Should a leading tiemaker cope with a market slump by putting his own neck on the line?
To all appearances, clothing designer Henry Jacobson has plenty of reasons to be confident. Over the past decade, the cofounder and CEO of Mulberry Neckwear, in Marin County, Calif., has managed to build a thriving necktie business--with lucrative licenses for the Kenneth Cole, Claiborne, Nature Conservancy, and Jerry Garcia brands. Mulberry also has done well with its own house brands, Ziggurat and Facets. Revenue at the 300-employee company has risen about 30% annually, reaching some $40 million in 2002.
But such success masks an unpleasant industry fact: The tie market is contracting, squeezing Mulberry's growth opportunities like a noose. Men simply don't wear ties that much anymore. The question for Jacobson is, what does a company intent on growth do when its primary market is shrinking?
Jacobson, a handsome 46-year-old former tennis All American, got the idea for Mulberry (named for a shrub whose leaves silkworms like to eat) while vacationing in, appropriately enough, Thailand. It was 1988, and at the time, he was a bored management consultant. He happened into a tailor's shop and was impressed by the store's handwoven ties, which were not like anything he'd seen back home. Mulberry Neckwear was born.
Jacobson began designing neckties in the second bedroom of his Corte Madera home. Manufactured in Thailand (cofounder Katie Smith sourced the product), the ties began selling briskly in high-end Bay Area specialty stores like Wilkes-Bashford. The timing was perfect. Neckwear sales boomed in the early 1990s, peaking at $1.3 billion in 1996. Mulberry expanded into department store chains such as Bloomingdale's and Macy's. Big fashion brands were attracted to Jacobson's styles, and Mulberry began picking up licensing deals. The company now has a team of 32 designers in its San Rafael headquarters. Working with contractors in China, Italy, and Korea, Mulberry currently sells its neckties in approximately 1,500 stores nationwide.
Mulberry's success so far has stemmed from its unusual approach to selling. The company eschews conventional department store marketing such as advertising and in-store promotions. Instead, it sends its own sales force to work department store floors, providing a high level of knowledge and customer service. While specialty men's stores employ salespeople who know a printed silk tie from a handwoven one, for example, few department stores do. Mulberry sales pros fill that gap. Jacobson calls it a "retail-centric" business model and admits it's an unusual approach for a garment manufacturer to take. "Even though you might look at us and say we're a manufacturer, ask anyone who works for us and they'll tell you we're in retail," he says.
The company is obsessive about sales tracking, monitoring data on a daily basis and giving salespeople extra incentives to sell brands that slip. The approach has made Mulberry the No. 1 tie seller in many U.S. department stores. "Mulberry is by far the biggest volume mover I have," says Tony Brown, divisional merchandise manager for men's clothing at Macy's West, where Mulberry accounts for 30% of tie sales in the chain's 90 stores.
Still, those dark clouds have been gathering in the necktie business. Since 1996, the market for ties has plummeted 30%, to $800 million in 2002, and Jacobson sees no end to the shrinkage. What's more, the market for menswear has fallen about 12% in the past two years, victim of the trend toward "business casual" at work. Mulberry has been struggling with how to cope with a slowdown in growth. The company believes it has a number of advantages, including its talented in-house designers, its sales-tracking system, and its intensive sales and service training. All of those things constitute the real value of the company, Jacobson believes. The question is, will they be enough to carry the business forward if the stormy skies in the industry begin to rain on Mulberry's success?
Mulberry wanted to do something to diversify its business, since most of its sales were dependent on licensors. "We're just renting our licensors' names," Jacobson says. "We decided that the thing to do is use our business model to support development of our own brand."
In late 2000, the company set out to transform its athletic, good-looking founder and head designer from Henry Jacobson to "Henry"--an icon that American consumers would be on a first-name basis with, as they are with fellow designers Ralph, Tommy, and Calvin. "The most powerful way to launch a brand is when you have a living designer willing to do it," Jacobson maintains. "I've always had a passion for clothing and how wardrobes should integrate with the modern guy's lifestyle. If my taste matches a broad enough range, why can't we be successful?"
Specifically, he believes there's room in the menswear market for a line of stylish yet casual menswear that can shift easily from the office to the soccer sidelines. The new "Henry Jacobson" line will include sportswear, dressy slacks, sweaters, shirts, sport coats (and ties, of course). To avoid angering licensees, the Jacobson line will feature styling different from and prices higher than Mulberry's licensed offerings ($72.50 for a "classic" Jacobson shirt, for instance, as opposed to $49.50 for one in the contemporary Kenneth Cole line).
Henry Jacobson shirts began appearing in stores in October. The brand's first full line will make its debut this spring in major department stores and at least one large golf resort. The company is moving slowly, funding the new line with cash flow and introducing it quietly in a limited number of stores.
"We're not doing millions in consumer advertising, or looking to be in 300 stores in our first season. We'll be in maybe 30 department stores, and grow it from there," Jacobson says. "That allows us to pull back and jettison the business if it just proves too difficult, without hurting our core business."
After more than a decade behind the scenes, Jacobson is ready to see his name on more than just neckties. He is trying hard not to get too excited, however, until he sees the new line make a profit. Still he admits that transforming himself into a brand is the most fun than he's had since competing at Wimbledon in the 1970s. "Nothing else I've done compares to it," he says.
President and CEO
Tommy Bahama Group, Seattle
The men's market is always looking for exciting new product. If Jacobson's product has a unique character, is appealing and well constructed and well priced, I see no reason why he shouldn't succeed. It isn't easy. I have some reservations about whether male consumers will connect to a name. I'm a traditionalist. I believe people are intrigued by product. If it's a great product, then they start to like the name that's on it.
Brandspring, a San Francisco-based brand consultancy
Jacobson has been successful by licensing brands with strong affinity groups. People buy brands because they identify with what the brand represents and the comment it makes. You can build a stealth brand, but you have to have a very clearly defined brand promise. I'm not clear on what Jacobson's brand promise is and how he makes that tangible to the consumer. He's good at making a good tie, but making a good tie isn't good enough for the overall menswear market. That said, there is an opportunity in the menswear market. I like the fact that he's going to test it first before he invests too much in the inventory.
Chairman and CEO
Mitchells and Richards, a SPECIALTY clothier based in Westport, Conn.
Men are dressing up more, maybe not wearing suits, but they're dressing up and not dressing down. That bodes well for somebody starting a collection. It's still a huge challenge. One of the ways the company has achieved success is putting some type of seller in the stores. That's a very good idea--it gives you a champion for the product on the selling floor. It's building the brand through the retailers by hugging the people on the selling floor and making the product come alive. That's where I would spend the money, to try to educate the associates and motivate them. To me that's a much better investment than advertising--until the collection is established.