Building an Ecommerce Business, Part 10: Apparel Sales, Manufacturing

Selling apparel on the internet is notoriously competitive. The margins are thin, typically. With hundreds of SKUs for size and colour and styles, stock management can be complex — especially when the items are custom made.

This is episode 10 in my series on building an ecommerce company from the bottom up. The preceding sessions are:

With this installment, I talked with Mike Schwarz, founder of RibbedTee, a Los Angeles-based producer and retailer of men’s undershirts and underwear.

What follows is my complete audio conversation with Schwarz along with a transcript, edited for clarity and length.

Eric Bandholz: Please inform us about RibbedTee.

Mike Schwarz: I began RibbedTee in late 2007. I had just gotten laid off from a high tech job. I had some time and was watching an entrepreneurial series called”The Big Idea with Donny Deutsch.” He said a few things that resonated with me. First, find a need and fill it. Secondly, the worse that can happen is nothing.

I had an idea for an undershirt. I could not find it. That show inspired me to get in the apparel business and make something I’d been on the lookout for.

Bandholz: Premium undershirts.

Schwarz: Yes, premium undershirts and underwear.

Bandholz: Totally bootstrapped, right?

Schwarz: Totally bootstrapped. I started with a $10,000 cash advance from a credit card. I don’t have any business partners aside from my wife, who’s not involved in the operations.

Bandholz: Apparel must be among the most competitive spaces.

Schwarz: Pretty much everybody said that I was mad. But with just about any industry there is going be competition. As an entrepreneur, you can’t be scared of it. Work out how to distinguish yourself.

Bandholz: I envision that products such as undershirts and underwear have fairly slim margins. How have you handled cash flow and retained the boat running for 12 years now?

Schwarz: Our margins are likely not as good as other brands in our group because we manufacture in the United States — our most important lines are 100 percent manufactured here in Los Angeles.

But because we do it all locally, we do not need to purchase large quantities. We can create in smaller batches and just do it more often. That helps. Another part of the equation is developing a toolset so that we do not need to have a huge staff.

We’ve got a small staff — about five people total.

Bandholz: It is always that balance of maintaining inventory very lean to place that money into advertising. What is a normal time for an apparel idea until it’s for sale on the site?

Schwarz: That is a great question. It’s likely a year. But I am particular. If you are going do something, do it right.

By way of instance, we found an underwear product named RG2 Boxer Briefs. Shortly after the launch, we moved back into product development because I wanted to improve on it. This process took approximately a year and approximately 50 unique iterations.

Bandholz: Perhaps you have set up systems for a product launch or stock management?

Schwarz: Yes. For each part of the company, we’ve got systems or standard operating procedures. We certainly have a methodology for conducting production. It usually begins on the calling side and trying to ascertain if something might run out of stock. That starts the production procedure.

When you are dealing with apparel production, there is typically a great deal of nuance and unexpected delays. You need to take those into account.

Bandholz: How long did it take to build that procedure, the SOPs?

Schwarz: It has been an evolution over the last ten decades. When problems occur, we learn from them and attempt to prevent them moving forward. And we have little glitches all of the time, like, as an instance, with a manufacturing delivery handoff. A major part of this is reconciling all the counts to be certain that what we planned to produce, we produced or accounted for.

Bandholz: What sort of tools or software are you using to manage all these processes?

Schwarz: We use a ticket system named Freshdesk. It’s one of our most important tools. All communication goes into Freshdesk — if it begins as an email or a voicemail from a client or something else.

We have two broad types of SOPs. Our solutions docs reside inside of Freshdesk. In addition, we have canned answers for all of the questions that come in. Hence the solution docs and the canned answers constitute a huge portion of our normal operating procedures.

Bandholz: There is a management concept of owning a visionary who places the direction of the company and an integrator who conducts operations. What are your roles?

Schwarz: I am serving both. In an ideal world, I wouldn’t presume the integrator role. However, it is a necessary evil at this stage because of cash flow and profitability.

Bandholz: Let us discuss inventory management somewhat more. How do you work out how to keep items in stock?

Schwarz: We’ve likely 350 SKUs. It is quite a bit for a little company.

I developed early a fundamental forecasting tool based on previous sales. It is not as good as other more intelligent systems. But generally, for those who have an idea about a per SKU level of this operation during the past 30, 60, 80, or 365 days, you can find an idea of when that thing will probably be out of stock.

Certain SKUs go much faster than others. We must be on top of these. We may have specific sizes and colors that sell seven days quicker than others.

Bandholz: And you developed your own stock tracker?

Schwarz: Yes. I wanted to determine the easiest way to ascertain when something may be out. Our ecommerce platform did not have a native forecasting tool, but it will allow us to expand it. I began working with our programmers to code it — to monitor earnings on an SKU level across pockets of time and then estimate when something may be out of inventory based on current stock.

Bandholz: Can you sell on stations other than RibbedTee.com?

Schwarz: RibbedTee.com is the principal station, but we also sell on Amazon.

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