Dayang Group, one of the world’s largest suit manufacturers that counts Warren Buffett has a major fan, has made a substantial investment in Canadian made-to-measure men’s apparel brand Indochino.
Dayang has invested 42 million Canadian dollars, or about $30 million at current exchange, into the Vancouver-based company — funds that will be used to accelerate growth, create operational efficiencies and expand product offerings.
Since its founding in 2007, Indochino has received around $30 million through Series B funding and from venture capital investors. But this is “exponentially more capital” than the brand has ever received in one dose and is a “pretty exciting milestone for the company,” according to chief executive officer Drew Green.
As part of the investment, Indochino signed a five-year alliance agreement with Dayang that will enable the company to introduce three new suit silhouettes, triple suit and shirt fabric selection, and quadruple the range of suit personalization options for customers, both online and in its retail stores.
“My objective as incoming ceo of Indochino was to create a five-year business plan and associated investment strategy that would position the company to become an undisputed global market leader in made-to-measure apparel,” Green said. “This alliance is the first phase of our investment strategy, and we will continue to explore strategic opportunities that further accelerate demand and distribution for our brand and products.”
Green said that under the terms of the deal, Dayang will now manufacture Indochino’s suits, replacing other Chinese companies that had formerly produced the merchandise. “We’re basically moving our entire operation into Dayang,” Green said, noting that the Chinese company is dedicating one of its factories to Indochino and is building a team there to work exclusively on the brand.
Dayang, which is one of the top three suit manufacturers in the world, also produces for Ralph Lauren, BCBG, J. Crew and Banana Republic, among others. Green said the company produces around six million suits a year.
Green said by partnering with Dayang, not only will the number of silhouette choices be tripled, but Indochino will increase the fabric selection for those suits to 300 by July 1 and its seasonal shirt fabrics options from 40 to 190.
“It feeds into what makes us successful,” Green said. “Our customers want two, three, four suits a year.”
They’ll be able to get those suits in retail showrooms in major North American cities and internationally. Like Bonobos, Knot Standard and Astor & Black, Indochino operates retail “showrooms” where customers can be fitted and personalize their options in a retail setting. But unlike traditional retail, no merchandise is stocked. Instead, a customer places an order and then the suit is manufactured and shipped in about 12 days. Most Indochino suits retail for $500 to $600, Green said.
There are seven retail showrooms in North America — New York, Beverly Hills, San Francisco, Boston, Philadelphia, Toronto and Vancouver — and the plan is to increase that number to 150 by 2020, he said.
“The data shows that when we open showrooms, online sales can go up sevenfold,” Green said. But he stressed that while retail storefronts are important to build brand awareness and increase sales, Indochino will be searching out partners for many of the stores outside of “tier one markets in North America and globally,” he said.
Although Green is exploring the possibility of adding ready-to-wear to Indochino’s offering down the line, that’s not a priority now.
“We’re entirely made-to-measure and we want to be the best at that,” he said. “We think that’s what’s going to be the fastest growing category in the next 10 years.”
Li Guilian, founder and chairwoman of Dayang Group who is known as “Madame Li,” agreed. “Both Dayang and Indochino share the belief that made-to-measure is the future of apparel, so this strategic partnership came about quite naturally,” she said. “The investment opportunity Drew and team presented provides our organization with multiple long- and short-term benefits. We were looking to increase our operations in this rapidly growing category, and Indochino had the expertise, along with a strong focus on growing its business into a global brand and leader in the made-to-measure category. We look forward to a long and mutually beneficial partnership for years to come.”
A representative from Dayang will also join Indochino’s board.
“Our mission is to manufacture and sell 1 million made-to-measure suits a year by 2020,” Green said. Although he declined to provide an exact figure for what Indochino produces, he said the company expects to make between 100,000 to 200,000 suits this year and an equal number of shirts.
In November, Indochino brought Green on board as ceo and revealed plans to expand the assortment and increase retail locations substantially. Green was founder of Canadian e-tailer Shop.Ca and took over for Indochino founder Kyle Vucko, who remains an adviser.
Green said Indochino has more than doubled sales annually since its founding and now counts customers in over 130 countries. As a private company, he declined to disclose sales volume.
“Indochino is one of those rare e-commerce companies that was early to multiple big trends, like online customization and online-to-offline retail, with the potential to fully capitalize on those trends in the months and years to come,” said Michael Cam-Phung, a member of Indochino’s board and principal at Highland Capital Partners. “This financing and strategic partnership solidifies the company’s position and ability to scale globally.”