The Spanx BillionairePosted: March 26, 2012 Filed under: Personal Coaching | Tags: clothing, entrepreneurialism, Sara Blakely, Spanx Leave a comment
This spring, Sara Blakely appeared on both the cover of Forbes magazine and on its list of billionaires. Who is Sara Blakely? If that name doesn’t ring a bell, probably her product, Spanx, does. Sara was 29 when she invested her life savings, $5,000, trying to come up with something flattering to wear under her white slacks. Six months later, the one-time Disney World ride greeter and door-to-door fax machine salesperson found her new line of shaping underwear, Spanx, named one of Oprah Winfrey’s Favorite Things. Since then, Blakely has taken Spanx from a one-product wonder sold from her Atlanta apartment to a business valued at a billion dollars with $250 million in annual revenues and net profit margins estimated at 20%. She owns 100% of the private company, has never advertised and never taken outside investment. Blakely turned 41 in February, making her the youngest female self-made billionaire in the world. Spanx started as a one-woman show. In her first year Blakely shilled her new invention from a folding table in the foyer of Neiman Marcus, with a giant before-and-after photo of her derriere in cream slacks and bikini briefs underneath in one shot (an embarrassingly obvious Maginot Line) and $30 Spanx Power Panties (et voilà! no more line) in the other.
The company is now run by a team of 125. It sells 200 products in 11,500 department stores, boutiques and online shops in 40 countries. Distributors worldwide clamor to get on the stock list.
In the Forbes’ cover story they described Blakely’s background:
Blakely grew up in the beach town of Clearwater, Fla., always looking to make a buck. She’d set up a haunted house at Halloween and charge her neighbors admission. Or, tearing a page from Tom Sawyer, she’d trick her friends into doing her chores by turning weedpulling into a competition.
But while riding a bike around her cul-de-sac, she saw a car run over her best friend, right in front of her. “I think that when you witness death at age 16, there’s a sense of urgency about life,” she says. “The thought of my mortality—I think about it a lot. I find it motivating. It can be any time that your number’s up.” That same year Blakely’s parents separated. She sought solace in her father’s Wayne Dyer cassette tapes, memorizing all ten volumes of the motivational speaker’s How to Be a No-Limit Person series. “People used to fight over who had to ride home with me at night after a party,” says Blakely. “No one wanted to be in my car—they’d be, like, ‘No! She’s going to make us listen to that motivational crap!’”
After getting a degree in legal communications at Florida State, Blakely twice took the LSAT exam for law school admission and twice scored abysmally. Frustrated, she drove from Clearwater to Orlando to audition for a job at Disney World. Two inches too short to fill the 5-foot-8 Goofy costume, she instead spent eight hours a day on a moving walkway buckling visitors into their seats at Epcot’s now closed World of Motion ride.
“I think I wanted to postpone reality, having spent my whole life thinking I’d be a lawyer,” says Blakely, who as a kid loved watching her dad in court. “It didn’t work. My first day at Disney I went on break and saw Snow White dragging on a cigarette.” After three months of misery at Disney, Blakely applied for a job she’d seen advertised on a billboard.
She spent the next seven years at Danka, then a $1 billion Florida-based office supply company, now part of Japanese printer giant Ricoh. It taught her the art of the cold call. “They gave me a cubicle, a phone book and a territory of four zip codes in Clearwater and said, ‘Now go sell $20,000 of fax machines a month door-to- door,’” she recalls. Blakely again found herself being escorted out of buildings. “I’d get business cards ripped up in my face because I was soliciting.” But with her easy charm, good looks and slick debating skills, she became, at age 25, Danka’s national sales trainer.
Like many startups, Spanx began life as an answer to an irritating problem. The panty hose Blakely was forced to wear at both Disney and Danka were uncomfortable and old-fashioned. “It’s Florida, it’s hot, I was carrying fax machines,” she says. She hated the way the seamed foot stuck out of an open-toe sandal or kitten heel. But she noticed that the control-top eliminated panty lines and made her tiny body look even firmer. She’d bought a new pair of cream slacks for $78 at Arden B and was keen to wear them to a party. “I cut the feet off my pantyhose and wore them underneath,” she says. “But they rolled up my legs all night. I remember thinking, ‘I’ve got to figure out how to make this.’ I’d never worked in fashion or retail. I just needed an undergarment that didn’t exist.”
Blakely, then 27, moved to Atlanta, set aside her entire $5,000 savings and spent the next two years meticulously planning the launch of her product while working nine to five at Danka. She spent seven nights straight at the Georgia Tech library researching every hosiery patent ever filed. She visited craft stores like Michaels to find the right fabrics. She sought out hosiery mills in the Yellow Pages and started cold calling, only to be told no repeatedly. Immune to rejection thanks to years selling door-to-door, she decided just to show up. At the Highland Mills hosiery factory in Charlotte, N.C., she was turned away, only to receive a call from the manager two weeks later.
To save $3,000 in legal fees she wrote her own patent from a Barnes & Noble textbook, setting aside $150 to incorporate her company, but couldn’t decide on a name. After a succession of terrible ideas she settled on Spanks, substituting an “x” at the last minute after reading that made-up names sold better. “The word ‘Spanx’ was funny,” she says. “It made people laugh. No one ever forgot it.” In the summer of 2000 she spent evenings on a friend’s computer designing her packaging. She went for cherry red and, with the help of a graphic artist, created a blonde cartoon model with a long ponytail called Sunny—Sara’s animated alter ego.
Blakely flew to Dallas that fall to meet with buyers from Neiman Marcus. Current CEO Karen Katz was president of all the upscale chain’s stores at the time and remembers seeing Blakely in a conference room, pitching. “Sara’s effort was to solve an age-old problem for women in a modern way,” Katz says. She adds that Blakely’s obvious charisma and unusual backstory didn’t
hurt. “We were smitten from the beginning.” With Neiman in the bag, Blakely convinced Bloomingdale’s, Saks and Bergdorf Goodman to give her a shot.
Blakely was still working her day job at Danka, keeping her side business top-secret, sitting up all night shoving Spanx orders into white padded envelopes from Office Depot. She was 24/7 customer service, answering phone calls from her bathtub or bed. Her then boyfriend quit his job and took care of shipping and handling.
Unable to shell out for advertising, Blakely took on marketing and p.r. She tore out journalists’ bylines from magazines and called them. She took over morning staff meetings at department stores to show sales associates why Spanx shouldn’t languish in the beige hinterland of the hosiery floor but be sold alongside womenswear and shoes. If that didn’t work, she improvised, once sneaking some red Spanx packages onto a rack she bought at Target and placing them by a cash register in Neiman. “All the staff assumed someone else had approved it, until they caught me on CCTV,” she laughs.
In November 2000 Winfrey named Spanx her favorite product of the year on the annual audience scream-a-thon that was her Favorite Things Show. When Blakely got the call from Harpo Productions, she was warned to get her website ready, since orders would undoubtedly cascade after the show. Spanx didn’t have a website. “We took a color copy of the packaging and scanned it in,” Blakely says. “I ran a considerable Web business for $18 a month.” She resigned from Danka two weeks before the show aired. Spanx was profitable from day one, and raked in $4 million its first year and $10 million the next.
For the next two years Blakely constantly traveled to do in-store demos and local news appearances. In 2001 she scored a coveted deal with QVC, which turned her down until it read a Forbes story (“Footless and Fancy-Free,” Apr. 2, 2001) that described Blakely as an “accidental entrepreneur” who’d reinvented the girdle. So what if Spanx took the high road (Bergdorf ) and the low (QVC) at once? Women were buying like mad.
“Sara was out there shaking her butt and selling her product,” says Goldman in her office, next door to Blakely’s and furnished like an Upper East Side living room—velvet fittings, monogrammed Louis Vuitton trunks. Laurie Ann Goldman, a ten-year veteran of Coca-Cola, where she ran the licensing division in 54 countries, came on board in 2002, first as a consultant, then as CEO. She was Spanx’s fifth employee. Her office was the kitchen in Blakely’s apartment in Decatur, but she knew that wouldn’t be the case for long. “I wanted to run Spanx like a public company from the start. I thought, Let’s get Ernst & Young to do our audits. They didn’t really do companies our size, but I said we were going to be bigger one day. We did the same with IT.”
Coming off its best year ever, Spanx has big plans for expansion. Goldman is pushing to double international sales, now over 15% of the total, within three years. She spends a lot of time jetting around Asia, laying the groundwork for Spanx in countries that don’t obsess about their posteriors quite as much as Westerners do. She and Blakely plan to open stand-alone shops, first in Atlanta, then slowly worldwide. They’re pushing their cheaper diffusion line, Assets, and adding new categories— swimwear, activewear, men’s underwear—as customers demand more options and competitors like Yummie Tummie, Dr. Rey Shapewear, Skweez Couture and Body Wrap (as well as Victoria’s Secret and Maidenform) flood the booming shapewear market.
Spanx is often the most expensive brand on the shapewear rack, but it hasn’t hurt sales. “If you have a great product, you can charge whatever you want,” says Noah Wrubel, CEO of lingerie site BareNecessities.com. “I as a retailer have no interest in a race to the bottom. Anyone can make a cheaper product.”
Blakely can afford to fund Spanx’s planned growth, but she and Goldman might, for the first time, consider a public offering or an injection of outside capital to speed things up. “We’ve been approached consistently from day one, and it was never something I entertained,” Blakely says. “Now, for the first time, I may entertain it.”
She still gets teary-eyed whenever she rides up the escalator in Bloomingdale’s to see the Spanx shop that opened last spring. “I have to pinch myself,” she says, hobbling in her different shoes, greeting shop assistants and adoring customers who recognize her from years of TV appearances. “Five grand,” she says, thinking back a decade. “Good investment.”