Tom Kartsotis and his brother Kosta built Fossil from scratch into a global lifestyle brand and public company with 14,000 employees. They started in 1984 (around the time Tom dropped out of college and was scalping football tickets in Texas). Thirty years later, Fossil 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 business while Tom (through his private equity firm, Bedrock Manufacturing) has turned his primary attention to a new venture: Shinola, an analog watch manufacturing and marketing start-up in a profoundly digital world. With seven retail stores, close to 400 employees making great wages, and an exploding online demand for products which now include multiple lines of watches, high-end bicycles, and other accessories, Shinola is well-positioned to help bring Detroit back and to create the next big lifestyle brand. And, amazingly enough, it's really just getting started.
The Kartsotis brothers are pretty private guys who rarely--if ever--talk to the press. 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. Recently, 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 entrepreneurs in our Chicago startup incubator, 1871, to give us the inside scoop on Shinola and how it's helping to remake Detroit from the inside out.
Tom shared some of the lessons he and his team have 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 also talked about the size of the opportunities they see ahead of them and the market gaps that they are targeting. Plus, 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 get 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 compelling story. Shinola is about pride and craft, making things that matter and last, and honoring the 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). Tom thinks there are still some folks out there shaking their heads, but now they're wearing Shinola watches and riding their Runwell bikes. Tom also noted that, for any entrepreneur, there will surely be bumps in the road and false starts which you'll simply have to manage through. He said his team had had plenty of hiccups, but they just kept their heads down and plowed ahead. Nobody ever said building a new business was easy.
"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 its own factory. All workers spend 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's management team 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 its 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 are 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, 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 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 this is opening up new opportunities for the company and its many U.S.-based supply partners. Shinola's team believes that 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 that were still very profitable and yet only a fraction of those prices of traditional brands with 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.