How DXL Finally Figured Out the Big and Tall Market

6/9/2016
When David Levin's company Designs acquired Casual Male out of bankruptcy in 2002, it added nearly 500 stores to its portfolio in a specialty niche where it had virtually no competition: big and tall. Still, Casual Male had previously filed for bankruptcy twice, and other players in the space were not particularly successful, either.

Levin wondered: "How could you own a space and not figure out the right model?" So Casual Male built up new stores, remodeled and ramped up PR and marketing. Even then, "we really weren't growing the business," he said. "It was very stagnant."

Then Levin started to dig deeper. While looking through data from NPD, a lightbulb went on. Men with waists in the 40-inch to 46-inch range represented 65 percent of the market, yet only represented 25 percent of Casual Male's business. "We realized that we owned the big and tall guy, but we really owned the tail of the market — the really big and tall guy." That guy had a waist of 48 inches and up. He had a good income, but wasn't a big spender on apparel.

In focus groups and in-home interviews, Casual Male started to talk to that 40-inch to 46-inch-waist guy — what the company identified as the "end-of-the-rack consumer." This consumer was highly underserved, said Levin. "He didn't really have anywhere to shop." This guy would go to a nice specialty store, but the retailer would carry very few garments in that end-of-the-rack size. So with a lot of effort, he'd piece together his attire. "Maybe he buys pants at Lands' End, a coat at Burlington. But he really couldn't find a wardrobe."

There was a lot of psychology at play for this consumer. He didn't consider himself "big and tall." Often, in fact, a year or two prior, he'd been wearing Polo or Nautica or Calvin Klein. "Suddenly they got a little bigger and couldn't wear it," Levin said. If they did happen to go to a Casual Male store, they were very disappointed. "Selection was narrow, stores were small, dressing rooms were small, and lighting was poor. We didn't have the brands," he added.

It was at that point that Casual Male decided to do something that had never been done before. "We realized that we could continue what we were doing for 10 years and be profitable but be limited in our growth potential," Levin said. "Or, we could transform ourselves into [a new company with] a new name, new real estate and new potential. That's a model that's never been done in the history of retail."

Since it opened its first four stores in 2010 — bigger stores with bigger dressing rooms, wider aisles, all the big brands, excellent customer service, TV monitors, scents — Destination XL has been on a tear. Its bigger, big-and-tall guy "teared up. They couldn't believe what they saw," Levin recalled. As for the end-of-the-rack customer, DXL began to market to that market segment. Since 2013, this man's awareness of DXL has risen from 13 per - cent to 38 percent, says Levin, and he now represents 48 percent of DXL's customer base. "That guy spends twice as much per year and shops 25 percent more often. This was the holy grail," Levin said.

"We're not losing any of our bigger guys, but now we can expand into a sweet spot that was neglected by all of the retailers. It's so exciting that now we have figured out the model of where DXL is going. It exceeded my expectations of how important it was to transform ourselves, to get out of one brand into another."

Today, DXL has 180 locations, with about 120 Casual Male stores still to convert. It is adding new locations, as well, in growth areas where no Casual Male previously existed. Ultimately, the company expects to have about 400 stores domestically. Revenues for 2015 were up 6.8 percent to $442.2 million.

DXL isn't stopping at the domestic market, though. Building on its experience with a DXL franchise in Kuwait City, the company is embarking on a new international franchise and licensing strategy. It is currently gathering data and creating the infrastructure for the strategy and expects to open additional DXL franchise stores in 2017. "We believe the men's big-and-tall population around the world is currently underserved, and that presents a tremendous opportunity for DXL," Levin said.

Domestically, the change from Casual Male to DXL was transformational for the company, but it was also transformational for its customers. Not only did DXL improve the customer experience and expand its offerings. In bringing all of the top men's brands into the big-and-tall sector, its global sourcing team has been able to work directly with the brands to develop tech packs to achieve the right fit and sizing for the brands.

"You can't just add a couple inches to a regular pattern to get an XXL size, because the body doesn't grow the way a pattern grows," Levin said. DXL has made sure to "keep the DNA" of the brand fit — a Tommy Bahama will fit differently than a Calvin Klein — while ensuring that the sizing is consistent across brands and also meets the different grading and other needs of the big-and-tall guy. Big-and-tall "requires different types of quality. It has to be built much stronger because the guys put more stress on the apparel," said Levin. "One of the beauties of our working directly with these brands — especially in the online business where returns can be 20 percent to 30 percent — is that our return rate is 8 percent, because a guy knows when he's buying any one of our brands, it's going to fit him."

DXL dominates the big-and-tall market. Levin thinks that one of the reasons virtually nobody else is in this business is because it's very difficult to manage the inventory. "For example, take one of our best-selling pants. It comes in more than 50 size combinations. And we have to carry all of them," Levin said. To manage that, DXL has a very sophisticated planning and allocation system. "One store may carry 38 sizes, and another might have 42. Every store has a different model, but all stores have 95 percent in stock — and we still have availability to ship that one size that only sells once per year.

"We're managing thousands and thousands of SKUs on a daily basis," he emphasized. "Most stores have pre-packs. We have to pick individual sizes to ship to stores, because there are so many sizes. We carry waist sizes from 38 to 60, plus different inseams. That's a lot to manage. You need amazing systems."

One of DXL's systems also now includes NGC's PLM and Supply Chain Management (SCM). DXL rolled this out in 2013 to all cross-functional departments to break down silos, streamline line planning, and increase collaboration with new and existing suppliers. Doing so significantly reduced time spent in internal meetings to review product development and production workflow on spreadsheets. "Everyone has visibility to their WIP tracking, calendar, development process, approvals and other information on their own devices through the web portal," said Angela Chan, senior vice president and chief sourcing officer for DXL.

DXL now communicates design and technical specs for approvals, color matches and revisions over the web. It also handles open bidding through the web, allowing the company to diversify its supplier base and replenishment strategies, producing identical garments in multiple countries, all to the same high quality.

With the ability to capture workflow information from the season start until goods are delivered to its [direct channel], the company also can better measure vendor performance. This centralizes reporting and improves accuracy. "Our on-time delivery, quality and compliance reached over 98 percent in 2015 versus 85 percent to 90 percent before we implemented PLM," said Chan.

Additionally, knowing the exact status of design and production at all times gives DXL the ability to respond to the latest trends, push decision-making further downstream and quickly react to unforeseen events, she said.

— Jordan K. Speer


Editor's Note: Interested in learning more about our 2016 Top Innovators? Find them here.
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