By Dennis Yang, May 28th, 2009 - 11:05 AM

Despite the recent downturn in the economy, Serena & Lily, a home and baby decor business, continues to grow — their business has grown 65% year-over-year, driven largely by the growth of their direct-to-consumer business, which has grown 220%. I had the pleasure of chatting with Lily Kanter, co-founder and CEO of Serena & Lily, about how their company was faring this year.

In 2003, Serena Dugan, an artist and textile designer, met Lily Kanter, an owner of a baby boutique, and founded their company, Serena & Lily. Their first line of products was a crib bedding line, and launcheSerena & Lilyd 8 months after the founding of the company into 400 specialty stores nationwide. Now, years later, they have grown to 32 employees and expanded their product line to include well-designed children’s furnishings and bedding for whole family.

Kanter theorizes that people aren’t consuming as much at the shopping mall these days; instead, they engage in “stealth shopping” at home, which is much less conspicuous. Seeing these trends, Serena & Lily is spending its marketing budget primarily on search engine marketing. Not only is online where the growth is, but Lily also points out that it is “extremely hard to determine the return on investment” for print advertising. Search engine marketers have developed rich toolsets that allow companies to track the ROI of keywords down to the penny. “It’s very easy to quantify your results,” Lily explains, “especially in an economy like this where you want to know that your ad dollars are making sense.” Kanter’s advice to focus online is congruent with reports about the state of online retail: the IMRG Capgemini Retail Sales Index reports a 14% year-on-year growth for the month of April.

Additionally, Serena & Lily is buoyed by the fact that the company is still in growth mode — its biggest challenge is still just getting its brand out there and recognized. One of the silver linings of a downturn is that there are less companies out there fighting for the attention of customers. So, as a result, Serena & Lily is still able to gain new customers more quickly than it loses old ones.

Furthermore, Kanter encourages other small business owners to concentrate on points of “extreme differentiation.” By recognizing a market need for designer baby products that didn’t look childish, Serena & Lily has revinented its product categories. Serena & Lily redefined the paradigm of a nursery by using original patterns that not only convey a sense of youth, but also appeal to adults. So, much like I described in my last post, by changing the rules of the game, Serena & Lily has established itself as a leader.

During this lagging economy, it’s especially inspirational to see businesses continuing to find ways to excel. Opportunities still abound, and as we’ve seen before, a downturn may actually be a fantastic time to start a new company. And while it’s always important to follow good business practices, tough times particularly amplify that fact. Thanks to Lily Kanter for taking the time to chat.

This article is from Open Forum Blogs.

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