That’s not how fashionistas buy clothes, but we make and sell clothes for professional working women—a story about understanding your customer’s needs and developing to their needs.

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Dave Young:
Welcome to The Empire Builders Podcast. Dave Young here, along with Stephen Semple. Stephen, good day to you.

Stephen Semple:
Good day to you, sir.

Dave Young:
You want to say good morning, but you never know what time somebody’s listening, so I don’t know. So you told me the topic this morning and I got to admit I’m sort of stumped. When you first started saying it, I thought, “Oh, cool. We’re going to talk about the 3M company.” Because you said MM and then I’m like, “Oh, 3M. Yeah, they’re innovative. They did some cool stuff. We’re going to do Post-it Notes? What are we doing?” And then you said a French word, M.M.LaFleur.

Stephen Semple:
That’s right.

Dave Young:
And you even gave me a hint that it has something to do with ladies fashions. And dude I’m stumped, this is my life as an unsophisticated hick from the sticks. I have…

Stephen Semple:
There you go.

Dave Young:
I had no idea what M.M.LaFleur is, but it sounds French.

Stephen Semple:
I will wet your whistle a little bit. 10 years after they founded it, they were doing over $100 million in sales.

Dave Young:
In just 10 years. You’d think I’d have heard of them.

Stephen Semple:
Yeah. So they were founded by Sarah LaFleur on June 1st, 2011. And as I said today, they’re doing over $100 million in sales. And the thing that’s really fascinating about this story is Sarah, the founder, had no background in fashion.

Dave Young:
Oh, well, she and I have something in common.

Stephen Semple:
Yeah. Here’s how little background she had. At one point, they said to her, “We need to hire a pattern maker.” And she said, “But I thought we were doing solid colors. Not anything with patterns.” And a pattern maker is the person who lays out how this material’s going to be cut so it could be sewn together.

Dave Young:
I would’ve actually had an edge on her at that point.

Stephen Semple:
Right? This is how little background that she had in fashion, but she was always interested in fashion and her mom had a jewelry business. And so she had this clear vision of what she liked. She liked things that were classic, and polished, and simple. And she had a number of professional jobs, she worked for Bain Capital for a while as an analyst there.

Dave Young:
Oh, wow. Okay.

Stephen Semple:
She would get up in the morning and she’d agonize over what to wear. And she found this was actually a pretty common problem. There’s studies that show that women spend on average 16 minutes in the morning just thinking about what to wear, which is basically the length of this podcast.

Dave Young:
Wow. Just thinking about it.

Stephen Semple:
Yeah. And it’s interesting. If we go back, in 2004 there was a book written, Paradox Of Choice, which talks about how, if there’s too much choice, we actually become more anxious, and less happy, and it leads to less sales, and all those other things. And so what she decided was she wanted to create a line of clothing that was simple, and elegant, and not have too many options. That was well made, looked great, reasonably priced.

Dave Young:
This is a concept in male fashion that has been addressed a lot. Einstein, Steve Jobs, famously black shirt, black jeans.

Stephen Semple:
Yeah. Yeah.

Dave Young:
And I’m thinking along the same lines here, I keep looking for a look for me and I can’t find one. And I know I don’t want to be the black T-shirt black jeans guy, because that just feels, “You just think you’re Jobs. No, you’re not.”

Stephen Semple:
Right. Well, and what she found was that it was hard to find clothes like this for regular women. A lot of things she found were ill-fitting, ripped a lot, or wrinkled easily. And she was always going to get things fitted, so she knew what she wanted to create. She wanted to actually create something for herself, a simpler wardrobe for women. And she wanted it not to be these really super expensive things, she wanted it to be dresses that sold for under those big $5,000 labels. But she also wanted to work with a high-end designer, she wanted it to look beautiful and luxurious. So in the spring of 2011, she quit her job, she had saved $35,000, her parents invested $35,000, so she had the $70,000 to put into this business and she wanted to find someone who knew how to make clothes. And as we mentioned earlier, she was clueless, right?

Dave Young:
Yeah.

Stephen Semple:
On this. So she started reaching out to fashion people and she got in touch with a headhunter and most rejected her and one decided to help her with recruiting. And she wanted to have a co-founder who had high-end fashion design experience, she didn’t want to do what other people were saying, “Look, you could do what Aritzia had done and all these others where… Or you could just knock the stuff off. See this, quickly knock it off, get it made in Vietnam or whatever, and roll it out there.” And she didn’t want to do that, but she came across Miyako Nakamura, who had left Jack Posen as a head designer.

And she was a major, major designer for brands, but here’s the thing that was really funny. They realized, when the two of them met, that they came from very, very different worlds. Miyako was bored, she thought she had designed everything that had already been done. Miyako realized very quickly it was going to be a new experience because she had never seen her clothes on someone other than a model, she had never seen it on the streets. She did Oscar gown stuff, but there was no practical elements to her design. So for example, one of the first conversations that they had was Sarah said to her, “I want to design things for real people. For example, for the woman who puts on flats and walks to work with heels in her bags, changes into the heels when she gets to work.” Miyako said she’d never knew anyone like that. She had never met anyone like that.

Dave Young:
Never heard of that.

Stephen Semple:
Never heard of it. The only people she knew were people who were in heels all day. So Sarah went out and she bought these luxury high-end clothes, seven dresses for $21,000, and said, “This is the type of clothes I want to design. Beautiful, tailored, all those other things.” And here’s one of the things that she discovered, most brands, if lucky, get fit onto a real model once before production.

Dave Young:
Yeah.

Stephen Semple:
Most never get put onto a person. So this is the reason why stuff is often ill-fitting, is it never gets put on to a person. Luxury brands get put on three or four times before production.

Dave Young:
Fitted each time.

Stephen Semple:
Which is why it feels so magical when you wear these well-fitted garments. Sarah then developed this test for her clothing. She had three tests for it to be great for real people. Taxi test, you had to be able to wear it getting in and out of a taxi without having to worry about the skirt. The bend-over test, you’d have to be able to bend over and not see any cleavage or bra and no underwear lines. Those were her three criteria for the dress, because she felt this would make women feel more confident, and comfortable, and also eliminate the worries about the clothes that they’re wearing.

Dave Young:
Yeah.

Stephen Semple:
They then started design these clothes and then went out to find someone to manufacture it. And here’s one of the things that shocked the hell out of her. She had spent all this time working for Bain Capital and all these people in the financial district and she didn’t realize that there was a district in New York, a few blocks away, which makes tons of garments.

Dave Young:
The garment district?

Stephen Semple:
She had no idea, but they found it really hard to find someone to make clothes because small designers come and go and people don’t want to do work with them, because you might be here this week and next week. And so they had to really beg someone to do it for them. And really the reason why is they trusted Miyako. But here’s the trick, and this is where the story gets interesting, and this is where it starts really becoming relevant to Empire Builders. It’s how they build this business. They only had 70 grand, right? That’s not a lot of money.

Dave Young:
She just spent 20 on clothes?

Stephen Semple:
No, she returned them.

Dave Young:
Okay. As one do.

Stephen Semple:
As one do. But that’s not a lot of money, right? 70 grand. So they decided what they would do is trunk shows, so the whole idea, they would go to a hotel, they would book a fancy room, they would rework the room. Like literally they’d come up with a way of how to turn the shower into a change room and all this other stuff. And this way they would only have to bring one of every size, they would only have to make one of every size, they could bring them, people would try them on and order them.

Dave Young:
And then you make them.

Stephen Semple:
And then they could also bring fabrics and samples. So you could sit there and say you tried it on, you liked the gold cab, would like it in this fabric. And so of course, first it was friends and colleagues. And shortly it became word of mouth, because what they would find is people would show up that they didn’t know. What they discovered was, people would go, “I saw someone in the office had this and I asked them, ‘Where did you get it?’”

Dave Young:
Yeah. Well, so what you just mentioned is yeah, we don’t often like clients asking it, but those are people that are doing advertising campaigns with mass media. And I would say if you’re doing something that there’s no way anybody could even hear about, heck yeah, you want to know.

Stephen Semple:
Exactly. It’s very different than asking, “How’d you hear about us?” When there’s an advertising campaign going on.

Dave Young:
Yeah, of course it was the advertising campaign. But no, this is you wore it and somebody said, “Where’d you get that?”

Stephen Semple:
“Where did you get that?” Here’s the funny thing is they were doing manufacturing and whatnot out of her apartment, but to make money, she was also doing tutoring. So she would do tutoring from four to seven in the apartment and then they would switch it overhead to doing labeling and all this other stuff. But now they were generating revenue. And what they wanted to do was go out and raise some money. Again, they started with friends and family, and over a nine-month period of time, they raised $400,000. They decided, with this 400K, to really blow up the business, they were going to move to sales online, because they saw all these online fashion companies and they thought, “This will be easy. We’ll just build a site and let’s do this.” Right? Easy. Right, Dave?

Dave Young:
I’ve seen that not work so many times.

Stephen Semple:
So on January 1st, 2013, they launched the site and they decided that they needed to hold inventory to fit these sales, so they had 350 dresses all sitting in her apartment, waiting to be sold. Nothing happened.

Dave Young:
Yeah.

Stephen Semple:
Only a few sales. A dozen orders on the day of launch, then a bunch of onesies and twosies came in. They were stuck with all these dresses and they had no money for promotions, so they still did the trunk shows to drive money. Every time they did a trunk show, they made money. And they knew when people tried it on, they loved it, but this was the problem with online, you can’t try it on online and they couldn’t sell online. And even when they started, it was funny. How often have we seen this as well? When they started in 2013, their goal was first year, 1 million in sales. How often do we see that?

Dave Young:
First year? Yeah.

Stephen Semple:
Right. I’m amazed the number of times people come, “Oh, we’re going to do a million bucks.” They weren’t even close.

Dave Young:
I’ve been there. I’ve done that.

Stephen Semple:
Right. They weren’t even close to a third. And by 2014, they have run out of money, so they need to raise money again. And the inventory is piling up and she makes this statement, Sarah made this statement, that she felt like she was going to drown under a mountain of dresses in her apartment.

Dave Young:
Yeah. Well, in fashion inventory stacking up, I mean fashion changes, so you’ve got to move that stuff.

Stephen Semple:
So they needed to find room. She had this idea, “What if we just sent customers an email asking, ‘Can we send you a box of dresses?’ Try on what you like, send back what you don’t want.” And they had, from doing the trunk shows, a thousand customers.

Dave Young:
Yeah.

Stephen Semple:
The people who are all from the fashion business, that was on her team, all hated the idea. They said, “Fashion’s not bought that way.” And she looked at them and said, “But you guys are all fashionistas.”

Dave Young:
Yeah.

Stephen Semple:
All the people who are not from the fashion industry thought it was a great idea.

Dave Young:
Yeah, because I could try it on in my house. No risk.

Stephen Semple:
So they sent it out. 18% of the people said, “Yeah, send it.” So they got to send out 180 boxes.

Dave Young:
Okay.

Stephen Semple:
They made more in that week than they had at any time in the past.

Dave Young:
I love that. I’m not shocked by that at all.

Stephen Semple:
Yeah. See, when you’re in the fashion business, you love fashion. When you work in an industry, you become immediately blind to the customer, because everybody in fashion had said, “That’s not going to work. That’s not how people buy stuff.”

Dave Young:
“That’s not how we buy stuff.”

Stephen Semple:
Correct. In the February of that year, they started a beta, and operationally, they screwed up terribly. Lots of wrong sizes and things along that lines, but they saw more demand for that service than they had ever seen. Let’s not forget, the trunk shows is what gave them the data. The trunk shows put them in front of customers, they then knew the customer size and preferences. So the people that they had met at the trunk shows, the sending them a box worked really well. People that were just prospects that they got through email lists that they never met, didn’t work so well, because what they discovered was they needed to gather more information from them. So they created a methodology for gathering information so they could send them the right boxes. And they decided to give the boxes a clever name, they called them bento boxes.

Dave Young:
The little sushi Japanese food box?

Stephen Semple:
Yeah.

Dave Young:
Yeah.

Stephen Semple:
Yeah. So it was bento boxes of dresses. This really started to move the needle. And then they launched this idea of the boxes on October the 14th. And each month, for a period of time, sales tripled, tripled, tripled.

Dave Young:
Tripled each month.

Stephen Semple:
Yeah. By 2014, they were doing $8 million, so if you think about when they started this, they launched it in 2014, they were doing like a couple $100,000 in sales. By the end of that year, they were doing $8 million and basically half those sales came in the last 12 weeks of the year.

Dave Young:
That’s amazing.

Stephen Semple:
So it just exploded. And what they felt was this whole idea of the bento box took away this decision paralysis. Try it on, understand what it’s worth, why it’s worth, how it fits. Don’t like it? Send it back.

Dave Young:
You might try it on two or three times.

Stephen Semple:
Yeah.

Dave Young:
You might have your friends come over.

Stephen Semple:
Right. And what people discovered was yes, this stuff was more expensive than Zara, or Etsy, or an H&M, but it fitted well, it was comfortable, it had pockets, it had zippers that you could operate by yourself, it was comfortable, you could wear it for 14 hours, it was machine washable. This is the thing that people discovered. And really it was designed for the person who doesn’t want to wear a hoodie, but wants to look nice.

Dave Young:
Yeah. Yeah.

Stephen Semple:
Right? And then by 2017, they were doing $70 million a year. And then today they’re well north of $100 million dollars, but the first two years of this, Sarah talks about it as being like the loneliest time of her life, where she was being buried under all of these dresses.

Dave Young:
One of the important lessons is, she’s very lucky that she got Miyako involved, because she got that fashion industry person. But, and this was the blind spot for all the fashion industry people that you talked about, in most businesses, we are not our customer.

Stephen Semple:
Correct.

Dave Young:
Right? You think that you’re thinking like a customer, but you don’t have the ability to, because you’re inside that world. Well, she wasn’t yet. Miyako was, but she wasn’t. She built the clothing company that she wished she could have bought from.

Stephen Semple:
Correct.

Dave Young:
Yeah.

Stephen Semple:
Absolutely correct. And the thing that’s also interesting, and we see this a lot with businesses as well, the other big plus that they had was doing the trunk shows. It turned out they were making money from the trunk shows, but even if they hadn’t, it was helping them build a list of customers.

Dave Young:
Absolutely.

Stephen Semple:
That they were then able to leverage later. Look, this is not much different. People should go back and listen to Springfree Trampolines. The asset that they had from their work with Costco, because they were doing direct deliveries is they knew where their customers were.

Dave Young:
If you have a thousand raving fans, you can build a multimillion dollar business.

Stephen Semple:
Yeah, leveraging those things.

Dave Young:
Yeah.

Stephen Semple:
To me, the interesting things from the story was A, her coming into this business with no background in it. And look, how many times have we seen this? Somebody comes and disrupts an industry, creates a new way of doing things. And how often are they from outside of the industry? Almost always. Airbnb was not created by somebody in the hotel industry. Uber was not created by a taxi driver. We see this over and over again that these new ideas come from somebody outside of the industry who says, “Man, this is a pain in the ass. If we could remove this friction to buying, if we could make this experience better. And as a customer, this is what I’m seeking, that’s where that innovation comes.” She was also smart enough to know she needed somebody from the industry. She wasn’t so arrogant to go, “Well, I can do this without a designer.” She’s like, “No, I also still need a designer.”

Dave Young:
There’s a lot of parallels here to our spanks issue as well.

Stephen Semple:
Yeah, absolutely. But then it was the problem of, “I’m drowning in dresses. What do we do? Maybe we should just send these out to people.” And then boom, a whole way of selling fashion is born. So I thought it was just a really interesting story and just brought a real different perspective for how disruptive businesses occur. She didn’t start off with the idea of, let’s do in the boxes. That was to solve a problem.

Dave Young:
I hadn’t heard of M.M.LaFleur before, but now I’m a fan.

Stephen Semple:
Now you’re a fan. You’re going to go by yourself a little black dress there, Dave?

Dave Young:
I don’t think any size little black dress would look good on me. I’ll tell anybody I know that they should check it out.

Stephen Semple:
All right. Thanks David.

Dave Young:
Thanks for listening to the podcast. Please share us. Subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review. And if you have any questions about this or any other podcast episode, email to questions@theempirebuilderspodcast.com

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