Knix founder Joanna Griffiths in the Soho neighborhood of New York City, home to the underwear and apparel company’s only U.S. store. New York has the highest concentration of online customers for Knix.Kellyann Petry/The Globe and Mail
When Canadian underwear and apparel brand Knix Wear Inc. opened the doors of its first store in New York City this month, the company was looking for a bit of a do-over.
It was not the first time the retailer – which designs and manufactures intimates, including its signature leak-proof underwear, as well as swimwear and clothing – had attempted to establish a brick-and-mortar presence south of the border.
In 2021, Knix opened three stores in California, taking advantage of leases that became available during the pandemic. It eventually exited those locations, which underperformed for various reasons.
“I would say in hindsight, we bit off more than we could chew, to be honest,” said founder and president Joanna Griffiths. But she also knew that Knix’s next phase of growth would require establishing a greater foothold in the world’s largest consumer market.
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Toronto-based Knix, which has grown from a small e-commerce startup to a retailer valued at roughly half a billion dollars in 2022, has already built an online following among American shoppers, who account for a large portion of its sales.
But as Knix has expanded in its home market as well, it has seen why physical stores matter. This year, its growth in Canada came mostly from offline channels – both its own stores, and wholesale partners. (Knix is sold at stores such as Holt Renfrew and Sporting Life, and it also has a partnership with Costco.)
In just the last four years, the company went from operating three Canadian stores to 13. Knix will have 20 locations in Canada by the end of this year, with another 8 to 10 openings planned for next year.
“We have a recipe that’s working for us in Canada, that’s a combination of retail stores, online, and select wholesale partners,” Ms. Griffiths said. “And we’re looking to take that to the United States.”
Swedish hygiene products giant Essity bought a majority stake in Knix in 2022. The year before that deal, Knix’s sales reached $133.6-million a year; it has now surpassed $200-million in annual sales in the U.S. and Canada.
Knix has learned from its last go-round in the States, becoming “much more selective” about locations, Ms. Griffiths said. While operating its new store in Manhattan’s Soho neighbourhood, which is on a shorter-term lease, the company is searching for the “perfect spot” in the area to build long-term.
The Soho Knix store in New York City. Knix had to hike its prices for U.S. customers by 7 per cent in response to U.S. tariffs.Kellyann Petry/The Globe and Mail
New York has the highest concentration of online customers for Knix; it plans to open two more locations, likely in Manhattan and Brooklyn, before launching more stores farther afield. The brand launched a campaign featuring actress Kristen Bell this month, coinciding with the first store opening.
But Knix is making the move at a tense time for retailers operating in the U.S. The Trump administration’s widespread tariffs on imported goods have upended how many companies do business and led to major spikes in cost to bring products into the market.
Knix had to hike its prices for U.S. customers by 7 per cent in response. (Pricing has not risen in Canada.) But like other retailers, it has had to absorb some of the cost increases.
At the peak of trade tensions between the U.S. and China in the spring, Knix was paying 177-per-cent duties on goods it manufactured in China and sold to American shoppers. Before the U.S. cancelled the “de minimis” exemption – a rule that waived duties on shipments valued under US$800 – Knix paid nothing to ship online orders to the U.S., since they generally fell below that threshold.
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Two things brought those costs down more recently: The U.S. lowered the tariffs on Chinese imports amid continuing negotiations, and Knix opened its first fulfilment centre south of the border, in Cincinnati, Ohio, in mid-July. That means Knix is now shipping roughly 40 per cent of its products directly to the U.S., instead of paying additional duties on transfer pricing for items that land in Canada first before crossing the border.
“That’s a big unlock for us,” Ms. Griffiths said.
Coming out of the height of the pandemic, Knix also had to rethink how centralized its manufacturing was in China. Learning from the supply-chain headaches of COVID-19, the company decided to add new vendors in Sri Lanka, and to work with its main manufacturing partner to launch a Vietnam facility – plans it accelerated as the threats of U.S. tariffs began to ramp up. At the beginning of this year, 90 per cent of Knix’s products were made in China; by the end of the year, it will be roughly 30 to 35 per cent.
Diversifying has helped mitigate the tariff impact, although countries remain in active negotiations, and much is still uncertain. At the moment, Knix pays roughly 55-per-cent duties on its Chinese-made apparel imports to the U.S., while for the other countries where it manufactures, the current average duty rate is in the mid-30s percentage range.
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The company is continuing to monitor the situation, Ms. Griffiths said, and is working to keep its products affordable.
“If I have it my way, we won’t touch prices again,” she said. “We’ve done just about everything we can as a brand to avoid that.”
Ms. Griffiths admits it is daunting to expand in the States − where in addition to opening stores, Knix is working on wholesale partnerships to build its presence. Not only is the expansion happening at a turbulent time, but building stores is capital-intensive, and the market is large and complex, with significant geographic differences, she said.
“We’ve been working at building the brand in the United States for the past 10 years, and we’ve been spending a lot on advertising and working with different partners. So, it didn’t make sense for us to walk away from it,” Ms. Griffiths said. “If anything, we see this as, potentially, an opportunity to double down.”
