Right about the time Goodhew was knitting its first batch of socks, the U.S. economy was coming unraveled. Conventional wisdom would suggest that the summer of 2008 was a risky time to launch a company -- particularly one like socks that would face an already crowded market.
But Goodhew, based in Chattanooga, Tenn. (www.goodhew.us.com), has proven to be anything but conventional. Unlike most sock manufacturers serving the outdoor industry, Goodhew uses just-in-time manufacturing, which does not require dealers to make huge preseason orders and allows them to order small quantities frequently. Also, Goodhew focuses on the lifestyle segment of the sock business, rather than producing socks for things like hiking and running. These two strategies have helped Goodhew quickly gain a foothold in the sock world. Within a year, it has established 160 retail accounts, with 35 percent of these being outdoor specialty retailers, and 65 percent being comfort shoe and men's specialty retailers.
Goodhew's methods of manufacturing and managing inventory seem to be especially attractive to dealers.
"They're really making it as simple as possible for the retailer," said Jonathan Scott, a buyer for Rock/Creek in Chattanooga, Tenn. Last fall, Rock/Creek made a modest investment to bring in a good representation of the Goodhew line, and Goodhew allows the store to place orders each week to replenish its stock. The greatest advantage is that Rock/Creek hasn't had to guess what would sell over a six-month period. "Since we don't have to carry a lot of stock, we can react to trends quickly," Scott told SNEWS®. "If something is not selling, you don't have a lot of inventory you have to sit on. That's a huge help in managing costs and keeping things flowing at a good pace."
Goodhew co-founder Jim Markley said that just-in-time manufacturing is a core element of the company. Markley was one of the first SmartWool employees and worked on the sales team from 1994 to 2006. "SmartWool was one of the best things that ever happened to me," he said, but one aspect of the business bothered him. "One of the most aggravating things I ever had to do was book out all these programs for six months, and then every month you'd spend crazy time trying to readjust the orders."
When Markley and Goodhew's other co-founder, Thomas Lee, decided to launch a new sock company, they wanted to operate differently. "Our concept from a business point of view was to make life as easy as possible for the retailer," said Lee.
Before he helped launch Goodhew, Lee was executive vice president of Crescent Hosiery Mills in Tennessee, which made socks for SmartWool during its first eight years. Lee and Markley not only brought great knowledge of the sock market to their new venture, but they had also developed strong relationships with mills in the Southeast. As a result, they were able to work deals with the mills to allow Goodhew to place smaller minimum manufacturing orders than is customary. Because Goodhew can do small production runs frequently, it can take weekly orders from retailers and ship them products within a couple of days. "They place orders every Monday, and we get them product by Wednesday," said Markley.
"And because we're not requiring huge preseason orders, we didn't have to put a large slug of inventory into the warehouse, and then figure out what to do if it didn't sell because the economy collapsed," Lee told SNEWS.
Also key to the company's success is the fact that it keeps its SKU count low by offering only two sizes of socks for men and two sizes for women. Goodhew socks are made of merino wool, bamboo and CoolMax and the company also uses a conservative range of colors and patterns that will suit most people. This contrasts greatly with most sock manufacturers in the outdoor market, which have increased their SKU counts to serve every niche outdoor activity and have broadened their colors and patterns to be more fashionable, Markley told us.
"If you look at the brands out there, they're all sport-specific and competing over one big pie," said Markley. "We don't have 12 categories; we have one category -- lifestyle. And it's much easier to manage one category."
Through unique construction and a greater use of Lycra than is typical, these two sizes fit 95 percent of foot types, said Lee, which also helps retailers as there is less inventory in terms of sizes for them to carry. "We don't have to have the bookends of the size chart and can eliminate what we don't really need," said Scott. "We can represent more product that's actually going to turn."
Rock/Creek's Scott also said he appreciates that his margin on Goodhew socks is in the high 50s. According to Markley, retailers can make a small commitment to the line and get a margin of 54 points. "They can get a 4-percent to 6-percent discount to reach 56 to 57 points," he said. "If they make a full commitment, they can get to the 59-point level."
The price points of Goodhew socks range from $12.99 to $16.99, with the heart of sales at $14.99. That's $3 to $4 less than lifestyle socks from other brands.
Jill Penn, a Goodhew sales rep for the Rockies territory, said the price points, margins, product focus and just-in-time manufacturing make the line "foolproof," and she has no doubt that Goodhew's business model has helped her open doors. "I've opened 55 stores since we went live in October, and I have 27 opening in the next eight weeks. It's a lot faster pace than what we would have thought," she said. "It's really nurturing the retailer and really supporting them in knowing they are not stuck carrying the inventory. It's a great business model."