Borrowing from Avon and Dell to Sell Shirts

You can't buy Dallas clothier J. Hilburn's shirts in a retail store or online. Nonetheless, the company expects to sell 60,000 of them this year by dispatching salespeople to customers' homes or offices to take measurements and suggest fabrics and styles. They send their orders to a factory near Macau, China, where shirts are cut and sewn from Italian fabric. Buyers receive them in two to three weeks and pay between $80 and $150, less than half the price of similar shirts sold in some high-end stores.

The company is the brainchild of a couple of former finance types who set out to serve men who see shopping as a chore. "No one's really thought about how to engage male shoppers," says Veeral Rathod, 31, one of the founders. Rathod and co-founder Hil Davis (the company took its moniker from his full name, J. Hilburn Davis IV) have borrowed from the direct-sales model of Avon Products (AVP), the supply chain management of Toyota Motor (TM), customization techniques pioneered by Dell (DELL), and Amazon.com's (AMZN) ease of shopping.

Some 30,000 people have bought clothing or accessories from Hilburn, the company says. And 93 percent of its customers return for a second purchase, says Davis. Since Hilburn was founded in 2007, its sales have tripled each year and are on track to top $9 million in 2010, driven by growing demand for its shirts as well as newer products such as trousers, cuff links, and cashmere sweaters. "Customers are basically saying, 'You've become my solution, now offer me more products,' " says Davis, 38.

Jim Pitkow started buying from Hilburn 10 months ago for the convenience and price. Pitkow, chief executive officer of a San Mateo (Calif.) software startup called Attributor, used to visit tailors during trips to London or send his measurements to shirtmakers, which sometimes resulted in a poor fit. Until he started buying from Hilburn, "nobody came to measure or fit me properly," he says. The shirts cost about half what he used to pay.

While new customers can find sales reps through Hilburn's website, most come through referrals. The company has 650 "style advisers" who earn commissions of up to 25 percent on clothing they sell after paying $399 for fabric samples, sales materials, and training. Most are women with school-age children looking for extra income, Davis says. As in other direct-sales companies, they get a cut of sales made by reps they recruit. Each Hilburn rep, though, can sign up only five others directly, which Davis says creates an incentive to find the best salespeople rather than simply recruiting as many as possible.

Amy Mancini started selling Hilburn shirts in 2008. A mother of three in West Boylston, Mass., the former nurse says she earns about $60,000 annually, spending between 20 and 25 hours a week managing other reps and visiting customers. "I have clients anywhere from college students all the way up to presidents and CEOs," she says. The sales calls are crucial to getting measurements right and making customers feel comfortable about buying a garment they can't try on. Clients' measurements are stored in a database, and the company plans to launch an online store next year where customers can order new shirts once they've been fitted.

The model removes some traditional up-front costs of retailing. "You've got a sales force you're not paying until they sell things. You're not paying to make the shirt until the shirt is sold," says Brian O'Malley, a Hilburn board member and partner at Battery Ventures. The Menlo Park (Calif.) venture capital firm has invested $7.25 million in the company. Hilburn is replicating custom tailoring on a mass scale, says Milton F. Pedraza, CEO of the Luxury Institute, a consultant to high-end brands. "They're trying to scale a model that already works," he says. The prices also give Hilburn an advantage: Pedraza says he pays more than $300 for similar shirts.

Making custom shirts, though, brings its own inefficiencies. The fabric for each must be cut individually, not in bulk from one template, the way off-the-rack shirts are made. The company's contract manufacturer in China eventually created a new pattern-making department where the shirt shapes are sized on computers and cut automatically. Still, each seamstress can make only about six shirts a day.

Hilburn recently hired Lawrence Hagenbuch, a veteran of General Electric (GE), as chief operating officer to help streamline manufacturing and distribution. Davis and Rathod want to halve the time it takes to get clothing to customers. Among other steps, Davis wants to box individual orders leaving the factory in China so they can be shipped directly to customers instead of having to break up shipments once they reach the U.S. "The apparel supply chain hasn't evolved since the 1920s," says Davis. "That's our opportunity."

The bottom line: J. Hilburn is trying to create a new retail model for men's fashion by combining customization with direct sales.

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