Fashion designer Kenneth Cole weaves together sharp
business strategies and a true dedication to social concerns.
Kenneth Cole’s fashion
industry roots can be traced back to a 5,000-square-foot factory in Brooklyn,
where his father manufactured ladies’ shoes. Hardly enticed by the thought of
joining the family business, El Greco, Cole opted instead for law school. But
just three months before the young man was due to begin class at New York
University Law School, his father’s manager quit. To help out, a 22-year-old
Cole agreed to postpone law school and join the business. That was 24 years ago,
and today, Cole is still immersed in the shoe business, with thoughts of the
legal profession long behind him.
One day, while working at
his father's company, Cole sketched a new shoe style. He called it
"Earthpadrilles" -- a shoe that featured a heel decked in
natural-colored twine. The model was a combination of earthiness and chic, and
Cole’s father liked it so much that he promptly began producing it. Realizing
that the family business wasn't such a bad occupation after all, Cole stayed on
board at El Greco for six years. But with a strong entrepreneurial spirit and
the desire to be his own boss, he decided he would rather be on his own. In
1982, at the age of 28, Cole took the plunge and set up office in his
two-bedroom apartment on Manhattan's Upper East Side. Using $200,000 he had
saved, Cole took just four months to design a new line, find an Italian
manufacturer, and prepare samples for New York's top shoe trade show in
December of that year. In his new line, he used innovative materials, like stone-washed
denim, and designed distinctive shoes with kicked-in heels and pointy toes, and
boots that had interchangeable color flaps.
From experience, Cole knew
he had to "get in quickly" because he had seen many promising new
companies in the shoe industry run out of cash flow before they had the chance
to make their mark. He also knew it was easier to get credit from factories in
Europe that needed the business than from American banks that didn't. So Cole
lined up the factories, went to Europe, designed his first collection, and
returned to the states to sell them. At the time, a novice shoe company looking
to display its goods at the trade show had two options. The first was to get a
room at the Hilton Hotel in midtown and become one of about 1,100 shoe
companies selling their goods. “This didn't provide the identity or image I
felt necessary for a new company, and it cost a lot more money than I had to
spend,” Cole recalls. “The other way was to do what the big companies do, and
get a fancy showroom in Midtown Manhattan not far from the Hilton. More
identity; much more money, too.”
Cole wasn't able to
exercise either of these options, but he did have an inspired idea. He called a
friend in the trucking business and asked to borrow one of his trucks to park
in Midtown Manhattan. The friend was willing, but was doubtful that Cole could
get permission to do such a thing. Next, Cole explains, “I went to the mayor's
office -- Koch at the time -- and asked how one gets permission to park a
40-foot trailer truck in Midtown Manhattan. He said ‘One doesn't,’ and that the
only people the city gives parking permits to are production companies shooting
full-length motion pictures, and utility companies like Con Ed or AT&T.”
Without hesitation, Cole
went straight from the mayor's office to the stationery store and changed his
company letterhead from Kenneth Cole, Inc., to Kenneth Cole Productions, Inc.,
and the next day he applied for a permit to shoot a full-length film entitled
"The Birth of a Shoe Company." On the day of the big show, with
Kenneth Cole Productions painted on the side of his borrowed truck, Cole parked
across from the New York Hilton to film his "movie." “We opened for
business with a fully furnished 40-foot trailer, a director (sometimes there
was film in the camera, sometimes there wasn't), models as actresses, and two
[New York police officers], compliments of Mayor Koch, as our doormen,” says
Cole. “We sold 40,000 pairs of shoes in two and a half days (the entire
available production), and we were off and running.”
During its first year of
operations, Kenneth Cole Productions
managed to nab orders from top department stores, including Bergdorf Goodman,
Bloomingdale’s and Macy's, and earn sales of $5 million. By 1992, the
10-year-old company boasted revenues of $46 million. This year, the company
expects to top $300 million through expansions and Internet sales.
Today, Kenneth Cole operates from two locations: a corporate
office known as the “Executive Office and Showroom” in New York, which employs
100 persons, and a corporate office and distribution center in Secaucus, N.J.
The latter has about 450 people who handle customer service, distribution and
other back-end operations. Altogether, the firm employs about 1,000 persons. In
addition to Cole, who serves president, CEO and designer for the firm, other
key employees include Paul Blum, COO, and Stanley Mayer, CFO.
To this day, the company is
still named Kenneth Cole Productions, Inc., a moniker that serves as a reminder
to the importance of resourcefulness and innovative problem solving.
“We’ve kept the name to
remind us of our roots,” says Cole, whose company now designs and markets
a broad range of premium-quality footwear, handbags and a variety of apparel
and accessory products for the fashion-conscious consumer. The firm
manufactures internationally and distributes men’s and women’s footwear and
accessories under the Kenneth Cole, Reaction and Unlisted labels, as well as
more than 30 product categories through various licensing partners. Kenneth
Cole has negotiated numerous licenses for items like briefcases and hosiery
that carry the company’s name and showcase its style. While the firm
manufactures its own footwear (90 percent of it in Italy) and handbags (made in
Asia), all other product categories -- from men’s tailored clothing to belts to
jewelry -- are licensed to other manufacturers.
Kenneth Cole, which has
branched out into men’s clothing, leather goods and watches, is now positioned
firmly as a top fashion brand. Kenneth Cole footwear, for example, represents
about half of the company’s sales and includes sexy, high-heeled shoes for
women and black, thick-soled styles for men. The styles set the pace for
today’s cutting-edge looks, with women’s shoes ranging in price from $60 to
$140, and men’s styles running from $95 to $180. Last year, Kenneth Cole also
launched a collection of $485, three-button, men’s black wool suits, made by a
licensee, that industry insiders say have become as popular as the “little
black dress” is among women.
Since 1983, Kenneth Cole
has also had its own retail stores, which tend to be in high-rent, fashionable
locales like the Outrigger Island Waikiki Hotel in Honolulu, Hawaii, the Town
Center at Boca Raton, Fla., and in the Forum Shops at Caesar’s in Las
Vegas. Retail expansion has grown the
company to 38 Kenneth Cole retail stores in the United States, as well as
Amsterdam, Hong Kong, Singapore and Taiwan. Furthermore, the Kenneth Cole
Catalog is mailed to over 3 million consumers annually.
Like many other companies
with established distribution channels, Kenneth Cole has focused a sharp eye on
the Internet, and aspires to fully integrate this new medium into the firm’s
existing operations. Along the way, Courtney Clark, Kenneth Cole’s vice
president of online, says the company faces a struggle to “grow each facet of
the business while also keeping all of them integrated.”
“It’s been an exciting challenge,
but growing different divisions while keeping everything in sync is difficult,”
she says. “Internally, we’ve focused on our core strengths, such as developing
a customer service department that covers not only the entire company, but also
the licensees, making the department knowledgeable across all lines.” Clark
adds that the firm’s retail buying group also buys for the Internet, and treats
the online channel as “just another store,” thus integrating the Internet as
another channel of distribution.
“We’re in a very unique
position because there are few companies with established wholesale, retail and
consumer-direct business through catalogs,” Clark says. “As a result, we’re
able to build our Internet business based on our pre-established, core strengths.
We see the Internet as both a valuable consumer information tool, as well as a
revenue generator. In the fall of 1999, for example, a newly revamped Kenneth
Cole Web site -- one that includes all products from our print catalogs -- will
debut.”
Why the overhaul? Simple,
says Clark; “Our customers demanded it!”
In his own unique way, Cole
has managed to see through the glitz and glamour of the fashion world and make
a name for himself as a true humanitarian. Cole has, in fact, become a business
owner with a social conscience.
To show his concern for his
chosen causes -- AIDS and homelessness -- Cole has designed a series of
provocative, stark, black-and-white advertisements that neatly intertwine
social messages with the company’s products. For instance, in one ad picturing
a shoelace, the tagline reads: “AIDS
can’t be fought on a shoestring budget.” In 1986, he skirted a taboo on condom
advertising with a photo of a prophylactic and the line, “Our shoes aren’t the
only thing we encourage you to wear.” Other notable Kenneth Cole media messages
include, “What you stand for is more important than what you stand in,” and “To
be aware is more important than what you wear.”
And Cole’s commitment to
such causes runs much deeper than a clever ad campaign. In 1986, for example,
his firm spent its entire $500,000 ad budget on a program that was tied to AIDS
prevention -- well before most of the fashion industry and other celebrities
took up the cause. And the world has taken notice of his efforts. For example,
in 1996, Cole received a CFDA Humanitarian Leadership Award for his ads, and
was recognized for his efforts to raise money and awareness for the fight
against AIDS and homelessness. Along with the award, he was given a $25,000 donation
to the charity of his choice.
In February 1999, Cole
hosted his company’s biggest media event yet, inside the newly renovated Grand
Central Station in New York City. The event was a live menswear fashion show
that appeared on the Internet, with viewers logging on through the firm’s Web
site. Several popular actors served as guest models, and online viewers got an
inside peek at Kenneth Cole himself, who last year was named People magazine’s "Sexiest
Businessman of the Year." In typical Kenneth Cole fashion, invitations for
the event were mailed to 750 retailers and fashion editors along with cloth
shoe bags, in which they were asked to bring an old pair of shoes to donate to
the homeless.
In June 1994, after 12
years in business, Cole decided to raise expansion capital through an initial
public offering. In the company's successful IPO, 29 percent of the company was
sold to the public for $20 million. The stock has since appreciated, and every
year since the IPO, the company has been on Forbes’
annual list of the World’s 200 Best Small Companies in America.
Subsequently, Cole and
other early investors have sold 23 percent of the stock from their own
holdings. From that offering, Cole took $45 million in cash, yet he continues
to own 32 percent of the company, with an estimated worth of about $80 million.
In March, Kenneth Cole
announced fourth quarter 1998 net income of $4 million, compared to $3.5
million for the same period last year. Pleased with the results, Cole
attributes his firm’s success to its ongoing efforts to promote a multi-brand
strategy, which includes Kenneth Cole, Reaction and Unlisted, while providing
multiple product offerings that reach the varied lifestyle needs of the same
consumer. He adds: “In addition, our various
channels of distribution -- including wholesale, retail, catalog and our
intensified focus on e-commerce, have allowed for continued strong growth in a
challenging environment.”
Company: Kenneth Cole Productions, Inc.
URL: www.kennethcole.com
Founder: Kenneth Cole
Industry: Apparel and accessories
Location:
New York City
Employees: 1,000
Revenues: $300 million+
For additional reading on this topic, see Creating Buzz
About Your Company, Competing With the Giants, Solid Identity +
Goals = Brand Awareness, Creating a Branding Strategy and Expand
With New Products and Services.
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Advisor,
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