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”