I am teaching the core operations class again this quarter and we are just getting to supply chain management and the newsvendor problem. Thus I was happy to see an article on a custom shirt maker in Sunday’s New York Times that makes a perfect talking point (Putting Customers in Charge of Design, May 16). The firm in question is Blank Label. Here is what their website says:
Blank Label is empowering you to be your own dress shirt designer. Forget about shopping at your local retail stores to buy a dress shirt ten thousand other guys can get, or a dress shirt that fits like a parachute. Design your own custom dress shirt to fit your style, personality and body. Make an incredibly unique dress shirt tailored to you. It’s better than a bespoke experience because you get more say in the design of your dress shirt and ours is actually a fun experience.
There have, of course, been custom dress shirt makers around for years and many have operate over the web. Part of what sets Blank Label apart is the price point. The other part is an emotional pitch (from the NYT article):
“The value proposition of customization at retail prices was a cornerstone of our company from the very start,” Mr. Bi tells me by phone from Shanghai, where Blank Label shirts are sewn to customers’ specifications and delivered anywhere in the world in about four weeks. But Blank Label, his Web start-up based in Boston, offers something else that off-the-rack doesn’t: “the emotional value proposition: how expressive something is.”
“People really like a Blank Label shirt because they can say, ‘I had a part in creating this.’ ”
Their website continues the creativity emphasis inviting you to “co-create your custom men’s dress shirt within 10 minutes.”
What does this have to do with the newsvendor problem? The newsvendor is all about short life cycle products, making it the go-to model of fashion apparel. Your basic white dress shirt will always be in demand but the more aggressive colors, patterns, and styles that Blank Label offers may not. Indeed, if Blank Label had to hold in inventory everything it can now make, it wouldn’t be in business:
The upside for business owners is obvious: low overhead. At Blank Label, for example, the sew-as-you-go business model eliminates the need to produce shirts of every size and style. There’s no need to rent space to store inventory. There’s no storefront, no office other than a borrowed space at Babson College in Boston, where until recently Mr. Bi was an exchange student from the University of New South Wales — he grew up in Australia.
“We’ve focused on being very bootstrap, very lean,” says Mr. Bi, who says the business has sold about 450 shirts. Recently, it has seen a big bump in traffic, with orders of about 10 shirts a day. He says the company makes money on every shirt.
This is one of the points I like to make when teaching the newsvendor. Variability is going to hurt you. It will generally be less profitable to serve variable demand instead of fixed demand. The ability to react to demand (as Blank Label does) opens up businesses that would not be profitable if one had to build inventory ahead of demand.
So is Black Label a sustainable business? I am not sure. They are a young and growing company and have gotten some good press. However, if anything, they prove that the barriers to entry are pretty low in this business. They at the moment have a niche over, say, Brooks Brothers (who also does customer shirts over the web) by emphasizing fun and cheap over exclusive and expensive. That seems to invite a race to the bottom to be cheaper and cheaper. I am not sure that is a good race to enter.