With $4 million in venture funding in its pockets, Vancouver-based online custom suit retailer Indochino is plotting new ways to hit its self-set target: tripling its annual business.
A homegrown success story, Indochino is the brainchild of University of Victoria students Kyle Vucko and Heikal Gani – now CEO and president, respectively. Frustrated at their own early suit shopping experiences, the two saw a market opportunity in 2007.
“We said, ‘Can we build a shopping experience from the ground up with men in mind?’” Vucko explained, noting that ease and efficiency were key goals.
The result is Indochino: an online-only custom men’s apparel company that sells suits, shirts and outerwear.
Since its launch, Vucko said, the company has attracted 17,000 customers worldwide in more than 60 countries, including a sizable volume of repeat customers.
While most North American companies in 2009 were struggling to survive the recession, Indochino’s annual sales broke seven figures for the first time. If anything, Vucko said, the recession has helped the company, as job uncertainty inspired a return to workplace formality and bolstered the suit market. He added that Indochino’s price point – custom suits start at $299 – was also recession-friendly.
In 2010, he said, the company’s sales jumped 245%. Its new Vancouver office increased from a staff of one – Vucko – to a staff of 12, and more than tripled its total headcount, between its Vancouver and Shanghai offices, to 35.
Indochino announced last week that it has raised $4 million in venture financing led by Madrona Venture Group.
“The big, disruptive idea here is mass-customization: delivering truly custom clothing that looks and fits great at price points that everyone can afford,” Madrona partner Scott Jacobson said in an email.
He added that while Indochino’s mass-customization market segment is “still a tiny sliver” of the $1 trillion global market for apparel, Madrona expects to see that change.
“We think that, over time, there will be a very large market for people who want clothing made specifically for them and not designed for the averages.”
Armed with the new financing, Indochino is laying the groundwork to sustain its growth trajectory by investing in marketing, technology and supply chain improvements, and an expanded executive team.
“[Tripling] growth when you’re small is relatively easy,” Vucko said wryly. “Going from two to six is one thing, but going from 40 to 120, or 120 to [nearly] 400 is much harder.”
On the marketing front, Vucko said, the company will take its first crack at using paid marketing channels, such as search engines, to drive growth.
“We’ve really been built on mostly word of mouth and PR to date; we haven’t really had the opportunity to really spend more aggressively on the marketing side,” he said.
On the technology and supply chain fronts, he said the company will invest to make its website more user-friendly and its sizing more accurate, and keep working to expand its custom production in China – a key hurdle the company has faced from day 1 (see “Indochino fashioning tailor-made success on the Internet” – issue 1064; March 16-22, 2010).
“There isn’t anybody in the apparel world that’s doing mass customized apparel at scale.”
Vucko added that when Indochino initially approached Chinese suppliers about making one item at a time within 72 hours, “They kind of us looked at us blankly.”
But having overcome that hurdle and established a new kind of supply chain, Vucko said the company is now hoping to parlay its growing volumes into securing larger supply partners.
“You just have to get to a certain size before they’ll even consider talking to you, let alone reconfigure 40% of their floor to do it your way.”
Finally, Vucko said, Indochino will use its new capital to expand its executive team with a CFO and chief technology officer.
The company also plans to double or triple its product offerings this year.
A longer-term ambition is to expand Indochino’s product lines to address all men’s apparel needs.
“We don’t see why we can’t one day offer you your entire wardrobe, custom-made, at the click of a mouse.”
With the exception of some tailoring shops that have put their offerings online, Vucko said his company thus far faces no real competition.
“We know [competition is] coming,” he said. “But we also know it’s just a very tough thing to do – harder than we anticipated, and I think harder than a lot of people anticipated. Just owning the back-end production and doing that beyond a few tailors is a very different challenge.”
Vucko noted the current lack of competition has some drawbacks for Indochino.
“Yes, it means there’s a little less pressure, but on the flip side, it would be nice if we had more competitors as it would kind of add validation to the market,” he said. “When you’re starting a market, it’s helpful to have more than one person around to say, ‘OK, this is legitimate.’”