LONDON — Sir Paul Smith may well be London’s most lighthearted designer with Monty Python-like humor and an office that’s a TechniColor curiosity shop, but there’s nothing silly about the way he runs his business. Postwar Britain’s most commercially successful fashion designer, Smith — and his wife Pauline — rank 243rd on The Sunday Times Rich List with a net worth of 230 million pounds, or $368 million at current exchange. Last year, Paul Smith Group Holdings Ltd., which Smith owns with Itochu, his longtime Japanese licensee and minority partner, had sales of 169 million pounds, or $270 million, and profits of 15 million pounds, or $24 million. During the buildup to his fall men’s wear show in Paris on Sunday, Smith, 63, talked about everything from fakes and frauds and canny money management to the psychology of the young Japanese consumer.

This story first appeared in the January 21, 2010 issue of WWD. Subscribe Today.

WWD: You’ve dubbed the past 10 years “The decade of fake.” Why?
Paul Smith: We live in a Photoshopped world. Back in October, I had an exhibition in Japan where I showed some of my personal [art] collection. One of the photographs is by Spencer Tunick. It’s in Mexico where there are several thousand naked people standing in a square — you can imagine what the organization of that would have been. People would walk into the gallery, come to the photograph and say, “Oh, amazing Photoshop!” I was recently in Antwerp for the evening to celebrate the first anniversary of my shop there; just a little evening that was about nothing more than just saying hello to customers and having a drink. But people were confused. They thought, “There must be a trick.” One customer said to me, “We received the invitation card, but we didn’t think you’d be here. We thought it was just a marketing ploy.” Unfortunately, it’s just so normal now for people not to believe anything and for people to lie about things, and gamble on them, and not be sincere. In a way, sincerity is the new fake because no one even believes you if you are sincere.

WWD: Many designers of your generation and stature insulate themselves from the public. You still ride a bicycle in London, fly commercial and chat with strangers at parties. Why?
P.S.: You see the people who are your customers, the ones who are paying your rent. If you live in a cotton-wool, ivory-tower world, then you’re not as likely to be as aware than if you are actually living a life communicating with people who are paying your wages — at whatever level. We have jeans collections and suits made from cashmere. It can be any level of customer — and that’s what I enjoy.

WWD: You have quite an old-fashioned approach to business: You’ve built it on equity rather than debt, and own the bulk of your properties, from the stand-alone stores to the showrooms and warehouse spaces in Europe and America.
P.S.: Over the last 10 years, time and time again, I felt like I was old-fashioned in the way I was approaching the business. It’s just been a matter, over the years, of putting the money back into the business rather than in the extravagance of a lifestyle. In the Nineties, the disease was about the big brands trying to keep up. They were opening colossal [numbers] of shops on all the most expensive streets in the world. Money was becoming so available in such a flippant manner that a lot of the big brands were just adding more and more brands to their stables and, in fact, quite a lot of them have never really worked.

WWD: What was your guiding principle during that go-go decade for fashion?
P.S.: It sounds incredibly smug now, and I don’t mean it to be. I think it was just understanding — luckily, and with the guidance of my wife Pauline — that life on earth is not just about gain, it’s about enjoying every day, and health and happiness and a working environment and lifestyle. And, unfortunately, so many people equated lifestyle to luxury rather than equating lifestyle to a day that was pleasant — without argument, without aggression or the need to show off. That’s quite a rare trait, and I don’t know where it came from — but probably from Pauline.

WWD: What sort of advice do you dispense to young designers about running a business?
P.S.: In the early days, you’ve got to live well within your means, and when you do make a bit of money, put it in the kitty so you can build up some cash. When I started, I did several jobs — I had my own little shop, but was also doing freelance designing and styling. When you open a shop, unfortunately, in your mind you think I’ve got to be on the main street, but in fact that would drain so much money it would be difficult to make it work. So it’s whether your shop could be in an area that’s not so obvious, but could still survive. The only way that would work [would be] if you opened in a place that wasn’t so well known, but above it was your apartment, or your showroom, or your studio so at least the rent was being helped by the fact that you’re running your freelance design studio from the same building.

WWD: You run a tight ship on a variety of levels and do a lot of work in-house, including ad campaigns.
P.S.: More recently, we’ve shot the ad campaigns in-house because we feel that we can control the image that we’re trying to get across rather than explaining what we’re looking for. We do all our shop design in-house and anything that’s to do with shop fitting — a belt stand or a hat stand — everything is literally done in this building. All the graphic design, marketing, press. It’s never really been a money issue, but just the fact that because Paul Smith is owned by somebody actually called Paul Smith, you might as well do everything where you can have a direct conversation rather than through a third party. It sounds almost too patronizing to talk the way I’m talking, but if it is so patronizing, then why do people get into so many messes?

WWD: Are you doing anything interesting in Japan?
P.S.: We’ll have more shops on the street and be less reliant on department stores. I think a lot of the younger generation think of department store shopping as what their parents did, and I think a lot of them are very keen on shopping in areas where there’s a whole group of younger shops and cafes where they can hang out more. It’s my hunch — I don’t know whether it’s true or not. We have a brand in Japan called R. Newbold, a casualwear line for men that is part of our license. A lot of the newer stores are on the street. Also, Paul Smith Jeans stores in Tokyo, Osaka and Kobe are on the street. For a young, cool guy to go into a department store, walk past fragrance, through classic suits and big brands and then up an escalator — that is not what they want to do.

WWD: What about China? What are your plans there?
P.S.: We don’t have any stores there, and no plans to expand. I think Hong Kong is still very good and very successful. I think Mainland China is still extraordinarily difficult for many, many brands. Louis Vuitton, Gucci, Dior — the big powerful brands — can have a good success in Mainland China. They are status symbols, they have logos. [Buying them] is a way of equaling success for the user. I think for brands like myself — and many others — it will be a very slow process. You will need a partner who’s trustworthy and who’s not going to suddenly be selling your goods in various ways across the country. Most of the people in China have never heard of me, and I don’t think we, as a brand, say the right thing to them.

WWD: What is your succession plan?
P.S.: I love the business and I feel very privileged to be here. At the moment, very stupidly, I’ve no plans for succession. In terms of the business as a whole, there’s a very sound team here of design staff, marketing, administrative, financial, distribution and sales. Of course, it would be different. Luckily, a lot of my staff have been with me for many years. The actual philosophy of Paul Smith is very ingrained, about keeping humble, living within your means, learning to say no, and doing what is right, not what is easy.

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