Star­tups: The founders of Jack Erwin just wanted a de­cent $200 pair of shoes

Jack Erwin fig­ured out how to take footwear di­rectly to con­sumers. By Kyle Stock

Bloomberg Businessweek (North America) - - Contents -

Three years ago, Ariel Nel­son was work­ing in food and bev­er­age dis­tri­bu­tion, and Lane Ger­son was gutting it out in the fi­nance depart­ment at a 3D print­ing com­pany. The friends were push­ing 30 and try­ing to spruce up their wardrobes for the stream of wed­dings they were sched­uled to at­tend. That was when they saw it: the gap­ing hole in the mar­ket be­tween the $ 100 pair of ox­fords at Aldo and the $350-and- $350-and-upup monk straps at Allen Ed­monds. ““I I would go shoe shop­ping and know ex­actly what I wanted in terms of style, color, and price, but I could only ever get two of the three,” Nel­son says.

At the time, “cut out the mid­dle­man” were magic words for e- commerce star­tups. The strat­egy had worked for ra­zor blades, eye­glasses, mat­tresses, and dress shirts—why should fancy footwear be any dif­fer­ent? The friends started Jack Erwin based on what seemed like a sim­ple premise: De­sign a $500 pair of men’s dress shoes, make them for $100, and sell them on­line for $200.

Turns out, the shoe busi­ness is very, very com­pli­cated. Making a high- end dress shoe re­quires about 100 sep­a­rate pro­cesses, each far more in­tri­cate than stitch­ing up a pants leg. Then there’s over­head: To make a pair of shoes you need a last, a foot- shaped mold used to shape the leather. Carved and sanded by hand, a last can take weeks of costly trial and er­ror to per­fect, and each model of shoe needs its own. On top of all that, fit is trick­ier with footwear than with ap­parel; 30 per­cent to 40 per­cent of cus­tomers typ­i­cally re­turn what they buy.

For­tu­nately, the footwear novices had a vet­eran to help them through this process. In Au­gust 2012, Nel­son over­heard then-saks Fifth Av­enue brands di­rec­tor Ber­trand Guil­laume grip­ing in a Man­hat­tan bar­ber shop about hav­ing to source a shoe line for the depart­ment store. He said he was tired of deal­ing with agents and dis­trib­u­tors in­stead of de­sign­ers and crafts­men, Nel­son re­calls. Six months later, Guil­laume was in Spain over­see­ing a fac­tory and a hand­ful of sup­pli­ers as Jack Erwin’s new head of prod­uct.

To fi­nance their first pro­duc­tion or­der of 2,500 pairs, Nel­son and Ger­son cob­bled to­gether $ $275,000 275,000 from friends and fam­ily. The shoes sold out within two months of their Oc­to­ber 2013 de­but. Ten weeks later, they had a wait­ing list of 4,500.

As or­ders stacked up, Nel­son and Ger­son dug deeper into their sup­ply chain and found more mid­dle­men to cut: the leather dis­trib­u­tors, the shoelace guy, the com­pa­nies that source the eye­lets and thread. Once they started do­ing it all them­selves, qual­ity im­proved, mar­gins went up, and the com­pany’s re­turn rate is now “well un­der” 30 per­cent, Ger­son says.

As Jack Erwin’s pro­file rose in the in­dus­try, sim­i­lar com­pa­nies be­gan to emerge, each with a dif­fer­ent­d­ifff­fer­ent twist on the busi­ness model. Beck­ett Si­monon, based in Colom­bia, is fo­cused on the men’s shoe mar­ket in Mex­ico and Brazil. Awl & Sundry lets cus­tomers mix and match ma­te­ri­als for a cus­tom­ized shoe. Paul Evans man­u­fac­tures its shoes in the same Ital­ian fac­to­ries that make footwear for Gucci and Sal­va­tore Fer­rag­amo. With prices from $300 to $400 a pair, Paul Evans is at the more ex­pen­sive end. Many sell their shoes for about $200.

With 23 full- time employees, Jack Erwin is the largest of the shoe star­tups. In Septem­ber 2014, the com­pany closed a $ $99 mil­lion round of fund­ing led by Caleres, then called Brown Shoe, the com­pany be­hind Fa­mous Footwear and Dr. Scholl’s. Jack Erwin then opened a 400-square-foot400-square- foot re­tail store on a sleepy block in Man­hat­tan’s Tribeca neigh­bor­hood. In late Novem­ber, it added a pop-up­pop- up shop in Mid­town Man­hat­tan, which will be open un­til March.

Al­though they won’t share fi­fi­nan­cial fi­nan­cial de­tails, Nel­son and Ger­son say sales have tripled both years. “We al­ways said we’d like to do $100 mil­lion a year af­ter five years,” Nel­son says. “So far, we’re right on track.” <BW> <BW><BW>

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