Strategies: JLD-Studios provides a big service made in small batches

By: Matthew Kish - Nov 13, 2015
Source: Portland Business Journal

Starting an apparel company goes like this: Come up with an idea. Spend thousands of dollars making a prototype. Fly to Los Angeles and pay tens of thousands of dollars to a factory than makes a small run, typically 300 pieces.

Then hope it sells.

It’s a terrible way to start a business.

Logistical and communications problems can delay orders for months, missing critical shopping windows. Young companies don’t have the cash to tie it up in inventory. Not to mention, launching product lines with minimal customer feedback can result in orders for the wrong sizes, colors and patterns.

Jennifer Diana knows it’s a problem.

In April the industry veteran opened the manufacturing arm of JLD-Studios. The business started four years ago as a design studio. It now makes small runs of apparel at a 5,000-square-foot site near Portland International Airport in addition to providing design services and pattern-making. It’s a critical new piece of the ecosystem for Portland’s rising crop of apparel entrepreneurs.

“It’s awesome” to have this in Portland, said Cathy Kellon, who this summer launched Ivalieu (eye vah lou), which makes pettipants for active women. “There are so many kinks you have to work out early on, especially when you’re doing it solo.”

Prior to working with JLD, Kellon had worked with a factory in South Carolina on prototypes. She also visited a Los Angeles factory.

“It made me feel like I needed to have a facility that’s close to home,” she said. “There’s just too much back and forth in those early stages.”

For now, she only sells through her website. JLD-Studios enables her to make products on demand. She’s not sitting on piles of product that might never sell. That allows her to make tweaks, such as incorporating new colors and patterns, as she hears from customers.

Finding profits

The trade-off: Margins aren’t as good.

Kellon said she marks up some products as little as 45 percent. That’s about break-even. As she builds a customer base and places bigger orders, she'll pay less for inventory. That'll enable her to book a more sustainable profit.

She’ll take the trade-off, for now. It gives her more control as the company develops.

“I would rather have a lower margin and make sure I’m hitting the right customers with my marketing and getting the right colors out there,” she said.

It’s also a much cheaper and less risky way to start an apparel company, which typically requires a lot of up-front cash.

Kellon launched the business with a loan from her 401(k) and some money from a relative. She didn’t need to convince a bank to lend her startup capital. She hopes to hit profitability within 15 months and leave her day job in the nonprofit sector where she works on drinking water protection.

Working for the little guys

As for Diana, she’s already break even. She worked with Portland-based alternative lending firm Craft3 to get capital to acquire her various printers and sewing machines, which she said cost “as much as a house.”

JLD-Studios employs 10 and has orders through February.

She’s experimenting with 400-piece orders, but might keep the cap at 300.

“We want to keep them small enough that we’re flexible enough to do these small runs,” she said. “If you start doing the big runs, you don’t have room to help these small independent designers. That’s why we built our business. It’s why we launched. It’s where we see the biggest needs. There are plenty of factories if you want 500 or 1,000 pieces.”

Before she launched the manufacturing arm, Diana said she worked with around 150 apparel startups. Only a handful made it to production.

“To me that was the big elephant in the room,” she said. “There are all of these emerging designers and everybody is talking about them, but nobody is giving them a path to be successful.”


CLOSER LOOK

The company: JLD-Studios

What it does: Makes small runs of apparel and offers design services for entrepreneurs

Founded: 2012. Manufacturing arm opened in April.

Owner: Jennifer Diana

Employees: 10

Profitability: Break-even