Iconic Tour

Kate Hudson shares her 5 secrets on how to start and grow a business empire

Constance Gustke, special to CNBC.com
Kate Hudson
Source: Fabletics

For Kate Hudson, co-founding athleisure retailer Fabletics in 2013 has been a winning exercise on building a brand in a market already dominated by a slew of activewear powerhouses. To date, Fabletics, part of the e-commerce juggernaut TechStyle Fashion Group, has a $250 million revenue run rate, with sales increasing 43 percent in 2016.

In just four years Fabletics has more than 21 million followers on Twitter and has opened 18 retail stores. Despite some controversy over its VIP monthly membership model, Fabletics has attracted 1.2 million monthly members in eight countries, who receive discounts of up to 50 percent on apparel. Starting at $49, members receive a top, sports bra and bottoms based on their lifestyle and fashion preferences. The idea: to offer personalized service and on-trend fashion at half the price of competitors.

So how did she do it? While massive name recognition certainly helps, the Golden Globe–winning actress saw an opportunity: to adopt a Warby Parker e-commerce model and create an affordable, high-quality line that inspires all women — regardless of size, age or ability — to look and feel their best and embrace an active, healthy lifestyle.

Hudson's mission was further realized Monday, when Fabletics announced its expansion into plus sizes.

"When I started rapping about this idea, I got so passionate about it," said Hudson. "There wasn't a great-quality, affordable active-wear line. There were $250 yoga pants."

A growing trend

Athleisure apparel – casual clothing meant to be worn in the gym and around town — is a growing trend. According to research firm NDP Group, U.S. consumers spent $44 billion on activewear in 2016; Morgan Stanley predicts the sector will represent $83 billion in U.S. sales by 2020. Much of this is driven by millennials, who are more health conscious and have more relaxed standards when it comes to clothing, even in the workplace.

While Fabletics' lower price point sets it apart from companies like Nike, Under Armour, Lululemon and Athleta, discounters such as Target and Wal-Mart have recently entered the field, driving prices down. But Fabletics, like Amazon, is banking on its tech-centric DNA, using big data to track customers' buying preferences and even predicting future demand with great accuracy. (The company's most popular items are the Salar Capri and the Lisette high-waisted capri, said Hudson.)

More from iCONIC:
Warren Buffett's favorite CEO annual letter is not his own. It's from this guy.
How three Michigan students turned a class project into $3 million
Investing legend Jack Bogle's 6 best money and career tips for young people

Fabletics also benefits from having TechStyle Fashion Group as its savvy parent. TechStyle is currently valued at more than $1 billion, making it part of the much-coveted unicorn club. Reuters, citing anonymous sources, is reporting that the company is on the block. (TechStyle declined to comment.)

Besides JustFab, TechStyle also owns other brands, like ShoeDazzle and FabKids. JustFab recently participated in Project Runway and is the exclusive accessories partner of the show.

Hudson's 5 tips for success

Hudson's drive to create fashionable, affordable fitness attire has been an inspiring journey, and she's learned many lessons along the way to building up her brand. Here, the mother of two shares her 5-point recipe for success that continues to churn out sales.

1. Identify marketing opportunities. Seeing that a lot of activewear was expensive, Hudson zoned in on a retail white space that other companies didn't see. VIP member prices for Fabletics athleisure, for example, start at $49 per month.

She and her team also decided to design activewear for all shapes and sizes. So the team got busy and created ready-to-wear lines for extended sizes XXS to 3X. "It's a lot of extra work," she said. "But the team is awesome."

The bigger story here, she adds, is about America's struggles with health. Hudson wanted to create clothes that are fun and fashionable and inspire people to work out more. If someone wants a glass of wine, too, that's okay, she says. The message is to encourage people to put one foot in front of the other.

"We need to start encouraging people to start small," she says. "You'll start to feel stronger and be less tired. Go out and breathe."

2. Stay hands on. Hudson looks at sales numbers every week. She also knows which apparel is moving — and which isn't. "What you thought would blow off the shelves isn't resonating enough," she said. Apparel that fails to sell is taken off the site right away.

New collections are launched every month. "It's like a big bet," she says, explaining that formulaic approaches don't necessarily work these days.

Hudson is also involved with marketing. Last year Hudson, who is also a director and producer, made a 30-second unfiltered commercial using her iPhone that she planned and shot herself.

"You have to be increasingly creative with marketing and design to have a successful company," she says. "Business doesn't lack creativity."

3. Rely on big data to make better decisions. When first signing up for Fabletics, new members take a quick quiz. That data helps Fabletics determine prices, turn inventory quickly and create models of what fashions customers will be demanding in upcoming months.

"Because we sell directly to consumers, we can hear what customers are saying," she says. "So we don't create waste."

4. Get inspired. Hudson's inspiration, of course, is her mother, actress and icon Goldie Hawn. Hudson is a member of the board of her mother's Hawn Foundation, which teaches mindfulness to kids. The program, called MindUp, is now taught to more than 1 million kids in the United States and several other countries.

"People thought my mother was crazy when she first started the foundation," says Hudson. "I watched her uphill battle and her passion and hard work to help kids."

Twenty years from now Hudson expects to follow her mother's lead and delve deeper into philanthropy. "There's a lot of stress on the world," she says. "We need to start with connection."

5. Believe in yourself and take risks. Hudson's motto is simple: Live your passion. Life on Earth is very short, so focus on what matters most. "Try to keep that in perspective," she said, "and you become fearless."

— By Constance Gustke, special to CNBC.com