How I Did It: Tumi's Charlie Clifford
Update: The iconic luggage brand Tumi begins trading on the New York Stock Exchange Thursday. It is pricing its initial public offering at $18 a share—higher than anticipated. The offering is expected to raise more than $338 million for the South Plainfield, New Jersey, company, which is valued at $1.2 billion. Tumi's founder and former CEO, Charlie Clifford, told the story of how he did it in the May 2011 issue of Inc. magazine.
Charlie Clifford ditched a corporate job in marketing to start a business selling rugged leather bags made in South America. That was in 1974. Nearly 30 years later, he sold his company, Tumi, named for an ancient ceremonial knife from Peru, to a private equity firm. Clifford, 67, credits the success of Tumi, based in South Plainfield, New Jersey, to an ever-evolving design. In the 1970s, posthippies loved the handcrafted leather; in the 1980s and '90s, frequent-flying yuppies appreciated being able to pack their socks in a separate compartment from their shirts. Along the way, he says, he listened carefully to consumers, salespeople, and employees alike.
I grew up in Midland Park, New Jersey, a small town of 5,000 people. My father worked for the New York Central Railroad, and my mom was a homemaker. I went to Indiana University and got my M.B.A. in marketing. I was interviewing for jobs when I heard about a Peace Corps program for M.B.A.'s. By then, I'd married my wife, who was also gung ho about travel. We went to Peru, where I worked with small businesses, from 1967 to 1969. There, I learned great lessons about running a business—starting with humility. M.B.A. theory only goes so far in the real world.
Back in the States, I worked for Grand Union, the food corporation, for five years, until I decided to do something entrepreneurial. Peru was known for handicrafts, which I loved, so I talked to a friend about setting up an import company. An importer I had worked for owed me some money—and paid me in leather tennis bags. Selling those bags provided my start-up capital.
One of the first things I did was join the Travel Goods Association. The executive director asked us the name of our company. We didn't have one, so I said, "I'll get back to you tomorrow." The Tumi knife is a national symbol of Peru—but it sounds like it could be Japanese, Italian, or Finnish. Plus, we had a dog named Tumi. We joked that we named the company after him.
I had no business plan and did no focus groups or market research. We found two factories in Colombia to produce big, soft, unstructured bags. Our biggest hit was a rugged duffel bag made from what is called naked leather—which is very rustic, with a pungent aroma. It was a huge hit. That first year, our sales were $625,000.
We priced that first bag at about $50, then raised it pretty quickly to $55, $59, $65, and so on. As the products got more expensive, we got more demanding about quality—manufacturers profit by using every square foot of the hide, so there's a temptation to use the insect-bitten or scarred parts.
I hired Jeff Bertelsen in the early '80s to oversee production and quality control. He was my most important hire; he wound up creating the iconic Tumi look in 1983: a wide opening with a U-shaped zipper and lots of organizational pockets that made packing easier.
The industry is based on relationships. I spent the early days traveling—doing three or four calls a day to shop owners, eating dinners on the road with customers, talking about products, the industry, and learning what salespeople and customers are looking for. There's no substitute for time on the frontlines. Salespeople are talkative, but if you're talking more than 35 percent of the time you're with a customer, then you're not listening—which is the best way to sell.
In the '80s, we decided not to limit ourselves to leather and started using a heavy-duty ballistic nylon that was originally designed for flak jackets. People could buy smaller leather carry-on pieces and then check the larger nylon pieces without worrying about damage.
We borrowed money from the beginning. Our bank was happy to loan to us as long as we were making profits—but it got nervous during the 1982 recession. That's when I decided we had to tailor our bags to business and frequent travelers, demanding customers willing to spend more for a superior product. We started advertising in in-flight magazines. The tag line was, "100,000 miles and this bag will look better than ever."
I was always focused on design. We didn't need to make the product, too. I saw an ad in a trade magazine that said, "We work hard and cheap." Alan and David Rice were based in Georgia and became our manufacturing partners in 1985. By then, we'd discontinued the rugged leather products and developed a line with Bloomingdale's using soft napa leather. The smaller stores were critical in teaching me the business, but Bloomingdale's introduced the brand to a larger population.
When something is "design fixed," it means that it's ready for production. Our products were never completely design fixed. We'd constantly make changes and tweaks: better handles, more pockets, stronger screws to hold the piece together. We never copied other companies—but we were never afraid to borrow good concepts and then interpret them as our own.
In 1990, we started selling in Europe. Germany was perfect for Tumi—an affluent market that cared about how a product was made and styled. Before long, we were in 90 stores. We grew from there, by word of mouth, to Brussels and Amsterdam. In the U.K., we worked with a distributor who got us into Harrods. When we asked to set up our own Tumi corner, they said, "We don't do that." We persevered, and finally they gave us a small, dark, dusty corner. We eventually got into Printemps and Galeries Lafayette in Paris.
I was in Japan on 9/11 for the dedication of our second Tumi store there. When I saw the planes crashing into buildings on TV, my first thought was for all the people. The second was, What does this mean for the business? People stopped traveling, and sales plummeted. Until then, we had 20 to 30 percent growth year after year. After 9/11, sales declined 40 percent. We had to lay off some 150 of 500 employees and make the very painful decision to take our manufacturing from Georgia to Asia.
We also took a private equity investment. I surrendered the majority of the company but remained the largest individual shareholder. In 2004, though, the company sold again, and as it started changing to a more corporate structure, I left.
I really missed the stimulation, so I started consulting with an English company called Knomo—they make very stylish laptop carriers and a variety of bags. I liked their vision and how hard they work, so I decided to set up a joint venture with them to expand to the States.
My relationship with Tumi today is friendly. I talk with the CEO from time to time, but there's no formal relationship. It's difficult to do that halfway.