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Anyone looking for a tale of the mythic American dream realized may find a classic example in the story of David and Kenny Khym, brothers and founders of Southpole, which this year marks its 20th anniversary in business.
This story first appeared in the August 22, 2011 issue of WWD. Subscribe Today.
Their family came to the U.S. in 1977 when their father moved to the Riverdale section of the Bronx from South Korea. In 1991, the duo founded the young men’s and juniors brand and its parent company, Wicked Fashions Inc. The Southpole brand now rings up $1 billion at retail and is sold in more than 5,000 department and specialty store doors.
Since taking a sales hit following the 2008 financial crisis and making a round of layoffs, Southpole’s sales have been growing at a steady 8 to 12 percent clip annually, on the strength of its robust sourcing operations, sharp focus on competitive pricing and fast-evolving designs that appeal to its core customer base in the midtier channel.
“In the fashion business, passion is the number-one most important thing, but then comes market research and understanding what the trends are,” said Kenny Khym, who is president of Wicked, which began as a single discount men’s wear store in the inner-city Brownsville neighborhood of Brooklyn.
Today, Khym oversees the day-to-day operations of the company out of its Fort Lee, N.J., headquarters, a seven-story building emblazoned with a prominent Southpole logo just off the George Washington Bridge. In earlier years, Kenny directed strategy and product development planning while older brother David ran the company. David now holds the chairman title and focuses on long-term growth strategies.
The elder Khym also oversees the Southpole Foundation, which provides scholarships to community college students in the New York and New Jersey area and provides grants to health and social-services organizations.
Southpole today is sold in more than 1,000 doors of J.C. Penney, 600 units of Sears, 480 doors of Stage stores, 300 Peebles stores and 70 doors of Gordmans. Department stores account for 80 percent of sales and independent specialty retailers for 20 percent.
About 50 percent of Southpole sales are in young men’s, 25 percent in juniors and 25 percent in kids.
Unlike its current incarnation as a midtier brand, Southpole started life as a premium urban brand, selling jeans for $60 at a time when Levi’s cost about $35, noted Kenny Khym. The biggest category for it back then was the puffy “bubble” jacket.
“It was a big trend, and we were competing with brands like Bear USA, The North Face and Triple Fat Goose. But I remember The New York Times did a trend story, and maybe six of the 12 photos were of people wearing Southpole jackets on the street,” said Khym, recalling that symbolic moment for the brand.
In 2001, Southpole decided to enter the midtier market via J.C. Penney’s and target a much larger customer base with lower-priced product. The following year, Southpole was picked up by Sears.
“Going into the midtier was the most important milestone for the company because it opened the brand up to such a wider audience,” said Khym. “Southpole was the pioneer in making…[urban] trend-right apparel accessible to Middle America ahead of others.”
Today, the sweet spot for Southpole denim runs from $24.99 to $29.99. In fleece, it’s $19.99 to $29.99, and in T-shirts, it’s $12.99 to $14.99. Denim now accounts for 32 to 35 percent of total sales; fleece for 20 to 22 percent; T-shirts for 30 percent, and non-denim fashion from 10 to 15 percent.
“Our biggest strengths are fashion, quality and our competitive prices, which I don’t think a lot of people can do in the way we can,” said Art Matura, Southpole’s senior vice president of sales, who is among about 500 employees of the brand.
Describing the company’s partnership strategy with retailers, Khym explained, “Our foremost objective is maximizing customer satisfaction and [retailers’] profitability. In other words, we aim to become a ‘solution provider,’ delivering what they need when they need it. There are various programs we provide, from replenishment to retail sales analysis providing merchandising solutions. All efforts are aimed at creating a win-win scenario for all parties involved.”
While Southpole is an urban-oriented brand, its appeal crosses a wide swath of the youth demographic, according to company research. That’s especially true in today’s market, where there’s been a wide-scale blurring of lines between the urban, skate, street and progressive sportswear sectors, where diverse brands like LRG, Stüssy, Levi’s, Rocawear and WeSC all compete for a broad range of young customers. In fact, according to an NPD study commissioned by Southpole, the brand’s customer base is equal parts white, African-American and Hispanic, with each accounting for about a third of sales.
“In our definition, the term ‘urban’ does not equal ‘hip-hop.’ Urban is a much larger realm that may encompass hip-hop. It’s a widely accepted misconception to correlate urban fashion with hip-hop, but we think otherwise,” said Khym.
Key branded competitors for Southpole include Rusty, Zoo York, Tapout, Ecko and Rocawear, added Matura, while private label brands like Arizona and St. John’s Bay compete with it on the lower end of the price spectrum. (Interestingly, though, Wicked’s retail division, Against All Odds, sells those brands alongside Southpole in its chain of stores. For more on Against All Odds, see page 8.)
However, Khym — who originally studied to be an electrical engineer at CCNY before switching to a business major at Baruch College — sees his competition in even larger terms. “Anyone who is able to address the needs of our target consumer lifestyles and divert consumption from the current market is a potential threat. We even see iPhones and video games as competition,” he explained. “They have created a new lifestyle that youth previously were not as immersed in, but now are taking away disposable income that otherwise might have been spent on our products. Ultimately, our competitiveness depends on how we can deliver to our wearers the coolness and freshness they [want] to express themselves.”
For spring, key men’s trends at Southpole include cleaner and slimmer silhouettes, brighter colors, stripes, utility themes and non-denim bottoms. In juniors, the company is focused on more fast-fashion deliveries that hit of-the-moment styles.
“Department stores lack the capacity to deliver fast-fashion relative to specialty stores,” noted Khym. “Southpole is working to provide the solution to that challenge.”
The Khyms have been besting challenges ever since they got their start in the apparel business in 1981, opening their men’s clothing store in Brownsville, called L&L Menswear, with $10,000 in family savings and a $5,000 line of credit. Their father, Ogden Khym, was born in Ogden, Utah, after his father, Ki-sun Khym, moved to the U.S. in 1899 with the help of Christian missionaries. Ki-sun Khym was one of the earliest Korean immigrants to this country and he earned a degree at the University of Nebraska before moving his family back to Korea in 1926. Ogden returned to the U.S. with his own family in 1977.
“Brownsville was a tough area but the key money was low and the rent was cheap. It was a good opportunity,” recalled Kenny Khym, who was still fairly new to America and in high school at the time his brother David opened that first store. The younger Khym worked after school, transporting merchandise on the subway from wholesale dealers in the Garment District to the store in Brownsville.
“Lee colored denim was big at the time,” Khym remembered.
In 1989, after the store’s landlord decided to jack up the rent by several-hundred percent, the Khyms moved their retail business to Jamaica, Queens, and founded a new store, called Metropolitan Total Fashion, which remains in business. Two years after moving the store, the Khyms founded Wicked Fashions to develop and wholesale their own line of urban men’s wear.
“It turned out that our ability to identify hit items was often far ahead of the curve and local suppliers could not produce sufficient quantities in a timely manner. This eventually led us to work directly with vendors abroad, where there was a greater variety of offerings and where we often had direct input into what was created,” said Khym. “Instead of waiting for the right products to be developed, we decided to develop those products ourselves.
“We called it Wicked because when our customers would come into the store and see something they liked, they would say, ‘Wow, wicked!’ — as in wicked good, not wicked bad.”
The brand name was changed to Southpole in 1995, after a South Korean expeditionary team reached the South Pole. “The term Southpole refers to the spirit of challenge and adventure,” noted John Um, executive vice president. “It’s also not tied to a particular country, so it can be used effectively in different markets.”
Among the first important customers of Wicked Fashions and Southpole was the now-defunct Merry-Go-Round young men’s chain, which was then omnipresent in malls across America. “I drove to the headquarters in Maryland by myself with the samples,” recalled Khym. “Back then, if you sold Merry-Go-Round, you were the toast of the town. Our product was unique — we came up with denim sets with velvet patches. This was something nobody had seen.”
Fast-forward 20 years, and today among the key challenges for Southpole and the industry in general are rising costs for sourcing and production, particularly the skyrocketing price of cotton.
“We’ve been faced with extreme difficulties in pricing, and this has been unprecedented,” said Khym. “However, one of our advantages is our established global production base. China still serves as a prominent sourcing base. In the long term, our infrastructure will play a critical role in setting ourselves apart from other players in the market. Our unparalleled sourcing capability and supply chain management will provide a firm foundation for any type of fashion business.”
The company maintains sourcing and production offices in Shanghai and Guangzhou, China; Karachi, Pakistan, and Dhaka, Bangladesh. The company operates a 400,000-square-foot distribution center in South Brunswick, N.J., as well as another distribution facility operated by a third party in California.
Due to increased raw materials and production costs, Southpole has raised prices by 8 to 12 percent, depending on category, over the past year. “The reaction so far has been steady, with no big negative responses,” said Matura about the increases. “We were able to get ahead of some of the cost increases by taking some big positions on certain categories, like plaid shorts, and we’ve passed some of those internal savings on to customers.”
The overall business climate since the recession of 2008 has also forced Southpole to rethink its business practices.
“Retailers’ open-to-buys have tightened up and they want to shift liability to the wholesaler’s end,” Matura pointed out. “We have to maximize our own capabilities in terms of allocation by door, stock analysis and replenishment systems. So, if I have a store that is doing 20 percent of sales on 10 percent of stock, I should increase that allocation to 30 percent of sales on 20 percent of stock. Allocation planning is key. Everyone on my team is not just an account executive, but really they are mini business managers. It’s not just about selling in product anymore.”
On the licensing front, key current partners for Southpole include Vida International for shoes, Concept One for headwear and cold weather accessories, Colors in Optics for eyewear and Adjmi Apparel Group for infant and toddler apparel. Other categories include bags, small leather goods, juniors intimates, sleepwear and hosiery.
The company has plans to seek licensees for underwear, watches and accessories, and international markets. Currently, Southpole has one licensee in Japan and another covering the entire European market.
“Our key focus right now is on China and Latin America, and we are actively seeking partners in those regions,” said Jean Luc Rim, director of marketing and licensing for the brand.
While Southpole is the flagship brand of Wicked Fashions, the company has a number of other brands in its portfolio, while several others have been launched and discontinued over the years. Lot29, which was launched in 2002 and focused on apparel and outerwear adorned with licensed cartoon characters, is currently on hiatus but is set for a relaunch under a new concept based on social media and digital platforms in the near future, said Khym.
Other brands in the Wicked stable that are winding down include White Tag, which targets midtier shoppers with a denim-focused line heavy on mixed martial arts elements and graphic prints, and A. Prodigee, which is aimed at suburban shoppers with surf and outdoors looks reminiscent of Abercrombie & Fitch or Hollister.
One of the company’s more ambitious launches was in 2009 when it introduced the RS by Ryan Sheckler brand focused on the street and skate market. Sheckler was a high-profile professional skater with his own MTV reality show at the time, called “Life of Ryan.” However, the brand was shuttered in 2010 after just a few seasons.
Going forward, a key initiative is the new WT:02 brand, which launched last year as an upscale, modern, young men’s line, primarily for specialty stores. The collection features clean silhouettes, utility-inspired outerwear, resin-coated fabrics and slim-fit denim meant to compete with brands like G-Star and Diesel.
“The brand concept targets metropolitan young men who are in their early 20s and are intelligent, independent and masculine,” said Khym, adding the brand will makes it debut in mezzanine-tier department stores soon.
“There’s a product design and development team that we internally call The Kitchen, toiling every day to bring fresh concepts to introduce to the market. We are a brand developer. We translate lifestyles into brands. We create new brands and businesses that our retail partners may also reap the benefit from.”
Looking back on the past 20 years, Khym said the most significant lesson he’s learned is the importance of communication — as well as having the right people in the right jobs.
“We have to make sure that the company has the right people on the bus,” he said, “the wrong people off the bus, and the right people in the key seats before we figure out where to drive the bus.”