Luxury Briefing: Why off-price fashion e-tailer Otrium closed its US operations

The December 28 closure announcement was made to the company’s shoppers, who must log in to browse the site, in an emailed letter from The Otrium Team. According to the email, the move is “necessary for [the company’s] strategic realignment and focus on [its] European home market.” By that time, the site had been wiped clean of all inventory, with its landing pages stating, “Otrium is available exclusively in Europe.” However, according to the email, the company plans to honor in-process orders and returns per its existing policies.

Also on Thursday, the company published a blog post titled, ”Otrium plots path to profitability in 2025.” Along with communicating plans to focus on the European market, it revealed that it had made a “strategic arrangement” to transition its U.S. business to Rue Gilt Groupe, 50% of which has been owned by Simon Property Group since October 2019. At the time of the 2019 deal, Simon announced the launch of Shop Premium Outlets, positioning it — along with Rue Gilt Groupe’s Rue La La and Gilt sites — as the online counterpart to its 70 physical outlet malls. Otrium, meanwhile, has long marketed its “online outlets” of popular brands. Brands that have sold on Otrium’s U.S. site included Proenza Schouler, Bally, Wolford, Diane von Furstenberg and Tommy Hilfiger. Shop Premium Outlets exclusively ships to addresses in the U.S.

In an email to Glossy, Otrium co-founder Milan Daniels addressed the closure, stating that the company had a “successful launch” in the U.S. market,” and has since experienced “significant customer adoption” and “strong growth.” However, “Otrium’s U.S. business was still maturing compared to our European operations,” he stated, adding, “It’s clear the U.S. operations were at an earlier stage compared to Europe. It would have required further investments to continue this strong trajectory.” He declined to disclose specific revenue figures. He also declined to share the details of the Rue Gilt Groupe deal, stating that both parties have agreed to confidentiality. 

Otrium launched in Amsterdam in 2015 and counts Kering Group as an early investor. In 2021, it raised a $120 million Series C round at a $900 million valuation from investors including Eight Roads Ventures, Index Ventures and Bond Capital. It planned to use the funds to support its new U.S. business. 

In this week’s blog post, Otrium additionally reported that it has seen 40% year-over-year revenue growth in the E.U. this year. It noted the “macroeconomic uncertainty and inflation” that plagued 2022, as well as the consumer shift last year to physical retail. But it also shared that the company made “significant investments in technology and logistics” in 2022. That included a made-to-measure packaging machine, allowing for more affordable shipping, and an updated customer experience, offering more scalability, personalization and mobile compatibility.  

The post also announced that Otrium had secured an additional €16.6 million, or $18.35 million, from its Series C investors. And it defined a new goal of full-year profitability in 2025, after first reaching profitability in the fourth quarter of 2024. Otrium has now raised nearly $175 million. 

Finally, the post stated that CFO Frank van Valderen is being promoted to CEO, effective January 1, replacing Zuhairah Washington. Van Valderen was formerly CFO at Dutch e-tailer Wehkamp and, prior, worked in finance at Zalando. New York-based Washington was promoted to Otrium’s global CEO in July, after being appointed the company’s president and COO in 2021. 

A LinkedIn post by Washington on Thursday revealed that she led the effort to secure the new funding, calling it “no small feat during a time when retail tech venture investing is down ~80%+ as capital markets have shifted from favoring ‘growth at all costs’ to placing a premium on profits.” She also noted that she “set in motion” the strategic plan focused on profitable growth in Europe and that she hired van Valderen early this year. 

Washington described Otrium as having a “triple-digit, hyper-growth U.S. business.” However, she said the Rue Gilt Groupe transition was necessary to “optimize capital and human resources,” while focusing on Europe.

Otrium’s U.K. operations have also closed, owed to business challenges associated with Brexit. The region’s dedicated website states, “Otrium will no longer be available for shopping in the UK from December 1st onwards.” In 2021, Otrium reported serving more than 20 markets from three logistics hubs in the Netherlands, the U.K. and the U.S.

Otrium has been quiet as of late. Following daily emails to U.S. customers, its most recent email before the closure announcement was on December 13. What’s more, the latest post on its once-active global Instagram account is from July 18. And its TikTok account, which has 80,000 followers, shows no activity since January 2023.

Considering Otrium’s mission is to help fashion brands “recover value and minimize waste,” according to the blog post, it seems well positioned. Amid rocky economic conditions, brands and retailers have faced sharper shifts in consumer demands. And options for offloading inventory without discounting in owned channels are dwindling. The RealReal, for one, has stopped buying products directly from brands. The fact that Otrium also aims to “redefine how consumers perceive and shop for end-of-season and archived fashion” reflects a familiar challenge. Likewise, resale companies have been working to change consideration of their respective category among luxury fashion shoppers — they’ve made good headway in the past few years. 

As McKinsey reported in 2022, off-price fashion is set to grow five times faster than the full-price segment from 2025 to 2030. In Europe specifically, online sales of off-price fashion, which made up 40% of the segment in 2020, are expected to increase 13% each year from 2021-2025. According to Bain, as reported by the Wall Street Journal early this month, 13% of all luxury goods are now sold through off-price channels. That’s compared to 5% of sales 10 years ago.

In a November 2021 interview with Glossy, Washington described Otrium as training wheels for brands entering the off-price channel. Many brands are comfortable launching off-price through Otrium based on the privacy and control it offers them, she said. For example, the site requires shoppers to enter an email address to access the experience. In addition, brands can opt out of Otrium marketing spotlighting their discounted products. Otrium also allows brands to dictate their products’ pricing and merchandising, and it provides them with data about what is selling and to whom. And finally, the company holds inventory, allowing brands to free up their own warehouse space for new products. Otrium works on a revenue share basis, splitting sales with brands.

At the time, along with being Otrium’s fastest-growing market, Washington said the U.S. was set to become its largest — the company later reported a 500% member boost in the U.S. in 2022. Prior to its U.S. launch, Otrium was selling 300 brands to 3 million members. They shopped an average of three times per year, typically buying multiple pieces during every transaction, and 80% percent of customers shopped through the Otrium app. The company’s total revenue had grown by more than 100% yearly since its launch.

Washington said Otrium’s investors had helped “open doors” to brand partners early on. In 2021, it aspired to be brands’ preferred off-price partner, as well as “the most personalized end-of-season shopping experience.” Expanding to categories including beauty was a goal.

Among Otrium’s board members are Andrew Robb, former COO of Farfetch, and Index Ventures’ Danny Rimer. The company was among Fast Company’s 10 most innovative fashion and apparel companies of 2023.

Earlier this month, U.S.-based members of the r/frugalmalefashion subreddit mourned the loss of “too good to be true” Otrium and its deals of up to 80%. Alternative options they shared included shopping the company’s Netherlands site using a VPN or turning to Shop Premium Outlets.