Jack Erwin laces up $2M to make premium mens footwear affordable and accessible

By Michael Carney , written on February 6, 2014

From The News Desk

Looking back on the last decade of fashion ecommerce, the footwear sector has been the undecided victor. Thanks to the cumbersome logistics of the shoe game – shelf space requirements, sizing variability, and SKU count – online shoe retailers been able to offer consumers price, selection, and experience that their offline competitors simply can’t match. It’s an advantage that is far less pronounced in the apparel sector.

The winners, including Zappos and JustFab, have won big, generating hundreds of millions in sales. Even the losers have managed to build multi-million dollar revenue streams, though profitability proved elusive. But, nearly all of action to date has been centered around women’s footwear. It’s obvious that the average woman’s shoe fetish far outweighs that of the average man, but men’s shoes is still a large market and one with little competition. So what gives?

New York-based men’s footwear startup Jack Erwin was founded to attack this greenfield opportunity. The company made its first sales out of a limited run test collection last fall, and has since moved more than 3,000 pairs of men’s shoes in the last eight months at an average price point of $195 – this despite regularly running out of inventory. Today, Jack Erwin announced $2 million Series A funding round aimed squarely at solving this inventory problem. The round was led by Crosslink Capital and also included Shasta Ventures and Menlo Ventures.

Jack Erwin is a dramatic departure from the ecommerce companies that have dominated the women’s market. There are no subscriptions, no celebrities, and no monthly collections of trendy (aka, gaudy) prints. The company isn’t looking to compete with the Aldo’s and Steve Madden’s of the world, although it may attract aspirational consumers from that genre. Rather, Jack Erwin is targeting brands like Cole Haan, Gucci, Ferragamo, Allen Edmonds, and the like.

The company aims to offer discerning customers access to premium shoes – modern takes on classic styles with full grain leather uppers, leather lining, and soles stitched rather than glued to the uppers – that would typically retail for more than $400, at half the cost. This is possible thanks to manufacturing savvy and a direct-to-consumer distribution strategy.

“Men are starting to care more and more about how they dress and how they look,” co-founder Ariel Nelson says. “We’re part of a generation that wants to understand the story and the process behind things they consume. And people are finally comfortable looking to the internet for trends and products. We feel like we’re targeting a growing segment that’s been completely underserved.”

Jack Erwin already has another 4,000 customers on its waiting list, all requesting specific styles and sizes when inventory is replenished. And despite Zappos-inspired free shipping and free returns, the company’s return rates have been less than 20 percent, with most customers even then choosing to exchange for size or color. Nearly 40 percent of the Jack Erwin’s business to date has occurred in new York, but it’s delivered shoes to 46 states. This is much more than mere friends and family demand.

When Nelson and his co-founder Lane Gerson came up with the idea for Jack Erwin, they knew less than nothing about the shoe business. They come instead from the finance and beverage industries. What they did know, however, was that once they entered the professional world, cheap shoes no longer cut it. But quality and stylish pairs cost more than rent in some cities. Getting from that realization to more than $600,000 in soft-launch revenue has been equal parts seizing opportunity and having the good fortune to meet the right people at the right times. The most important of these encounters happened entirely by chance.

Late in 2012, while visiting his neighborhood barber shop for the first and only time, Gerson sat down in the chair next to Bertrand Guillaume. What he didn’t know at the time, was that Guillaume, a Frenchman living in New York, was one of the head shoe buyers for Ralph Lauren Purple Label, the American designer’s most premium line. He would later take a Senior Director of Merchandising position at Saks Fifth Avenue.

A few minutes of small talk and a subsequent meeting over drinks was all it took to convince Guillaume that there was a gaping hole in the mens footwear market – one that could be filled with well-made shoes sold direct-to-consumer. He worked with Gerson and Nelson as a consultant at first, but has since joined Jack Erwin full time as the company’s VP of Product.

Through Guillaume’s relationships, the trio tested a more than a dozen factories across Latin America, sending mock-ups and collecting product samples. They eventually settled on a third-generation Portuguese factory that delivered the quality, reliability, and price point they were seeking. Better yet, the manufacturer had capacity within its 30,000 square foot facility, and another 90,000 square feet of space ready for further expansion. Jack Erwin is fond of saying, “Our men’s dress shoes were conceived in New York City and born in Portugal.”

Everything up until this point is what could be considered the good news. The company has built out its supply chain – although inventory financing has thus far proved to be a limiting factor – and found organic demand in the market. Jack Erwin also attracted a syndicate of experienced investors willing to bet on its small six person team and early traction. Plenty of startups fail to make it even this far. But Jack Erwin will have an uphill trek if it wants to prove that this is a scalable, sustainable business.

Unlike women’s footwear startups like JustFab and ShoeMint, who see customers buy three to six pairs of shoes per year on average, Jack Erwin will be lucky if its men buy half that many. Men simply buy less shoes, especially expensive and high quality pairs in timeless styles. The very fact that the shoes last forever and never go out of style is a double edged sword. And while Jack Erwin’s high price point, relative to the women’s subscription analogs, will give it higher margins, it means the company will also find it harder to elicit impulse purchases and repeat business.

Operational efficiency will also be a big challenge. Manufacturing and delivering physical products is incredibly complex, before even considering the challenges of tapping into style trends and building brand identity. Nelson and Gerson will be well served by Guillaume’s footwear expertise, but the trio have already run into difficulties matching production volume to demand. It’s one of those infamous good problems to have, but it means they’ve regularly delivered a poor customer experience to those critical early adopters and potential brand evangelists. The founders know they’re walking a fine line and have taken to over-communicating with their existing and wait list customers as a result. Whether that will be enough and the demand will still be there when inventory is replenished in another few months remains to be seen.

Jack Erwin is also heavily reliant on a single factory at the moment, something its founders acknowledge they will need to address before inevitable unplanned manufacturing outages further affect their production timelines. Finally, delivering premium quality, and doing so cost effectively, is far different in small batches than it will be once volume increases. If Jack Erwin is building its reputation around quality and value, then the company needs to guard against compromising in either area, something that has befuddled far more experienced teams.

Perhaps most challenging will be the need to build authenticity around the its brand. Jack Erwin already means something to its two founders, as it’s a combination of each of their father’s first names. But to the average consumer, Jack Erwin could be an actor, a hipster bar, or a grooming product. Brand building takes time and is more art than science, so this early obscurity is to be expected. But Nelson and Gerson will be wise to study the recent success stories of companies like Warby Parker and Bonobos who have built large and loyal followings based on what their brands stand for and how they make consumers feel.

“Brand building is something you can’t force, but we know we have to nail it,” Crosslink associate and Jack Erwin investor Adam Levin says. "This company is geared toward a generation that's more focused on fashion and is comfortable buying online from brands they trust and associate with quality."

The company has yet to spend a dollar on paid marketing. Rather, it’s cultivated relationships with publications like GQ and men’s fashion blogs that have driven early sales. Nelson and Gerson have also started testing other block-and-tackle tactics like cultivating relationships with business schools and investment banks. This is an enviable situation, while it lasts, but eventually the company will need to scale its customer acquisition beyond favorable press and guerrilla marketing.

Jack Erwin needs to get from 4,000 to 400,000 customers, and then eventually to 4 million. Men aren’t discovering fashion brands on Pinterest and Facebook like the fairer sex, meaning that the standard ecommerce playbook won’t work here. How efficiently they can cross this chasm will go a long way toward determining whether it’s in business in two years time.

Even in the women’s market, where the demand is obvious, more online shoe retailers have failed than have succeeded. Of course, those who’ve survived have been rewarded with massive businesses. The men’s market may not be as big, but Jack Erwin is looking out at mostly virgin ground and has designs on capturing a sizable chunk.

Nelson and Gerson have surrounded themselves with smart people and proven themselves savvy and gritty enough to get Jack Erwin this far. It’s an impressive feat, but they’re still at the very beginning of the road. With their bank account full, there will be no more excuses for inventory problem. We’ll should have a good idea within in a matter of months whether this company is headed for hero or zero.