It's not often a fashion mogul extols the virtues of a power strip.
I'm inside the rooftop lair of Tom Kartsotis, the entrepreneur who made hundreds of millions of dollars peddling watches built in Asia, and who, perhaps, will make hundreds of millions more peddling watches built in America. Kartsotis's private penthouse office sits atop his company's posh, landmarked building in Manhattan's Tribeca, a locale he dips into every few weeks from his home in Texas. Five years ago, after growing Fossil into a $2 billion accessories behemoth, Kartsotis hatched Shinola, a high-end watch brand famous, mostly, for being manufactured in Detroit.
With a flop of gray-streaked hair that perpetually spills over his eyes, Kartsotis unveils the power strip, an object typically relegated to a back aisle of Ace Hardware. But where most retailers see commodity, Kartsotis divines a gorgeous vessel. "A power strip is hideous," he says in his Texas-light drawl, holding his prototype, which, once produced, will sell for an astounding $65. Embossed on the plug is Shinola's logo--a horizontal lightning bolt, the same one Kartsotis has tattooed on the inside of his wrist. "This isn't final," he says, cradling the meticulously designed powder-coated metal strip. "But these are going to be amazing."
How a power strip could possibly be amazing has less to do with its aesthetic than with the alchemy of its branding. It turns out the idea for the Shinola power strip goes back at least three years, when executives from General Electric toured the watch company's factory. In its short life, Shinola had quickly catapulted from half-baked marketing concept concocted by Kartsotis and a bunch of his ex-Fossil hands in Plano, Texas, to national symbol of Detroit's revival and American manufacturing possibility. Michigan governor Rick Snyder touted the company as a model for reimagined job creation, even as he imposed bankruptcy proceedings on the city. A swell of celebrities and politicians, from Neil Young to Jeb Bush, showed up at the factory to see the craftsmanship firsthand. When former president Bill Clinton--said to own more than a dozen Shinola watches--dropped by, he propped it up as a homespun model for the rest of the country: "We need more American success stories like Shinola in Detroit," he said.
At the time, General Electric was facing its own dwindling American manufacturing footprint. Once the face of America manufacturing, the $275 billion company had been offshoring most of its production for decades. In recent years, it had shuttered its last major domestic light bulb factory. CEO Jeff Immelt wanted to start bringing some of that manufacturing muscle back home. So when Jonathan Bostock, at the time GE's general manager of trademark and partnerships, walked the Shinola factory floor with Kartsotis, he smelled opportunity. "A lot of us were impressed," he says. "You had an individual who founded a large watch company reliant on Asian manufacturing prove that he could make these products in the U.S." Bostock figured GE could help train Shinola's workers in more technically complex manufacturing, in exchange for some of the upstart's marketing juju.
Now Shinola and the megacorporation have paired up to birth a brand partnership that can exploit the storied pasts of both, even if one of those pasts is just recently minted. The new co-branded effort will soon sell everything from that chic power strip to a $395 clock with a vintage industrial design reminiscent of the GE clocks that used to populate American factories and classrooms in the 1950s. "Deciding to do this with Shinola ties into our heritage," says Bostock, without irony.
This is just the latest postmodern layer Kartsotis has baked into Shinola, which is no longer an experiment in manufacturing authenticity, but a fast-growing business. "The coolest brand in America"--as recently ordained by Adweek--can now be found in boutiques from Paris to Singapore. Shinola retail stores have surfaced in more than a dozen cities; plans are to almost triple that by late 2017. The brand isn't slowing down for anyone--not even the Federal Trade Commission. In November, the government agency went after Shinola's "Built in Detroit" tagline, accusing the company of embellishing its made-in-America claims. But Shinola isn't bothered by such criticism. "We believe that 'Built in Detroit' accurately reflects what we are doing here," the company, which had sales of more than $100 million last year, told the Detroit Free Press.
Kartsotis has spent his career finding creative ways to boost the value of ordinary products. Born to a Greek American family, he dropped out of Texas A&M, discovering his entrepreneurial flair as a ticket scalper. In his early 20s, he ventured to Asia with a plan to import cheap toys, until he was tipped off that the market for moderately priced Asian-made watches was growing. With $200,000 that he'd earned scalping, Kartsotis opened Overseas Products International, an importer of watches from Hong Kong. But it wasn't until Kartsotis came across Life and Look magazines from the 1950s that Overseas morphed into the brand called Fossil. Kartsotis and Fossil head designer Lynne Stafford (whom he later married) reimagined the watches, channeling the magazines' vintage look, and packaged them in tin boxes. Three decades later, the company--run by Kartsotis's brother, Kosta--does $3.2 billion in sales annually."If we were just making watches, we'd be very profitable, but we're diseased gamblers."Tom Kartsotis, founder of Shinola, the Detroit-based luxury lifestyle brand that's going global
With Shinola, Kartsotis has performed a near magical marketing act--creating an artificial heritage brand by co-opting others' rich American histories. He won't reveal the secrets of his particular style of marketing theater, but he leaves enough breadcrumbs to piece it together. If the Shinola name feels vintage, that's because it is. In 2010, his outfit reportedly spent some $1 million to buy the name of the long-defunct American shoe polish remembered today for being part of a World War II-era insult--"You don't know shit from Shinola"--and reanimated it with a new narrative. Shinola's products are designed and packaged with an American midcentury look, evoking nostalgia for a bygone era of quality and integrity. Most important, by hatching the brand in Detroit--a city emblematic of American hardship, resilience, and craftsmanship--the brand is selling more than watches; it's selling a comeback. Every time customers in Neiman Marcus or Saks purchase one of the brand's $850 watches or $300 leather iPad cases, they too can feel like they're doing their part in Detroit's fight for survival.
In Shinola, Kartsotis has managed to engineer a brand that feels authentic despite being largely contrived. How he's done that is a study in new-age marketing: a new brand that pretends to be an old brand, built on the promise that it's made in scrappy Detroit by a near-billionaire from a suburb of Dallas.
For a master storyteller, the one story Kartsotis is oddly reluctant to tell is his own. The 56-year-old has spent most of his career out of the public's gaze, generally deriding anything that casts attention on him as a member of what he calls "the rubber-chicken circuit." During his decades at Fossil, he did only one interview with the press. When Shinola won an Accessories Council award in 2014, he sent two factory workers up to the podium. Kartsotis emits a charming Texas cool--he plays poker with celeb stoners Willie Nelson and Woody Harrelson--yet he is one of the most angsty subjects I've ever interviewed. At times, it's hard to tell if his aversion to the spotlight is the behavior of a humble founder or a hyper-controlling CEO.
Over the course of my reporting, Kartsotis and I met up in three different states, where he'd breezily riff for hours. Our chats spanned the White Stripes' Jack White--he helped bring the rocker's Nashville record shop to Detroit--to Filson, a 119-year-old hunter and fisherman's clothing brand he bought to rehab in 2012. Yet virtually every conversation seemed to end up devolving into a brief therapy session, with Kartsotis backpedaling. "What percentage of this story will be about me?" he'd nervously demand to know, begging me not to include him in the article. After months of negotiating a photo shoot, he bellowed, "If I don't like this story and I agree to be photographed, it will be the worst scenario." What scenario is that, I asked him? "A nuclear winter," he warned. When he finally did show up at the shoot, he barked that he'd give the photographer only 30 seconds to take one shot of him--for which he awkwardly high-fived a Shinola factory worker.
In late 2010, Kartsotis was feeling a bit more unfettered. Right before New Year's Eve, he packed his family into an RV and drove to a destination a half-hour south of the Grand Canyon. Bedrock City, in Williams, Arizona, was a dilapidated Flintstones theme park built in the 1970s, a kitschy real-world version of the cartoon's hometown. Ever since Kartsotis was a kid, he has had a fascination with the prehistoric series. He named Fossil as an homage to it, along with Bedrock Manufacturing, the venture-investment firm he started in 2003. At one point, Kartsotis had even gamed his online persona: If you Googled his name, the only photo that would appear was a cartoon headshot of Fred Flintstone.
Standing amid the fiberglass replicas of Fred and Wilma, he began to ponder his next act. It had been a year since Kartsotis stepped down as chairman of Fossil. He had taken the company public in 1993, and with more than 1,000 percent revenue growth (adjusted for inflation) after almost two decades, Fossil had become a Wall Street darling. But the pressures of running a public company left Kartsotis feeling creatively stifled. On the side, he had been running Bedrock, a firm that would go on to invest in high-end hipster fashion brands like Steven Alan and accessories designer Clare Vivier, along with one-offs, like animation studio Reel FX. But it was the first time in his adult life he wasn't actually building something. He was itching to take a risk.
Viewing the desert scrub, Kartsotis contemplated buying the dust-coated park, turning it into a model for sustainable living, and using any proceeds to support nearby Native American communities. But as he and his family were packing up to leave, a friend who had caravanned with them made what seemed like an outlandish proposal: "If you want to do something to help," he said, "you should go to Detroit."
After spending most of his career slingshotting between Texas and Asia, Kartsotis had set foot in Detroit only a handful of times. Having mastered manufacturing halfway around the world, he had, at moments, considered establishing a watch factory on U.S. soil. "I talked about it, but never got cracking on it," he says. Detroit, once America's manufacturing mecca, was now a shell-shocked hull of its former glory days, and certainly an intriguing backdrop. Within weeks of his New Year's desert visit, Kartsotis decided not to pursue the crumbling theme park, but to take the Rust Belt plunge instead.
Kartsotis's introduction to Detroit was hardly grassroots. On his first exploratory visit, he was escorted by his buddy and Michigan native Don Nelson, the legendary former NBA coach. It didn't take long for Kartsotis to connect with Dan Gilbert, the Quicken Loans co-founder and majority owner of the Cleveland Cavaliers, who has pumped more than $2 billion into revitalizing some 80 properties in downtown Detroit. Kartsotis made quite an impression on Gilbert, who eventually became a Bedrock investor. "Here's this Texas entrepreneur and a wealthy guy saying he's coming to Detroit to build a manufacturing plant and 'I don't need subsidies from anyone.' You remember a meeting like that," says Gilbert.
At first, Kartsotis planned on building a 100-person factory in Detroit that would produce timepieces for brands like Tiffany and Movado, much as he'd done at Fossil. "This was half about creating jobs and the rest, pure sport," he says. "I wanted to see if we could do it. I don't need more money."Every time customers purchase an $850 Shinola watch, they too can feel they're doing their part in Detroit's fight for survival.
But Kartsotis quickly tuned into something a less savvy marketer might not recognize: Detroit's rising power as a brand. Why be a behind-the-scenes manufacturer for other companies when the real money was in launching a brand with built-in purpose? Resurrecting America's watch industry--which hadn't existed for half a century--in a city that was long ago left for dead was an irresistible marketing proposition. Detroit's manufacturing legacy could provide Shinola with talent, and an instant backstory. Tim Calkins, marketing professor at Northwestern University's Kellogg School of Management, lauds Kartsotis's counterintuitive instinct. "You can't go to New York City or San Francisco and expect to build a unique brand--there are so many of them," he says. "That's why Detroit is so compelling. Detroit is not an aspirational city." James Gilmore, co-author of Authenticity: What Consumers Really Want, says Kartsotis is helping pioneer what he describes as Made in America 2.0. "In an increasingly fake world, there is a longing for something real," Gilmore says. But the public can easily sniff out an imposter, he says, so if a brand is going to make the claim, it had better do so artfully. "Nothing raises suspicion about authenticity more than self-proclaiming it," says Gilmore. "What Shinola does wonderfully is they say they are authentic, but only through other cues."
Constructing a brand that gives the appearance of a small-batch operation requires sophisticated global orchestration. Kartsotis tapped a number of his former Fossil execs to run the business. One of them commissioned a focus group to see if consumers would pay $10 for a pen made in the U.S. and $15 for a pen made in Detroit. The study confirmed what they suspected: People were willing to pay the Detroit-made premium. Kartsotis purchased the Shinola shoe polish name and recruited creative talent from global luxury houses, including Gucci and Louis Vuitton. He enlisted Partners & Spade, the New York City branding firm that made its name injecting its own heritage formula into mass retail brand J. Crew. To kickstart the actual watchmaking, Shinola partnered with Ronda AG, a Swiss maker of watch movements, and Taiwan-based dial manufacturer BAT Ltd. Both foreign companies provided components and trained Shinola's workers. By March 2013, Shinola watches were already at Baselworld, the annual luxury watch-a-palooza in Switzerland.
Virtually everything about Detroit--the locals, the factory, its workers--would become a prop in service of the Shinola brand. The factory space Kartsotis chose came with its own insta-heritage of ingenuity: The Argonaut was the former site of General Motors' famed research lab, where the first automatic transmission and heart-lung machine were created. Shinola's factory employees, many of whom had worked for the Big Three automakers, would end up gracing the luxury brand's slick marketing materials, their hardscrabble stories and subsequent comebacks casting the company as one of their town's saviors. Customers at the Detroit flagship store could enjoy artisanal entertainment, watching dial makers through plated glass. Its retail stores would be accented with products from "real" Detroit designers, as if they were craftsman from some remote village. Kartsotis poured millions into a marketing campaign shot by famed fashion photographer Bruce Weber, starring leggy supermodel Carolyn Murphy posing with Detroit locals. One Shinola marketing video featured just two young African American girls rapping on a Detroit sidewalk, with some preroll of Shinola's logo.
Perhaps most audacious, though, was using Detroit's economic peril as an opportunity to amplify Shinola's message. In 2013, when Detroit announced its bankruptcy, Shinola practically became the voice of the city by running a full-page ad in The New York Times. "To those who've written off Detroit, we give you the Birdy," it declared.
"The Birdy," the ad winked, was also the name of a $500 Shinola watch.
On a summer day in June, Kartsotis shows up at Shinola's factory in jeans and work boots dishing out high-fives. Lately, he's been spending so much time in Detroit, he bought a house here, joining the four Bedrock executives who have moved from Plano in the past two years. "Here the executives will eat with you and conversate," says Krystal Bibb, a 32-year-old Detroiter who was laid off from a Ford plant where she says she hardly ever spoke with managers. She was first hired by Shinola as a part-time night janitor, then worked her way up to quality supervisor in the watch factory, where employees make between $11.50 and $14 an hour, well above Michigan's $8.50 minimum wage. "I never thought I'd be doing anything other than cleaning sinks," she says. "I never thought I'd be a supervisor anywhere."
Kartsotis claims people like Bibb are his primary motivation for growing the brand. As he puts it, wrapped up in his plan to sell Shinola's "affordable luxury" products is actually a sophisticated strategy for job creation. He brings in outside partners, like Ronda (and potentially GE), to train his U.S. workers in complex manufacturing skills that were long ago offshored. He says the more the company grows, the more new job posts he'll have to fill, the more skills training he'll provide, and the more supply chains he can help reshore. "The competition came here and took our manufacturing overseas," Kartsotis says. "Fifty years later, I'm trying to get it back and use their experts to build our factories."
But what Kartsotis has also built is an authenticity machine that propels the company's growth: More factory success stories lead to better marketing, which leads to selling more products, which leads to hiring more workers. Which is why, Kartsotis says, watches are just the beginning. Last year, he raised $125 million from a cadre of investors, including Detroit's Gilbert and venture capitalist Ted Leonsis, to fuel Shinola's next chapter of growth. Along with the watches and leather goods it already produces, the company will soon be manufacturing everything from the GE power strips and electronics to eyewear and homeware. (Some of the products being considered are purely marketing exercises, like a boutique Shinola Hotel in downtown Detroit that will have a "rooftop vinyl listening room" with Shinola-branded turntables.)
Right now, Shinola is losing money. Kartsotis says that's on purpose; building a massive lifestyle brand is expensive. "If we were just making watches, we'd be very profitable, but we're diseased gamblers," says Kartsotis, who has put about $100 million of his own cash into the company. "We are losing millions right now, and I'm OK with that." He hopes to raise another round of capital within the next year, and to take Shinola's parent company, Bedrock Manufacturing, public within the next five years. "I've never seen a brand that has this potential in multiple product categories, in multiple geographic regions," he explains of his ambition. He's well aware that the halo of American-made has even more cachet and financial opportunity overseas than it does in the U.S. "As a private enterprise," he says, "I wouldn't be able to achieve all that without access to the markets."
But as Kartsotis steamrolls into categories well beyond his core competency, there's always the danger Shinola is moving too quickly, in too many directions. This fall, it will debut its next big product line--audio, including high-end headphones, which will eventually be manufactured in a 1915 creamery in Detroit. "I think audio can be in excess of a $25 million business its first 16 months out," Kartsotis says, inspired, in part, by the market Beats cracked open. However, he also knows there's risk, especially when dealing in his brand's particular high-wire act. "I might bite off more than I can chew, create categories that aren't authentic, and damage the brand by doing something stupid," he says. "I could still fuck it up."
Lately, Kartsotis has been looking beyond Detroit, visiting other forgotten cities across the country that Shinola might colonize next. He's considering planting its eyewear factory on the South Side of Chicago and a new leather goods factory in the Bronx. To pick locales, Kartsotis says, he goes by his gut and by how gutted the cities are. "I could've gone to Utah," he says of the new eyewear factory. "But they don't have the kind of unemployment that Chicago does." As Kartsotis has discovered, a city's struggle is his greatest asset. Chicago's South Side could soon provide Shinola with more workers, a different narrative arc--and a whole new fount of marketing possibilities.
Brands have been borrowing geographies--and the stories that come with them--for decades.
While living in Germany in 1897, Wilhelm Hasse had one dream: to become a Mexican brewing legend. Three years and 7,000 miles later, he introduced Dos Equis Ambar to the world. Today, it's a Cinco de Mayo staple, despite being a Vienna-style lager.
The hair care brand oozes France, but it's actually been manufactured in St. Louis since its founding in 1947. It's named after former hair care industry spokeswoman Edna L. Emme. The French pronunciation of Tresemmé translates to "very loved."
This 55-year-old ice cream brand does not actually hail from Scandinavia, but rather from the Bronx. Its founder, Reuben Mattus, made up the Danish-sounding name because it conveyed an "aura of the old-world traditions and craftsmanship"--and Denmark, he said, was "the only country that saved the Jews during WWII."
Despite ads featuring men competing in Celtic warrior games, the Irish Spring brand has no actual ties to Ireland. Launched in Germany in 1970, the soap was originally released in only one scent, dubbed within the company as "Ulster Fragrance," after the Emerald Isle's northernmost province. -- Abigail Baron