How Kristi Soomer created a Versatile and Sustainable fashion brand-L Ep 73

Because there's a lot of luxury brands out there. And nobody talks about this that have slave labor in their supply chains, just because the product is really, really expensive. Doesn't mean it's ethically made.

Welcome to FASCINATING ENTREPRENEURS. How do people end up becoming an entrepreneur? How do they scale and grow their businesses? How do they plan for profit? Are they in it for life? Are they building to exit these and a myriad of other topics will be discussed to pull back the veil on the wizardry of successful and FASCINATING ENTREPRENEURS? My book RELENTLESS is now available everywhere books can be bought online, including Amazon and barnesandnoble.com. Try your local indie bookstore too. And if they don't have it, they can order it. The reviews are streaming in, and I'm so thankful for the positive feedback, as well as hearing from people that my memoir has impacted them positively. It is not enough to be resilient. You have to be RELENTLESS. You can go to therelentlessbook.com for more information. Thank you so much. In this episode we hear from Kristi Soomer the Founder, CEO of Encircled. It is one of the few slow apparel brands that is a Certified B Corp, which puts the planet and people before profits. We talk about what sustainable fashion really means, profit margin and how she's funding her company. Now let's get right into it.

So originally, I was actually in a completely different career. I started my career and sort of packaged goods. I worked in brand management and then I ended up in management consulting because I'd had a dream as an undergrad in University, wanting to go into management consulting finally made my way there after finishing my MBA. And just started to realize that I wasn't sending super connected to my work. You know, I was working in retail, which I love, but I was helping really big brands and I didn't always feel like I was doing impactful work. And it was really this like fateful moment that I've told this story. I feel like a thousand times, so I'll keep it short, but I was packing for a yoga retreat. I'd never been on before. It was just like 2012, maybe not as popular as they are now. And I was like, that's a yoga retreat. So I was like trying to pack and are shoving everything into my suitcase way overpacking because I'd never been on one and my suitcase ripped. So it was like a super last minute trip. I was a last cancellation spot, fell into the trip. So I'm packing my before suitcase rips, zipper rips have to shove everything into a small bag, last minute. It's like three in the morning. And my flight's at like 7:00 AM or something. I have to be at the airport. So you trying to figure it out. And then as I'm like going through everything and bringing I'm like, why am I bringing this? Like, I'm just going to wear this on the plane. And then I might wear this with down here. And like, I was just starting to question everything and it kind of sparks the concept that like why do we need to travel with so much stuff and why don't we have more versatile options for travel? So really the first product idea that came up with was this innovative eight and one tunic dress scarf, cardigan Cape piece called the Chrysalis Cardi. We still have it in our collection today. And it was kind of based off that idea that there was really popular at the time of the infinity scarf. They can convert into like a hundred different things. Yeah, exactly. Except those pieces didn't work because usually the fabric was poor quality. Typically it wasn't him. You had to like tie it to look like a potato sack, which could be cute. But I mean, it did not look cute. And so I was like, there's gotta be a better way to do this. Like, what if we can just make this thing do like maybe four or five, eight things max, not 30, we don't need 30. And what if I can find a way to like, hold it together so that when you're wearing it, it actually looks like what you're wearing, not a scarf tied into something. So through that process, I came up with these like strategically placed snaps on this garment, ultra soft, sustainable fabric. And then I was like, you know what? I gotta launch this. I gotta create a product. So that's kind of originally how the business ideas sparked was just from that one product, which kind of kicked off the whole collection.

Is that where you came up with the name Encircled?

Yeah.

Okay, great. Yeah. It's interesting how we name our businesses early stages, and then it develops into something else. Sometimes relevant to the name we gave the business. Other times, not at all yours is in there still. Tell me, like you're explaining for the very first time, what does sustainable fashion mean?

So sustainability and fashion is not just the materials that we make a product from. That's definitely one component because sustainability is a really holistic viewpoint to the production of fashion I would say in general. So we call ourselves a slow fashion brand. Many people be familiar with fast fashion brands, like H and M and Zara and the like, and really fast fashion brands. Their goal is to pump out as much new product as possible, make it as cheap as possible. And therefore it's not necessarily built to last. Not really using premium materials, really designed to be kind of worn a couple of times

We could put in so much of it. Why is that?

They are making a lot? Yeah. So like the newest kind of fast fashion brand that's exploded onto the scene is one called Sheehan out of China. And they launch an average of, I think a thousand styles a day is what I heard, which is just, to me, mind blowing because it takes us like six months to do one style. So I'm like, how are they doing that in one day? Like what kind of mechanisms behind the scenes that are driving this? But yeah, it's all based on, more is more consumption, trends, not longevity. These materials are rarely even close to sustainable and if they are, they're like, greenwashed. So we're pretty much the opposite of that. So we tried to slow down the consumption cycle. We really do bring a lot of intention into our design. So when we design a piece, we take our time, we fit it on real people, multiple bodies, to see how it fits. We play around with things we wash tested. We use sustainable materials in the production. We also use local productions. We make everything about 50 kilometers from our office. We also knit about half of our fabric and diet locally as well to reduce the carbon footprint and then pretty much everything in our supply chain. Sustainability. So down to the education we're providing to our customer on what to do with clothing. At the end of life, we have a Encircled community group where people can buy, sell and trade. If they like outgrow their designs, or maybe they lose weight or gain weight or whatever. So we try to really embed that spread throughout everything that we do, which I would say sum up, if you think of like the fast fashion brand, we were just basically the opposite. Right, right.

Yeah. So what is the big difference in margin for your business in sustainable clothing versus none?

So yes, there's definitely, major difference in terms of cost. Yeah. So the cost of like ethical production, obviously being onshore as well and the cost of these premium materials. It can be anywhere from 10 to 20 times higher on the labor and fabric side. So that's pretty massive. However, I would say the internet being what it is has allowed us to go direct to consumer, which helps us a lot, because from a wholesale model, we would probably have. Double our prices. So we are on like, they get up in the jazz consumer. Yeah, absolutely. Cause if we were going through like Nordstrom or something like that, we would have to probably increase our price like 80, a hundred percent even make margin off the back end.

That brings me up a question. I wear a lot of Eileen Fisher clothes. Love her, love her, but a lot of them are made in China and the very expensive, but they don't last forever. They do have a give back program, but is that an opportunity for you to stay B Corp stay sustainable and then go off shore? Or does that make the sustainability.

I would say it just depends. We're pretty committed to producing and Karen where we're based for a number of reasons. But I would say obviously the labor and ethics are very important. We have a very high minimum wage here, really strong environmental health and safety regulations, but also we're really close to our factories. So we can literally go pull a t-shirt off the line in like 30 minutes or go look at the fabric. And so their quality is so good because of that, because we can spot mistakes very early on versus like, Maybe another brand overseas gets a container full of product and they're all like the tag is on backwards and this stuff happens all the time in fashion because it's such a handmade business. This is the other thing that a lot of people don't know is that there's not robots making your clothing. These are people holding the fabric, cutting the fabric, putting through machines. It's like one of the most old school industries. Still is out there. There have been some advancements like laser cutting, but it's very, very manual. So brand like Eileen Fisher, who personally, I just think is she's fantastic. There are ways to go overseas and find ethical productions for sure. But you have to be in a bigger scope and a bigger scope. You have to have a lot of people to help you to audit that properly because you can't take at face value what the people are saying to you you'd have to have people on the ground there, but she probably does to audit her factories and stuff like that. And the wastewater, everything I know, cause she's a B Corp corporate. I know we are too. It's so hard to become that. So I know she must have these audit trails and stuff like that, but so it is possible

Thank you for leading into this next question then I'm really interested in what is the process of, and how difficult is it to become a certified B Corp.

It's really hard.

I haven't heard detail.

Yeah. I would say it's very difficult for a smaller business again, because the certification process takes a lot of resources and reporting and information that likely you're doing these things, but you're probably not documenting them. And so that's where the rubber hits the road. Right. Because you need the documentation to support you can't just say, "Hey, B- corporate, we're doing this." And they're like, yeah, it's totally like their regular.

I mean is it, is hard to become a B Corp or harder than to become a I did this and I thought I was going to tear my hair out an official women owned certified business. Oh, prob oh, is it really, really, really hard to,

I'll have to get links from you on that because we're actually not an official women owned business, so I'm not familiar with that process, but it is a lot, it takes about six months end to end and a lot of document. Compilation when we did it, we just recently recertified. So we were certified in 2018 re certified recently, and I had to pick up the process cause somebody had left the company who was running it. And I was like, whoa, this is a lot of information. And I ended up giving up points because it basically, or you, because I was like, I just can't, I don't have the bandwidth to do this. It's just not my sounded to me. Why was it important for you to become a certified B Corp? Because there's just so much greenwashing out there. And I think consumers are looking towards certifications. As a matter of

What is greenwashing mean, you're going to have to spell it out like-

Greenwashing, greenwashing or ethic washing is really the idea that a brand or company or an influencer or somebody is trying to purport themselves as sustainable or ethic when actually they're not, and they're not necessarily telling you the whole truth about the thing. So an example

Is there an example that you can give without.

I'll give you a great one. So yes, I'm not going to name the brand, but there's a fast fashion brand that has a conscious collection. And somebody did a study on their conscious collection, which is there sustainable collection and realize that those actually more synthetic materials in the conscious collection than there is in the non-conscious collection.

Can I say the name of the brand out loud as a guest?

Yes, allegedly. Yes, you can.

I think its H&M. But anyway, wow.

Yeah. So that's like an example of greenwashing. Cause a consumer would think, yeah, well look, they're being sustainable, but when you start talking Ravel, yeah. When you start to read the labels, you're like, whoa, this isn't sustainable. Or it's like 20% a sustainable material. So that's a great example of greenwashing. And again, like anybody can make these claims in my career, I worked in toothpaste marketing at one point I was on a product that was drug regulated in Canada. Say anything about it. You had to have like factual studies, clinical studies in fashion, you can pretty much say anything. So B Corp is really that extra measure of consumer protection and it says that we're legit. It puts us in really great company with other brands. And it's something that I think is becoming more popular too.

Yeah. So like Athleta is a B Corp, correct? So are they upholding all the standards that you are, or is there gray area?

So there's a continuum. So if people are interested, they can go into B- Corp's website and look up the brands and it'll show you the score. So there's a minimum score then you to get to become a certified B Corp, but the range of scores will be quite different. So our scores quite a bit higher than Athleta.

Do you put your score on tags?

We do not, but that's a great idea.

Well, you know, I bring up this question because to educate everyone, if you do see B Corp, everyone that's not terribly knowledgeable is going to just think, "oh, it's all the same. It's all good." But it's variations of good. I remember in my event and entertainment production company, we were hired by Method Soap. So to help them do a fun stunt to celebrate. They're B Corp and it wasn't them becoming a B Corp. I think the celebration was the numbers. They must have gone up a number and I didn't understand it. And honestly, at this point I didn't care, but it did make me realize, oh, there's different levels. And then how does that affect your revenue and the attention to the brand? How much does it really help do you think? Or how can you tell?

It's hard to measure the impact? Really it's a market credibility, but it's also a mark of accountability. So for us, we actually have to rewrite our bylaws, our corporate bylaws to put into it that we will use business as a force for good. So it's actually a legally binding commitment that we've made. Eileen Fisher has made. Athleta has made that if they do something that is against that practice, they'll lose their certification. Not only permanently, but probably be publicly shamed for it. So one of the benefits of it is that that I'm a very accountable person, but what if I sell this company to somebody else, what are they going to do? So it is that kind of like deep rooted, sustainability and ethics in the business to measure. It would be hard to say. I do think it is. Something that now consumers are starting to look at and understand more, which is good because we want those little things to help these brands separate from other brands. Cause like when you're just picking on price, you're leaving a lot. Cause there's a lot of luxury brands out there and nobody talks about this that have slave labor in their supply chains just because the product is really, really expensive. Doesn't mean it's ethically made. So there's so much, They are just making so much more

money on it.

Yeah. Yeah. Their margins are amazing. But it's very ethically dubious. So, you know, the more education in this space there just needs to be more in general because I think it's a very shrouded industry. There's a lot of secrecy, still some more transparency with errors. Yeah.

I have a friend or I probably have a couple of friends, but one particular where she would, she always boasting isn't the right word, but she's very proud of the choice that she makes and sustainable, not just clothing, but toothpaste and deodorant. And she's always giving me. I was like giving me some deodorant, like, is that a message? It is very important to her. And there is a subsection of people that it is important to more than like, for me, I don't shop that exclusively because of what it means. But under conversation like this, I probably would.

Yeah. Yeah. I think it's becoming the awareness in the last couple years. Exponentially grown just because of everything that happened with the pandemic. I think supply chains overseas got very disrupted. So there's this huge focus on supporting local. And a lot of local businesses are very mindful about their sourcing, even when it comes to like food and stuff like that. Outside of coping. So I think it's brought a lot more awareness to space, which is great. Now we kind of need it to branch out more because it's still so niche, right? It's still like 99% of fashion brands or something are not paying living wages. So, you know, we're still like the 1% and not in a good way. So we still need that awareness to grow. It's just very hard because they dominate the media and they have so much money. So it's a slow, we're making progress, but it's definitely not like. Exponentially, I would say, but we are making progress in our direction as a society, I think.

Well, let's hope so.

Yeah.

Let's talk about how you're funding your company from the start where you like I'm going to bootstrap not taking outside money.

Yes. I started it with my own savings of about $20,000. I sold my car and I pretty much bootstrapped it from there on end until about 2015, I took on a small angel investment. I went on a show called Dragon's Den, which is similar to shark tank. Yeah. Yeah. And actually the episode never aired. We filmed for like two hours, never aired and I got two deals, took one deal, deal fell through. So I lost the deal and I lost the TV.

Why didn't it air?

They don't air everything. They didn't tell you.

Were you not crazy enough.

I was not crazy enough. Yeah. It was probably too boring for them. Yeah. It was really good for me because number one, it was a validation of my valuation because they gave me really good feedback. They pumped my tires as an entrepreneur. Like it was very helpful that actually ironically, the one person who didn't like it on the panel was a fashion guy, but he's from the fast fashion space. So that's why I like it, but he didn't like my margins, but yeah, so it was very interesting for me. But after that episode, I ended up taking on a small angel investment from a purpose-driven investor in Toronto, and that's been our only investment sense. And that was a very small raise. So we've largely just bootstrapped through positive cashflow has been difficult for sure at times, because an inventory driven business is quite tricky with cashflow, but finance is my background. So it's something I'm really. I wouldn't say passionate about, but I watched the numbers a lot for sure.

Are you against any other kinds of investments because of your background?

No. I mean, I think it's individuals. What, so, you know, people want to go out and raise a lot of money. They should raise a lot of money for me.

For you, are you avoiding that because you really want hands-on and to really continue to own your product.

Yeah. We've had offers for people to invest and some want to take closer to a majority share, and I don't want to work for somebody else. That's not why I started this. So for me, my intent is to really scale up the business and ideally move myself to the board someday and sell the business. And it's not that I want to take the lion's share of what I'm getting from selling the. But I just don't want that creative control or restriction. We're very blessed to have an investor who's just totally collaborative. Like they're there, if we need them, they're not, if we're not some of the caveats of taking more capital, I'm sure. As you know, is that the more investors you have-

The more opinions, the more accountability.

The bigger your board, the more they're calling you at three in the morning. Cause they don't like the P and L from last month. And like, personally, I just didn't want that stress, but there's other ways to run the business. You just have to be a little bit more creative and maybe a little bit more thrifty, but we've gotten into some periods where we were growing really quickly and we really invested and cashflow in any business is just the lifeblood. So you have to be so, so careful on, I think Eileen Fisher recently downsized her team as well, just because the pandemic has caused so many shifts and things. So, so yeah, so it is possible. I think to scale a business, we have to be very intentional about what you're doing and why.

How do you figure out how many pieces to make of one style? And I'm asking, because I'm thinking about Eileen Fisher and at Macy's, at least there's like 70 pieces of one thing. And I know they're not all going to be sold.

Yeah.

Why?

So part of slow fashion is really like minimizing your production and doing small batch production. So that may seem like a lot, and I don't know what her volumes are, but when you think about like somebody like H and M, who's probably doing run sizes of like a hundred thousand pieces, she's probably not doing that. We're very on the smaller, for sure.

How many of, one of your bestselling pieces do you make at a time?

Maybe a couple thousand. It's not going to be that big number one because the capacity here locally, they can't even do run sizes as much bigger than that.

Will you warehouse them?

Yeah, we warehouse them. And then the costs, you don't want to keep too much inventory on hand. This is the balance, right? Like you want like enough that you have to sell, but then you don't want too much. You don't want like six months, you want maybe like two or three months. And it's always a dance right, with inventories. So that for me has worked really well. I'm passionate about starting small. So like that's the advice I always give to new entrepreneurs in the space. It's like tested design, even us. Like when we launch a new design, we rarely run more than 100 to 200 pieces because we want to see what people think of it. Like, do they like it? Or they really like resonating with it. Is there anything we want to change from a fit perspective? And it's a lot easier to do that. If you haven't run 2000 pieces. And then have to mark down the inventory or carry it or hold it. So that's always been, our process is kind of slow and then scale.

How do people find you and your brand for the most part?

It's a mixed, I would say we do a lot of influencer marketing, so a lot of gifting and seating and paid collaborations, lots of paid advertising. So we still are pretty heavy into Facebook ads and Instagram ads and then organic social as well. So we do a lot on Instagram, Facebook and a little bit on Tiktok and we really focused on education on our social channels. So that's something we're really passionate about as well as collaborating with other amazing brands. So we do a lot of that with like other B quirks. We'll do some marketing campaigns and stuff like that to build awareness. Yeah.

So what is the biggest challenge that you're facing in your company today? When we get off this call and you're, and if you choose to face this challenge, what is it?

I think it's finding focus. I'm a workaholic. So I come from a very high-performing athletic background. So I've had to really scale back my hours in the last few years, especially the last year, because I've had some health problems and it's been hard for me to figure out how to do that in the business without like taking on more. So like that schedule. When I say to myself, I want to work five hours a day, cause that's all I can do. And I look at my schedule and like, actually that looks like nine hours. So that is my biggest challenge is not taking on too much. I would say as a business owner. And then right now we're just starting to try to hire some people as well. So finding the right structure, I think for the team is a big challenge too.

That is always an ongoing challenge for small business. And I think any business, but you're the founder CEO. And I would guess that you are still working in the business day to day.

Oh yeah. Yeah. I'm very heavily involved.

Right, and ultimately one day you will probably come to realize. Even though you love it. And you're workaholic that it's better for you to be more of a visionary and strategists rather than the day-to-day person, but everybody has their own path on their own journey. So what is your brand's biggest strategy for growth this year?

I would say focusing on making really amazing products. So we've really slowed down our product development cycle a lot. We got very excited last year because we had a lot of growth and we're like, let's make all this products mostly, but like, we didn't do it the way we'd done it all along. And I think that impacted us. So we've really slowed down product development and tune back into our customers. Like what do they actually need? And really slowed that down. That's been like really successful, lots more collaboration this year. So lots more partnerships with influencers and lots more reaching influencers outside of our typical space. So usually we would partner with like slow fashion influencers, but now we're reaching out to people in like the food green beauty kind of space. Organic lifestyle people who'd be adjacent because I think there's a big teaching and learning opportunity there. And then probably third, just like working smarter, not harder. So we're doing a lot of internal efficiency staff. We're actually moving our warehouse out. Of our studio in about a month. So that's like a really big root because we've been software house since the beginning. So that's a big like efficiency play as well. Right.

What is your number one favorite piece on the site that we can all go and look at and buy?

Yeah, the dress, these sweat pants are one of our top sellers there. I live in mine. Love them.

Do you have them now? I won't ask you to show them.

I do. I do. I wear them almost daily and they're just classic. They were invented by me after a really long plane ride. And I was tired of it. It was like polyester pants. You have to wear for work. And I was like, why can't make dress pants looked like sweatpants. And I was like, I guess that person's meat. So that's been the legacy of that pan and it is one of our most flattering pants on many shapes and sizes. So that one is a good one.

And what is your size range? I really see like Athleta, uh, they're going in store and so many stores are up to three X. I don't know how far up they go, but-

Yeah, I think online, I think now they go up to six X. We go up to four X on some styles. Generally every style has extra, extra large to extra small. We've started doing petite lengths. We're going to start doing tall. That's a bit of a challenge for a smaller brand to do that many sizes and every style. Cause it, quadruples the inventory usually, and also our factories. If you do above a certain number of sizes, usually six, you get up charged again. So it becomes more and more expensive. So that's one of the costs of producing locally, but we want to do more of that. So like really we're focusing on less is more in our collection and we added two styles and up to four acts like two best. Now we're adding two more, I think, in the fall. So kind of as we identify those hero products, we're kind of building them out and making sure also too, that we're designing them in a way that's intentionally designed for that size versus just grading up the size. So we actually refit all of our extended sizes on plus size fit models to make sure that they're sitting how they should sit. Um, and the faculty-

It's like cooking. You can't just double or triple a recipe, it doesn't always worked out.

No, no, it'll look weird because proportions don't necessarily, we're not like all of a sudden we all go up by the same inch, like in every area. Like it's very, that would be weird. Right. So, so yeah, something we want to do more of, it's been a little challenging, but I think the more we refine our collection and focus on fewer, but better pieces, the more we can do that better.

For more information, go to the show notes where you're listening to this podcast. Want to know more about me, go to my website, officialnatashamiller.com. Thank you so much for listening. I hope you loved the show. If you did, please subscribe also, if you haven't done so yet, please leave a review where you're listening to this podcast. Now I'm Natasha Miller. And you've been listening to Fascinating Entrepreneurs.