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Blackstone's Acquisition of Spanx, the Innerwear Industry and Women-Led Enterprises

Oct 23, 2021 5:09 PM 4 min read

Some people build their careers on reputation. Some build it on the ability to create wealth. Sara Blakely built it on the public's preoccupation with a funny word - Spanx! 

That's right. In 2000, Sara and her $5,000 in savings made their way to a billion dollar company by selling shapewear, undergarments, leggings, swimwear and maternity wear in over 50 countries. Soon, Spanx grew to become a household name and eventually a celebrity favourite. 

Today, it is an iconic brand that was bootstrapped into a category creator, a symbol of authentic fashionwear, feminine confidence and women empowerment. It is these qualities that have resulted in Blackstone acquiring a majority stake worth $1.2bn in the company with an objective to expand its digital and global presence. 

Let's see what it was that made Spanx "tuck" as a business and flourish as part of the retail undergarment industry. We will also explore how women-led enterprises are making it big out there everyday. 

Always in Style

Once a door-to-door fax machine salesperson, Ms. Blakely made a makeshift undergarment using nothing but a pantyhose to wear under white slacks that would work better in the sticky, hot and uncomfortable Florida weather. 

After some initial success with the product in her circles, she found a factory in North Carolina that was willing to mass produce it. She wrote the patent herself and pitched all the big players in retail fashion. Marquee investors like Neiman Marcus, Bloomingdales and Saks Fifth Avenue soon came on board. Spanx was officially in the retail business. 

But the brand got its biggest break later that year when Oprah Winfrey's stylist picked it up. Spanx generated $10m in revenue in the year 2000 and by 2012 it was generating $250m.

Since then, Spanx has expanded to other assorted products like activewear, denim and even men's shapewear. Form-fitting shapewear remains the biggest selling point for Spanx but it is no longer unique to the brand. 

Skims, the shapewear brand owned by Kim Kardashian is valued at a whopping $1.6bn. Similarly, HanesBrands, the multinational clothing company has also maintained a considerable presence in the shapewear segment. And then there is Victoria's Secret which offers considerable challenge to other brands in the intimate apparel industry with its high visibility marketing, branding and cataloguing features. 


Hidden Figures in the Market

Like everything else, the coronavirus pandemic hit the fashion industry hard, leaving retailers with excess inventory and near-zero demand. But the pivot towards a work-from-home culture necessitated the demand for loungewear and innerwear. Not only was there a 28% hike in Google searches for these items, but also an expansion in the sizes of collection for the same. Retailers seem to have learnt to capitalise on this demand and bring in more variety in the merchandise, despite "there being a recession".

Many brands are also finding creative ways to navigate this new normal, be it through influencer marketing to reach a wider audience or through sales via big box retailers. With a projected growth of 4.2% CAGR in the sector between 2017 and 2021, customisation and versatility of products is at an all-time high. 

Therefore, perhaps Blackstone's acquisition of Spanx comes at an opportune time with the company aiming towards a wider expansion of its direct-to-consumer arm which would reduce its dependence on discount retailers, e-commerce sites and other wholesale partners. 

This is a growing trend in the apparel industry with even other big-ticket brands like Nike, Coach, Levi Strauss etc. Increasingly focusing on building closer customer relationships and increasing margins from each transaction by investing more in their own websites and other consumer-facing sales experiences. 

In India, the shift from the "underwear to innerwear" market has also been typical, given the change in user preferences driven by growth of high-end consumerism and rise in the fashion quotient. With offline sales muted during the pandemic, online innerwear sales in India picked up by 4-5x, especially from tier-2 and tier-3 cities (as of May 2021). The female innerwear market in the country is expected to reach around $11-12bn by 2025. 


Women Under Investments

Incidentally, this isn't Blackstone's first bet on a women-led business. Earlier this year, Blackstone plowed over $2bn in cash to buy a controlling interest in Bumble's parent company MagicLab which is led by Whitney Wolfe Herd, the youngest woman to have taken a company public. Before that, Blackstone also acquired Reese Witherspoon's media company Hello Sunshine for $900m

In fact, female-led and female-founded startups and enterprises are becoming more and more common, despite still making up a relatively smaller share of all startups globally. Although the number of women who have gained acclaim for their entrepreneurial success is far from scant, on a global scale, women still face a sizable disparity when it comes to raising capital.

It also varies from one country to another, considering the variable matrices that determine the ease of doing business and the support of enforcement agencies. 

Despite that, the number of unicorns founded and managed by women has steadily grown in recent years including the ones which are or are about to go public (e.g. Bumble, Figs, Maven, Fenty, Nykaa). There may not be an Arianna Huffington, a Debbie Fields, a Folorunsho Alakija or a Denise Coates in every corner, but the era of businesswomen ideating and executing entrepreneurial projects is constantly on the rise, even in light of still-prevalent gender gaps and the pandemic's hot waters styming their growth. Venture capitalists could take a leaf out of Blackstone's book in pursuing the gains from these projects. 

Let's hope they overcome these challenges and embody the words of Eleanor Roosevelt who said,

A woman is like a tea bag. You never know how strong she is until you put her in hot water.


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