Since founding Detroit-based Shinola in 2011, Tom Kartsotis has expanded the brand beyond its initial offering of watches into a full-fledged business with new categories, stand-alone stores and huge growth potential.
In a presentation that was repeatedly interrupted by applause and stirred emotional responses from many in the audience, Kartsotis told the story of his company’s efforts to bring jobs to an economically devastated city. In what seemed an against-all-odds strategy, the company brought in Swiss watch technicians to train unemployed workers in the craft of watchmaking.
“The original plan to was to have a small watch factory that sold watches to people like Tiffany and Movado, but along the way, we ran into some nice surprises,” Kartsotis said.
After purchasing factory space in a Detroit trade college in March 2013, Shinola brought on a team of local workers for training. By June, they had 2,500 units produced. “We ran an ad that said we wanted to presell,” Kartsotis said. “So, we were asking customers to buy a watch that we barely knew we could make and cost $550, and we were asking them to pay in advance. They sold out in about a week. That kind of changed the whole plan for us.”
By October 2013, Shinola had made 55,000 watches. When budgeting for 2014, the brand determined they would produce between 150,000 and 170,000. However, upon informing the strap maker, based in Florida, they were told it would be impossible to meet that demand. In response, the company contacted a manufacturer in Switzerland to bring in the “Rolls Royce” of leather goods-making machines. With that machinery in place, the Detroit factory makes about 300 straps a day.
“This is significant, not just because we’re going to make our financial plans, but when we’re training people to make watches, the pieces are hard, so it’s like building a Tinkertoy,” Kartsotis said. “It’s a science. When you are working with natural material, like leather, it’s both an art and a science. Early in the spring of next year, we’re going to start making belts and small leather goods out of this factory. We’re hoping to make larger handbags in 2016, and maybe one day we’ll be able to make shoes, which would be the mother lode in terms of job creation.” He later added, “We’re looking at all kinds of product categories that we could theoretically make.”
Job creation within Detroit remains one of the strongest pillars for Shinola. “The minimum wage in Detroit is around $7 an hour and, honestly, I don’t know how people live on that,” said Kartsotis. “The objective is to create really incredible jobs that are aspirational. When we train people, we pay them $12 an hour. Once they are productive, it’s about $14 to $17 an hour.” Shinola also offers a 401k plan, paid time off and full benefits.
This week, the company will move a factory specializing in Swiss watchmaking from Taiwan to Detroit. The notion of job stimulation also encouraged Shinola to move beyond watches and into other, unexpected categories. “We wanted our second category to speak towards the fact that jobs had been lost in the United States,” Kartsotis said. Enter Richard Schwinn, great-grandson of the founder of Schwinn bicycles, a company that went bankrupt in the late Eighties. “When they went bankrupt, Richard bought a factory that makes frames and forks for the bicycles,” said Kartsotis. “For the last 20 years, he’s been making 100 bikes a year. There is a six-month waiting list and they are $10,000.” Kartsotis reached out to Schwinn to work out a plan to produce the bikes in mass. “He said, ‘We have to produce our production and hire a lot of people,’” said Kartsotis. “So that’s what we did.”
Shinola’s marketing strategy is equally Detroit-focused. Three days after the city officially filed for bankruptcy, the brand took out an ad in the New York Times that read, “For those of you who’ve written off Detroit, we give you the Birdy” — a reference to the name of one of the brand’s most popular watch styles. Beyond the tongue-in-cheek ad, Shinola went on to tap Bruce Weber to shoot its first ad campaign, casting actual Detroit residents alongside model Carolyn Murphy, with the city prominently featured in the background.
Kartsotis summed up the brand’s growth strategy by saying, “We’re trying to find a defined market in the United States for goods that are made here. And with capital and innovation, we’re trying to expand those markets and create more jobs.”
Besides the factory in Detroit, Shinola has store locations in Minneapolis, London, New York and, of course, Detroit. In its first six months open, the original Detroit store did $3.1 million in sales and is projected to hit $9 million this year. “So, we’re opening a bunch of stores,” he concluded. “Someday they’ll call Geneva the Detroit of Switzerland.”