Photo: J Hilburn
A few weeks ago, I meet the President of JHilburn.com, Veeral Rathod, at a First Growth Venture Network Event. J Hilburn makes custom shirts, pants, and suits. I thought the concept was interesting, but when Veeral told me that over 97% of his company’s 2,000 employees were women, I had to dig deeper. It’s not everyday you meet a former banker who is up-ending men’s fashion. I decided to interview Veeral and find out how JHilburn came into being. It’s a great story for any entrepreneur (or banker) and reminds us that there are always multiple ways to disrupt an industry.
What are the backgrounds of the founders?
Hil Davis (Founder & CEO), Veeral Rathod (Co-Founder and President)
Hil and I both come of out investment banking. Hil started out as an equity research analyst covering restaurants and retail at Thomas Weisel Partners. He spent time as Head of Investor Relations at Brinker International (owns chilli’s, Maggiano’s and Macaroni Grill) before getting back to equity research with SunTrust Robinson Humphrey. Most recently, he was at Citadel Investment Group managing a portfolio of restaurants, apparel and footwear.
I started as a mergers & acquisitions analyst at Credit Suisse First Boston Technology Group. I then spent four years at Cogent Partners, a private equity secondary firm in Dallas.
We were introduced through a mutual friend. Hil shared with me an idea he had been developing to sell custom luxury apparel at attractive prices by compressing the traditional retail supply chain and selling directly to the consumers.
What made a bunch of bankers think they could do fashion?
We knew that the traditional retail model was fundamentally broken – high markups, heavy inventory, significant discounting. Also, consumer preference was shifting towards customised styling and product curation.
We launched the company with custom shirts, and significantly underestimated the difficulty of product design and custom supply chain. The apparel supply chain is built around bulk production and it took us two solid years just to reach a base level of consistency in our shirting program, from working with the Italian fabric mills to the few high-quality, scalable factories that would make custom. Good news is that while this has been one of our hardest challenges, it is now one of the most defensible strengths of our business.
We also believe that rockstar people are the most important driver of success. In May 2009, we brought on our lead product designer, Jon Patrick who had 10+ years experience of menswear development at Ralph Lauren. His core philosophy is that fit, focus and quality are paramount. Our brand delivers luxury quality, a better fit and relevant styling.
A few months after bringing Jon on board, we hired a supply chain expert and an engineering team that have helped us to develop a scalable custom clothing supply chain that includes shirts, suits, sportcoats and trousers. We have found that our custom shirts are the lead product into the guy’s closet. This builds that initial trust that keeps them coming back for more shirts, suits, trousers and sportswear.
How did you start the company – and how were the first 6 months of getting it off the ground?
We spent the first half of 2007 developing the custom shirt program, recruiting Style Advisors and raising friends and family seed capital. We launched in beta launch on June 17, 2007 with 20 Style Advisors across Dallas and Houston, focusing on the sales experience. We asked each Style Advisor to find five test customers. Hil or I went on every client appointment to better understand that interaction – the needs of the consumer as well as the needs of our Style Advisors. After refining the process, we officially launched on October 1, 2007.
The first six months were very tough. We were essentially building everything from scratch, so we had to constantly improve the process and recover from mistakes. Having been through it, I think we could restart this business for $0.30 on the dollar.
What are J.Hilburn’s current number of employees (including sales reps)? How many are women vs. men
We have nearly 2,000 Style Advisors nationwide and we are tripling the Style Advisor base every year. 90-seven per cent of our Style Advisors are female, but more men are expressing interest, especially in bigger cities. We have 55 corporate employees with a 50/50 split.
Initially, our style advisors commit a few hours per week in order to build a customer base. They usually start selling into their close social network of friends and family. These clients get their clothes, rave about the fit, quality and value, and then leverage our referral program to bring in their friends. It’s the ultimate social commerce model because the Style Advisor proactively leverages networks, instead of relying on consumers to directly refer and engage with each other. Unlike pure e-commerce, they are local and trusted, and they build personal relationships with their clients.
Our social selling model enables us to drive low-cost customer acquisition and high lifetime customer value.
Is being a sales rep for J.Hilburn financially rewarding – how much does an associate make per sale?
J.Hilburn offers a very compelling income opportunity, with the benefit of flexible time. A Style Advisors earns up to 30% of their personal sales during the month and the percentage goes up as the Style Advisor sells more. For example, if you sell between $1,250 – $1,999 during the month, you earn 20% commission. Our average order size is $450, so one client per week gets you in that range. If you sell $5,000 or more, then you earn 30% commission on the total amount. Now that we have a full product assortment with tailored clothing (suits, trousers, sportcoats), custom shirts, and sportswear – so earning 30% direct commission is easier than ever.
We also have a team earnings component that enables Style Advisors to earn commissions on the sales of their teams. We took a very unique approach to build a hybrid franchise-direct sales model, which leverages the best practices of franchising, strong corporate support, singular branding, excellent training, with the strength of direct selling, social selling and supply chain compression. We also eliminate the negatives associated with each approach – high startup costs and regulatory restrictions with franchising and high-churn, low productivity problems with direct selling.
As our Style Advisors experience success selling the product and building a customer, they take the opportunity to start building a team. The result is a business that focuses on motivated, engaged people with high productivity and low churn.
This year, we will see 3-5 Style Advisors earn $250,000 to $400,000 in commissions (more than double their income last year). We also have a group of 20-30 that will earn $150,000 to $200,000 this year, and nearly 100 that will earn around $100,000. These Style Advisors are working around 15 to 20 hours per week.
Our goal is to get a Style Advisor to $1,000 in monthly income within their first few months working 3-5 hours per week. Once they reach this level, we see minimal churn and they continue to see income growth as their customer base and team grow.
Where do your style advisors usually meet their clients (office, home, etc)?
Our Style Advisors typically meet at the client’s office. An appointment with a new client takes 30-45 minutes, and the Style Advisor takes all their measurements and gets an idea of the client’s likes and dislikes. Subsequent meetings are much shorter because they already have the measurement, so the Style Advisor walks in with a curated offering for the client. We’re currently building a very cool point-of-sale iPad application that our Style Advisors will use to present our product offerings, mix and match looks, and submit their orders. This should further elevate the experience.
We continue to see online sales grow, but the reality is that apparel is tactile and personal. Our clients like to see and touch fabrics and meet someone in-person to try the brand. Over time, we see customers get more comfortable ordering online, and just calling or emailing Style Advisors with their needs (I need a few new shirts to match the suit you sold me, or I need a something to wear at a wedding next month). We have surveyed our customers on how they want to use technology to engage with our brand, and we are developing solutions around that input.
Who are your biggest competitors?
We are going after the same customer as Nordstrom and Brooks Brothers. Our strength right now is that we have a very personalised and convenient experience as well as better fitting apparel than off-the-rack. Also, our direct-to-consumer model gives us an edge to deliver a higher quality, custom product at a better price point.
Ultimately, our biggest advantage versus our competitors is a lower cost supply chain and lower fixed operating cost because we don’t have to operate stores. This allows us to sell the same quality apparel that you find at a Nordstrom or Neiman Marcus for a fraction of the price.
What’s the most exciting part of the job for you. What’s the toughest part?
I think the most exciting part of the job is knowing that our model works, and that it is a game changer in both retail and direct sales. The toughest part is staying focused and ahead of everyone else trying to crack retail apparel. There are new start-ups looking to copy parts of our model, or in some cases, the whole thing. Also, we know larger, well-capitalised bricks & mortar retailers are investing heavily in the direct channel. In fact, we are starting to get inquiries from them on strategic partnerships.
What are your plans for the next 18 months?
We have the opportunity to become a major player over the next 18 months. We’ve been investing heavily in supply chain technology and feel confident we have scalable production. We’ve also made some major improvement with our branding and recognition in the lifestyle press. So we have the right foundation to focus on customer growth and brand awareness over the next 18 months.
Our key initiatives are technology, customer experience and Style Advisor development. We believe the online experience has to be much more engaging than just presenting the product catalogue. It needs to be personalised to each customer, like Netflix has done with media. We have so much useful information on our customers buying patterns – measurements, fits and style preferences –our online shopping experience should be driven by a virtual style advisor. Most guys don’t want to browse the whole product catalogue or build custom shirts from scratch. They want a continuation of the Style Advisor experience where they can quickly select from curated options, and not have to think about what size they need or what collar they like on their shirt.
We’re currently building this technology in a mobile application that our Style Advisors will use at the point-of-sale with the customer. The goal is that our offline channel as well as online channel is seamless and complementary.
It’s leveraging the power of social and local, online and offline, and supply chain compression with a customised personal relationship.
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