Andrew Blackmon (The Black Tux) - How He Approaches Standardization, Customization and Scale Running a Tuxedo Rental Business

0:00This episode is brought to you by Vobin from Carta. Vobin from Carta is the easiest way to launch and run your venture investing. They offer SPVs and fund vehicles for GPs at all stages of the journey, from your first syndicate to operating a multi-million dollar venture fund. If you're interested in investing in startups, stick around after the episode where I chat with Gabriel Shin from the Vobin from Carta team, who shares his perspective and tips about how to start investing and how Vobin from Carta can get you set up. The link to Vobin from Carta's website is in the show notes. we want to create something that makes people feel a lot makes people feel like it's a lot different than what they expected from a tuxedo rental company and we want to generate press around this because if we can kind of drive this engine of word of mouth through press and through I would just say like the brand image we create and then we can back it up with a good experience and a tuxedo rental that they didn't expect or it's just like a lot better than they had done in the past, we felt like people would just tell other people about it.

1:03And that is exactly actually what ended up happening. We got some press, like we were very fortunate to be covered in GQ and the wall street journal and some other places. We didn't have that many suits. So pretty quickly it turned into like a long wait list for our service. Um, and you know, a wait list is kind of like, I think a really good to go out and raise venture money because you're basically using the money to fulfill demand, not create demand. And, you know, demand is like, for a company at that stage, it's the biggest risk because people don't know if you have product market fit or if other people are going to want the service.

1:38Hello, I'm your host, Mike Gelb, and this is the Consumer VC Podcast, where we discuss the intersection of venture capital and consumer innovation. If you're enjoying the show, also subscribe to my newsletter at the Consumer VC where you'll receive new episodes straight to your inbox and a weekly recap of all the consumer deals that are happening. All content and episodes are for informational and entertainment purposes only and is not investment advice. This episode is brought to you by Vauban from Carta. Vauban from Carta is the easiest way to launch and run your venture investing. They offer SPVs and fund vehicles for GPs at all stages of the journey from your first syndicate to operating a multi-million dollar venture fund.

2:20If you're interested in investing in startups, stick around after the episode where I chat with Gabriel Shin from the Vauban from Carta team, who shares his perspective and tips about how to start investing and how Vauban from Carta can get you set up. The link to Vauban from Carta's website is in the show notes. Our guest today is Andrew Blackman, who is the co-founder and CEO of The Black Tux. The Black Tux is reinventing formal wear. They design and manufacture modern suits and tuxedos for rent or for keeps. We discussed why Andrew decided to start a DTC rentals tuxedo business in the first place, how he thinks about size, fit, what standardized versus customization, and the different growth avenues that they've experienced over the past few years.

3:04And what I thought was really interesting, how they're influenced by fashion trends, or if they're influenced by fashion trends when it comes to design, and much more. Without further ado, here's Andrew.

3:20Andrew, thank you so much for joining me today. How are you? I'm good. Thank you so much for having me on the show. Excited to be here. Oh, it's an absolute pleasure. Thanks for taking the time. So I want to start from the very beginning. Tuxedos. Why build a tuxedo business and what was kind of like the origin story of the Black Tux? Yeah, so it's a good question because most people don't look at tuxedos or tuxedo rentals in particular and think that's the most interesting business. You know, it really came from a need that my co-founder and I identified when we were younger and we were going to a bunch of weddings.

3:55We both got married ourselves and going to proms and we just realized tuxedo rentals are kind of a bad experience. Like there's a negative stigma in the industry or there was at the time. Most people believed that if you rented, you were going to end up with something that had a really baggy fit and didn't essentially fit or look great for what's usually a really important day. And so the idea and the reason we wanted to do this is really just we were the consumer and we didn't like what the current incumbents were offering. So we wanted to start something different and better. And so we conceived of this idea.

4:31So when you began to think of this idea, how did you think through it? because, and what's kind of the origin story there with like BlackTux in terms of what the first steps that you and your co-founder took? Yeah, so we both had literally no experience in any industry that was relevant, which actually I think helped us out a little bit because we were somewhat naive and we didn't look at things that most people would look at as a massive challenge and think they were a challenge just because we didn't even know at that point. So for us, the first step was actually kind of different than what I see most entrepreneurs do.

5:06We wrote a business plan and it was like 40 pages long with like, here's the idea, here's the brand, here's what we think the financial projections could look like. I mean, of course, the financial projections were just so wildly off, but everything else was kind of like what we ended up doing. We identified the problem. We thought about how we would, you know, create a more or create a suit or tuxedo that people want to rent. That would be more like something you buy for higher price. Um, we thought a lot about the brand in that business plan. We thought a lot about how we would do the operations and the shipping and how we would go to market and things like that.

5:45So I think it was like, we had never started a business before. We were both about 26. We had just come out of business school and just had no experience. So we're like, okay, the only way people are going to take us seriously is if we really do a lot of research into this market and put together something like, um, which I think people found funny. I think most people, when we took it to them, when we're trying to raise capital, we're like, where's your 10-page slide deck? Like, what is this? But I'm glad we did it because it helped us to think through all the potential issues and really think about what we wanted to do with the business.

6:20In that first round of funding, were you trying to raise prior to actually having the brand launch? Yeah. So the first round of funding is actually kind of an interesting story for us. the first first round was just myself my co-founder our families you know we're lucky to give us a little bit of money to get this thing off the ground and then some like family friends so your typical friends at family ground but after we did that we because we had no experience there were a bunch of startup accelerators in la where we started the company and you know we talked to a bunch of them and one of them that we really liked we ended up joining which is a thing called mucker Labs, which is now Mucker Capital, which are early stage investors who I really, really think highly of.

7:02And so we joined that. And when we joined that, we spent like a year putting together the site, the product, everything like that. And they had a demo day. And when we did the demo day, we got a bunch of investors who were interested in like doing around before we actually took the company to market. So we were like, okay, let's talk to all these investors. They're all like brand name Silicon Valley. And almost all of them ended up saying no at the beginning because it was like we had no traction. Everyone, I think, liked the idea, but they were like, you know, it probably makes sense for you guys to put it out in the marketplace, see if you get some traction before we invest behind it, which was actually at the time like really disappointing to us.

7:44We were bummed because we're like, we have meetings with all these really interesting and successful people. And most of them are saying no. The good thing is the no was kind of like a come back later. No, not a, Hey, we never want to do this deal. And so we ended up launching the company in June of 2013. Um, I think this kind of potential fundraise like happened two or three months before that, uh, or I should say failed fundraise. And then after June, we got a lot of traction on the business. And so we went out that fall and did our first seed round, which is what they were calling it at the time.

8:21And we were lucky to do that with a bunch of really great investors from mostly San Francisco, New York. So from a cashflow perspective, you were still able to launch. You didn't actually need the capital per se to actually launch, which was a good thing, obviously. Yeah. We had enough just from that small friends and family round to buy suits, tuxedos, put together a website, got a little tiny warehouse in Santa Monica, etc. Can you run through me what the operations were? I know you just said it in two seconds, but details in terms of where you source the tuxedos, how you thought about warehousing, and overall what the launch strategy was?

9:05Yeah. So I will say first, the operations of this business are challenging. And we were almost like hit with a brick when we realized how hard it is to run this business in the early stage. So it was myself, my co-founder, Patrick, and we had a few other people involved. And then we brought on another person who had a lot of experience, like kind of operating early stage startups. So essentially the business has to ship out all the goods to the customer and then receive them back. And in between those two things, that has to dry clean, tailor, and like basically get paid to give to the next person.

9:39That's, it's really in its essence, like a big dry cleaning and kind of tailoring cobbling business. And so we had a space in Santa Monica that was kind of off of a back alley. And we just had, maybe it was like 2000 square feet. We put in some racking and we would just do all these things ourselves. like my co-founder Patrick was responsible for kind of sourcing and finding the goods and so you know we were traveling all over the place to figure out how to manufacture what we felt was like a high quality tuxedo that could also withstand multiple dry cleanings so it could be rented the other guy we brought on Mike he would really focus on how do we operate this business like how are we tracking the inventory what technology are we using there was some off the shelf technology that we could use in the early days that didn't scale but worked for that phase and then I was focused a little bit more on how do we create the brand get it out in the marketplace in the ecosystem and then I was doing a lot of our customer service as well just taking phone calls answering emails etc and then we had like a few kind of first and second employees who also helped us just with any task so it was like the most fun and most hectic time but really just figuring out everything on the go.

10:56All of us would wash and clean and polish shoes ourselves. It was like, you know, we really did everything we could just to kind of prove that the concept. Can you, can you also speak to a little bit about how you thought around how many different types of sizes may be of tuxedos to actually carry? Cause I think as we began this conversation, when we talked about the, um, um, what, you know, like the, the, the bad process, you know, originally when it comes to tuxedos, You might get a tuxedo that might be too big, too small. It's kind of a customized piece of apparel. And that's what I would imagine is quite challenging because you kind of want that customization.

11:31But from a business side, since your rentals, these tuxes are going to be worn by multiple people instead of by only one person. That also, I'd imagine, is quite challenging to kind of balance that customization with standardization. Yeah, absolutely. So that was a huge challenge in the early days because statistically to cover everyone's size without needing to do a lot of tailoring, you have to carry quite a few different sizes. Basically, every size in a short, regular, extra short, long, extra long. Sorry, I went in a funny order there, but I think you get it. And so the amount of sizes for every style, if you want to statistically be able to serve everyone in a wedding party, is extremely high.

12:11We couldn't even do that at the beginning days, so we had to do quite a bit of tailoring to take garments, make them fit somebody, and then kind of tailor than to fit somebody else afterwards, which was cumbersome on the business. In terms of like figuring out what that size distribution looked like, it was hard and we got it way wrong. And I'll tell a funny story about that. So at the beginning, we basically got a data set from the US government, who it's a public data set who had all these measurements on people who were essentially joining the army, who are predominantly male. And so we could look at that data set and And we could basically create our own algorithm that says, if somebody is this height and weight based on this data, what do we think their suit size is going to be?

12:54Because they had suit sizing as part of that. So we thought, great, this is a really interesting data set. Hopefully it's representative of our customer. We have our first kind of orders that we're sending out. I still remember the name of the person that we were sending the first orders to because we're like, we're just going to do one wedding party the first weekend and make sure it works. and this person called me on the customer care line and just basically said hey man I'm bummed about this but literally nothing fits sent us photos like the jackets were past the person's hand and so Patrick and I we were like you know yeah shed a tear because this was so disappointing and we had at that point invested so much time and energy and effort into this business and so we dug in I mean we fixed that issue we ended up buying the sky suits sending him chain, just making sure he was totally taken care of for his wedding.

13:43But we dug into the algorithm and realized two things. One, that this data set was not representative of most people because somebody joining the army is like has a much different build than the average population of the US. And then two, our quote unquote algorithm that we created in Excel was over predicting people's size by like two standard deviations. So we basically, it was a solvable problem, but it showed us really early, like two of the hardest things in this business, one are going to be fit and then two is going to be operations. And those kind of go hand in hand, like operating the business to get people the best fit was going to be challenging.

14:21Luckily, we fixed the issues with the algorithm. We got a better data set. And now we have our own data set, of course, because we've served close to 2 million customers to this date. So now we can predict someone's size really well. But in the early days, it was pretty challenging. Um, and it was like a lot of trial and error to figure it out. Um, so it's interesting kind of how, um, how, uh, the BlackTux has evolved, as you said, maybe, um, as you said, like in your, um, using, first of all, like an external data set, and then you're able to, once you had like two, about 2 million customers or what have you to use your own data set and actually own that entire process when it comes to fit and size, how still like backing up in the early days, how did you approach though?

15:05like the launch, what were kind of some of the key maybe drivers or levers that you're able to pull that you said that you kind of came out pretty fast and then became attractive to investors? Talk to me a little bit about that experience. Yeah. So because we were starting a brand and one of the biggest parts of this opportunity that we saw was the brand experience. If you look at the market before we launched, it was mainly like big box retail stores and local mom and pop shops, both of which didn't focus on the brand that much. So for us, we actually spent a long time before launch figuring out the right product and the right sort of like brand and aesthetic and way to talk to the customer.

15:44Like I really felt like, Hey, if we create an emotional connection with the customer, people will spread this word of mouth because it's a very word of mouth type of business, given it's catering to weddings, proms, things like that. So we took that mentality into our launch and said, Hey, look, we don't want to do a ton of marketing. We want to create something that makes people feel a lot, makes people feel like it's a lot different than what they expected from a tuxedo rental company. And we want to generate press around this because if we can kind of drive this engine of word of mouth through press and through, I would just say, like the brand image we create, and then we can back it up with a good experience and a tuxedo rental that they didn't expect or it's just like a lot better than they had done in the past.

16:29We felt like people would just tell other people about it. And that is exactly actually what ended up happening. We got some press, like we were very fortunate to be covered in GQ and the Wall Street Journal and some other places. We didn't have that many suits. So pretty quickly, it turned into like a long waitlist for our service. and you know a wait list is kind of like I think a really good to go out and raise venture money because you're basically using the money to fulfill demand not create demand and you know demand is like for a company at that stage it's the biggest risk because people don't know if you have product market fit or if other people are going to want the service so that was our approach and we didn't actually spend any money on marketing for like the first two or three years in the business.

17:11It was really just like trying to keep up with the demand spread word of mouth pretty quickly. Wow. Well, that's awesome that you didn't have to spend anything on marketing for the first two, three years. And I mean, because it's, it is so interesting. I mean, during that time, right, I'd imagine it's like 2013, 2014. Is that right? Yeah, exactly. Where like, you know, like, you know, a DTC brand, online brands were kind of all the rage and also spending, a ton of marketing typically. So that's incredible that kind of, of course, you were growing, it seems, pretty rapidly, but didn't have to actually spend money on marketing.

17:49That's great. Yeah, we got lucky. There's some inherent things in the business, like essentially a bride and groom create an order for themselves and on average, five groomsmen. And then those people could end up getting married or end up being in another wedding. So there's actually some natural role of morality to the business, which helps it as well. Yeah, that's, that's interesting. I was interviewing a founder, um, that was, that, that was building in the baby category and same, same kind of thing, because a lot of those, um, a lot of their products gets on, you know, gift registry, obviously different, but like gets on like gift registries.

18:24And so usually that they're actually gifted products, um, uh, to people that, you know, are about to, um, have a child. And then what tends to happen is when then that person ends up having a child, then they actually are like, oh, well, this brand. So yeah, totally. That makes a lot of sense. Your operations, did it all change? Like, did you eventually find yourselves or did it lead to? I know you were buying like the tuxedos initially. Did you ever think to yourself like, okay, does it make sense for us to maybe own our manufacturing more or always kind of using third parties? So we're pretty vertically integrated.

19:01So when we say we're buying our own inventory, we're actually designing and manufacturing everything with a third party partner. So we don't like manufactured in house, but we'll take the designs and we'll go as far as like working with a wool mill directly to weave the fabric that we want for our suits and tuxedos, bringing that wool then to the cut and sew facility to have them cut and sew them in the designs that we like. So I don't think it makes sense for us to own those parts of it because those are pretty sophisticated businesses to like make wool and do a cut and sew. So that doesn't make sense, but I think we're pretty vertically integrated in that we own a lot of that process.

19:43Cool. No, got it. Got it. And, you know, like talk to me a little bit about like the user experience and in terms of like when you were getting better, I know you originally talked about kind of this fit, the fit technology that, that, that you had developed. Talk to me a little bit about, about from the user experience, like what, what measurements like would you collect in order for, for it to, to fit just right? Originally we took and collected a lot more measurements. Like the way that people have always been able to sort of submit their sizes to us is Either they go to one of our locations, which is pretty easy to get measured, and we put that into our system, or they do it themselves.

20:30Doing it themselves, we used to send them a tape measure. I oddly have one in my hand right now. We'd send them a tape measure and instruct them, like usually a friend or significant other or something, like what measurements to take and then give it to us. and along with that they would give us like height, weight, some questions about their body type, age, where they live in the U.S., things like that and so as time went on we actually found that the latter of those questions were more statistically significant in the predictability of what someone would wear than the measurements that they were taking with a measuring tape and there were a few reasons for that.

21:09One, there's a lot of human error with the tape. As much as you want to instruct someone to do it, they're probably going to breeze through it and do it the way they want to. And it often is incorrect. But two, like height, weight, and the questions that we ask about body type are very predictive in what suit size somebody is going to wear. And so over time, we've paired back the amount of information we need from the customer in order to, you know, fit them with a high accuracy. No, that's great. That's great. That is like pretty interesting, as you say, move kind of... So having, first of all, it'd be easier on the customer since they don't actually need to actually take their own measurements and what have you.

21:50And actually taking less data is actually more vital for you than what you originally were doing. That's pretty interesting. Yeah, we thought at the beginning, like we wanted to take all this information because people didn't trust us yet. We were a new brand. This is an important moment in your life. There has to be trust. We didn't have all these partnerships with like Nordstrom and other good brands. And so part of like collecting a lot of information was to generate trust. Now that I think we have more trust and more people know about us in the micro place, it's a little bit more about making it easy for the customer.

22:21And then the other side of fit is also making sure that there are a lot of safety nets in place in case something doesn't fit. So we ship it so the garment arrives 10 days prior to their event, so they have enough time to try it on. If anything doesn't fit, we'll overnight them a replacement item for free. We allow them to tailor the garments. And so we kind of worked on both ends of this, like how do we get the most likely fit on the first delivery? But then because everyone's body is different or everyone's preference is awesome um we wanted to make sure that there was a big enough window to make sure that somebody had a good fit um for their event that's awesome um and and how did you think about um where do these where your showrooms would be um uh would actually be located in terms of like what the type of partnerships would be or if it would be the its own retail um standalone it It happened kind of naturally.

23:20So like a lot of other, I think, DTC companies, we opened up a little space in our office in Santa Monica, took appointments. We realized like these appointments converted a high rate. People like the experience. They were often overbooked. So we opened an actual store in Santa Monica and then we opened one in New York and then Chicago, Dallas, San Francisco, a bunch of places. And they all were performing and continue to perform really well. but then we had the opportunity to instead of scaling those kind of orderly and ourselves to partner with Nordstrom where we have stores within a store so it's a pretty similar experience where you go into Nordstrom you get fitted and then we still ship everything to you but we have almost 30 of those so those were just easier to scale more quickly and Nordstrom is a great partner because they have a good brand they're known for customer service which is something that's really important in our industry.

24:15So I think that opportunity was just one that we kind of had always dreamed of. So when it came to fruition, we wanted to take that. I think as we go forward, we'll open more Nordstrom and more of our own stores because both really work with the model. Got it. No, that makes a lot of sense. I mean, I imagine too, probably you're getting, Nordstrom's also getting like more as well traffic from you all too, which is obviously very complimentary to their store. Yeah, exactly. Like we're sending all the volume to their people aren't usually walking through Nordstrom and saying, Oh, I need a tuxedo rental.

24:49It's more they're looking for a suit or tux rental. They want to try something on in store. And then we kind of booked the appointment at Nordstrom. So a lot of the customers are new customers to Nordstrom. They're often making purchases of other things at Nordstrom after the appointment. So it really is It's like a perfectly balanced partnership between the two companies. And the tuxedo market, is it one that's pretty cyclical? And more so, I would presume more so like summers and spring and maybe fall and maybe not as much winter? Or is it pretty much year round pretty busy? No, it definitely has a seasonal element to it.

25:29So there are proms that kind of begin, call it March, April, and then there's spring weddings that take up that same time period. The bulk of the business is in the fall wedding season. So really August until October. October is, to most people's surprise, the biggest month for weddings in the U.S. almost every year. There's a little bit of a downtrend in November. December is a solid month just given there's like a bunch of new year's events and black tie um occasions and then q1 is really the seasonal low point for business and you know because wait like um like I've interviewed like a couple like athlete athleisure wear brands and it seems like um and as well just think giving like my own taste when it comes to um to what I wear I feel like the world is kind of becoming a lot more casual maybe also due to covid um uh the world is kind of becoming more casual seems like though on the tuxedo side since this is for weddings and those are still formal um and kind of these uh special events formal uh of formal locations um but how how do you kind of think about black tie black tux excuse me moving forward um today given that there's been quite a big change when it comes to what people wear in the past 10 to 20 years, especially in formal wear?

26:55Yeah, that's a good question. So we definitely see casual versus formal ebbing and flowing over the last 100 years. It goes back and forth, the tide changes. And we're definitely in a period of more casualization. I think you're right. During and post-COVID, when most people are working at home, they want to wear sweatpants and things like that. My guess is that will change. Who knows when? But our business is luckily focused on events. And because we're so focused on events like weddings, proms, quinceañera, like black tie, New Year's parties, those can become more casual. Sometimes a wedding can become more casual.

27:34But even if it's more casual, a lot of people are wanting to rent or buy and are wanting the groomsmen in the wedding party to look uniform. so they need to go to somewhere to do this so we're a little bit more resistant to I think some of those changes than most people would guess what we have seen since the beginning the share of or the split of suits rented versus tux rented used to be heavily favored tux and then it went in the suiting direction as things have become more casual like tan suit gray suit blue suit but interestingly this year we're seeing that reverse and we're seeing things move more towards the tux rental rather than suit.