Rags to Raches

rags to rachesRachel Nilsson pitches Rags to Raches, her line of kid's Rompers, sweatshirts, and tees, in Shark Tank's “Made in the USA Special,” episode 718. Nilsson started the business by selling her kid's old clothes on Instagram when she needed extra cash. She realized the best-selling items were things she made herself, so she started offering her Rompers (a one piece toddler outfit) for sale. The clothes are brightly colored and feature slogans like “duh,” “Bbite sized,” “abracadabra” and more on the front.

She started out in her parent's basement, then moved to a house and hired some help. Before long, she was making over 400 units a week and she got someone to manufacture her products for her. Now she's in a big warehouse with a fulfillment company shipping her kid's clothing all over the country.

Nilsson still markets actively on Instagram. She's gaining accolades along with her ranked one of the top 15 fastest growing companies in Utah, too. Huffington Post called Rags to Raches one of the “top 15 coolest kid brands in America,” and the company is ranked as one of the top 15 fastest growing companies in Utah. Like the other entrepreneurs in this episode, all Nilsson's products are made in the USA.

She likely wants a Shark to help manage her rapid growth. Will a Shark like this rags to riches story?

Rags to Raches Shark Tank Recap

Rachel enters seeking $200K for 10% of the business. She says what started as a side business became a fashion frenzy. She introduces her best selling product, the romper. Parents loved them for style and practicality and they keep buying them because she does limited design runs.

Rachel's kids come in and point at the sharks in the hall; they are wearing rompers and hand out samples to the Sharks. Kevin wants to know how a kid would “have a peepee” and Rachel says you pull the whole thing down. Her customer base is infant to toddlers. The Sharks are impressed when she says she went from being “broke as a joke” to $792K in one year. Profits are $280K. 95% are Romper sales with 88% of sales occurring online. Each romper costs $7-$10 to make and they sell for $37-$50. She's afraid of wholesaling because she doesn't want to cannibalize her online sales.

Kevin says people will knock it off, but she's an established brand and she has lots of fans. Daymond says she has a great following, but it will get knocked off. He thinks they'd sell for $19.99 in the mass market. She has $215K in the bank and needs money for more inventory for her retailers.  So she won't compete with her online sales, she created an exclusive line for retailers.

Mark says she may be the most profitable business from zero on the show ever, but he'd go nuts. He says she's good at designing and establishing her brand, but she's “exceeded my here's the deal quota.” She can't make up her mind about making up her mind; he's out. Robert asks what does she want to do and she says “I want to make money and be Mrs. Wonderful!”

Robert thinks she's authentic and offers $200K for 20%. Kevin thinks she'd fit into the “Something Wonderful Platform” and offers $200K for 20%. Robert compares her to Tipsy Elves – they are online only and doing $15 million in sales. Kevin says his “Something Wonderful Platform” has $500 million in sales.

After a break, Daymond has an offer. He says she should license mass market goods to competitors, so she'd knock off herself to make money on the inevitable. Daymond offers $200K for 20% subject to licensing a sub-brand. Rachel loves Tipsy Elves and she knows people will knock her off. Robert says she should create the brand, then license it.
Daymond says she should make money off knock offs. Lori says she would make the same offer as Daymond, but he's good at it; she's out.

When Rachel asks Robert to go to 15%, he says do we have a deal if I do? Rachel says “we have a deal!” Out in the hall she's emotional and, while holding back tears, says she's proud of herself and her family.

RESULT: DEAL with Robert for $200K for 15%

Rags to Raches Shark Tank Update

Making a deal with Robert launched Rags to Raches into the stratosphere of the children's clothing market. Within a month of the episode's airing, sales went up by five times. When Rachel came onto the Shark Tank, she had four full-time and four part-time employees. Her team was quickly overwhelmed by the number of orders, and she had to bring in a fulfillment company to handle the orders. She had offers from over 100 retailers looking to sell her products.

With Robert's investment and the wave of new sales and interest from the Shark Tank effect, Rachel's team has scrambled just to keep up with the storm surge of sales. She plans to continue to expand her line, and become the “Amazon of children's clothing.” Robert made an investment in Rags to Raches that will have him romping all the way to the bank.

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