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Wednesday, September 3, 2008

A Dated Industry Gets a Modern Makeover

Spanx refashions shapewear, making the products must-haves for a younger, hipper audience.

Like many women, Sara Blakely was unsatisfied with the way her rear end looked in a pair of snug white pants. So one day 10 years ago, she sliced the feet off a pair of pantyhose and wore them under her pants -- giving her the firm rear view she hoped for. But over the course of the evening, the hose rolled up her leg.

Instantly, Ms. Blakely says, she recognized the business opportunity -- shapewear fashioned from hosiery material that would be invisible under contemporary, slim-fitting apparel.

"I knew this could open up so many women's wardrobes," she says. "All women have that clothing in the back of their closet that they don't wear because they don't like the way it looks."

Today, Ms. Blakely is the founder and owner of Spanx Inc., which manufactures the footless pantyhose that Ms. Blakely dreamed up that day, as well as dozens of other types of shapewear and, most recently, bras. With more than $250 million in retail sales last year, the Spanx name has become synonymous with high-end shapewear. Celebrities like Oprah Winfrey and Gwyneth Paltrow have sung Spanx's praises.

Not Your Grandma's Girdle

While many entrepreneurs tackle new or emerging businesses, hoping to come up with the next great product, Spanx succeeded in reviving a tired industry by casting it in a fresh new light.

Existing companies in some sectors often run their business the way it has been run for years and aren't as able to spot shifting customer preferences, says Mark Rice, professor of entrepreneurship at Babson College in Wellesley, Mass. Entrepreneurial companies often can "bring a fresh perspective to a market and see where it's not working as well as it could," he says.

For Spanx, that meant developing a product line that refashioned shapewear -- a corner of the retail universe that had been sagging for decades, since women stopped regularly wearing pantyhose -- as an essential item for well-heeled, well-dressed women. With slick, colorful packaging and kitschy product names like Hide & Sleek, Spanx shapewear appeals to a younger, more fashion-savvy demographic than a traditional girdle, which instantly conjures an old-lady image.

"Ten years ago, shapewear was considered your grandmother's kind of product," says Mary Krug, a vice president and divisional merchandise manager for Neiman Marcus Stores, a part of Neiman Marcus Group Inc. in Dallas. Spanx "made it cool and hip in what is not a cool and hip category." Today, she says, Spanx is one of Neiman Marcus's highest-grossing intimate-apparel vendors.

Loads of Legwork

Before starting Spanx, Ms. Blakely sold fax machines door-to-door. Armed with an idea for footless pantyhose and a passion for selling, she spent seven straight days at the library, researching related patents. Satisfied that no one had ever patented a product like hers, she began looking up hosiery mills on the Internet. She called mill after mill, but none would talk to her. So Ms. Blakely drove to North Carolina, a center for textile manufacturing. As a saleswoman, she says, "I knew things get done more face-to-face."

One mill owner after another told Ms. Blakely that it "was a stupid idea," she recalls. But one agreed to manufacture the prototype -- after speaking with his daughters, who thought the idea might work.

Ms. Blakely submitted the patent paperwork herself, after buying a book on the subject. She applied online to the trademark the Spanx name, paying about $150.

She designed the package on a friend's computer, focusing on differentiating the product from a sea of beige hosiery cases showing a photograph of a woman's legs. Instead, her packages were bright red, adorned with animated, Spanx-clad women.

As an upstart, she says, "one of the biggest things you can do is differentiate yourself. I wanted the package to make me happy -- make me want to buy it for myself."

The initial investment was about $5,000, Ms. Blakely says. The biggest chunk -- about $4,000 -- went to the production of the prototype and the packaging.

Bathroom Demonstration

Two years after coming up with the original idea, Ms. Blakely was ready to try to get it into stores. She focused on high-end department stores, she says, where women would pay a premium price for an item that would make them look better in their pricey designer clothes.

"If you're spending more on fashion, you're willing to spend more on the foundation," she says. Today, the undergarments range from about $30 for firming underwear to $88 for a full bodysuit shaper.

A Neiman Marcus Group buyer agreed to see her, as long as she paid her own way. So Ms. Blakely booked a flight to Dallas, where the company is based. But when the entrepreneur showed the buyer the product, she wasn't impressed. "You could see on her face that she wasn't making the connection," Ms. Blakely recalls. So she marched into the bathroom, where she offered a before-and-after presentation -- of her own rear end. The buyer agreed to try the product, Ms. Blakely says.

The sale to Neiman Marcus allowed Ms. Blakely to invest in the business, researching more products and expanding to other department stores, including Bloomingdale's, a division of Macy's Inc., and Nordstrom Inc.

For the first year and a half the products were in department stores, Ms. Blakely says, she traveled the country, talking up the product with the sales associates, and flashing before-and-after photos of her rear end. Because hosiery departments didn't get a lot of foot traffic, she positioned herself inside store entrances, lifting her pant leg to reveal her Spanx when shoppers walked by.

As the company grew, Ms Blakely realized that while sales was her strength, day-to-day operations were not -- a big lesson for the entrepreneur. She didn't have a cohesive plan for hiring or for the business in general. So in 2003, she hired a full-time chief executive officer, leaving Ms. Blakely free to do what she did best -- marketing and selling.

"I'm the face of the brand, and we didn't have money to advertise," she says. "I had to be out. Sitting in the office wasn't helping" the business grow.

Today, Spanx offers a slew of shapers. A new lower-priced line is being sold at Target stores. Ms. Blakely declines to reveal Spanx's biggest seller but says that the company's high-waisted shapers "have been our star." But not everything has been a blockbuster. Interest in low-rise footless pantyhose is more limited, Ms. Blakely says.

The most recent addition to the product line: Bra-llelujah, a bra fashioned of hosiery material. "I didn't know anything about bras, but I had to buy them," Ms. Blakely says. "I came in one day and thought: There's got to be a better way."

By: Simona Covel