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

Selling apparel online is notoriously competitive. The margins are thin, typically. With hundreds of SKUs for size and color and styles, inventory management can be complicated — especially when the items are custom manufactured.

This is episode 10 in my series on building an ecommerce business from the ground up. The previous sessions are:

For this installment, I spoke with Mike Schwarz, founder of RibbedTee, a Los Angeles-based manufacturer and retailer of men’s undershirts and underwear.

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

Eric Bandholz: Please tell us about RibbedTee.

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

I had an idea for an undershirt. I couldn’t find it. That show inspired me to get into the apparel business and create something I’d been looking for.

Bandholz: Premium undershirts.

Schwarz: Yes, premium undershirts and underwear.

Bandholz: Totally bootstrapped, right?

Schwarz: Totally bootstrapped. I launched with a $10,000 cash advance from a credit card. I have no business partners other than my wife, who is not involved in the operations.

Bandholz: Apparel has to be one of the most competitive spaces.

Schwarz: Pretty much everyone told me that I was crazy. But with almost any industry there’s going be competition. As an entrepreneur, you cannot be afraid of it. Figure out how to differentiate yourself.

Bandholz: I imagine that products like undershirts and underwear have pretty slim margins. How have you managed cash flow and kept the ship running for 12 years now?

Schwarz: Our margins are probably not as good as other brands in our category because we manufacture in the United States — our main lines are 100 percent manufactured here in Los Angeles.

But since we do it all locally, we don’t have to buy large quantities. We can produce in smaller batches and just do it more frequently. That helps. The other part of the equation is creating a toolset so that we don’t have to have a large staff.

We have a small staff — about five people total.

Bandholz: It’s always that balance of keeping inventory very lean to put that money into marketing. What is an average time for an apparel idea until it is for sale on the website?

Schwarz: That’s a great question. It’s probably a year. But I’m particular. If you’re going do something, do it right.

For example, we launched an underwear product called RG2 Boxer Briefs. Right after the launch, we went back into product development because I wanted to improve on it. That process took about a year and about 50 different iterations.

Bandholz: Have you set up systems for a product launch or inventory management?

Schwarz: Yes. For each component of the business, we have systems or standard operating procedures. We definitely have a methodology for running production. It usually starts on the forecasting side and trying to determine when something might run out of stock. That starts the production process.

When you’re dealing with apparel production, there’s typically a lot of nuance and unexpected delays. You have to take those into account.

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

Schwarz: It’s been an evolution over the last 10 years. When problems occur, we learn from them and try to prevent them going forward. And we have little glitches all the time, like, for example, with a production delivery handoff. A big part of that is reconciling all of the counts to make sure that what we intended to produce, we either produced or accounted for.

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

Schwarz: We use a ticket system called Freshdesk. It is one of our main tools. All communication goes into Freshdesk — whether it starts as an email or a voicemail from a customer or something else.

We have two broad categories of SOPs. Our solutions docs live inside of Freshdesk. We also have canned responses for all the inquiries that come in. So the solution docs and the canned responses make up a large part of our standard operating procedures.

Bandholz: There’s a management concept of having a visionary who sets the direction of the business and an integrator who runs operations. What are your roles?

Schwarz: I’m serving both. In a perfect world, I would not assume the integrator role. But it’s a necessary evil at this point due to cash flow and profitability.

Bandholz: Let’s discuss inventory management a bit more. How do you figure out how to keep items in stock?

Schwarz: We have probably 350 SKUs. It’s quite a bit for a small company.

I developed early a basic forecasting tool based on past sales. It’s not as great as other more intelligent systems. But generally, if you have an idea on a per SKU level of the performance over the last 30, 60, 80, or 365 days, you can get an idea of when that item will likely be out of stock.

Certain SKUs go a lot faster than others. We have to be on top of those. We might have certain sizes and colors that sell seven times faster than others.

Bandholz: And you developed your own inventory tracker?

Schwarz: Yes. I wanted to figure out the easiest way to determine when something might be out. Our ecommerce platform didn’t have a native forecasting tool, but it does allow us to extend it. I started working with our developers to code it — to track sales on an SKU level across pockets of time and then estimate when something might be out of stock based on current inventory.

Bandholz: Do you sell on channels other than RibbedTee.com?

Schwarz: RibbedTee.com is the primary channel, but we also sell on Amazon.

See the next installment, “Part 11: Selling on Amazon.”