Is Shinola’s Americana fairy dust burning less bright?
Store closures, big-name designer posts left empty, reduced advertising efforts and layoffs are hitting the Detroit-based brand, which has built its name on American-assembled heritage goods and analogue watches. Despite these apparent troubles, chief executive officer Tom Lewand says sales are growing by double-digit figures.
Lewand, a former sports executive who joined the firm in 2016, confirmed store closures in Portland, Ore.; Miami and Los Angeles, as well as several pop-up locations, including New York City’s SoHo district. Shinola operates 28 stand-alone stores across the U.S., Canada and the U.K. and sells with third-party stockists including Neiman Marcus and Nordstrom. Soon the company will enter 35 locations of the midmarket Jared jewelry store chain.
“We are like any other company, transitioning from start-up phase to something more mature and scalable and it’s reflective of that. Any smart company in this retail environment is looking at how customers interact with the brand and product, and evaluating how to improve that in the most impactful and sophisticated way possible,” he told WWD last week.
Lewand would not reveal sales figures, but insisted that Shinola’s e-commerce site is experiencing double-digit sales increases and the in-store and wholesale businesses are seeing marked growth against a backdrop of a generally slow time for the retail sector.
“We are up in all three channels this year,” Lewand said, while highlighting the success of Shinola’s first hotel — opened in January — which offered “a huge boost for the brand,” and opportunity for expansion into new categories like blankets and pillows.
Nonetheless, the day following Lewand’s discussion with WWD, Shinola revealed that about 5 percent of its staff had been laid off — affecting some 30 people. The staff reductions, according to sources, follow months of additional layoffs and affect high-earning salaried employees in departments across the company, including production, human resources, accounts payable and design.
Shinola issued a statement about the layoffs: “As Shinola remains committed to delivering the highest-quality products to its customers, the company is taking the necessary steps to refocus its business strategy for future operations. In order to advance this new phase of growth, the company is reducing its workforce by less than 5 percent.…While difficult, this step is critical to enable and scale profitable growth.”
Lewand, speaking with WWD on Monday, reiterated the company’s success. “Any business goes through changes and evolves. To go from building a watch factory in the U.S. to scaling up is clearly hard. Thankfully we’ve had more wins than losses, but by no stretch of the imagination are we perfect. We want to make the best kinds of changes to move into a new phase of growth,” he said, also emphasizing double-digit growth figures, which he declined to specify further.
Sources who spoke with WWD, all former Shinola employees who have departed the brand within the last six months, disagreed with Lewand’s claims. Speaking under condition of anonymity, they remarked on the company’s slowing product launches and declining sales.
Layoffs, according to one former employee, began in late 2018 — when Shinola dismissed its real estate acquisition and build-out team, or those responsible for growing its brick-and-mortar retail operation. A spokesman for Shinola confirmed these layoffs, when “it was decided that we would no longer be opening new storefronts.” From there, “one or two people every couple of weeks” were let go, the source said, while other positions were eliminated when employees departed on their own terms.
In the last year, leading designers who parted ways with Shinola have not been replaced with other leading names. Pamela Love — brought on in a much-publicized consultancy role to steer the brand’s foray into fine jewelry — chose not to renew her contract with Shinola early this year in order to focus on her own label, which had recently been acquired.
Richard Lambertson and John Truex, who launched Shinola’s leather goods and handbag business, departed in May 2018 to reboot their namesake line.
Both roles have not been replaced, and Lewand said the company has no plans to do so. “Their legacy lives on with the designers they trained. Now that we have developed that expertise, we have gotten some experience in that space and have internal teams with young designers. It’s time for them to establish their own voice to expand that vision,” he said.
Established in 2011 by Fossil Inc. founder Tom Kartsotis, Shinola hoped to reestablish Detroit — hit by the downturn of the American car industry — as a Made-in-America Shangri-La. It promoted imagery of its local workforce, assembling watch parts on a picturesque factory line as a rallying cry to invest in domestic craftsmanship. Riding on a hipster craze for heritage brands, Shinola opened stores in Los Angeles’ Silver Lake neighborhood and Brooklyn’s DUMBO district, some with coffee shops or juice bars inside.
Advertising campaigns promoting Detroit and American-made goods took up high-wattage residencies in Times Square and Washington, D.C.’s Union Station.
But the factory that once hosted all-expense-paid trips for journalists is now seeing “cost-cutting across the board in every department of the company because stores are not performing and are losing money,” according to a source.
In 2016, prior to Lewand’s tenure, Shinola faced charges from the Federal Trade Commission for claiming its products were made in America, when in fact its watches were assembled in the U.S. using components made overseas. The widely publicized ruling was a blow to the brand’s marketing morale. Lewand said the company has since rebounded. “I cannot say there is a single person [in the company] who spends time thinking about the FTC,” he said.
In its earlier years, Shinola introduced categories at a rapid clip, launching everything from paper goods to pet accessories and audio accessories, but those launches have slowed as well.
One source said factory employees “were aware’’ of a slowdown in product category launches, which most speculated was “sales-driven.”
The introduction of Shinola Audio — a range of luxury turntables and headphones — had been a large expenditure for Shinola and failed to take off, according to a source, who said the company was so over-stocked on leather headphones that it gifted a pair to each of its 600-plus employees last year for Christmas.
Lewand feels that Shinola’s slowing of product launches is par for the course. “If you carried that logic forward, we’d have a couple thousand categories by now, I don’t think anyone would expect us to continue on that pace,” he said, insisting that the brand is profitable and has not seen reduced earnings.
Shinola watches, priced upward of $550, lay in the midprice timepiece category — the sector facing the hardest market challenges. Shinola’s entry-level designs are fairly simple from a technical perspective, most featuring quartz movements, but are priced considerably higher than the multiuse Apple Watch, which starts at $399.
Lewand said Shinola will introduce a new price-point category in August, but declined to provide additional details.
He confirmed the company is reevaluating its advertising strategy, and is investing in consumer data research — targeting audiences online through YouTube advertisements and other live marketing initiatives. The firm has hired Tyra Neal, former vice president for global marketing at Aveda, as its new chief marketing officer. It has also embarked on a multimillion-dollar partnership with Salesforce to better analyze consumer data and improve its omnichannel experience.
Said Lewand: “We have a real opportunity to build brand awareness. We are bringing the best components from around the world to Detroit for men and women to build world-class timepieces.”