Are Shinola's Luxury Goods Actually Helping Detroit?

What to make of Shinola Detroit? On the one hand, the company is a perfect case study in the power of consistent branding paired with a strong, compelling story to build a company that rises above the crowd. On the other hand, it may still end up a cautionary tale for conscious businesses about the importance of authenticity. Like, the real kind.

Let’s back up. First, the basics: Shinola makes luxury watches, bicycles, leather goods, pet accessories, and more. It was founded in 2011 by a Texas-based venture capital firm called Bedrock Manufacturing Co., led by Tom Kartsotis, founder and former CEO of Fossil Group Inc. The name Shinola comes from a vintage shoe polish brand that gained fame in the 1930s and inspired the popular expression “You don’t know shit from Shinola.”

Kartsotis and team decided to revive the brand and use the name to build luxury watches in the US — specifically, in Detroit, in part thanks to the city’s manufacturing heritage. Also because it was a smart branding move: As legend has it, an early focus group revealed that people chose to pay a premium for the “made in Detroit” story when given the choice between a $5 pen from China, a $10 pen made in the US, or a $15 pen from the Motor City.

Shinola had 17 retail locations at press time, and is continuing to expand its offerings, with audio coming this fall and eyewear reportedly on tap for 2017. President Obama gave a Shinola watch to then British Prime Minister David Cameron in spring 2016, and Bill Clinton supposedly has bought more than a dozen of them. The company has created more than 350 full-time jobs at its Detroit offices, and holds community events at its stores.

And yet ...

Despite those successes, Shinola’s story isn’t all shiny. In 2016, the Federal Trade Commission (FTC) reviewed the company’s marketing practices and, according to a June 2016 FTC ling, “raised concerns that certain market- ing materials overstated the extent to which certain Shinola-branded products ... are ‘made’ or ‘built’ in the United States.” Shinola imports many of its parts from overseas and merely assembles them in Detroit. The FTC opted not to take any enforcement action on the condition that Shinola change its marketing, including “transitioning away from the Company’s ‘Where American is Made’ slogan and developing enhanced policies and procedures ... to avoid future deception or mislabeling.”

Meanwhile, the company has faced criticism for appropriating the Detroit “brand” to sell luxury goods made in the poorest large city in the US, thus (the critique goes) perpetuating problems of inequality. “Bougie crap sells itself as a product inspired by manual labor, either related to the work of a craftsman, artist or designer or to the physical exertion of, say, a farmer, woodsman or rancher,” writes University of Michigan art professor Rebekah Modrak in a critique of Shinola. “Bougie crap uses the pretense of ‘quality’ to create a two-tiered system: the people who can afford to buy these products and the people who can’t.”

Is Shinola’s success so far a powerful lesson in the importance of a clear mission and story? Is it a bona fide conscious company that has found the secret sauce for bringing long-term jobs back to Detroit — and beyond? Or rather a cautionary example for conscious entrepreneurs around the potential unintended consequences of well-meaning actions divorced from a true connection with community?

Some of each? None of the above? The truth is that we don’t know, even after the following interview with company president Jacques Panis, which has been lightly condensed for space and clarity. Perhaps only time will tell. Until then, we’re glad to see an example of a company bringing jobs to a city in need, and we hope any tough or critical conversations about the company encourage it to make its commitments to mission even clearer.

Shinola

You and your founder have said many times that the company isn’t primarily about the product, it’s about creating jobs in Detroit. Is that mission formalized in any way? [Editors’ note: As of press time, Shinola’s mission does not appear on the company’s website.]

Jacques Panis: Yeah, of course. That is our mission. Our mission is to create world-class manufacturing jobs, more specifically here in Detroit today and, if we’re able to, in other cities around this country. You might have read recently that we would potentially do something in Chicago in the future. Nothing has been confirmed, but we are a job creation vehicle in the United States.

How are you ensuring that the mission, creating world-class manufacturing jobs, stays central and isn’t compromised at all as you grow and expand?

JP: It’s the core of what we do. It’s a focus that we talk about. It’s an objective that we have at the center of this organization. All of our teams that have to do with managing and operating the business understand what that mission is and that we are here to create jobs.

And not just jobs, but good jobs. Jobs that are healthy. Jobs that imply a good workplace. Jobs that imply good wages. Jobs that imply healthcare benefits. Jobs that imply paid time off.

How we maintain that internally starts with ensuring that the management teams understand what our mission is, what we are here to do and, from there, we go execute. It really depends on the leaders of the organization to execute that mission.

“Shinola is part of Detroit, but it’s not about what Shinola has done for Detroit, it’s what Detroit has done for Shinola.”

What are you doing specifically to attract and retain workers? Has that been a challenge for you?

JP: I think when people come to Shinola for an interview or they learn about Shinola and the opportunity to be part of this team, it’s exciting. People come in very excited and people stay here and there’s not a lot of turnover. We’ve been extremely fortunate in terms of building a culture that enables long-term employment. And that’s what we want. We want people to be here for the long run.

We foster people and we work with people to give them opportunities, to bring them up through the various stages of becoming a leader. We give opportunities to people in terms of leading; for example, our community outreach program called Reach, to organizing our company picnics, to being part of organizing various events within the organization. For example, you have Krystal Bibb, who was our nighttime janitor. Today, Krystal leads a team of twelve people in our quality-control operation.

Shinola is enabling people to come in and flourish and become part of the team for the long run.

What are the biggest challenges that you are facing as an employer right now?

JP: For us, as we scale, it’s maintaining that culture I just spoke about. We have to maintain the integrity of our culture and make sure that the integrity of the mission of this organization stays intact.

Do you have any specific practical things you’re trying to help that happen?

JP: It’s, again, making sure the leadership teams understand what that mission is and deploying strategic initiatives around maintaining the integrity of our mission and our culture. Strategic initiatives continue to drive the message of our culture; we call it “high- five culture.”

Can you talk more about what that means to you, high-five culture?

JP: The high-five culture means gratitude, respect. It means honesty and integrity. It revolves around our values. Equality. It’s a culture where people are thanked. People, we hope, are happy. It’s one where we are approachable, we engage, we find solutions together, and we work, again, towards one common goal of creating world-class jobs here in the United States.

When you say you’re approachable and you engage, what does that really look like in practice? Do you have any channels for, say, Krystal the janitor to be approaching you if she has an idea? What are the strategies you’ve put in place, especially as you grow, to keep that approachability without getting overwhelmed within the leadership team?

JP: That approachability is very much alive and real to the degree where someone can walk right up to my desk. I don’t sit in an office; our leadership teams don’t sit in offices; no one sits in an office here. We all sit out on a big floor, and we all operate the organization together in a very collaborative way that enables us to communicate with folks on a one-on-one basis if need be.

But, again, I go back to the scalability. As we scale, how do we maintain that? That’s something that we’re working on all the time. For example, yesterday, T.T. [employee Te’Nesha Martin] walked up to my desk and said, “Hey, Jacques, it’s my birthday next week. Come if you’re in town.” It’s that kind of approachability that exists, still, here today.

In many ways, Shinola has been a huge success story; you have President Obama aligning himself with your products. Yet your founder, Tom Kartsotis, told the New York Times in January 2016 that you weren’t profitable yet. Is that still true? And how are you measuring success internally, if not by profit? 

JP: We’re not pro table yet, as Tom mentioned in that article. We’re measuring success through incremental improvement and working towards profitability and working towards scaling the organization to where we need it to be.

It’s an interesting paradox that you are, in many ways, incredibly successful but not pro table yet. How do you deal with that tension? How do you communicate around it? How do you think about it?

JP: We think about it in a lot of different ways. We look, again, to “Are we improving?” Do our KPIs [key performance indicators] tell us that we’re headed towards profitability and headed in a direction which we’d want to go in from a financial point of view? Are we maintaining the integrity of the brand? Are we ensuring that the jobs we’re creating are good jobs?

There’s a bucket of things that we look at and measure and ask ourselves on a daily, if not hourly, basis. Are these key strategic initiatives in place, and is everyone on board and aligned with one another in terms of what we are doing to drive this business towards profitability?

Are you able or willing to share any of those specific measures? Obviously, profit is one of them. But are there others that you can point to, in the interest of helping other people think about what they could be measuring?

JP: Yeah. There are so many... If you look at e-commerce KPIs: Is traffic up? Is conversion rate moving in the right direction? How does our bounce rate look? Are we up year-over-year? Are we hitting our numbers from a plan point of view? There are so many different KPIs that we look at across the entire business.

Just to narrow it a little bit, you mentioned maintaining integrity and ensuring good jobs. Do you have any specific KPIs that help you mea- sure that piece as you grow?

JP: In terms of what good jobs look like, I mentioned these things. Is the work environment clean and healthy and good? Are we paying livable wages? Are we providing excellent healthcare benefits? Are we offering people participation into a great retirement plan? Putting measurable elements in place for good jobs is somewhat challenging but we do mea- sure it at different levels. And some of it is subjective, what we believe are good jobs. We believe good jobs are jobs that pay livable wages and afford people opportunity to grow within the organization.

A little bit of a tough question here: Please correct me if I’m wrong, but some of the coverage that I read about the company includes criticisms that Shinola is swooping into Detroit and taking advantage of the struggles of the city to help with branding. In response to that, how are you ensuring that Shinola’s success is also truly Detroit’s success?

JP: I can’t assure that Shinola’s success means Detroit’s success. All I can assure is that what we’re doing in the city is very real. We’ve done what we’ve said we’re going to do and we’re going to continue doing what we say we’re going to do.

Shinola has not saved Detroit and Shinola will not save Detroit. Shinola is part of Detroit, but it’s not about what Shinola has done for Detroit, it’s what Detroit has done for Shinola. And we’re grateful for that. All we can do is continue to be good citizens here in the community and stick to our mission.

Do you have three pieces of advice that you would give to somebody else considering trying to start manufacturing in the US?

JP: Don’t take no for an answer. Fail fast. And don’t give up the fight.

What’s giving you hope right now?

JP: The people around me. I am inspired daily by the people around me.

This article appeared in Issue 9 | September/October 2016

We’re going local in Issue 9, taking a deep look at what it takes to create thriving communities, where some attempts fall short, and how conscious business can and does help. We have interviews and advice from top CEOs, including George Siemon of billion-dollar farmers’ co-op Organic Valley; Robyn Sue Fisher, who built a 200-employee ice cream business out of a Radio Flyer wagon; and Reeves Clippard of A&R Solar, one of Seattle’s fastest-growing companies. We also investigate the dark side of the sharing economy, offer a complete guide to the new equity crowdfunding law, and present the case for employee ownership. Plus: how to be a better listener, key business lessons for makers, Detroit’s leading innovators, and more!

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