18 secrets to a profitable clothing line

A friend sent me a link to an article about Hanky Panky which has been manufacturing in the United States -in NY City no less- since 1977. By all accounts, they’re not likely to change that. Read the article, an interview with the CEO, for the reasons for their success. Here’s the cheat sheet; tell me if it reminds you of anything:

1. Slow patient growth. They started with one seamstress, cutting and sewing to order.

2. Being well-rounded with a range of experiences. The designer had previous industry experience and the other partner’s background is in social psychology.

3. Being privately held. The firm is owned by the original two partners. Not having investors meant autonomy to define their own course instead of worrying about making next quarter’s profit targets.

4. They didn’t borrow money. They used sales to drive growth, plowing the money back in.

5. They kept their egos firmly in check. No prima donnas here, they didn’t shoot for being the next rock star.

6. Publicity was organic, driven by the product’s integrity. They’ve never paid for a celebrity endorsement.

7. They manufactured domestically in NY city. They save money and time on shipping which lowers their carbon footprint.

8. Being domestic allows fast turn around on trends.

9. They cut small lots.

10. Value: their products aren’t commodities but they’re not bridge or designer either.

11. Effective partnerships. They’ve been working with the same suppliers and contractors for 25+ years in mutually nurturing relationships.

12. A core value of environmentalism and sustainability before it became a trend.

13. Enduring tough times: their strategy relies on providing value -not discounts- continuous improvement and innovating with new product launches.

14. Retail partnerships: they wanted an ecommerce site but it took awhile to figure out how they could do it without competing with the retailers who made their success possible.

15. Protecting the brand by rigorously maintaining their reputation on all fronts. This meant not cheapening the product  with discounting and being careful who they sold to. They focused on internal conditions over which they have control.

16. Keeping their employees happy. The company pays 100% of health insurance premiums.

17. Profitability, not growth or company size, has been the guiding force behind their decision making.

18. Accountability, always knowing what’s going on. The CEO opens all the mail.

Note the things that were not mentioned as the underpinnings to their success:

  • Offshore sourcing to get the lowest cost per unit price.
  • Not cutting large quantities to get a lower per unit cost.
  • Hiring someone else to do all the heavy lifting.
  • A focus on intellectual property, patents, trademarks, NDAs et cetera.
  • Huge marketing and PR budgets to maintain their image.
  • Having a cute logo slapped on everything.
  • Getting investors and taking out loans.
  • “Leveraging” (arm-twisting) those with whom they work in synergy.
  • Fast growth with ambitious goals. Success kills small companies faster than no growth.

In short, does the profile of Hanky Panky’s success remind you of anything? Yeah, it’s the nuts and bolts of my book. Good thing this interview is recent, otherwise I could be accused of using the material without citing my sources. It takes adherence to core values to guide your course. The rules aren’t sexy, they aren’t flashy but you know what, 30 years from now you’ll be an icon. A profitable one. I close with this quote:

We keep the product developed and manufactured where we can see it and where we can make sure that not only are the proper production qualities being followed, but also that the manufacturing facilities are following all the rules and regulations required by the United States. It certainly reduces our carbon footprint because we’re not shipping goods, either raw materials or finished goods, from here to there.

Our goods don’t need a passport to get into this country. Manufacturing in New York also gives us more opportunity to develop special programs and products based on trends because the turn around time is much shorter than if we were to manufacture overseas. We can also run smaller lots here, so we’re able to work closely with our stores and develop special programs on-trend. Also, it’s good for the economy. And as an American company, it is important to do what we can to create a healthier economy for our business to exist in.

Success isn’t a vicarious accident. My book will show you how to build the core of a thriving happy company where ever you live with these 18 secrets.

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19 comments

  1. clf says:

    Thanks for drawing our attention to this article and this amazing company. (I don’t wear thongs, so had never heard of them.) This is how companies used to be run pre-1980s.

    I wonder, if all companies (not just clothing start-ups) ran like this, would we be in the economic mess we’re in today? Some of the “don’ts” on your list seem to be guiding principles in American business these days. Fast growth kills big companies too.

    ps
    I noticed their lace is copyrighted. So they do protect some of their intellectual property.

  2. Miracle says:

    I have to clarify some things:

    They don’t pay for celebrity endorsements but they spend a lot of money on celebrity gifting.

    They may not have launched with loans, but I’d be hard pressed to believe they have no debt in the form of loans, factoring, equipment leasing or lines of credit or other types of financing– which are all some form of loan.

    They do have PR, I don’t remember if it’s in-house or an outside firm.

    In short, I think there are certain ways for people to grow a business and some people need certain things in order to grow to a certain size. Sure there are lots of people who make poor decisions and have poor execution, but that doesn’t make the things they wanted/used intrinsically bad.

    Investors, intrinsically, are not bad
    Offshoring, intrinsically, is not bad
    Celebrity endorsements, intrinsically, is not bad
    Financing, intrinsically, is not bad

    Sure people can screw up using them, without proper knowledge and guidance, but for that matter people can screw up using a pair of scissors.

    There are many ways to skin a cat, and there are no hard and fast rules. everybody has to do what works for their business. For every “rule following” success story, I could show you another that did it completely differently, and yet another that did it completely differently. And yet another.

  3. Andrea says:

    Well stated Miracle! I love the bullet points, though. I used to sell Hanky Panky at a boutique I worked in and they were always one of my favorites to deal with. We sold a lot of it. I think the over arching meaning (that I got, anyway) was that Hanky Panky conducts business as it is and doesn’t follow the “tried and true” rules of engagement. As I struggle on with my company, I am starting to realize that every rule I thought was sacrosanct really isn’t.

    Thanks Kathleen!

  4. Denise says:

    This is a refreshing story for me. I’m glad to hear humility, the product, and how its crafted and manufactured are the keys to this company’s success.

  5. imron says:

    Thanks for the great article it was fun to read how others are doing it, and also a thanks to Miracle for her thoughts….

  6. Leslie says:

    I’ve been trying to follow (most) of these rules for some time now. They are also working for me, although I can’t claim to have known this was the best way…its just the way I did things because I didn’t know how else to do it. I’ve been through some dry spells when I wondered why I didn’t just throw in the “towel” (I sell towels…so that’s not a pun) But, I can hardly keep up with orders and I haven’t spent any money on advertising. This year will actually be the first time I go to a large trade show. I think it really boils down to common sense, and what our gut tells us to do, despite what we see everyone else doing.

  7. Eric H says:

    @ Miracle

    I wish your comment was more circumspect.

    There are exceptions, but those exceptions make the rule. Pointing out those exceptions is incomplete analysis: you have to count both the failures and the successes among those who violated the rules in order to avoid survivorship bias. Alas, we tend to suffer from the availability heuristic, so this is easier said than done. Cohort study, anyone?

    The Lake Wobegon and Pareto effects are both at work here: 95% of the new DEs coming from their previous work to apparel manufacture think that *they* are the 5% who can make these things (borrowing, offshoring, celebritying) work while simultaneously learning a whole new business. They’ve all been pumped up with ideas like, “All I need is a logo and a brand, enough startup money, celebrity endorsements, and I’ll be the next Tommy!” In terms of priority, the manufacturing process comes in a distant second to those DEs because they are caught up in the *idea* of success rather than the actual work of success. They think they can start at the top and do things the way those people work: they think they should *start* with a 32 piece line in 8 sizes and 5 colorways. When they realize that they will have to borrow money and probably go offshore to pull that off, it seems like confirmation of their beliefs, but it’s really just confirmation bias (and self-fulfilling prophecy).

    At this point, they have completely lost any chance at controlling their business: it is now controlling them. They *have* to produce in volume. They start cutting corners. They have no idea how well it will sell. They need to start looking at discount pricing. And they still think their offshore contractor is the manufacturer. Then when it all goes pear shaped, they think that all they were missing was luck and the right celebrity endorsement. All you can hope is that they don’t take too many others down with them.

    So when you validate their misguided theories without proper attention to the caveats (“proper knowledge and guidance” is a very, very deep rabbit hole, isn’t it?), all they catch is the validation and they ignore the rest. For people without your education and experience, those things just might be intrinsically bad.

  8. Miracle says:

    First things first, items were pulled from the article without context. That it wasn’t stated in the article, doesn’t mean the company doesn’t engage in something. So using the article as validation of “see, this is what i’ve been telling you” is a bit shortsighted because there are things that were not written in that article.

    For example, it’s a matter of semantics to say you don’t pay for celebrity endorsements when you spend on celebrity gifting. Saying you don’t pay for endorsements implies that celebrities were not a factor in building the brand. I know that’s not the case with this company. Few fashion companies actually pay for celebrity *endorsements* (when you look at the total # of companies in existence), but it doesn’t mean celebrities don’t help their line.

    So it’s like saying “see you don’t need celebrities” when, in fact, using the example of a brand that really has benefitted tremendously from them.

    As much as you can say that I’m validating misguided theories I will say that the two of you are ignoring a way of doing business that works for a lot of companies and throwing the baby out with the bathwater just because it doesn’t work for everyone. Or just because some overzealous people believe that those things are *the key* to success.

    The fact that DEs are not quite as knowledgeable and don’t have the acumen has no bearing. Everybody is not meant to succeed as an entrepreneur and all the blog posts in the world won’t change that. There are people who will succeed there are people who will fail, there are lots who are in the middle but they pretty much sort themselves into either camp based on what they are willing to learn. The fact that there are people who “don’t get it” is irrelevant, there will always be people who don’t get it.

    Having said that, we can agree to disagree. I fundamentally believe that the missing element to F-I is that a site that proclaims to want to help manufacturers build businesses to employ more people in the USA and keep jobs at home, focuses on strategies that really, for the most part, keeps people in businesses that are owner-operated and employ no one but the owner (and sometimes not even that). Simply because there is a tendency to regard things as “intrinsically bad” just because some people don’t understand them or use them well. So telling people not to have loans, not to have investors, not to use celebrity, they don’t need marketing and PR etcetera etcetera, yeah just how much of a business are they supposed to grow when they’re throwing out ALL of that?

    Have you ever crunched the numbers? (plus there’s an assumption that investor means professional investor when in reality investors come in many forms)

    For people without your education and experience, those things just might be intrinsically bad.

    Then it’s not intrinsically bad, it’s a mistake when executed in a certain context.

  9. Kathleen says:

    You’re right, the context was isolated to serve my points which are specifically, that this firm did not start out with the gifting, financing, getting investors, and all that to get off the ground. They started simply at a scale they could manage, perhaps only employing themselves but they grew with a solid footing and understanding of the processes and elements that were pivotal to making their plan work. I don’t believe it was coincidental that becoming successful was based on the foundation of concepts I teach.

    It’s not that branding, loans and all that are intrinsically bad because those are boosters when you need them (more importantly, are ready for them) but that most DEs start out with the assumptions you need all of this stuff at the outset. Like Eric said, they don’t read the caveats, they just roll with the messages they hear most frequently. And because they can’t get all of the whistles and bells at the outset, they never launch or fail soon after because they blew what little they had putting the cart before the horse. All of what you say is great if you have a solid footing and understanding already but most don’t. Everybody else out there is saying to do all these things, the gifting, loans etc, whatever, shouldn’t there be one last refuge focusing on the basics?

    I fundamentally believe that the missing element to F-I is that a site that proclaims to want to help manufacturers build businesses to employ more people in the USA and keep jobs at home, focuses on strategies that really, for the most part, keeps people in businesses that are owner-operated and employ no one but the owner (and sometimes not even that).

    You might think my strategies only help a limited number of people and it can only be true considering the gamut of possible entrants (neatly sidestepping survivorship bias) but I cannot list all the people I know personally who are now running solid enterprises. On the other hand, I cannot name one single person who started out putting the cart before the horse with all the bells and whistles who has gone onto to make something of their enterprise. Unless they had a big pot of money to start with -and most don’t.

    After your first comment, I did a lot of hard thinking. I’m having a crisis of faith Miracle. A deep and profound crisis of faith. I’ve had to face that I am approaching a parting of ways in terms of my career -such as it is. Until now, I always believed my loyalty to my industry and loyalty to my craft was one and the same. I don’t think that now. So I have to choose. Is my loyalty to my craft or to my trade? If loyalty to the trade now means putting the cart before the horse, then the choice is clear. I’m out. Not because I abdicate but because I’m not qualified to go there. I refuse to fake it like so many others do. I am not going to transcend my boundaries of competence just to stay up front and center. So, if I have to choose and being too young to retire, I choose my craft.

    I know that a focus on the essentials works, has worked and will continue to work even if you think these enterprises are too small to make a difference. I can name people I’ve helped who started with nothing -they’re mentioned in my book- who now run companies with sales in excess of 150 million dollars a year. I don’t know anyone who bypassed the basics who has done the same. I’m not saying they don’t exist, just that I don’t know them. Every once in awhile I’ll get a letter from the CEO of a company that I really admire, companies so established that I’m nervous opening the email. And shockingly, they’re writing to thank me for getting them off to a good start, saying that my book inspired them and led them on a course that got them to where they are today.

    There’s all kinds of gaping content holes on this site because I’m not qualified to write it. Sure, I could learn it, probably crappily considering I won’t have meaningful field experiences to test run a lot of scenarios but then I wonder why I’m supposed to be all things to all people. I don’t know enough about my own stuff much less something that is alien to me. You know, I try hard. Being old school in today’s economy is hard but I’ve worked and studied to adapt. I have email. I have websites, I do the social stuff. I have helped a lot of people in many ways that no one else ever has and then I have to do other heavy lifting on my end (like learning CAD etc) that you don’t see. A person only has so many hours in a day and frankly, I’m getting older. And tireder. Sometimes I’m so discouraged that getting out of bed seems like a major accomplishment.

    In spite of becoming obsolete before my very eyes because 10, 20, 30 years from now no one will want or care to do these things anymore, I can only change so much. You will have to accept that I’ve failed to meet your expectations to do and become what you find meaningful. I’m a failure and I feel defeated. I’m depressed that everything I’ve done to help so many for so long is now thankless and useless or becoming that way quickly. I don’t know what I’ll do now. I’d get a job if I could but who would hire me? That isn’t important tho. As far as the community goes, someone else will step in to fill the void of needs I cannot meet.

  10. Thomas Cunningham says:

    the last thing this industry needs is another f** blog about the *hype* the gifting and the ‘glamor’ of this business. Those blogs are a dime a dozen and are a waste of time. this is the ONLY blog I know that covers even a tiny element of what this business is supposed to be about – namely cutting and making stuff that gets sold. So don’t throw in the towel, Kathleen, It’d be a huge loss for us.

    As for Miracle — sure maybe some of your points are valid, but *presumably* we have brains and can make our own decisions. To blame Kathleen for somehow steering ‘poor little DEs’ the wrong way seems a little unfair. There are a lot of information sources out there and I am sure that entrepreneurs consult many of them. having said that, I am a financial guy, not a designer. And I can tell you that most of her business principles make good sense to me.

  11. Miracle says:

    I’m not blaming anybody.

    I read the response yesterday and just decided to not reply.

    I objected to the presentation of some of the information about the company because I know that’s not necessarily the case just because it’s not stated in the article. So I voiced my opinion.

    Eric rebutted and I replied to him.

    Then Kathleen came in and all of a sudden this became a personal issue of failure and giving up and frankly, I’m kinda tired of it all. Seriously? I can’t object to the representation of a company’s success without this becoming some sort of personal attack? OK.

    namely cutting and making stuff that gets sold.

    Steps on soapbox–

    Yeah STUFF THAT GETS SOLD. So when someone rephrases it and leaves some things out, yes, I kinda step in and say “you know what, that’s not really how it went.”

    Go back and read most of the fashion-incubator articles on that part of it, the part about getting stuff sold and see who wrote them. Go ahead, I’ll wait.

    For years, YEARS, I have been a contributor to this site in areas where Kathleen’s experience levels off. Up to the point where my experience, knowledge, and pooled information levels off.

    There is a way to do EVERYTHING in this industry and there is a way to MANAGE it all. It’s really about do you want to teach people how to manage, give them the resources, and bring in contributors with expertise, or do you just say “it’s bad” and never get those contributors because you have essentially written off what they do?

    Ultimately, it’s not my choice, and it’s not my blog, but if you can presumably make your own choices, then you can make your own choices about everything and don’t need info about gifting but also don’t need someone to say that valid business principles are intrinsically bad.

    But whatever, I’ve already spent more time on this than I care to.

    Continue as you were.

  12. clf says:

    Whoa! I love a lively discussion/debate and constructive criticism. I have no idea what the back story is that has turned this thread into a pissing match. But why not discuss this privately Miracle? Or you could always rip away on your own blog. (Btw, gifting and endorsements are not the same thing.) To the rest of us, this little back and forth seems like something between the two/three of you and doesn’t add much to the thread. I can’t make much sense out of the conversation without context (nor do I care to make much sense out of it, frankly). For example, to this outsider Stuart’s comment did not seem like a personal attack at all.

  13. ju zhang says:

    Notice they do underwear, which makes it possible to still profit a lot when producing in the U.S. And the same rule does not apply to labor intensive garments, like blouses, pants, coats, etc.

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