As Richard Hall and McGregor Madden traveled the country fitting clients with their high-end, custom-made suits, they noticed something strange — professional men yearning to look stylish nevertheless sported dress shirts with stains.
Their young, tech savvy professionals were reluctant to replace them because they cost so much. A designer dress shirt, after all, can easily top $100. “They were like, ‘Help me,'” Hall said.
That observation sparked a new business. Meshing their know-how of good tailoring and manufacturing, the 28-year-olds launched Hall & Madden, a made-to-measure dress shirt business. For $150, they will ship three hand-picked shirts every three to six months based on measurements that the client supplies.
Hall & Madden are among a growing pack of young e-commerce retailers who are doing what many larger retailers have been doing for years: bypassing the middlemen and going directly to the source for fabric and manufacturing in an effort to cut costs and boost margins.
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Working from their River North basement office and showroom, they say their aim is to deliver shirts that are well-made and affordable. They leveraged existing relationships with manufacturers in China — and their ability to speak Mandarin — to go straight to the source to purchase the ready-made fabric and produce the shirts, which are designed in-house.
By going directly to the mills and Chinese garment-makers, they are able to shave costs substantially, Hall said. Setting up shop in Chicago this year also allowed them to benefit from the area’s low-cost shipping rates.
They met in the early 2000s while studying abroad in Hong Kong during their undergraduate years. After graduation, they decided to move to China to start their careers. When the raw materials trading firm they worked for eventually shut down, they moved on to various jobs — Madden worked for Groupon in China — before deciding to venture out on their own. Along the way, they got a glimpse into the world of behind-the-scenes clothing production — how clothes are stitched and delivered to customers.
“We were taken over by how quick everything was happening in mainland China and how raw the capitalism was,” Madden said. “We immersed ourselves in the thick of things. It was a great way to grow up and cut our teeth.”
“And then you look at your own clothing,” Hall added. “And you think, ‘I spent $125 on this shirt and it’s not made well?'”
By 2009, they had launched Proper Suit, in which they persuaded suppliers to assume some of the risk so they could deliver custom-made suits for the price of a high-end ready-to-wear suit. The business is doing quite well, they said, and should clear $1 million in revenue this year, which they will continue to funnel back into their new venture, Hall & Madden.
Their model (they make $15 on the sale of each shirt) works in part, they said, because they lack the overhead that some of their larger competitors are faced with. The software Hall uses to manage subscriptions and customer service cost $130. And having subscribers and a set number of shirts to order keeps inventory and costs low. Their office is in the basement of a River North loft because the rent is cheaper below ground-level, they said. Hall designed their website and serves as the model on the site’s front page. Instead of a huge marketing budget, they’ve opted for social media, a crop of menswear bloggers and word of mouth to do their advertising.
Since its September launch, the company’s subscribers have grown 500 percent, Hall said, and they are more than halfway to their goal of landing 1,000 subscribers by August. The company will remain a bootstrap business with no funding from outside investors, Madden said.
Hall & Madden’s approach is an emerging trend among startups angling to break into retail without the backing of deep-pocketed investors. Thanks to the Internet, upstarts can get into the retail game easier and faster than ever before, industry watchers say.
Companies such as eyeglass purveyor Warby Parker, wardrobe basics online seller Everlane, menswear-maker Bonobos and Hall & Madden are able to keep costs low by working directly with materials suppliers and manufacturers, bypassing wholesalers and selling directly to consumers.
Chicago-based online menswear retailer Trunk Club Inc. also uses the subscription model to capitalize on busy professional men who don’t want to spend time shopping.
“E-commerce has changed the business around,” said Neil Stern, senior partner at McMillanDoolittle LLP, a Chicago-based retail consultancy. “I can buy my fabric from one place and get my manufacturing done somewhere else. It’s not easy but more doable on a smaller scale than it ever was.”
Large bricks-and-mortar retailers such as Sears and Macy’s have been bypassing manufacturers and delivering “private label” apparel for years. “Lands’ End did it 40 years ago, by taking out ads in the back of publications,” Stern said. “These companies are the new Lands’ End, (and) they don’t have to go through the cumbersome process of acquiring customers.”
Selling shirts via subscription also allows Hall & Madden to keep costs down because, unlike traditional retailers, they aren’t placing large orders — or bets — and hoping to find customers to buy them. Their clients sign up, and the first box arrives in a week or so. Subsequent boxes follow unless the account is canceled, with no penalty.
Retail consultant Steve Pruitt isn’t convinced of the model’s sustainability.
The founder and senior consultant at San Francisco-based Blacks Retail, a retail and fashion consulting firm, thinks consumers eventually will tire of monthly deliveries. “The strength of the long-term viability of the business will be determined by the people who resubscribe,” Pruitt said. “The pool is small for these faddish types of things.”
Hall isn’t deterred, however. He and his partner are considering developing a mobile app and making the service more personalized for customers.
“I don’t see it tapering off; our churn rate is pretty low,” he said. “But I do see it evolving in the next … two years.”
Twitter @corilyns