Founded by Canadian business students Kyle Vucko and Heikal Gani in 2007, Indochino is the global market leader in the nascent online custom suit industry. With over 100,000 customers across 50 countries, Indochino has surpassed revenues of $10M and has received $17.25M in VC funding across four rounds.
Indochino’s core business is predicated on offering high-quality, well-fitting suits with customer service that rivals Amazon and Zappos. It offers a range of suit fabrics, presented as collections that include “Essential”, “Premium”, and “Special/Seasonal”. The suits are priced starting at $449 and ending at $849; at the entry price, Indochino’s offerings are up to 50% cheaper than comparable fabric suits at brick-and-mortar custom tailors.
Because ordering a custom suit online involves the inherent risk of a poor fit, Indochino offers customers a step-by-step video tutorial on measuring oneself. Measurements are inputted into a ‘customer profile’ to allow for easy purchasing on subsequent orders. Most importantly, Indochino stands by its proprietary measurement system by offering $75 in local tailor alterations and free refunds or remakes when that is not possible.
Since 2011, Vucko and Gani have evolved their business model to include first a “traveling tailor” and then local showrooms in the biggest U.S. cities. The traveling tailor concept was developed in response to potential customers’ hesitance to measure themselves – essentially, Indochino’s tailors would visit big cities over two week periods and offer free 15-minute measuring appointments to those interested. That concept was furthered in 2014 to include full showrooms and measurement appointments in cities including New York, San Francisco, and Boston. These showrooms have granted Indochino omni-channel presence and expanded its customer base to those men unwilling to buy suits online, but kept costs low because the small showrooms carry no raw inventory and require minimal physical space.
Indochino’s operating model is a complex balance of production planning, purchasing, materials management, distribution, forecasting, and customer service. Wool is purchased from Australia, milled in Italy, and constructed in Shanghai. The factories in which the suits are constructed were traditional mass suit producers that made 10,000 suits every 4 months; Vucko convinced these manufacturers to reconfigure their entire floors, instead operating on a new “mass customization” model that produces one new suit every 1-2 days. Indochino pays the factory workers but does not own any assets, a decision reflective of its business model that keeps all input costs low and passes the savings on to the customer. Traditional suit manufacturers have grown to welcome Indochino’s production model because the higher margins on custom suits more than offset the loss in output.
The company’s proprietary measuring algorithm serves its business model well, as the algorithm has been refined numerous times to achieve the perfect fit across all body types. Though Indochino offers $75 or a free remake/refund, it bets that the quality of its measurement model has minimized all potential errors, thereby reducing their fixing costs and maintaining overall margins.
Indochino’s information systems keep the whole operating model afloat – because they have minimal inventory, the computer model determines when to purchase new materials and how to coordinate shipping between Australia, Italy, and China. This system also takes all orders, relays them to the Shanghai factory, and ensures customer delivery within 4 weeks. Meanwhile, a small creative team decides which types of wool to source based on current fashion trends. This team also publishes an online style guide, in turn affecting customer purchasing decisions and therefore increasing predictability in sourcing.
Indochino is well positioned in this small, but fast-growing market because they have benefitted from the network effects of being the first mover. Through powerful Facebook marketing and strong reviews from trusted menswear sources like GQ and The Sartorialist, Indochino has a customer base that dwarfs its competitors (Black Lapel, Knot Standard, Modern Tailor, etc.). The only other formidable player in this space, J. Hilburn, has adopted a different strategy in targeting higher end customers with a required in-person stylist and more expensive fabrics. As more globally access the internet and have discretionary income, the trend of online custom-suiting is likely to continue, perhaps reaching an entire paradigm shift in both suit purchase and production.
Above all, Indochino stands to be the market leader for the foreseeable future because it has shown consistent responsiveness to customer needs, as well as the agility required to succeed in a developing industry. It still considers itself a startup, often refining its business and operating models to scale effectively. First with the showrooms and now with new custom shirt offerings, Indochino plans to grow next by offering more price points as well as women’s suits. Given their historical success, an IPO over the next decade is a reasonable prediction.