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ONE PRICE FITS ALL

Kuhlman helps professionals on a budget look good

BY KAREN M. KROLL

Can the Starbucks business model — a store on every corner offering a bit of luxury to the masses — work in men’s apparel retailing? Scott Kuhlman, founder and CEO of Minneapolis-based Kuhlman Co., says yes. Within the next year, he says he plans to add 100 more Kuhlman stores to the 30 currently open. Down the road he says he wants to be operating about 450 stores.

Kuhlman stores are small (most measure less than 1,000 square feet) and feature stylish shirts, ties and suits. All items sell for a single price — shirts are $55, ties are $39, and suits are $495. The chain also has five women’s stores featuring a similar selection.

The chain has tapped into a segment that needed some attention, says one observer. “The stores uniquely serve the young professional who is early on in his career,” said Erin Harney, marketing manager in the Minneapolis office of Brookfield Properties Corp., a New York City-based office development firm that rents street-level retail space in its properties. “They have to wear nice dress shirts every day but can’t afford to buy everything at Neiman Marcus.” Harney is based at Gaviidae Common, an upscale mall in downtown Minneapolis.

Kuhlman’s retail career was launched, as it happens, through his seventh-grade science class in Ogallala, Neb. When his teacher left education to open a men’s apparel store, Kuhlman began working for him after school.

After graduating from the University of Nebraska with a degree in finance, Kuhlman landed jobs in sales and product development at several clothing manufacturers, including Joseph Abboud and a Canadian firm called S.F. International, or S.F.I.

In January 2002 Kuhlman left S.F.I. to start Kuhlman Co.. His wife, Susan, oversees the women’s lines. The chain still designs products for department stores in addition to running its own stores.

Several years ago, while in Europe on business, Kuhlman saw men’s shirt stores “popping up all over.” Many were just a few hundred square feet in size and sold only shirts, he says.

Kuhlman tried to get his department store clients interested in opening similar stores in the United States. They declined, so he decided to do it himself. He brought in John Gangelhoff as chief financial and operating officer, and Greg Griffith as COO.

Gangelhoff was most recently CFO at M.A. Peterson, a Minneapolis-based interior design firm. Griffith held various positions in retailing with Nordstrom and Macy’s, among other firms. Most recently, he was a product merchandiser with the men’s apparel retailer Bachrach Clothing.

The first Kuhlman Co. store opened in July 2003 in Gaviidae Common, an upscale shopping center in downtown Minneapolis. Within two months, two more opened in the Twin Cities and one each in Orange County, Calif., and Las Vegas. Last year the chain rolled out 25 more.

The clothes in his stores are not “fall off the runway” in terms of edgy fashion, Kuhlman concedes, but they do have a sartorial edge. The “Maurice” men’s shirt, for instance — each style boasts its own name —is bright green with a teal crisscross design. The “Leonard” is made of blue and brown striped material cut both horizontally and vertically. “It’s a little color, but not too much,” said Darnell Littleton, a Taubman Centers leasing representative. “It’s still professional.” (Taubman has Kuhlman Co. stores in three of its centers: Great Lakes Crossing, in Auburn Hills, Mich.; the Shops at Willow Bend, in Plano, Texas; and Woodfield Shopping Center, in Schaumburg, Ill.) Kuhlman and his wife design the merchandise and contract out the manufacturing, most of which is done in Italy and Turkey. This allows for the placement of smaller orders. Some plants in China, for instance, require orders of at least 1,200 for each design, whereas many Turkish plants forgo minimums. Kuhlman typically orders between 400 and 600 shirts per style.

The chain may be hitting the market at just the right time, as many workplaces rein in casual dress codes, notes Lois Huff, senior vice president of consulting firm Retail Forward, in Columbus, Ohio. “There’s a return to a more formal, suit-oriented look in certain industries,” she said. Huff observes that many men are looking for suits and shirts with a bit of flair, more than they did in the 1990s. “Style is a hotter commodity,” she said.

The merchandise also is earning plaudits. “They make great quality shirts,” said Littleton. Harney says the shirts compare favorably with those offered at London-based Thomas Pink stores, which retail for between $140 and $170.

That’s important, given the kinds of customers Kuhlman Co. is targeting. Though they range in age from their mid-20s to their 50s, Kuhlman says, “the sweet spot is the mid-30s.” Their jobs require more-businesslike styles than they are likely to find at such stores as Abercrombie & Fitch, he says, though they themselves desire that bit of flair.

As for the chain’s one-price strategy, analysts see both advantages and disadvantages. On the positive side, because most men don’t enjoy shopping, they appreciate any steps a retailer takes to make the experience easier for them, says Huff. “Men are mission-oriented,” she said.

On the other hand, the chain may just be leaving money on the table, says Frank Bilstein, a managing director at the Cambridge, Mass., office Simon-Kucher & Partners, a Germany-based consulting firm. “My question is, why forgo the benefits of different prices?” he said. Just the fact that a store offers suits at both $495 and $595, for instance, will sometimes prompt a customer considering the lower-priced suit to trade up to the higher-priced one, he says.

To date, the chain’s financial performance has been comparable to that of other men’s specialty retailers, Littleton says. For his part, Kuhlman says the chain’s sales range from $400 to $1,000, per square foot.

Most Kuhlman stores are located in downtown areas. “For us, the low-hanging fruit is the urban centers,” said Kuhlman. In addition to high foot traffic, these areas offer lots of attorneys, bankers and brokers — key customers all.

Kuhlman says he has not forgotten the suburbs and plans to open more suburban stores as the brand gains prominence. Besides the Chicago suburb of Schaumburg, the chain has stores in King of Prussia, Pa., a Philadelphia suburb. But the chain will focus first on the East Coast, particularly the areas in and around New York City and Washington, D.C. “It’s a concentration point for us now,” he said.

Urban areas in the Western part of the U.S., such as San Francisco, are attractive too, Kuhlman says. He plans to move a bit more slowly there, however, reasoning that the chain’s dressier style means the opportunities are greater in the East.

Kuhlman acknowledges that opening 100 stores within a year sounds aggressive, but he insists that the task is not as risky as all that. Most of the stores are small enough to require only four to five employees, reducing the amount of time needed to recruit and train workers. Furthermore, the chain typically does not demolish and rebuild an existing space, but will instead upgrade it with new carpeting, paint and lighting.

“We’ve limited the amount of effort [required to build out a store] but do it in a cool way,” he said. The stores often feature a spare, modern look that is stylish but not extravagant. Dark-purple wood frames the front windows. Inside, the walls are painted a lighter purple, while wood-finish cubes and tables hold merchandise. A few photographs pretty much complete the decor.

Ultimately, almost any type of location, including lifestyle centers, regional malls, airport shopping areas and freestanding sites could work, he says. “Every town in America can support what we’re doing,” Kuhlman asserted. “We’re building a brand for the masses.”

The chain’s Web site (kuhlmancompany.com), which is nearing 1 million hits per month, is yet another way to reach customers. The goal there is to drive customers into the stores, where most purchases are made, says Kuhlman, though he declined to give a Web- and store-based sales breakdown.

Kuhlman sends e-mail blasts to about 40,000 customers every 10 to 14 days. Most of these messages alert customers to new styles in the stores. After those are issued, typically on Thursday mornings, Kuhlman says he sees a spike in traffic. He says he cannot specifically attribute the bump to the e-mails, because traffic typically picks up going into the weekend, but they are probably having an impact.

Customers soon learn that if they like a particular style, they need to act quickly. Once a shirt is gone, it is gone. A pink plaid shirt called “Isaac” sold out 48 hours after one of the e-mail messages went out.

Opening stores opens doors
Otherwise, the chain does little print and no broadcast advertising, relying instead on publicity and their storefronts to bring customers in. “We believe that the best marketing strategy is opening stores,” said Katherine Tousignant, a spokeswoman.

Kuhlman is keeping mum about exactly how he plans to pay for the 100 new stores, other than to say that the company is obtaining financing for expansion. According to one newspaper account, the chain secured about $4 million in external financing late in 2004.

Some of Kuhlman Co.’s competitors are also targeting 30-something career men. The small numbers of specialty retailers has aided the companies in the market, notes Littleton. Jos. A. Bank Clothiers, for instance, raised its earnings guidance for the fiscal year ended in January to $24.2 million, a jump of 46 percent over the previous year. The company also announced plans to open 60 to 75 stores during the coming 12 months.

S&K Menswear, a retailer of moderately priced menswear, also saw a bump in revenue, albeit a more modest one. The Richmond, Va.-based company said sales for the 48 weeks ended Jan. 1, 2005, rose 6.6 percent from a year earlier, to $176 million.

It is too early to predict whether Kuhlman will succeed in growing the company both quickly and profitably. But if his plans sound unrealistic, the same could have been said of Howard Schultz’ ambitions 20 years ago, when he began his quest to get millions of people to pay several dollars for that morning cup of coffee.