Unless you're a guy with a penchant for posh bespoke threads, you've probably never heard of custom clothier J. Hilburn. But even if you're not in their target market, the privately held, five-year-old company's stellar trajectory (from nothing to an expected $20 million in revenue this year) provides a host of object lessons in how to turn a passion into a business, build a profitable custom retail model, and (most important) position for growth via a channel that wasn't a consideration at the start.
Never say never
Co-founders Hil Davis and Veeral Rathod didn't believe a luxury brand could be built online. But the two Wall Street alums with a passion for custom shirts were convinced they could provide a luxury product at a great value -- via sales consultants direct to consumers. Even with such personal attention, and sourcing fabrics from such venerable European mills used by the Zegnas and Burberrys of the world, Davis and Rathod cut costs by bypassing the whole brick-and-mortar expense and experience. The result: J. Hilburn's made-to-measure shirts cost only $99. (A Burberry shirt off the rack will set you back about $225.)
Shirt-by-shirt, J. Hilburn built the business through that growing network of local style advisors and eventually branched out into trousers, outerwear, and accessories. The company's luxury value proposition pushed it past such online competitors as Proper Cloth and Blank Label. For perspective: Blank Label sold 450 custom shirts per month** through May of last year where J. Hilburn sold 60,000 (with a 93 percent reorder rate) -- all without a single click.
A natural progression
Despite their initial vision, Davis and Rathod are now launching J. Hilburn's e-commerce site. But rather than eat their words, the founders say this progression actually proved their original theory that a tech-enabled clothing company has to develop in stages, with offline brand building as the vital first phase.
Davis and Rathod told me the online shop enhances the in-person experience and enables existing customers to buy more items without an appointment but still get the virtual feedback. They also maintain e-commerce won't have an effect on shipping costs and distribution. They're currently working with UPS on break-bulk shipping, which will cut delivery times by a third.
Savvy building from the inside out
Starting from scratch with a new brand, Davis and Rathod had to establish their own customer insights, supply chain, and identity. With the foundation set and the customer base in place, they now have to tackle the increase in volume brought in by online sales. "E-commerce is a very powerful channel and we needed to be ready from an infrastructure standpoint to handle the additional volume e-commerce brings," they told me in a joint email.
Maintaining margins as raw-goods prices rise presents another challenge. While traditional retail supply chains have goods marked up at least six times the unit cost before they even reach the consumer, J. Hilburn keeps prices down by avoiding the expense of advertising and retail markups. The company's sales volume and loyalty rate allows for better inventory management and help it avoid mark downs on overstock.
Growth for everyone!
With 800 style advisors currently on board, J. Hilburn plans to continue to build out its network across the country. By the end of 2011, the founders plan to have 2,000 partners bringing in $20M in revenue, and selling 150,000 custom shirts.
Davis and Rathod are convinced their sales model is key to successful growth.
Unlike other direct sales models, J. Hilburn allows each style advisor to sponsor only five additional advisors in order to focus on quality versus quantity. E-commerce will drive style advisor growth as their stylists experience the residual commissions associated with customers ordering online. Imagine if you were paid a commission every time a friend you sent to jcrew.com ordered from them. Just as eBay created a monetary ecosystem for their sellers, J. Hilburn will create a similar environment for their style advisors.We'll check back in with the J. Hilburn guys in December and see if their predictions were accurate.
** Per Fan Bi, Founder of Blank Label, the company sold 450 shirts per month through May of last year after which things picked up and have been stronger ever since.
Image via J. Hilburn