Crains New York - February 11, 2013 - (Page 4)

Sudden shuttering of clothier shows perils of custom apparel BY ADRIANNE PASQUARELLI When Quincy Apparel arrived on the scene last spring, many female shoppers rejoiced.The online clothing company promised made-toorder clothing for every body type. But after 10 months in business, Quincy ceased operations. Late last month, the company said its first collection, released in September, would be its last. “We literally ran out of money,” said Quincy co-founder Christina Wallace. “Consumers will give you one chance, and if it’s not the most perfect thing, they’ll try something else and that was your shot.” In the crowded world of e-commerce, apparel brands that promote ever more customization—and indeed strive for creating products that hew perfectly to the whims of customers—can face more pitfalls than new entrepreneurs might realize. Fledgling firms receive venture-capital investment— in the past year, e-commerce apparel companies attracted $325.4 million in funding, a 47% increase over the year-earlier period, according to research firm CB Insights— but several startups, like Quincy, have folded shortly out of the gate ‘It’s a hard operational challenge to get right’ or trimmed their offerings after missteps. Those that survive are forced to quickly revise their initial business plan by offering more specialized fare. That can backfire. A custommade product often leaves retailers grappling with supply issues, stocking just enough inventory to meet demand without having to mark down excess. Many have also had trouble finding the perfect fit for shoppers. Steep learning curve “It’s a really hard operational challenge to get right,”said Sucharita Mulpuru, a vice president and principal e-commerce analyst at Forrester Research. “There’s a difference between mass customization and truly bespoke.” Ms. Wallace, a Harvard Business School graduate, set out in 2011 to offer a better fit in clothing for women. She created blazers and blouses based on bra size and torso length, and pants modeled on body type, waist and height.The site went live last spring. Over the course of 18 months, Quincy raised just under $1 million from angel investors and ventureSee E-TAILORS on Page 23 We congratulate our client in addition to on the successful recapitalization of by Aaron Elstein newscom E-tailors struggle for right fit IN THE MARKETS S&P suit puts CEO in the hot seat O n a conference call with investors last November, McGraw-Hill Cos. Chief Executive Harold Whittlesey McGraw III (better known as Terry) was pleased to share what he described as encouraging news: 30 lawsuits against his company’s Standard & Poor’s division for slapping AAA ratings on junky mortgage-backed securities had been dismissed, he said. What’s more, nine of those of dismissals had been affirmed by higher courts, and 10 other suits were withdrawn. “We have said that the legal risk is low, and it’s bearing that out,” he said, according to a transcript. Looks like Mr. McGraw spoke too soon. On a quarterly earnings call Tuesday, the CEO is expected to address investors for the first time since the Justice Department sued his company and S&P for fraud last week. State attorneys general, including New York’s Eric Schneiderman, are looking to file their own actions. While the 64-year-old Mr. McGraw’s name shows up nowhere in the feds’ lawsuit, the onus will fall squarely on him to explain how the company will manage its way through its latest legal mess. The suit has already taken a big toll on McGraw-Hill. Its stock price sank by 26% last week. The drop wiped out $4.2 billion in market value. The stock decline almost completely eliminated the $4.6 billion McGraw-Hill appreciated by over the past 18 months, when Mr. McGraw began taking steps to restructure the company founded by his great-grandfather 125 years ago. Prodded by activist investors like hedge fund Jana Partners, McGraw-Hill last November sold its education business to privateequity firm Apollo Global Management for $2.5 billion. Analysts at Barclays Capital said in a report last week that they hope the company will use the sale proceeds to aggressively repurchase shares to win back investors. However,the company may need to hold onto its cash. The feds are seeking $5 billion in penalties from McGraw-Hill,so Mr.McGraw may decide he can’t be as generous with shareholders as they’d like him to be. Mr. McGraw may instead try to raise his company’s stock price by selling assets such as consumer research company J.D. Power and Associates or Platts, which provides news to the energy industry. The key, analysts say, is for Mr. McGraw to convince investors that the rating agency is not the company’s only valuable property. If McGraw-Hill’s stock remains depressed because of its legal problems, look for activists to make another run at the company and demand the exit of Mr. McGraw. While the heads of many familyrun media firms, like the New York Times Co. or News Corp., use special classes of super-voting stock to protect themselves from the wrath of shareholders, Mr. McGraw, who controls 1.6% of his company’s stock, has no such protection. Ⅲ 19.4% Want more info on our done deals? Scan the QR Code with your smart phone. 4 | Crain’s New York Business | February 11, 2013 INCREASE since Jan. 1 in the world’s hottest stock marketplace: the Vietnam Stock Index, which tracks all 307 companies listed on the Ho Chi Minh City Stock Exchange. Bourses in China, Japan and the Philippines have also posted strong gains. http://www.goulstonstorrs.com

Table of Contents for the Digital Edition of Crains New York - February 11, 2013

IN THE BOROUGHS
IN THE MARKETS
THE INSIDER
BUSINESS PEOPLE
CORPORATE LADDER
OPINION
GREG DAVID
REPORT: SMALL BUSINESS
THE LIST
CLASSIFIEDS
DIGITAL NY
FOR THE RECORD
NEW YORK, NEW YORK
SOURCE LUNCH
OUT AND ABOUT
SNAPS

Crains New York - February 11, 2013