Podcast: Why Canada Goose Soared and Shinola Sputtered

PODCAST TRANSCRIPT

Laura PAVIN: Hey, it’s Laura Pavin. This is the second of our two-parter on how to craft a luxury brand. Last episode, we heard how these brands spin a tale of their excellence by having an authentic connection with the past, having an extraordinary founder, and having high-status customers.

A lot of those brands, you might remember, were older—they’ve been around for a long time. But what if you’re a newer company that wants to break into the luxury biz?

On this episode of Insight Unpacked, we hear about the newer brands that have tried their hand at luxury. Some have done it successfully. Others, not so much. Hopefully, we can learn from their mistakes.

That’s next.

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PAVIN: Kellogg Marketing Professor Gregory Carpenter, our luxury expert, says newer companies DO have a harder time succeeding in the luxury space. But it’s not impossible.

Let me direct your attention to a company called Canada Goose: It makes winter clothes, but it’s mostly known for its expensive parkas. They can cost between $500 and $1,500.

But Canada Goose wasn’t always this exclusive-feeling.

Gregory CARPENTER: Yeah, it started out as a producer in a garage in Toronto of winter wear for police and military in Canada, and it became sort of the staple—like the way the Jeep became the military vehicle in the United States and then later, the Hummer.

PAVIN: It didn’t start out with the goal of becoming commercially popular. It was committed to quality first.

CARPENTER: So the important part about that is that it had this authentic foundation, in that it was connected with actual people who wore it for harsh winter conditions, and it had this clear, distinct, functional benefit.

PAVIN: Canada Goose realized later that it could do something smart with this reputation.

CARPENTER: The company began to understand that this was an advantage and they began to popularize it and link it with status in terms of endorsements from people, James Bond characters, and others who are associated with the brand.

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[CLIP FROM JAMES BOND] James BOND: The name’s Bond, James Bond. [THEME MUSIC]

PAVIN: The brand’s jackets were worn by the cast and crew of James Bond with Daniel Craig. They were also worn by the scientists of the United States Antarctic Program, alongside explorers and athletes. To land itself on the bodies of these high-status people, Canada Goose leveraged its REPUTATION of providing the best of the best in winterwear. It had that history of craftsmanship that we all seem to associate with luxury.

CARPENTER: So what they did is took their authentic beginnings and linked it with luxury status, and that created a successful luxury brand.

PAVIN: Canada Goose was the fastest-growing luxury company in the world in 2018 and 2019. In 2022, its revenues surpassed a billion dollars.

It’s doing pretty darn well.

But what if you’re not a brand with even a SOMEWHAT established presence, like Canada Goose? What if you’re brand-spankin’ new? Well, there’s another workaround for you to play with, Carpenter says.

CARPENTER: So one of the most common ways to build a modern luxury brand is to find an old defunct brand or struggling brand that has heritage and revive it.

PAVIN: A man by the name of Jean-Claude Biver did this with Swiss watches to GREAT success.

CARPENTER: He went and purchased the oldest producer of watches in Switzerland, a company called Blancpain, and resurrected it and essentially used that as the basis for the revival of the Swiss watch industry. And mechanical watches are doing extremely well now.

PAVIN: So, no, you don’t need a time machine to craft a heritage for your newer luxury brand. You can BUY up an old brand and graft your business onto it.

There is, of course, a wrong way to manufacture heritage. Ever hear of a brand called Shinola?

If you haven’t heard of them, you’d be forgiven. I couldn’t say the name for half the interview with Carpenter.

PAVIN to CARPENTER: Shihn-low-uh?

CARPENTER to PAVIN: Shinola

PAVIN: Shinola also makes watches. But it didn’t always.

CARPENTER: Shinola was a brand of shoe polish that was created in Rochester, New York in the late 1800s.

PAVIN: The most attention Shinola got was probably during World War I, when its shoe polish was used by soldiers. It faded away from the public’s memory after that.

In 2011, though, a private equity firm got its hands on the name and made some decisions.

CARPENTER: The people who purchased the brand decided that they would sell watches made in Detroit. It didn’t have any connection with Detroit either, but they linked it with Detroit.

PAVIN: Shinola, a WWI-era shoe polish that was actually based out of Rochester, New York, became a watch brand based in Detroit, Michigan. The idea was to play up a nostalgia for vintage America and manufacturing.

[CLIP FROM SHINOLA COMMERCIAL] NARRATOR: The question isn’t why would you build a watch factory in Detroit; it’s why you’d build one anywhere else! This is the city that made this country. With its steel. With its skill. With its labor…

PAVIN: And, in kind of a jump in logic, they hoped people would take all this to mean “luxury.”

It seemed to work….to an extent. The company hit $100 million in sales in a short time—just a few years.

CARPENTER: It had some success. Bill Clinton was a fan of Shinola.

PAVIN: But it didn’t last. For starters, it had to stop saying its watches were “Made in America” because they were actually made using Swiss parts and some other foreign parts, and the U.S. Federal Trade Commission found out about it.

This contributed to an even bigger problem: the lack of a coherent story. Here’s YouTube watch reviewer Jory Goodman, AKA The Time Teller, talking about it.

[CLIP FROM YOUTUBE] Jory GOODMAN: Half their marketing was saying “Swiss, Swiss, Swiss!” and half their marketing was saying “Detroit, Detroit, Detroit!” so what Shinola is left with is a watch that’s not Swiss enough to be Swiss-made and not Detroit enough to be Detroit-made. But they ARE allowed to market themselves as “Built in Detroit with imported Swiss parts.” [chuckles]

PAVIN: In another world, the watch brand might have done better if it just picked a lane and stuck with that. Maybe things would have worked out, for example, If it had opted to revive a brand that was ACTUALLY from Detroit, with parts that were also actually from Detroit…and there was some kind of extraordinary story that neatly tied it all together, like, maybe it could have found some connection to Ford’s visionary founder, for instance, or to a luxury, made-in-Detroit sports-car like the Viper.

But Shinola couldn’t get its story straight. It confused people!

Today, Shinola isn’t completely in the gutter. But it’s not doing what it first set out to do.

CARPENTER: So it’s been successful as…let’s call it more of a mass market brand, and less of a luxury brand.

PAVIN: All of this is to say that, if it’s luxury you want, you have to work REALLY HARD on the story you’re telling people—especially if your brand is newer.

CARPENTER: The challenge with a new brand is you have to really give it meaning and status and convey the message of its authenticity from scratch, and that’s not an easy thing to do. To get people’s attention in this day and age is tough.

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PAVIN: So you need an extraordinary story. But there are a couple of other things Carpenter thinks you should keep in mind, if you’re trying to start the next big thing in luxury. Let’s call them “traps.”

Trap number one? Trying to turn an everyday, mass-market brand that’s already popular into a luxury brand.

It’s really hard to reposition yourself once people have you pegged!

CARPENTER: Volkswagen tried to do this. They launched an expensive car called a Phaeton, which you may or may not recall. It was their most expensive car and they sold very few. It was a fine car. It was rebadged as a Bentley and it’s done very well. So with a luxury brand, it was a success. With the Volkswagen mass market brand, it lacked the status and therefore had no appeal.

PAVIN: The Phaeton came out almost two decades ago and cost more than $95,000. In today’s dollars, that translates to more than $150,000. And people were like “huh?”

[CLIP FROM YOUTUBE] Doug DEMURO: That was its biggest problem: Trying to sell a $100,000 car with relatively anonymous Volkswagen lookalike styling. You’d never really know that you were looking at anything more special than a Passat, unless you saw on the back that it said “Phaeton.”

PAVIN: That’s a review of the car from YouTube car reviewer Doug DeMuro from a few years back.

I found a writeup about the Phaeton online—on a car news website called Jalopnik. And I think it describes the car best.

It says, “it’s a vehicle that shared a platform and parts with the Bentley Continental and Audi A8 but wore the badge of the people’s car.”

So, trying to suddenly swing from mass market to luxury? That’s a trap you don’t want to fall into.

Trap number two: making yourself too common.

This is a tricky one, right? For most businesses, becoming common is great! You’re popular enough that people keep buying your stuff, and that increases revenues. But for luxury, that carries a downside.

CARPENTER: So for many companies, for luxury companies, this is typically a huge challenge because they need growth—like all organizations need—to survive. The problem is making the brand too common, which then makes the brand less exclusive. So the sort of typical example that pops into my head is that Harley Davidson originally sold to a very small group of people. They become more common. Once they become more common, they lose their appeal of being sort of rebellious. That’s harder to recover from.

PAVIN: When you go common, it’s hard to go back to exclusive.

Ralph Lauren learned that the hard way. Carpenter says the brand prioritized the mass market too much, at one point.

CARPENTER: I mean, the reality is they make a huge amount of money on the outlets. So Michigan Avenue and Madison Avenue are the sort of advertising showpieces. The real money comes from the outlet malls

PAVIN: The company was feeding a LOT of product to the discount channels, like T.J. Maxx, Marshalls, Macy’s and Dillard’s. They ended up producing too much, and retailers had to slash prices by up to 70 percent to clear them out. This diluted the brand’s swankiness, and things took a downward turn for Ralph Lauren. That was in 2015.

I actually kind of remember that whole thing, myself. When I first saw it at outlet stores, I was like “wow Ralph Lauren!” Years later, I was like “ugh, more Ralph Lauren?”

To try to survive the damage, the company ended up closing dozens of stores and laying off more than 1,000 employees. And they literally burned all their excess inventory. Millions upon millions of dollars worth of it.

They’re getting back to their more exclusive roots, now. And revenues are on the upswing. Which is a win, but one that was really hardfought.

So don’t get too common.

Now, this doesn’t mean that luxury brands can’t ever expand into new markets. But you have to get clever about it. Here’s Carpenter.

CARPENTER: There’s a famous wine in France made in Bordeaux called Cheval Blanc. It’s one of the most expensive wines of France and it’s owned by LVMH. And they’ve just opened a set of hotels in France called Cheval Blanc Hotels with this idea of being exclusive, extraordinary, and competing with Four Seasons and even more expensive hotels. So the idea is, then: have an experience which is related to the experience you would expect from the physical product.

PAVIN: Ideas like a hotel experience make the product more attainable without becoming too common. We’ll see how the hotel experience pans out, but it raises the idea that adjacent ventures could skirt the rule of becoming too common. So take note, would-be luxury brands!

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PAVIN: It takes work, but newer brands CAN find stories that elevate their status to one of luxury. The key to it all, though, is to make sure it’s based in truth—in authenticity.

So if you think you have what it takes to craft a brand that’s worthy of elite status, go on and do it! Just make sure you’re not trying to turn a shoe shine brand into a line of high-end watches.

[CREDITS]

PAVIN: That does it for our bonus series of insight Unpacked! If you want to check out the brands we mentioned and just get a more visual experience of the episode, you can visit our website at kell.gg/unpacked.

This episode of Insight Unpacked was written by Laura Pavin. It was edited by Jessica Love, Susie Allen, Fred Schmalz, Maja Kos and Blake Goble. It was mixed by Andrew Meriwether. Special thanks to Gregory Carpenter.