Spanx, Inc.

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Spanx, Inc.

3391 Peachtree Road, Suite 300
Atlanta, Georgia 30326
U.S.A.
Telephone: (404) 321-1608
Toll Free: (888) 806-7311
Fax: (404) 321-4464
Web site: http://www.spanx.com

Private Company
Incorporated: 2000
Employees: 50
Sales: $100 million (2006 est.)
NAIC: 424330 Women’s, Children’s, and Infants’ Clothing and Accessories Merchant Wholesalers; 454111 Electronic Shopping

FASHION REQUIREMENTS INSPIRE NEW PANTYHOSE

REVIVING THE HOSIERY INDUSTRY

BODY-SHAPING FEATURES EXTENDED TO NEW PRODUCTS

MEDIA EXPOSURE AND AVENUES OF GROWTH MULTIPLY

PRINCIPAL COMPETITORS

FASHION REQUIREMENTS INSPIRE NEW PANTYHOSE

Sara Blakely founded Spanx on the idea of providing women with a lightweight, body-shaping undergarment that would smooth bulges, eliminate panty lines, and fit the needs of contemporary fashion. The inspiration for Blakely’s first product came in 1998, when she sought a slenderizing hosiery to wear with a pair of close-fitting, cream colored pants and open-toed shoes. When she could not find hosiery without feet, Blakely cut the feet off a pair of control top pantyhose. The control feature eliminated panty lines and provided bulge control, but the leg bottoms frayed and rolled up her calf. With the insight that other women would desire the kind of hosiery she did, Blakely created a sketch of her ideal pair of footless pantyhose, with a knitted band at the calf to prevent fray and keep the hosiery in place. She invested $5,000 of her savings into starting a business, which she operated from a spare bedroom.

While employed as a sales trainer and a stand-up comic, Blakely spent many evenings performing research on pantyhose patents at Georgia Tech Library and about the pantyhose industry over the Internet. She studied books on the patent process and then approached lawyers to write the legal patent. The lawyers, however, thought her idea too bizarre; one lawyer even thought he was on Candid Camera. Consequently, Blakely decided to write the patent herself, saving money in the process. She received her patent within a year of originating the footless pantyhose. Later, she found a lawyer to handle the claims.

Blakely brought her comedic wit and practical marketing research to determining a brand name for her product, specifically in using the “K” sound. A trade secret among comedians is that the “K” sound makes people laugh. Also, Coca-Cola and Kodak, two widely recognized brand names, both have a “K” sound, so Blakely decided she wanted her product to have that sound, too. The name Spanks hit Blakely like the proverbial bolt of lightning experienced by many entrepreneurs. Further marketing research revealed that fabricated words were more successful as trade names and reduced complications in the trademark process. Hence, Blakely changed the “KS” to “X,” and Spanx emerged as a fun, hip, and memorable brand name.

After obtaining the patent and a trademark for Spanx, Blakely’s next challenge involved finding a manufacturer to produce the footless hosiery. This is where a sales background helped Blakely to attain her goal. As a saleswoman for a fax and copy machine distributor, Blakely had made countless cold calls and was even escorted from office buildings where she solicited sales. Such tenacity served Blakely well as she made several cold calls to hosiery manufacturers, both by telephone and in-person. For a week she drove around North Carolina talking to mill owners. She encountered much skepticism and doubt. Mill owners asked her who she was, who she represented, and who provided financial support for her business. Without answers adequate to their concerns, Blakely found herself begging them to produce the footless pantyhose. Eventually, she found a mill owner willing to take a risk. Initially, like the lawyers, Samuel Kaplan of Highland Mills, in Charlotte, thought footless hosiery was a crazy idea, but his two daughters convinced him otherwise. In fact, they wanted to know where they could find such an item. Two weeks later, he contacted Blakely to discuss details.

After a year of experimenting with materials and knitting techniques, Blakely emerged with a prototype that satisfied her desire to create the most comfortable undergarment possible. Product features included a cotton gusset, rather than polyester, to provide cool wearability. The pantyhose offered slenderizing control with a soft waistband that did not dig at the waist and a cuff which did not roll, fray, or crease the skin at the ankle. Hence, she named the product Spanx Footless Bodyshaping Pantyhose.

In creating product packaging, Blakely sought to rejuvenate a boring industry with a brash style. Blakely examined hosiery packaging for visual style as well as language. In contrast to the gray and beige colors then typical of hosiery packaging, Blakely chose a vibrant red color. Also, discontented with photos of half-naked women, Blakely employed a graphic designer friend who created colorful illustrations of three fully-clothed women in different stances to show the effects of wearing the pantyhose under a skirt or pants. Thus, the Spanx package expressed the confidence Blakely wanted women to feel wearing the product. Using her mother and her friends’ mothers as a test market, the Spanx name received resounding laughter, and a tagline emerged that fit with the humorous, self-assured style of the brand: “Don’t worry, we’ve got your butt covered.”

COMPANY PERSPECTIVES

Spanx products are designed by a woman and are crafted to promote comfort and confidence in women.

REVIVING THE HOSIERY INDUSTRY

With a complete product in hand, in July 2000 Blakely began to seek outlets for Spanx. She found immediate success in approaching a buyer at Neiman Marcus. She asked the buyer for ten minutes of her time to demonstrate the product. Blakely flew to Dallas, took the buyer into the women’s restroom, and showed her the before and after effect that Spanx pantyhose made under the original cream pants that prompted the invention. Blakely’s demonstration sold the product, and Neiman Marcus tested Spanx in seven stores. Priced at $20 per pair, Spanx Footless Bodyshaping Pantyhose were stocked on the shelves three weeks later. Two weeks later, the store sold out, and Neiman Marcus placed an order to stock all 32 stores with Spanx hosiery.

Blakely did not have funds to advertise Spanx, so she enlisted the help of her friends to generate sales. She called women friends and asked them to purchase the pantyhose with much bustle and enthusiasm in order to attract attention to the product. She applied her sales skills by traveling to stores and holding rallies with the sales associates. Afterward, she stayed in the stores to introduce the product to customers, lifting her pant leg to reveal the footless pantyhose underneath. Also, Blakely and her friends called newspapers, magazines, and television stations, successfully obtaining media coverage of the product.

Spanx received a major boost in media exposure through use of the product by celebrities Oprah Winfrey and Gwyneth Paltrow. Winfrey, who cut the feet off her pantyhose, too, put Spanx on her “Favorite Things” list in O magazine in 2000, and Blakely appeared on her television show. As a result, distribution of Spanx expanded rapidly to several high-end department stores in the fall of 2000, including Saks Fifth Avenue, Bloom-ingdale’s, Nordstrom, Von Maur, Marshall Field’s, Lord & Taylor, and Bergdorf Goodman. More than 100 upscale boutiques carried the product as well. Within three months, Spanx distributed 50,000 pairs of footless pantyhose. Four months of sales produced $400,000 in revenue in 2000, garnering a pretax profit margin of 25 percent.

Despite this initial success, Blakely still operated the business on a shoestring, without an advertising budget. After exploring low-cost marketing options, Blakely applied to QVC, Comcast’s home shopping network, to gain an appearance on the show. She had determined that, as a new invention, the footless pantyhose required some explaining, and QVC provided an avenue to discuss product features and benefits in detail. The process took several months, as QVC evaluated the product for quality, salability, programming match, and fit with QVC’s existing product line. Though only 3 percent of more than 15,000 applicants meet QVC requirements annually, Spanx Footless Bodyshaping Pantyhose emerged as a viable product. Blakely appeared on QVC in May 2001 and, in less than eight minutes, sold 8,000 pairs of Spanx, double QVC’s initial buy of 4,000 pairs. Afterward, Blakely appeared frequently on the show, and QVC sales became an integral aspect of Spanx marketing. In 2002, Spanx retail sales on QVC reached $8 million, accounting for approximately 30 percent of revenues.

The introduction of Spanx revitalized the hosiery industry, then in the midst of a ten-year decline in sales, as business casual became the norm and women opted for other casual styles, such as open-toed shoes. Hence, hosiery manufacturers followed Blakely’s lead. Sara Lee, maker of L’eggs and Hanes brands of pantyhose, launched Smooth Illusions in the spring of 2001, and leading designers, such as Donna Karan and Calvin Klein, responded with comparable products.

BODY-SHAPING FEATURES EXTENDED TO NEW PRODUCTS

The success of Spanx led to the development of several other body-shaping hosiery products, serving a variety of women’s fashion requirements. In 2001 the company introduced Super Spanx, footless pantyhose with a stomach panel that provided stronger slimming effects than the original product. Spanx Control Top Fishnet stockings differed from typical fishnet stockings, which offered no control top features and no attached panty. Spanx fishnets provided comfort and shapeliness with a combination of 70 percent nylon and 30 percent Lycra. Applying a bold comedic style to describe the primary benefit of the product, the company seized on the tagline, “No more grid butt.” Moreover, the brash marketing style garnered a place in Trivial Pursuit, which used the tagline in the 2004 edition. The game asked the question, “What company invented control top fishnets and coined the phrase, ‘No more grid butt’?” Answer: Spanx.

KEY DATES

1998:: Sara Blakely’s futile search for footless pantyhose to wear under body-hugging pants leads to invention.
2000:: Distribution of Spanx Bodyshaping Footless Pantyhose begins at Neiman Marcus; the company meets success with publicity from Oprah Winfrey.
2002:: Several new products are introduced, including the popular Power Panties.
2004:: Spanx introduces Bod-a-Bing’, a line of slenderizing apparel, and Bra-lleluja, an all hosiery bra.
2005:: Spanx introduces two lines of intimate apparel, Hide & Sleek and Slim Cognito.
2006:: The moderately priced Assets line of hosiery is introduced at Target stores.

The next new product, Power Panties, followed from customers who approached Blakely with their complaints about undergarments. In particular, the strings on thong underwear created panty lines, and traditional girdles and shapers used leg bands that created bulges mid-thigh. Band-free Power Panties resolved these problems. Launched in 2002, the product provided mid-thigh shaping and stomach minimizing and the soft waistband prevented formation of a bulge over the top of the undergarment. Other new products introduced in 2002 included Topless Trouser Socks, in which band-free chins prevented the formation of deep crevices in the skin. Mama Spanx offered footless and full-length pantyhose in maternity sizes and featured soft, underbelly support. Blakely launched Two Timin’ reversible tights and socks with an appearance on QVC. The stockings provided two color options in one pair, switching from black on one side to gray, navy, or brown on the other side. The tights were offered with reversible patterns, diamond grid on one side and flowers on the opposite side. In 2003 Spanx followed with Turbo Tights, footless tights designed to provide warmth in the winter as well as slimming effects.

The success of Spanx required new staff and office expansion. In 2001, Blakely moved the business from the spare bedroom to an office in Decatur, Georgia. The company grew to employ a staff of 11 by the end of 2002. That year, Blakely hired Laurie Ann Goldman as CEO; while Goldman handled practical business decisions, Blakely focused on product development and marketing. A year later, to prepare for further expansion, Blakely relocated to a 10,000-square-foot office space at Lucerne at Lenox in Buckhead. The staff expanded to 26 employees, and additional hiring for sales and marketing was expected.

MEDIA EXPOSURE AND AVENUES OF GROWTH MULTIPLY

The media continued to play a role in generating awareness of Spanx.InStyle, Glamour, Jezebel, Vogue, and other women’s magazines highlighted the company’s products in their new products or advice columns. Blakely herself garnered media attention as an inventor and entrepreneur. Articles in WWD, Forbes, and Entrepreneur highlighted Blakely’s product as well as her business success.Georgia Trend placed Blakely on their list of 40 rising stars under the age of 40, and Blakely was one of four local leaders pictured on the cover of the magazine. Also, she received the Southeast Regional Entrepreneur of the Year award from Ernst & Young in 2002.

As the public face of the company, Blakely garnered media exposure that facilitated the 2003 introduction of Spanx to the United Kingdom. The Spanx products were distributed through such fine department stores as Harrods, Selfridges, and Harvey Nichols, as well as on mytights.com, a London-based Internet retailer. Blakely introduced the product at a press breakfast organized in coordination with MyTights. Blakely emphasized the differences between fashion in the United States and Europe, where slimming products had not become a fashion essential. Hence, Spanx became the first company to offer body-shaping hosiery and apparel in the United Kingdom. In October 2003, QVC became a launching pad for international expansion when Blakely appeared on QVC UK and QVC Germany, with a potential audience of 11.6 million viewers in the United Kingdom and 34 million viewers in Germany. Also, Blakely gained an appearance on the British television’s version of The Apprentice, called Rebel Billionaire: The Quest for the Best, hosted by Sir Richard Branson, the dynamic founder of Virgin Atlantic Airlines and Virgin Records. Blakely spent three months participating on the business reality show, accepting management assignments in China, London, and South Africa. In addition to obtaining access to the public for Spanx, Blakely met Nelson Mandela and conversed with Branson about business and nonprofit foundations. Winning second place on the show, Blakely received $750,000, which she used to form The Sara Blakely Foundation in support of women’s education and entrepreneurship around the world. The show aired on Fox TV in the United States.

The growing popularity of body-shaping hosiery led to a proliferation of product ideas, in both garments and undergarments. In 2004, Spanx launched a line of slenderizing apparel under the name Bod-a-Bing!. The collection featured a body-hugging liner under a pair of pants, a skirt, a turtleneck, and a three-quarter-sleeved top. Prices ranged from $48 to $72. The success of that collection led Spanx to use the liner as the basis for a collection of intimate apparel. Hence, in March 2005, Spanx introduced the Hide and Sleek line of body-shaping undergarments, with a half-slip, full slip, strapless full slip, camisole, and strapless camisole. Spanx’s Slim Cognito products further expanded on the concept but offered stronger body-shaping ability with a fabric blend of nylon, spandex, and cotton. The Slim Cognito line offered a bodysuit, control panty, mid-thigh shaper, and a control thong. Hide and Sleek and Slim Cognito product lines carried prices ranging from $11 to $36. Also, in 2004, Spanx introduced the first all hosiery bra under the name Bra-lleluja. The bra provided support and comfort as it minimized bulges and visible lines.

Celebrities’ embrace of Spanx heightened women’s awareness of the products. In 2004, one week after giving birth, Gwyneth Paltrow wore two pairs of Spanx Power Panties to a Los Angeles gala. She revealed the secret to her smooth, postpartum body in USA Today, then Us magazine repeated the quote. A few months later Oprah announced that she had relinquished conventional underwear and wore only Spanx.

New avenues of growth involved entry into specialty stores. The two new lines of undergarments expanded Spanx from the hosiery department into intimate apparel, thus opening new markets at intimate apparel stores, such as Soma, a new ten-unit chain. Other new customers included Chico’s, a national chain of 400 women’s clothing stores. After introducing Spanx Queen Comfort in plus-sizes in 2005, the company began to distribute merchandise through specialty chain stores catering to the plus-size market, such as Lane Bryant, Catherine, and Torrid.

In 2006 executives at Target approached Blakely to develop hosiery products that would sell for a moderate price. Blakely responded with the brand Assets, but she changed the names of specific products. Lucky Leggings corresponded to the original footless body-shaper, Unbelievable Underwear corresponded to Power Panties, and Sensational Shaper to the High Falutin’ Bodyshaper, with bulge control power from high waist to mid-thigh. To reduce the cost, these products incorporated less Lycra and more nylon in the materials mix. Target introduced the product in the spring of 2006, and Blakely launched a promotional tour to Target stores in 11 major cities in 2007.

In the autumn of 2006 new fashions promised to support business growth at Spanx. With the renewal of 1980s styles, featuring leggings under dresses and oversized sweaters and shirts, Spanx provided both the style and the slenderizing comfort that women desired. In a Wall Street Journal article that evaluated the new style for office appropriateness, three fashion experts approved the Spanx example. In July 2006, Us magazine printed a “leggings do’s and don’ts” article that showed a picture of actress Jessica Alba wearing Spanx footless pantyhose under a sundress, a fashion “do.” Also, the article quoted Blakely giving advice on how to wear leggings, that they should “cover the full part of the calf.”

Hollywood continued to be a source of publicity for Spanx. An October 2006 article in In Touch Weekly, a celebrity magazine, hyperbolized Spanx as “Hollywood’s Big Secret.” The article highlighted product use by Oprah, Jessica Alba, and other celebrities. On Oscar night, The Tyra Banks Show and E! News touted Spanx as famous actresses walked across the infamous red carpet, looking smooth and svelte for the photographers with Spanx under their body-hugging gowns. Moreover, celebrity stylists began suggesting the use of Spanx products to their clients, including Halle Berry, Meg Ryan, and Sandra Bullock. Spanx took advantage of celebrity allure to create its own video in a television magazine format. The film highlighted celebrity use of Spanx products and aired it on YouTube.com in a cooperative marketing venture with BareNecessities.com, an Internet retailer of hosiery and intimate apparel. Blakely became something of a celebrity herself, appearing with boxing champion and kitchen appliance entrepreneur George Foreman as a judge on American Inventor, a prime-time reality show based on the American Idol concept. Traveling to six cities, the panel of judges met with inventors or teams of inventors who presented their ideas for an opportunity to win a cash prize of $50,000 to support further entrepreneurial development.