketing director of the Ukrainian startup Looksery, which was acquired by the American company Snapchat for $ 2019 million in 166, joined the project. Yulia headed product development in the new company.

DressX launched on August 1, 2020 as a website where anyone could purchase virtual clothing.

The process of buying digital clothes is simple: a person visits a website, selects clothes, uploads a photo of the person to be dressed, pays. The 3D DressX specialist receives the photo, “dresses” the virtual things on the photo and sends it to the customer.

The dressing process is now manual, but Daria says the startup is getting closer to creating an algorithm to automate this process. Now the client receives a photo with the purchased "clothes" in 24 hours.

At the start of the project, customers could choose a virtual outfit among 30 available models. They were sent to Natalie by five or six 3D designers who create models of ordinary clothes.

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The price of virtual clothes was formed together with the designers. Under the terms of cooperation with DressX, the designer receives 15-30% of each sale, while his share in physically made clothes is about 30%.

When asked why a person cannot download, for example, a jacket from the Internet and use Photoshop to “dress” it on his photo or apply to a specialist with such an order, Daria replies that it is very difficult to do it with his own hand, and the services of a specialist are more expensive.

Despite the unusual type of services, after the launch, the DressX online store was visited by 15-20 thousand users monthly, Shapovalova notes.

Now the virtual store is visited monthly by 20-30 thousand people. More than 1500 clothing models are available to them. Approximately 40% were developed by independent designers, 60% by designers working in a startup.

The entrepreneur does not disclose what percentage of site visitors use the services of the store, but says that after the first purchase, 15% of customers returned and bought again.

DressX's average bill is $23, 40% of customers are men, 60% of customers are US residents. They are followed by Great Britain, France, Russia and Ukraine.

As the project began to grow rapidly, after three months it received $ 250 in angel investments.

With this money, the startup hired the first engineers who began working on creating a mobile application for iOS. From August 2020 to February 2021, the staff of the startup team increased from three to sixteen people.

In July 2021 DressX signed a $ 2 million venture capital agreement. According to Daria, after that the company received another round of investments, but she did not disclose their size.

Taking into account this round, the entrepreneur estimates the startup capitalization of $ 6- $ 15 million.

What are they working on now

Thanks to generous funding, the startup is growing rapidly.

In August 2021, DressX launched an app on iOS, which includes a subscription: for $ 2,99 per week, the user has access to 35 virtual dresses and augmented reality technologies.

The technology allows you to “wear” digital things on yourself in real time and create videos for social networks. Monthly access costs $9,99, yearly access costs $99,99. Soon, a thousand clothing models will appear in the application, Shapovalova promises.

The startup plans to launch an Android app in 2022. At the same time, DressX is developing an online store function that will allow selling virtual clothes in the form of NFTs.

This technology is based on blockchain technology: the owner of virtual clothes can confirm their ownership of it and resell it.

“Fashion is one of the industries that pollutes the planet the most. We tell all investors that our main goal is to reduce the production of unnecessary things. Such things should only exist on video and photos,” concludes Daria.

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