You Don’t Know Shinola
Tom Kartsotis and his brother Kosta built Fossil (FOSL) from scratch starting in 1984 (when Tom dropped out of college and was scalping football tickets in Texas) into a global lifestyle brand and a public company with 14,000 employees which - 30 years later - sells $3.2 billion worth of bags, watches and clothing a year and has a market cap of more than $5 billion.
Tom retired as Chairman of Fossil in 2010 and these days Kosta runs the Fossil Group while Tom (through his private equity firm – Bedrock Manufacturing) has turned his primary attention to a new challenge – Shinola (www.shinola.com) - an analog watch manufacturing and marketing start-up in a profoundly digital world. With 7 retail stores, close to 400 employees making great wages, and an exploding online demand as well for its products which now include multiple lines of watches, high-end bicycles and other accessories, the company is well-positioned to help Detroit and to create the next big lifestyle brand. And, amazingly enough, it’s really just getting started.
The Kartsotis brothers are pretty private guys and rarely – if ever – talk to the press or any other media. They understand the power and importance of getting their brand and their “story” out there, but they prefer to do it guerilla-style and face-to-face rather than through the traditional channels. So Tom and some other key members of his team (including Shinola President Jacques Panis) agreed recently to sit down with me and a couple of dozen of our 1871 entrepreneurs in our Chicago startup incubator to give us the inside scoop on Shinola.
Tom shared some of the lessons they’ve already learned (as the company nears its third year of existence) in building a “new” manufacturing business in an era of high-tech and digital everything; he talked about the size of the opportunities they see ahead of them and the openings and market gaps that they are targeting; and he answered a bunch of questions from the founders of some of our own most exciting startups. There were plenty of concrete take-aways that were relevant to every entrepreneur in the room and I’ve summarized a few of the most important ones below.
I Wish I Could Say That We Had A Plan.
Sometimes you just have to believe, get the process started and have confidence that - with a lot of effort and persistence - you will get there – even when you’re not exactly sure where there is. It helps a lot to have a vision and a dream and a compelling story. Shinola is about pride and craft, making things that matter and last, and honoring our past as well as the future. It’s a no-nonsense notion combined with a lot of nostalgia and it’s the real deal. No one believed the Shinola team when they explained what they intended to do (start a watch factory in a 100-year old office building in Detroit) and Tom thinks that there are still some folks out there shaking their heads, but now they’re wearing Shinola watches and riding their Runwell bikes. He also noted that there will surely be bumps in the road and false starts which you’ll simply have to manage through. He said that they’ve had plenty of hiccups, but they just kept their heads down and plowed ahead. Nobody ever said building a new business was easy. He pointed out that their idea for a Tall Men’s store in Tokyo didn’t work out real well – but he was just kidding.
If We Take Care Of Our People, They’ll Take Care Of Our Customers And Our Business.
Shinola pays its people well; provides amazing medical benefits; and even pays them above-market wages while training them right in their own factory. Everyone spends time in the company’s retail stores because listening to the customers is the best feedback you’ll ever get. But – far more importantly – Shinola believes and shows everyone that anyone can succeed if they’re willing to work hard and put in the time and effort that is required. The company celebrates their successes and some of the most important team members – who started with Shinola as guards, janitors, delivery people, etc. – are now in charge of critical parts of the operations and continuing to grow and learn more every day. Success breeds success and believing that your people are your most important asset and that they can always be better is the only way to keep raising the bar.
We Start With The Best Product We Can Find (Or Imagine) And Then Make The Numbers Work.
If you aim for the stars and being the best you can be, you very often get there. If you ask people why not and why something can’t be done a new way; you’d be surprised how often you get the answers and the results you looking for. The Shinola team brought in the best Swiss watch builders in the world to train their people. They built a first-class factory that’s as clean as a surgery suite. And they guaranteed their products for life. These aren’t small hurdles or tentative commitments – these guys are all-in, but they also understand that they’ve got to make the numbers work for the long term so that the businesses can scale. It’s reverse engineering on steroids and a fierce attention to every production detail and source of materials and it’s opening up new opportunities for the company and its many U.S.-based supply partners. Shinola believes that - penny for penny and pound for pound, their people can learn to build better products at competitive costs with far higher quality in Detroit than are now being manufactured anywhere else in the world.
If Your High Prices Are Propped Up By Huge Marketing Spends, You’re Ripe For Disruption.
The traditional high-end luxury watch industry has benefitted from enormous mark-ups and margins which are largely dependent on the manufacturers’ very substantial brand advertising and marketing spends. Shinola saw an open space in the market and an opportunity to offer a high quality product at price points which were still very profitable and yet only a fraction of the pricing which the traditional brands were maintaining through their massive ad campaigns. The Shinola team believed that you can make a great product and a great living (and even give back to your community) without being greedy and taking advantage of the consumer. These days the Shinola watches are the entry point into the higher-end, luxury watch sector of the business even while they are also seen by consumers as solid, workman-like, precision products suitable for everyone.
It’s not easy to be all things to all people, but it appears that everyone knows and loves Shinola.
PS: “You Get What You Work for, Not What You Wish for”