REPUBLISHED MARCH 2013 AS PART OF PRIVCO'S SERIES: "2013: THE RISE OF THE FEMALE BILLIONARES" ALONG WITH PRIVATELY-HELD TORY BURCH LLC AND OPRAH WINFREY'S HARPO PRODUCTIONS & OWN NETWORK
March 21, 2012 – In an era of founders purging ownership stakes faster than you can say Silicon Valley, privately-held ‘shapewear’ creator and retailer Spanx, Inc. and its founder Sara Blakely are a rare foil. In a world where Mark Zuckerburg’s 28.2% Facebook ownership is seen as immense, Spanx is practically unheard of. However, by maintaining complete 100% control, Blakely has successfully managed Spanx’s growth story from $5,000 in savings to its current $1 billion valuation.
Spanx, Inc. is perhaps the modern United States’ closest embodiment of an American Dream reincarnate. Like previous generations of American entrepreneurs, Spanx founder Sara Blakely began her company with an idea bootstrapped on her life savings and a proclivity for hard work. The idea was born out of frustration with conventional pantyhose that revealed seams at the toes but were a necessary undergarment. Her meager $5,000 was accumulated through stints in door-to-door fax sales and Disney World and represented her entire life savings.
After an uncomfortable night of adjustments following the “de-footing” of her pantyhose with a pair of scissors, Blakely saw a need for footless hosiery and sought to fill that hole with her own prototype. In conserving the $5,000 bootstrap, Blakely wrote her own patents, trademarked ‘Spanx’ online, and drew on experience as a stand-up comic to create witty Spanx slogans such as, “Don’t worry. We’ve got your butt covered.” As her own CEO, Company, and financial backer, Blakely persevered to a textile mill partnership and used her knack for sales to successfully convince target retailers into carrying Spanx via the cold-call. Without spending a dime on advertising, Blakely promoted Spanx via word of mouth and literally put her butt on the line for in-store demos modeling the before-and-after Spanx photos. Finally in 2000, after inclusion in an annual riot called the Oprah’s “Favorite Things” episode, Spanx entered mainstream with endorsements from Hollywood and middle-America alike.
Increasing in size, offerings, and public presence through the 2000s, Spanx Inc. has grown from Blakely in her Decatur, Georgia apartment to 125 full-time Atlanta-based employees. Beginning as footless hosiery offered only in Neiman Marcus department stores, Spanx’s line has increased to 200 products within 11,500 department stores, boutiques, and online stores in 40 countries. The Company netted 20% of nearly $250 million in sales during 2011, and Spanx has been recently valued at $1 billion by four separate Wall Street investment banks. At age 41, Sara Blakely who owns 100% of the privately-held company has become the youngest female self-made billionaire in the world.
PrivCo, the Private Company Financial Data Authority, has broken down 5 major components of Spanx’s success:
1. Breaking the Modern Day Start-up Mold: In today’s start-up environment, VC funding and outside capital seem like pre-requisites to creating a company. While perhaps necessary in the ultra-competitive tech space, outside funding with its inherent sacrifice of ownership and control has reached even the most artisanal of brands, such as yogurt-maker, Siggi’s Icelandic Skyr, for example. While funding is generally positive, it is not necessary for every business, specifically immediately profitable types like Spanx who could self-support organically.
Thus, the Company is debt-free and has never received a dollar of outside funding, allowing Blakely to bootstrap Spanx under her vision without investor pressure or influence on operations. Having never taken a business class, Blakely admits her fortuitous ignorance to the normal start-up search for VC and investors. This old-fashioned but ultimately most desirable approach has garnered the parallels between Spanx and the revived American Dream.
2. Free Advertising: Spanx could undoubtedly afford any ad-space in America; however since inception the Company has never paid a dollar in advertising. Beginning with Sara Blakeley’s in-store demos, the self-funded Company relied on the word-of-mouth approach beginning with women recommending shapewear to each other. Today, Spanx’s outreach platform has gotten its shapewear in the hands of prominent women. The Company benefits from a multitude of celebrity endorsements from Oprah Winfrey to Gwyneth Paltrow, whose individual praise is worth far more than a television ad.
3. Blakely Hired Her Weaknesses: As the sole founder, Sara Blakely represented every department of Spanx from sales to product development and even shipping during its early stages. She quickly realized her own weaknesses and preferences in the business and once she could afford it, hired accordingly to fill those gaps. Two-years in, Blakely hired CEO Laurie Ann Goldman, a Coca Cola veteran who ran its licensing division for over 50 countries. Blakely said in a recent interview, “A lot of entrepreneurs get in the way of the growth of their own business because it is a different skillset to run, operate a business, grow it YOY versus be the one who started it.” With Blakely’s focus on product development, sales, and brand representation, the successful partnership with Goldman has resulted in growth to its $1 billion valuation today.
4. Mass Market Appeal: Spanx has over 11,500 retailers selling its line of shapewear products from high-end Bergdorf Goodman and Bloomingdale’s (where Spanx has a store-in-store) to broader market retailers such as QVC and Target. To cater to more women, Spanx also released its low price-point ‘Assets’ collection in Target and similar stores. The price of the original Spanx footless hosiery is an accessible $20 while certain undergarments can run into the hundreds with Spanx typically the most expensive on the shapewear rack. Still, Spanx has gained its mass appeal among all women by selling at price points accessible to all income classes, while utilizing retailers whose appeal varies across wealth divisions.
5. Continued Innovation: As the creator of shapewear, Spanx and Sara Blakely have become synonymous with the industry similar to Xerox in the photocopy world. As competition has grown, Spanx has innovated beyond its original prototype footless pantyhose to swimsuits, active wear, apparel, low and high price point lines, and even shaping underwear and briefs for men.
Fresh off its $1 billion valuation, Spanx has its sights set on serious expansion with international growth (international represented 15% of 2011 revenues) and Spanx standalone stores at the top of its priorities. Blakely recently admitted a new consideration to outside investments after years of funding Spanx herself saying, “If [an outside investor or public offering] makes sense, then I will do it.” With retail IPOs performing well over the past 14-months, the time could be right for a Spanx IPO. If that day does come, Spanx and Sara Blakely may just create a modern American Dream of not only creating and owning a successful business but one day watching it trade on a major exchange.
