How Knock Out! Improved Underwear

Angela Newnam’s quest to make the perfect pair of underwear began with camouflage. It was 2009, and the textiles consultant-turned-stay-at-home-mom had combed through hundreds of patents in search of a technology that would wipe out the unmentionables—odor and moisture—in unmentionables. She learned that Dan River, a textiles company that closed in 2008, was selling a patent for No Trace, an odor-absorbing solution developed for hunting apparel so deer wouldn’t be tipped off by the smell of a sportsman’s sweat. Newnam bought up all the No Trace camouflage gear she could find on EBay (EBAY). Then she got out her scissors......Find out what happened next.

She cut small swatches and placed them in Ziploc bags together with pungent-smelling foods. She also set up a control group with regular cotton fabric. Then she had her friends do a smell test to see if No Trace lived up to its name. “One hundred percent,” she reports. Next, Newnam sewed the camouflage as liners into underwear and gave them to a couple dozen girlfriends to test during workouts.

The results were unanimous.
No Trace—Newnam bought the patent—is a key component in Knock out!, a line of women’s underwear made by her Washington-based startup. Launched in late 2010 with $100,000 of Newnam’s own money, Knock out sold 20,000 pairs of its lace-trimmed thongs, briefs, and boy shorts in its first year. Hanky Panky, the company credited with making thongs mainstream, sold just 5,000 pairs of its signature one-size-fits-all version the first year it was introduced. In April, Knock out won Harvard Business School’s Alumni New Venture Contest for startups with less than $1 million in invested capital and less than $2 million in revenues.

Newnam grew up in North Carolina, where her father worked as an executive for Milliken, a maker of carpeting and specialty fabrics. After graduating from HBS in 1996, she spent seven years consulting in the textiles field for McKinsey and then Springs, which makes home linens. The idea for Knock out came from Newnam’s nagging feeling that women had issues that neither they nor the market were addressing. “I knew there were so many great high-tech fabrics out there, yet our undergarments seem to be the lowest-tech thing we have,” she says.
Her timing is perfect. Intimates were one of the first apparel categories to recover after the recession, says Marshal Cohen, chief industry analyst for researcher NPD Group. Sales of underwear rose 3 percent in the 12 months through July, to $234 million, according to NPD. Cohen says that brand-name lingerie companies have unsuccessfully “dabbled” in concepts such as Knock out’s. To succeed with it, Cohen says, Newnam needs to nail the marketing. “You could argue Spanx wasn’t anything more than an elastic band when it first started,” says Cohen of the shapewear company. “But the message was believable. It was clear and distinct in telling the consumer, ‘Here are issues you wrestle with every day. Here’s a solution.’ ”
Newnam says she thinks of Knock out as less of a lingerie company and more of a tech venture. She markets the underwear as “smart panties” and confines the description of how the liner works to the inside of the hang tags. “We don’t try to say too much, because people—they just get it,” she says.
Getting buyers at lingerie stores to understand the concept does take some explaining, though. The No Trace molecules—they contain the same active ingredient as Febreze—are bound to the cotton in the finishing process, creating small pockets that trap scents. Because the molecules are encapsulated in the weave, they’re good for at least 40 washes, says Dave Brown, who developed the patent for Dan River and is now a consultant to Knock out. The wicking technology can disperse up to three-quarters of a teaspoon of moisture toward the outside of the liner without leaving a mark on outer-garments. Jim Mitchell, Knock out’s sales rep in the Southeast U.S., says he carries a water bottle on sales calls to demonstrate exactly how it works. “Once they get over that initial 20 seconds of shock of what you’re saying about this product, their light bulb comes on,” he says.

Knock out’s panties are manufactured from Supima cotton in the U.S. and retail for $16 to $38. They’re sold at 310 stores in the U.S. and Canada, including Bra Smyth in New York and Holt Renfrew in Canada, up from 200 at the end of 2011. Newnam, who used to host panty parties at the homes of friends to hawk her merchandise, hopes to hook a high-end U.S. department store by the end of 2013. While she declines to disclose her revenues, she says she expects to triple her sales volume this year.

To expand, Knock out recently launched a line of men’s briefs and undershirts as well as women’s nightgowns and pajamas. In August, the company signed its first deal to license the No Trace technology to another apparel maker—one that makes camouflage hunting gear.