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Designer Clothes for 1/3 the Price? Gustin’s Innovative Retail Model Makes It Possible
Free Enterprise Staff | September 4, 2014

When Josh Gustin was working toward an MBA at the University of California, Berkeley, he didn’t exactly have the same mindset as many of his peers.

“I didn’t know what I wanted to do, I didn’t want to keep doing what I had been doing,” Gustin says. “I had worked in product management at tech startups in the Bay Area, and I got sick of tech startups and wanted to make something with my hands.”

That love of working with his hands ultimately led him to start Gustin, which, since launching nearly a decade ago, has designed and sold men’s clothing. Yet what makes Gustin interesting is how its business model has changed drastically over the past 18 months.

Gustin, who, along with Stephen Powell co-founded the company that bears his name, had become disillusioned with the prevailing retail model after years of selling his wares directly to boutiques. “I loved denim and I figured I would just teach myself how to design and make denim,” he says.

“I loved designing, but I hated the distribution model. The only distribution model at the time was selling to high-end boutiques, but that’s a pretty frustrating system, because you have to take on a lot of risk as a brand. You’re guessing what people want to wear, and you guess wrong a lot of the time. It’s just a really, really difficult model to work within.”

Fueled by this frustration, Powell and Gustin sought to create a new, more efficient way to sell clothing. Eventually, they developed the idea for Gustin, which removes the middlemen from the economic equation. “Essentially, it’s like Kickstarter for fashion,” Gustin explains.

“We design a style and we put a campaign on our site saying, ‘Hey, if 100 people back this jean, we’ll go intro production.’ So if 100 people do back it, then we purchase all the materials and create the product. We don’t incur any design risk, and we hold zero inventory.”

Fittingly, when Gustin and Powell were seeking initial funding for their reimagined fashion house, they went to Kickstarter. Using the site, Gustin says, they raised $450,000, which they then used to turn their idea into reality. After a few months of development, the site launched in April 2013 and has drawn a steady stream of new users ever since.

The innovative retail model eliminates nearly all of the waste that the traditional system unintentionally generates. If a design doesn’t end up being funded, Gustin isn’t on the hook for hundreds or thousands of pieces of unsold merchandise. Typically, designers either absorb those costs completely or recoup a very small percentage of them, selling unwanted merchandise at steeply discounted prices to chains like T.J.Maxx and Marshalls.

Free of this burden, the company has been able to concentrate squarely on improving the customer experience, Gustin says. “Because there’s zero waste we give those savings back to the consumer,” he explains.

“Where jeans would cost $250 at a boutique, we usually sell them for between $81 and $100. There’s huge savings for the consumer, and it’s good for us, too,” he says. “If something doesn’t get funded, the great thing is that it doesn’t matter. We haven’t put hundreds of thousands of dollars into this denim jacket that didn’t get funded. We made one sample and that’s all the cost we incurred. We just don’t have the same steep losses when something doesn’t get funded.”

What’s more, the innovative retail model enables Gustin to take design chances that other companies simply don’t have the economic resources to make. It also allows Gustin to create whatever he wants, whenever he wants. “We usually do releases every Tuesday and Thursday of anywhere between two and five products,” he says. “The pace of developing is just radically faster.”

Though the company gives consumers the power to dictate what types of apparel they want to wear, nearly all of its designs get fully funded.

“Right now, the vast majority of our products do get fully funded,” Gustin says. “I think that’s because we design good stuff and because we know our audience. We’re not going to put out a campaign for 100,000 pairs of jeans, because we know we don’t have the audience size to fund that right now.”

Looking toward the future, Gustin and Powell are confident their innovative e-retail site will continue to attract all different types of customers—just don’t expect to see a billboard directing you to the site.

“We’ve expanded 100% from word of mouth,” Gustin says. “It’s all organic growth, because we don’t like buying customers. We like having people come to us who want to support us. It’s a lot of people who have had a good experience telling their friends, and we love that.”