November 01, 2013
J.Hilburn: Built to Last
by Jennifer Workman Pitcock
- Founded: 2007
- Headquarters: Dallas, Texas
- Co-Founders: CEO Hil Davis and President Veeral Rathod
- Products: Custom clothing and accessories
In six short years, J.Hilburn has grown to be the largest maker of custom shirts and made-to-measure trousers in the world. Each year since its 2007 launch, J.Hilburn’s revenues have doubled. The company is on track to reach $55 million by the end of 2013.
By the end of 2014, J.Hilburn expects to double its distributors—known as stylists—hitting the 7,000 mark. What’s behind the company’s success? According to CEO Hil Davis, it comes down to two things: the company’s value proposition for its customers and its value proposition for its stylists. “If you own these two things, you’re going to build a successful business,” Davis says.
For the customer, that means getting the best product for the money. J.Hilburn uses custom Italian fabrics—the same quality as Armani or other high-end brands. But the shirts start at $89.
And when it comes to stylists, the company really listens. J.Hilburn defaults to the stylists when they tell executives what they need. “We realize that they’re not just a distribution channel, they’re our brand. They’re our stores. If you start looking at the stylists like that, it changes the way you think,” Davis says.
Maintaining Davis’ two value propositions is harder than it looks. “It’s expensive,” he says. One thing that sets J.Hilburn apart from other direct sales companies is that it spends more on product. “Our profit margin is 60 percent,” he says. “Then you take 35 percent for commissions, and you have 25 percent left over. Most direct sales companies have 35 percent left over because their products are marked up more.” At the end of the day, J.Hilburn has less to reinvest in the company.
Davis and his co-founder, J.Hilburn President Veeral Rathod, believe that their next focus has to be on investing more in technology and brand. “We’re doubling without them,” Davis says. “But imagine what will happen when we actually build those two areas.”
J.Hilburn has already begun improving its technology. Last year, the company introduced an iPad app for its stylists. The J.Hilburn Style Kit is a sales tool. The executive team spent a lot of time with the stylists and asked them to share their biggest challenges. Stylists told the executives what they needed, and J.Hilburn built it. The result was an app that includes all clothing the company sells in an easy-to-search format that can show multiple images.
The app also addressed the biggest frustration of the field. “When they would take an order from a guy and later find it was out of stock, they would lose the sale,” Rathod says. “So they wanted real-time inventory availability.”
The app provides that and much more. It also functions as a “virtual showroom.” With the app’s style boards, a stylist can pull together several looks and show the customer how various pieces work together. “This was a big breakthrough for us,” Rathod says. “The average volume on orders that come in through the iPad app is about 40 percent higher than without.”
The company wants to continue to expand its use of technology to help stylists engage with customers. J.Hilburn has brought in two business data analysts to dive into customer data. The analysts examine trends, customer segmentation, life cycle and lifetime value. The company also hired e-commerce experts to focus on creating customer engagement.
One goal is to automate the curating process that stylists provide for each customer, creating a virtual stylist. “This is not to replace our stylists, but to supplement them,” Rathod says. “When our existing customers go online, we want them to feel like their stylist is with them in their closet. Instead of saying, ‘Here’s what’s new for fall,’ we’re showing them, ‘Here’s what we recommend for you.’ ”
And that’s the core of what J.Hilburn is able to do that no other company currently can. “One of the big advantages we have is that we’ve got every guy’s measurements and style preferences,” Davis says. Already J.Hilburn’s monthly emails have a 45 percent open rate. Having every customer’s purchase record will allow them to make the emails even more targeted and valuable. Soon J.Hilburn will be sending what Rathod calls “curated emails” with suggestions tailored to customers’ preferences and buying history.
J.Hilburn also intends to use its wealth of information to help men visualize how to create a look out of items they own, while also suggesting new pieces that would work well with previous purchases. “When you log on, you will see your closet,” Davis says. “It’ll have everything you’ve ever bought from J.Hilburn. You can click on any product and say, ‘I want to wear it with a suit or denim,’ and it will spit out a look, as well as what you should be adding to complete that look.”
Eventually J.Hilburn’s accumulated information will allow the company to become “the fit graph”—just like Facebook is the social graph.
The company has already put all its customers’ measurements into 3-D sizing technology. “If we wanted to right now, we could roll out 1,000 different sizes,” Davis says. That means even their ready-to-wear—a category that’s grown to 30 percent of J.Hilburn’s revenue—will be nearly a custom fit based on J.Hilburn’s use of information and technology.
“The average volume on orders that come in through the iPad app is about 40 percent higher than without.”
—Veeral Rathod, Co-Founder and President
A brand is built on more than a product. It’s an emotional connection and an experience. Through its market research, here’s how J.Hilburn has come to understand the journey that a typical customer takes toward understanding style and developing brand loyalty:
Hil Davis and Veeral Rathod have always known that brand-building is key to J.Hilburn’s long-term success. (See sidebar.)
“If you build a brand and infuse that into direct sales, you have a very powerful model,” Davis says. “There are more direct sales companies that do $100 million than e-commerce companies that do $100 million. But why aren’t there more billion-dollar direct sales companies? There should be. Direct sales should be as powerful as franchising, but it’s not.”
Davis attributes the lack of billion-dollar direct sales companies to lack of brand, which is why establishing the J.Hilburn brand is a top priority.
That’s what led J.Hilburn to Brandstream. “We wanted to go out and find the team that’s built the biggest iconic brands in the world,” Rathod says.
In 2011, J.Hilburn named Scott Bedbury, CEO of Brandstream, to its board of directors. The mastermind behind Nike’s “Just Do It” campaign and the redesign of Starbucks in the 1990s, Bedbury is a key player in J.Hilburn’s current brand-development efforts.
Bryan Kokkeler is Creative Strategist at Brandstream, and he says that a brand is not simply a logo or a tagline. “It’s an experience and a relationship. How we deliver our products is as important as what we deliver,” he says. Through research, J.Hilburn has discovered that what resonates with customers is more than just clothing. It’s “the way it makes them feel when they wear something that truly fits them,” Kokkeler says.
As part of its research, J.Hilburn conducted focus groups in seven cities. The purpose was not to test new fabrics or products. “We were just genuinely interested in what [customers] thought about fashion, about shopping, about fashion brands, and what they thought about us and how they felt about the experience,” Kokkeler says. “It was very rewarding to hear how satisfied they were with our products and how strong their emotional connection was with the brand and their personal stylist.”
“If you build a brand and infuse that into direct sales, you have a very powerful model.”
—Hil Davis, Co-Founder and CEO
J.Hilburn displays its clothing at its recent conference.
Davis and Rathod both emphasize that every contact a customer has with the company should help to build that sense of brand. Since the stylists are such a big part of the brand experience, excellent training is another priority for J.Hilburn. “Training is a part of brand,” Davis says. A good experience with a stylist creates repeat business.
Here’s where more data is utilized, which makes sense because even a brief conversation with J.Hilburn’s co-founders includes lots of statistics. They’re constantly analyzing the data to better understand what’s working for the company and what’s not. The stylists do not escape this level of scrutiny. “We’ve run regression analysis on our stylists to find out what makes them successful—down to hair color, ZIP codes, income—everything. What we’ve found out you’ve got to have is what we call A, B, C, D, E: Attitude, Belief, Commitment, Duration, and Engagement,” Davis says. “What makes a stylist successful or not is all internal.”
But at the same time, J.Hilburn representatives fit within certain parameters. For instance, 92 percent are women aged 30 or over. And the closer they are to a family income of $100,000 or higher, the broader their network of friends who will be potential customers. “There’s a demographic cutoff for us that doesn’t necessarily exist at other companies,” Davis says.
Larry Novak is President of Partner Development. He and Development Director Karen Bejjani are the executives that work most closely with the stylists. Novak says that the majority of J.Hilburn stylists haven’t been involved in direct selling before. That means most don’t already know how to develop an organization or how to manage it and communicate with their recruits.
That’s one reason the company has invested heavily in leadership development. Along with the usual weekly updates, webinars, back office videos and social media communications, J.Hilburn offers specialized training. Each stylist receives a full day of classroom training when they first join the company. “As a custom provider of clothing, we want to make sure that they really understand all the different measurements,” Novak says. The training also includes more information about the opportunity and growing an organization.
But what Novak and Bejjani believe really sets J.Hilburn apart is the company’s leadership schools and coaching. When a stylist reaches particular career levels, they’re invited to leadership school in Dallas. There are five schools, which correspond to J.Hilburn’s career levels. “The leadership schools equip them for what happens at that career level,” Bejjani says. And it doesn’t end there. “What’s taught at leadership school is pulled through with coaching,” she says. “Coaching fills the gap between ‘I know the skill’ and ‘I can do the skill.’
“I don’t know of anything else like our training and coaching to take people to the next level,” she continues. “It’s been wildly successful.” During Bejjani and Novak’s tenure with the company, they’ve seen soccer moms who didn’t know how to lead or build a business transform into leaders, grooming those under them to become leaders too.
The numbers speak for themselves: J.Hilburn’s churn is incredibly low, with 80 percent of recruits still with the company three months later. And 80 percent of those stay on long-term with average sales of $20,000 annually.
Davis’ introduction to direct sales through reading the book The Warren Buffett Way is now part of J.Hilburn lore. The founders may have come to direct sales with skepticism, but today they’re more committed than ever to this channel and its future potential.
“Direct sales is one of the most powerful distribution channels out there,” Davis says. And it may be undervalued right now, but he sees a future where big corporations will utilize direct selling. “I think that in the next three years, we’re going to be in a perfect storm, where big balance-sheet players are going to come in and completely rejuvenate this industry.”
“I think that in the next three years, we’re going to be in a perfect storm where big balance-sheet players are going to come in and completely rejuvenate this industry.”
The reason? Companies need to maintain growth, and their other channels are largely tapped out. Direct selling opens up markets where a brick-and-mortar store would never be feasible. “Direct sales gives you the ability to get into every single market,” Davis says. “That’s a really powerful thing.”
As J.Hilburn’s founders look to the future, they are intent on building an organization that will last. The company plans to expand into Canada in 2015 and to be in the U.K. in 2016. But they’re also thinking beyond international expansion.
“I think a lot of times direct sales companies are more interested in maximizing profit near-term instead of building something that’s really big. We’re building a reputation that will translate into a lot more verticals,” Davis says. “We’re building a platform, a brand of stylists and a concept that is much bigger than J.Hilburn.”