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Self-Determined

Bud Konheim's philosophy of doing things his own way helps Nicole Miller Ltd. thrive.

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Every day is Independence Day for Bud Konheim.

The outspoken co-founder and chief executive officer of Nicole Miller Ltd. has stuck to the plan that he and designer Nicole Miller came up with 25 years ago when they started their firm: They did it their way — taking risks and rarely conforming to the conventional wisdom or norms of Seventh Avenue.

Konheim and Miller had worked together for seven years at dress firm P.J. Walsh — he was in sales and she was the designer — before they decided to go into business together.

Since 1982, they have frequently gone against the grain, mostly led by Konheim’s often unorthodox way of running the firm, opening their own stores at a time when few designers were doing so, and refusing to play along with the markdown and chargeback mania that struck department stores during the Nineties.

“When I think about the last 25 years, it’s not about how big we’ve become. It’s whether there’s anything the industry can learn about what we’ve done,” said Konheim, who has spent his entire 50-year career in the apparel industry. “For instance, people have asked me over the years how we get away with not giving chargebacks. It goes back to the basic philosophy between Nicole and myself. I told her from Day One that we’re going to run a business that’s totally independent and rests on your ability to design clothes. I told her, ‘You design for yourself and we’ll find enough people in the United States that share your aesthetic and your idea of clothes, and we’ll make a business out of it.'”

Konheim said he told Miller it would be his job, “no matter how small or big we become,” to make the business profitable.

In order to make a profit, Konheim has relied mostly on his instinct as a fourth-generation clothing entrepreneur, what he calls Miller’s “incredible antenna” not just for figuring out and designing the next hot trend, but also turning something she simply found interesting into a viable commercial product, and, admittedly, “a little bit of luck.”

Interviewed in his offices at 525 Seventh Avenue, which are filled with family photos, magazines and assorted mementos, he reflected on the first style that was a hit for spring 1982: a hip-smock dress. Everybody said that no woman was going to wear smocking at the hip because it’s not flattering, but when the model put it on, it looked sexy in a dignified way, Konheim said.

This story first appeared in the January 31, 2007 issue of WWD.  Subscribe Today.

“We managed to get a cutting — 300 pieces — sold,” he recalled. “The end of the story is that we sold over half a million of the dresses. Jane Pauley was wearing it on the ‘Today Show.’ The dress was copied by everybody; it ran for 10 years. It was unbelievable. The point is that it was very risky to make the dress when everybody said don’t do it. It was the first independent thing that we did together and it rested totally on Nicole’s ability to design a new idea.”

Another example Konheim gave of why his partnership with Miller has endured came in 1986. Miller decided that the popular long dress lengths had seen their run and she designed what Konheim called a “cheek-high” mini. The stores balked at it and the company went from 1,500 accounts down to 50.

“That was the closest we ever came to being in serious danger of going out of business,” Konheim said.

Among the 50 accounts, Tootsie’s in Houston, Gazebo in Dallas and the Nicole Miller store in Manhattan were checking the short dress.

“We went down to almost $8 million in volume that year,” he said. “We would stay until 9 o’clock at night to call the West Coast to sell two pieces. The whole company was committed to staying alive. Then, one night, buyers from Neiman Marcus walked in — I can remember it like it was yesterday, Neeva Hall was the merchandise manager, Becky Sharp was her boss and Terry Ozer was the buyer. I asked them what they were doing here because I wasn’t selling Neiman’s at the time — Allen Questrom was the president and he had charged me back for a freight allowance, so I told him, ‘Sorry, that’s your overhead and we can’t do business.’

“They said they wanted to buy the dress because at a cocktail party in Dallas, everybody was wearing that dress that they had bought at Gazebo. They ended up ordering 1,000 pieces at a time. All of a sudden, we were the kings and queens of the little black dress.”

Then there’s the luck: Miller had made a dress out of a theater ticket print that bombed, so she suggested making scarves out of the fabric. Konheim thought of making ties out of it as well, since he had never made anything for himself. So, they had about 60 ties made, Konheim took one for himself and the rest were sent to the Madison Avenue store. A security guard at the store also worked at the Metropolitan Opera gift shop. He brought a tie to the gift shop manager because one of the tickets in the print was for the Met. She bought the ties from the store, put them out for $90 and sold them out in three days. She wanted to reorder them and had a difficult time doing so, but finally reached Konheim and bought 300 ties for the gift shop.

That led to other “conversational” prints, including the popular “stuff that’s at the bottom of your purse” theme. These were made into scarves and men’s ties to be sold at women’s stores as gifts. Selma Weiser, founder of the now-defunct Charivari, a hip apparel retailer, put them in her store, which led to Barneys New York, Saks Fifth Avenue and Bloomingdale’s buying them without solicitation.

“Within a year and a half, we had a $12.5 million tie business,” said the dapper executive, who often sports the print ties. “It was lucky, but you also have to give luck a chance to happen by being open and creative. Everybody in the company is encouraged to be creative, from the production manager to the head of sales. Everybody here goes beyond their main function.”

As for the aversion to markdowns and chargebacks, Konheim said, “Someone once asked me how we get away with it and I said, ‘Just say no.’ It doesn’t make sense because the money has to come from somewhere, so if you raise the prices in order to pay back, you’re encouraging the markdown. It’s a silly game and I refuse to play it. That’s why we couldn’t do business with May Co., which was risky, but we were successful without them and I didn’t have to give in to something I knew wasn’t right. Unless you sell the clothes, all the guarantees are worthless.”

One area in which Konheim has struggled to find the right balance is in product and store licensing. The firm’s first license was in signature stores, the first opening in Mexico City in 1991. It was the second unit after the company-owned Madison Avenue shop.

“We ended up with about 30 stores in the U.S.,” Konheim said. The company currently operates 17 stores worldwide. “Then we got into licensing manufactured products,” including handbags, fragrance, jewelry shoes, bed and bath goods.

Some troubles arose, however.

“The second you let the control out of your own hands, you’re in danger of someone making something that’s ugly and of bad quality and calling it Nicole Miller,” he said. “Then you’re dead.”

Konheim said the key to licensing was finding the right partner and drafting the right licensing documents to protect the brand name, and “making the partner understand that it’s not what the store or the licensee wants, it’s what Nicole designs and thinks the product should be. We’ve lowered the financial bar for our licensees, so that sales minimums are not the main point of the license,” Konheim said. “It’s understanding the aesthetic and then figuring out how to sell it.”

Konheim told WWD a few years back that advertising was “like shouting in a noisy room — it’s very hard to be heard.” He also once thought runway shows were an expensive waste of money and bad for business. He has softened on both issues.

“Nicole and I had a ‘discussion’ from 1982 to 1990 about having a runway show. I said a runway show is an absolute waste of money because you’re being judged by people who have no stake in whether your product sells or not. By 1990, I changed my mind because it became a merchandising tool for us. Nicole had to edit a lot of the line because there’s a limit to what can be shown, and she didn’t put anything on the runway that wasn’t wearable or salable. It let Nicole make her mark and create a signature.”

Konheim also feels that Miller set the pace for using actresses and celebrities on the runway — for free — when in 1996 she had the likes of Gretchen Mol, Jill Hennessy and Minnie Driver on her catwalk augmenting the traditional hot models.

“People didn’t really understand why we did it,” Konheim said. “They thought we did it to save money, which is always a good idea. They didn’t understand that this was the wave of the future.”

As for ad campaigns, he stated, “The desire to advertise comes from something I call status anxiety.”

While he still feels that the best advertising is “people wearing your clothes,” the company has embarked on a new venture. After many years of doing print ads in-house consisting of “nice” product shots, the firm has hired its first ad agency, Paris-based Assouline, which also works with Tag Heuer and Cartier, but primarily publishes high-end coffee-table books, in October.

“After seeing 24 agencies, they showed us three photos that absolutely blew us away,” Konheim said.

Starting next month, a $2 million ad campaign featuring images with a cinematic feel will begin appearing in magazines as two-page spreads and on outdoor venues.

Also new is the company’s revamped Web site (nicolemiller.com), which now features video clips of Nicole working with a crew of young designers, as well as backstage clips.

“The idea is to show that even though we’ve been around 25 years, we’re a young company,” Konheim said. “What you see on the Internet now will seem like kids’ play in five or 10 years, and we’ve got to keep up with that.”

This was an astute observation from a man whose great-grandparents started selling clothes from a pushcart on New York’s Lower East Side in the late 1800s.

“The big thrill was when they actually rented a place indoors, which was risky,” he said. “When things got slow, they would show movies in the alley behind the store.”

Konheim was born in Manhattan in 1935. He graduated from Dartmouth University in 1957 with a business degree and went into his family’s dress manufacturing business.

“At Dartmouth, everybody was interviewing for bank jobs and stock jobs and at giant corporations, and they would come back to the fraternity after their interviews and talk about the retirement plans these companies had,” he recalled. “I used to think to myself, ‘They’re 22 years old. What are they going to do until they retire?’ So I thought then and still think this is the most exciting industry to be in. I can say that in 50 years in the business, I’ve never had an uninteresting day.”

The ceo also says he never intends to retire, although he is an avid golfer, often leaving for long weekends in Florida to play several rounds.

“My golfing friends often ask me why I don’t retire,” he said. “I tell them if you had my office to come to every day with all the young women who make me feel young, you wouldn’t retire, either.”

Konheim has seen the industry change a lot over the years. He remembers a time when people couldn’t walk on the sidewalks of Seventh Avenue because there were so many rolling racks of clothes. But most of all, he said, what has been lost is “spontaneity.”

“The manufacturing and designing were all in one place,” he said. “If an item was hot, you could get it into the stores in a matter of days. Then companies started going offshore to manufacture, and once they did that, things changed dramatically. Now, most of the companies in the Garment Center aren’t even in the [fashion] industry.”

Rattling off a list of names — Bonwit Teller, B. Altman, Franklin Simon, Gimbels, E.J. Korvette and Ohrbach’s — Konheim said he’s seen “a lot of incredible retail businesses disappear in the last 25 years.”

“How does it happen?” he asked rhetorically. “You have management that doesn’t pay attention, doesn’t know what to do. For the sake of being big, you leverage yourself beyond the ability to do business. What it does, however, is open up opportunities for entrepreneurs to come in and offer consumers something they want in a smart way.”

While Konheim and Miller have built their firm into a $82 million company and feel they’ve made their mark, there’s a lesson to be learned.

“The biggest companies in our industry are marginal,” he added. “That’s why you always have to be alert and flexible, because you can lose what you have in a very short time.”

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