The watercoolers in Westport, Conn., must dispense Kool-Aid laced with Red Bull. That seems like the only logical explanation for the boundless energy and unbridled enthusiasm that permeate every fiber of every person who works at Mitchells.
This story first appeared in the July 21, 2008 issue of WWD. Subscribe Today.
That same joie de business has transferred over to the other two stores in the company stable—Richards of Greenwich and Marshs of Huntington, N.Y.—and led to the company’s unparalleled success, something along the lines of $100 million in annual sales.
Mitchells’ enviable position at the forefront of specialty retailing in the U.S. is a far cry from its humble beginnings 50 years ago. It was in 1958 that a case of ulcers prompted patriarch Ed Mitchell to ditch the corporate rat race and open a men’s apparel store. The original idea was to relocate to Florida, since it was less hectic than Connecticut and would make for better quality of life.
However, just before the family packed up and made the big drive down south on I-95, Ed’s wife, Norma, suggested he consider opening the store in Westport, where the family had deep roots and which lacked any true men’s wear retailer.
Ed acquiesced and soon signed a lease for an 800-square-foot space in what had been the display area of the Dickson Plumbing & Heating building on Post Road and North Compo. And so with little fanfare, Ed Mitchell opened its doors.
“When the store opened, there were a few dozen shirts, some socks, a couple of sweaters and a few ties,” Ed’s son Jack, chairman and CEO, wrote in his book, “Hug Your Customers: The Proven Way to Personalize Sales and Achieve Astounding Results.” “Plus exactly three Doncaster suits, the brand Dad created for the store, priced at $65 a piece. A size 40 banker’s stripe, a 43 navy blue and a 42 charcoal gray.”
That may be hard to believe given the Armani, Zegna and Brioni suits and Valentino gowns that now don the marble floors of the tony retailer. But while the assortment may have changed dramatically, the hallmarks of the business remain the same: superior customer service and a family entrepreneurial spirit that connect as well with customers today as they did a half-century ago.
“Nothing has changed but the scale of the business,” says co-president Russ Mitchell, Ed’s grandson, Jack’s son and the third generation to helm the store. “We win or lose on whether the local people like shopping here. We provide the same experience as my grandfather did—people liked and trusted him. They come here, by and large, because they like the experience.”
“We’re honored by the legacy,” adds his brother Bob Mitchell, the other co-president and another of Jack’s sons. “The foundation of a business is the hardest part to build. But that’s what gave us the platform to grow as much as we have. We recognize, acknowledge and appreciate that legacy from a business, community and family perspective, but we also realize the energy and ideas that have been enhanced by the addition of the third generation.”
In the beginning, Norma handled the books and Ed served as salesman, buyer and janitor; Ed’s mother, Gertrude, was the tailor and seamstress. Calling his father the “original hugger,” Jack wrote: “The coffee pot was always on—still is. I guess the place was about as homey as you could get.” It did $50,000 in volume its first year.
Ed’s son and Jack’s brother Bill, currently vice-chairman, was the first family member to join the business in 1965, followed by Jack in 1969, the same year the store expanded into women’s wear. In 1979, after a series of expansions, Ed Mitchell moved to its current space at 670 Post Road East, which today is 33,000 square feet.
To reflect its growth, the company changed its corporate name in 1993 to Mitchells. Two years later it expanded its reach by acquiring competitor Richards, in Greenwich, Conn. Marshs was added in 2005.
In 1972, Ed passed the baton to Bill and Jack, and now all seven of their sons are active in the business. Tyler Mitchell, Bill’s youngest son and the last remaining member of the third generation to join the business, came on board last year as vice president and men’s furnishings buyer. One of the rules of the company is that each family member must work outside of the Mitchells/Richards/Marshs juggernaut for at least five years before becoming part of the team. “They weren’t entitled to a job just because their name was Mitchell,” Jack has said.
The first to join was Russ in 1990. After spending five years in sales at IBM, he came into the business as CFO to handle the financial end. Bob joined the next year as vice-president of merchandising after working at Malouf’s in Lubbock, Texas; Norton Ditto in Houston; J. Schoeneman; and Sports Illustrated.
In 1994, Jack’s son Todd joined the firm from Apple to help Russ with the administrative duties at the new store. Scott, Bill’s son, came on board in 1998 after stints with Abercrombie & Fitch, Eddie Bauer and Ann Taylor to manage the women’s business in Greenwich.
Andrew, Todd’s twin, joined in 1999 after working in marketing for Godiva Chocolatier to take over the marketing and advertising for the stores. Bill’s son Chris joined in 2003 and now manages Marshs.
“It’s the great natural cycle of the business,” says Bob.
In the years since Bob and Russ have been with the company, the growth has been substantial. “Mitchells has grown tenfold since we joined,” Russ says. “We’ve experienced rapid growth while we’ve been here. The company that exists today has been enormously influenced by this generation.”
Although the growth has been exponential, he stresses that it has also been “very measured. We’ve never had a down revenue year since we joined.”
On the merchandising end, the “new set of eyes on the merchandising” has been instrumental in the growth of the luxury end of the business. Significantly expanding women’s wear at Mitchells in 1993 also changed the complexion of the store, as did the addition of Richards. “These were all calculated moves,” Russ said.
It also helps that the Mitchells have been blessed by calling Westport home. According to Westportct.gov, it has a total population of just under 26,000 with a median household income of nearly $120,000 and a median family income (defined as two or more people living together) of nearly $153,000 a year.
“In the nearly 20 years we’ve been here,” says Russ, “Westport has about the same number of people. There’s been no net population gain, so we have to do more business with the same people.”
In the early days, Mitchells’ business centered on the sale of primarily dark suits. “It was the traditional body covering for men,” says Russ. “Now our scope is much wider.”
Bob adds: “We’re getting more of their closet share by selling women’s, jewelry, shoes, etc. If you look at the number of suits we sell today, it’s probably less than it was 20 years ago, but we’re doing a better job selling other things.”
In fact, those words are indicative of the growth strategy employed at the company. “We’re not immune to competition,” says Russ, pointing to Barneys, Saks, Neiman Marcus and other luxury retailers who operate stores within their trading areas. But that hasn’t pushed the Mitchell family to make any rash decisions on the expansion front.
“The national first reaction of retailers is to add more units and more growth,” says Bob. “But we think our best opportunity is to grow in our existing stores.” Russ adds: “There are still a lot of potential customers in our communities. We’re not getting the complete share of closet.”
Beyond that, the primary opportunities, they say, are the continued expansion of the women’s business—which recently surpassed men’s in terms of sales at the stores, about 55 percent to 45 percent—as well as jewelry and “a broadening of price points” that will involve more opening-price-point merchandise.
Until the economy improves, Mitchells will invest in renovating its existing units and enhancing its partnerships with its vendors “to position us to grow when the economy starts humming again,” according to Bob.
“And we’ve got to perfect the experience,” Russ says. “We want to be around for the next 50 years. The retail environment is littered with people who expanded too fast. We believe in growth through better execution.”
Bob agrees: “That’s our competitive advantage—being close to the customer.” Russ said that because the company owns its own real estate, which is “also an enormous competitive advantage.”
That’s not to say the Mitchells are not always looking for other potential additions to the stable. “If you project 10 years out,” Bob says, “there will be more units, but it’ll be measured.”
In fact, with the environment as tough as it has been lately, retail competitors approach the family all the time about selling to the Mitchells, the co-presidents acknowledge. “But we have to make sure the potential of the market is big enough to throw our brainpower and resources at it,” Bob says. “It has to have the potential for at least $10 million in sales.”
In addition to its three stores, Mitchells has a deal with Vineyard Vines, another family-owned Connecticut company, to operate several units around the country, including one up the block from Richards on Greenwich Avenue. The Mitchells operate four more Vineyard Vines stores: Westport; Ocean Reef in Key Largo, Fla.; Edgartown, Mass.; and Georgetown, Washington, D.C.
“We want to grow and not set ceilings,” Bob says. “We have to figure out how to do more and do better. We know we’ll never get comfortable and coast. In fact, this is the time to take market share from people.
Because of Russell’s organizational and financial skills, we’re better positioned for the future.”
Russ shrugs off the compliment, pointing to his brother’s skills in merchandising as key to the company’s recent success.
This yin and yang between the two stems from a lifetime of brotherhood. Born two years apart, they went to the same high school and college, played sports together and were in the same fraternity. “We both respect and acknowledge each other’s strengths,” Bob says. “With us, one plus one equals five.”
Russ notes: “It’s very rare that we don’t know how the other one will answer a question. We normally agree, which is good, because if you have two people running a company who don’t agree, it wouldn’t work.”
One of the amazing things about the Mitchells operation, however, is that even when they’re not family members, the people who work there are of the same mindset. A visitor can talk to anyone from top sales associates, such as Richards’ Frank Gallagi or John Hickey, to Mitchells’ 49-year-veteran and oldest employee, tailor Dominick Condoleo, and the message is the same.
“They’re the people who touch the customer,” Russ says of the staff, a group that is at the center of Jack’s latest book, “Hug Your People”. “We believe the interaction with the customer is the essence of what we’re about. It’s all based on us empowering them.”
Bob adds: “The really important thing in our culture is that we’re a principles-based company. We have only one rule: If you steal, you’re fired and prosecuted. But beyond that, we believe in the flexibility of scheduling and treating everybody like family. We try to create a flat organization so that people feel included. There’s no bureaucracy here.”
Russ notes: “There’s no pre-set model, but if you’re not passionate and enthusiastic about the business, you won’t last.” “Positive energy produces positive results,” his brother says.
John Hickey, now the store’s top men’s wear salesman, has been with Richards since 1978; in fact, his father had worked for former owner Ed Schachter. It was at Richards that he learned “how to treat the customers and make them feel like they’re in our home. We’ve been hugging our customers forever. So many clients are really good friends. When they come in, they say they’re going to see John. [That closeness] is the one thing that separates us from everybody else.”
When the Mitchells bought the business, Hickey said he was apprehensive, but “they were smart enough to embellish it, not change it. All of them are so respectful and appreciative of what we do. They coach us and it keeps us going. It’s been such a home run.”
Frank Gallagi, another super-salesman at Richards, feels the same way. A 43-year Richards veteran, Gallagi says the acquisition “worked out to be the best thing. They’re phenomenal, wonderful people. We work ‘with’ them, not ‘for’ them. They’re very family-oriented and they want you to take time to be with your family. It’s not all business.”
Dominick Condoleo, who manages Mitchells’ tailor shop, says: “They have a very unique formula that makes people want to do things. Nobody forces you, but they empower you, and with empowerment comes responsibility.”
With employees like these, it’s no wonder Mitchells has managed to survive and prosper. It was also the reason the business was chosen as one of the featured companies in a one-hour documentary that will be aired on PBS in New York this fall. Based on a book titled “Leading With Kindness” by Bill Baker, the film profiles five firms deemed great to work for because of their culture, explains Gino Del Guercio, producer. In addition to Mitchells, by far the smallest, the others are Pitney Bowes, Google, the Juilliard School of Music and Eileen Fisher.
The Mitchells segment tells the company’s story from the perspective of its owners and employees. “They’re going to be one of the best profiles,” Del Guercio says, “because of the passion you find in the people who work there. They really care about everyone. They’re so warm and welcoming. It’s so easy to be jaded, but what they’re doing makes sense— business sense.”
But maintaining a family business through a number of generations also takes a certain skill set. In the case of the Mitchells, it was Ed who set the precedent by transferring equity to Jack and Bill in 1972. Although Ed remained a part of the business until his death, it was his sons who ran it. Jack and Bill did the same thing after their children came into the fold. According to a case study by Amy Edmondson and John Davis of the Harvard Business School, “In 1991, Bill and Jack gifted 75 percent of the business to their seven sons. In 2006, they would pass the remainder of their ownership to their sons. Jack’s four sons would then each own 12.5 percent (up from the 9.4 percent they owned previously) of the business and Bill’s three sons will each own 16.7 percent (up from the 12.5 percent they owned previously).”
Although Bill and Jack no longer have a stake in the business, they’re both still active. In fact, Jack is a fixture on the sales floor on Saturdays with his tape measure draped around his neck, while Bill is a familiar sight on the charity circuit, cementing the company’s standing within the community.
Bill notes: “Jack and I turned over the reins to the kids and we feel good about it. But the kids don’t want us to go away. They still ask our advice and that feels great.” Jack adds: “What I’ve picked up over the years is that [sometimes in a family business] the older ones meddle. I look at it as checking in, not checking up. We desire the business to go forward, so we’re responsible for passing on the principles. Dad was a great role model. He passed the mantle and we kept him informed. [Bill and I] may not own any of the business anymore, but we still feel like owners.” His brother jokes: “My kids say: ‘You own no stock and no real estate. So it’s just day-to-day.’”
Bob and Russ say they welcome the continued involvement of the two older men. “We want them to be active and play a role,” Bob says. “They don’t meddle or second-guess.”
That’s key to the seamless transfer of power and is one reason the Mitchells have managed to avoid the pitfalls that often demolish other long-standing family businesses.
To help it negotiate any potential problems, the company belongs to two industry organizations: The Forum Group and the International Menswear Group.
The Forum Group, which includes about a dozen of the country’s top specialty retailers, started in 1940 when a group of men’s wear retailers got together on the train from Chicago to the New York market to sip bourbon, play cards and indulge in a little shoptalk. Although the store names have changed, the group still meets for several days twice a year to discuss tough issues and lay bare the most intimate information about their retail operations— everything from gross margins and occupancy costs to personnel and personal salaries. For this elite fraternity, only one subject is off-limits: the deals they negotiate with their vendors.
The makeup of the IMG is very similar. Also about a dozen stores strong, this group boasts the finest family-owned men’s and women’s apparel stores in the world. It was founded in 1958 by legendary European retailer JBWA Giesbers of the Netherlands, who established a small core of the top men’s wear retailers in Europe that has expanded to a dozen countries around the world, including Australia, Canada and the U.S.
“In addition to merchandising ideas, we share financial information, cash flow and profitability figures,” Jack explains. “The only thing we don’t share is the relationships we have with our vendors. And although we sign a confidentiality agreement, there is a spirit of openness and not one of competitiveness. That’s why there’s only one retailer per country in the group.” It also helps that the Mitchells employ an outside consultant to head off any potential problems.
According to the Harvard case study: “[Bill and Jack] engaged a family business consultant [in 1985] to help them create forums for family discussions and maintain effective communication among family members. Bob refl ected on the complications of family communication in business: ‘Feedback is not something you’re used to getting and giving as a family, but constructive feedback, when you get used to it, enhances the business and the family. The two keys [to healthy family companies] are communication and empowering the next generation. We have to continue to do that.’”
Add to that the guidelines that Jack and Bill set into place to “safeguard the professional management standards of the business,” according to the case study, and it becomes clearer how this unique situation works. Those guidelines include the rule that each family member must work somewhere else for at least five years in a job that matches his “skill set, expertise and experience.”
Weekly meetings are also held every Tuesday morning and there’s a family council that includes everyone over the age of 14. This group, which includes spouses and children, gathers three to four times a year to discuss the “state of the store” and encourage bonding. “So many family stores come apart when the family comes apart,” Bob says.
Additionally, an advisory board was created in lieu of a board of directors, the case study notes, and it has met quarterly since 1989. Its outside members, which include executives from various industries, “sound out strategic business decisions and impart a sense of business discipline to the organization,” the study says.
“It includes all active Mitchells and four outside people,” Bob says. “It forces some discipline. We have over 300 people working here, so we take it very seriously. We’re not just doing this because it’s fun to sell clothes.”
In an interview, John Davis, faculty chair of the Families in Business program at Harvard Business School, says he chose the Mitchells to use in his course materials because they are a “very good illustration of the things a family can do right to keep their business going.”
So many family businesses can “manage through the first two generations very well,” but after that, it can get a bit dicey. “In any business, long-term success depends on having a culture and employees who buy into the principles and practices, and hold themselves to very high standards,” Davis says. “The seed is implanted by the family, but as they get bigger, you hope that the values and principles can be maintained.”
However, he raises the question of whether the Mitchells can continue to maintain the momentum as more and more family members come on board and the corporation grows. “The interesting question is: How long can it be sustained?” Davis says. “What is the trajectory of the business? Do they look into different markets or keep the business sized just for the family? That’s for them to decide as is what the ownership should be in the future. Should everyone stay involved? Those are the questions the family has to answer.”