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Your home might be worth more than you think. Find out how much at Airbnb.ca.host. Did you have any fear about leaving Ralph Lauren to start something? Sure, but I felt so comfortable when I could take an original design concept, and I know I could see the finished garment.
So if I found an antique piece of fabric from a quilt right from the 1920s, I could take that and visualize a cool shirt with these type of buttons and this type of wash and these type of seams, and I just knew I could make it. And I'm like, if I can do it here, it's go time. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raus, and on the show today, our college admissions essay grew into Fairety, a clothing brand that traveled the country in a mobile beach house before growing to a quarter of a billion dollars in sales.
Most entrepreneurs are taught to pick a lane, go all in on wholesale, or all in on direct to consumer, or all in on retail. But today's guests, they didn't pick one. They picked all of the above. When Mike and Alex Fairety launched their clothing brand in 2013, investors were throwing money at direct to consumer companies.
Low overhead, high margins, no middlemen. That was the quote unquote smart play, but the Fairety twins had something else in mind, a blend of wholesale, brick and mortar, and online sales. A strategy most people thought was outdated, maybe even doomed. And yet that contrarian move helped turn Fairety into a $250 million brand.
Now, if you're not familiar with it, Fairety is a brand of clothing that takes its inspiration from surf culture. Today, the company has around 80 stores across the US. The roots of the story, though, go back more than a decade before launch, because Mike Fairety first dreamed of starting a clothing brand as a teenager. And instead of rushing into it, he and his brother Alex spent 12 years getting ready.
Mike studied fashion and college, and then worked at Ralph Lauren. Alex built a career in finance to learn business and to save money. It was a long first step, but that patience and that all of the above business model, it paid off. And for Mike and Alex, it was the culmination of a childhood dream of working together.
The twins are the youngest of seven children. They grew up in a small town on the Jersey Shore where they both learned surf, and all the clothing they wore was bought at the local surf shop. In middle school, the family moved to New York City, and Mike remembers noticing different fashion styles around him, starting with the clothes his dad wore to work. My dad had a pretty good style, so I always looked up to him.
Like, his first gig after college was on Wall Street in the 70s, so like, you can imagine dressing the part was a big part of it. So he had like, naturally good style. Like, I always remember, like, as a kid going through his tie closet, and like, looking at the color combinations of the Paisley's and being like, wow, that's interesting. And then like, feeling his t-shirts, because they were like, better than my Quicksilver t-shirts.
And then all of a sudden, I'm in New York City, and my dad took me to Bergdorf Goodman. And I remember feeling a cashmere sweater for the first time, and being like, what is that? And I was like, there's something, I'm into this. I'm into walking into Bloomingdale's by myself after school and going to the Ralph Lauren store.
And then you get to high school, and you're like, trying to create my own style. And the surf stuff didn't feel like where I wanted to go anymore. So I started buying some other pieces to play with the surf stuff. And so junior year, you got to start thinking about going to college, you got to sit down and write an essay.
And one of the questions that whatever the prompter was like, you know, what do you want to do when you get older? And I sat there and I started writing about starting a clothing company. I started writing about this line called coast occur, and it was my life, the things that worked on the coast. Came to the city, the quality of the things I saw in the city, the vibe of the things I saw in the coast, and this line of clothing that I could create.
I'm wondering, Mike, in high school, did you ever feel like you kind of had to hide, you know, your interest in fashion and design? Like, because, you know, high school, people could be weird about this. Was that something that you didn't really talk about much? No, no, because some of the gift of moving to New York City was like, art's cool.
You know, like being an artist is cool. Where you live in a small suburban town, like being a surfer's cool. Yeah. And, you know, I had some great mentors, like teachers that I was like, this guy's really cool.
And he's like, you know, a professional ceramicist. And so probably the combo of my parents, like my mom is creative and always pushed me to be more like, take a lot of art classes. Like, I started getting comfortable with like, I'm actually going to be an artist. I can actually have a real job being a fashion designer.
And then my dad is like the ultimate optimist and like, anything's possible, guys, like whatever, who cares what people say, just go do it. Yeah, I should also mention that both of you guys, both people really good at sports. I think Alex, you played football at high school and then in college. Yes.
And Mike, you played basketball at Wash U in St. Louis. And I also read that you majored in fashion design there. Correct.
And you took a sewing class in college. I had multiple years of sewing as a curriculum. Okay. But on the team, like I'm just trying to imagine these guys like, dude, you're doing what?
You're majoring in fashion design. You're taking sewing. Like, did you get grief? Totally.
I mean, my coach, my coach was beyond, you know, because he's like this old western guy. I grew up. Absolutely. And, you know, let alone to have an art school kid on the basketball team, like to have a fashion designer.
You know, I had fashion shows guys. So like the guys would come to the shows, you know, and I was like using them as models. Wow. We would fly to games, come home Sunday night.
I'd have to go right to the studio to finish a sewing project. I'd be sewing all night. I'd be so tired. I'd show seams backwards and then like stay up another two hours to steam rip it and start again.
And you know, I was the only male student in the program. I had no previous experience sewing, but I there was just something about it that I like, even when it was hard and I was like, I had that I just stick with it, learn the craft, keep going step one on your journey. Alex, when you were in high school, right? You're playing football.
Yeah. Yeah. And you saw your brother's interest in art. I'm sure you remember him talking already in high school about one day wanting to start clothing business.
When he started to talk about that, did you already at that point see your you having a role in doing that with him? Yeah, he wrote when he wrote his college essay. Can't remember if it was exactly right after he wrote the essay, but the dots that we connect is I met my wife. She tells the story when we kind of first met and started hanging out that I told her I was going to start a company with my brother.
When you first met her in college, you said, yeah, when I graduated from a start clothing company, my brother. Yep. And so I think that our friends are world like it was just we kept it. We said it.
So we put it out in the world. I think we were always like, we got to do something together, like whatever our job is in the future, like it needs to be together because what could be better than us working together one day. I just I'm curious and you may not have the answer to this because maybe I have to ask your mom or I don't know other people, but what did your parents do to cultivate the relationship that you guys have because, you know, like my sisters are best friends, absolutely best friends. My children are really close.
My voice are and I hope they will be forever. But like you guys are grown in with families and you're so tight. What do they do to cultivate that help you guys becomes not only brothers, but like best friends? I think some of it is we were the last two.
So we were the youngest. We just could easily be with each other. And so whether that's a twin thing or that's a brother thing, it's like, it's even harder to describe. It just was like a natural thing that we experienced from the day we were born.
Yeah. I mean, my mom talks about like when we're zero years old and couldn't walk or crawl, we still ended up in each other's cribs. She'd be like, I don't even know how you can't even move. And like you end up in each other's cribs every night.
I mean, it's very rare and you're extremely lucky that already at a young age, you had this vision of what you wanted to do. Mike, you knew you want to start a business in fashion or fashion brand. Alex, you knew you wanted to work with your brother. And so I mean, it sounds like it and just correct that I'm wrong that you both went into college studying these things so that you could get jobs to help you learn more in order to help you get to the place where you could then leave and start a business.
Is that more or less true? Yeah, big O. Yeah, that's true. And I even in some of my sophomore year in college, eBay was just coming out.
Yeah. And I used to in free time, I used to go to like the local marshals and TJ Maxx's in like the New Haven area and I would buy things and resell the money back. Like I got into, you know, whatever merchandising or whatever you want to call it. And so I think for me, a lot of it was I got to learn.
I got to figure out what am I going to bring to the business. All right. So you graduate from Yale. You go to New York, Alex to work finance, not with the intention of like making partner and buying a house in the Hamptons and, you know, taking helicopter there one day on the weekends, but just to make enough money so you could leave and start this fashion business.
Like from the time you got to the first job after college. Yeah, it was make as much money as I can and learn as much as I can. And I found myself always wanting to work on the consumer projects that investments that we were looking at where I could learn more about specific things within consumer or parallel. So I always gravitated towards, okay, if I'm going to do this, what can I work on?
How do I work on this team to get me a little bit more exposure and Carrie, who was your girlfriend in college who factors and she would go on to marry each other and she would join the company that you guys started as a co-founder. She went to law school at this time, right? She California. Yeah.
All right. Mike, you graduate from Wash U in 2005. And again, like you and your brother are just you've got this vision, but the vision is I'm going to start a clothing company, but I'm 22, 23. There's no way I can do this now.
I better go find a job and in a bigger company and you got a job with Ralph Lauren. Oh, yeah. Wow. So I worked in by a year and kids and then I got picked to move into men's design Ralph Lauren and that was just, you know, that was incredible.
All right. So you would spend, I think, seven or eight years at Ralph Lauren. Yeah. Yeah.
Eight and change. And most of the time I read that you were working on their like their double RL line, which are like outdoor Western. Yeah. It's kind of like super premium, but rugged and very vintage inspired.
It's sort of like focused on denim and American work where and sort of the heritage of American clothing and trying to sort of replicate that style. And then what really clicked for me was when I started going overseas to the factories and fabric mills and that just was like, that was just like, they sent you to, they sent you to Asia to like Hong Kong. I was 23 years old and I was in Hong Kong four times a year going from Hong Kong to China, India to Taipei to Japan to Tokyo and, you know, working on that line double RL was it was a gift because, you know, the dream for Ralph was like to replicate a garment from the 1930s. So like, yeah, and how do you do that in 2015 or 2016?
Like you got to dissect every element of that fabric from the yarn size to how the yarn's finished to the finishing of the fabric to how densely it's woven to then when it's sewn, like what kind of stitching do you do to have it be like super durable or crinkle in certain ways and then how do you wash it to break it in? And so like I just started becoming an engineer really. You become a garment engineer at that point and that was like took my passion to another level. Did you guys see, I mean, did you see each other a lot in New York City when you were both because you were based, both of you were based in New York City, right?
So we live together until Karen and I moved in together in 2010. So it's like the first five years we live together. You see, you guys roommates in the city and Alex, you would be going to your finest job and Mike, you go to Ralph Lauren every day. That's the office.
Okay. And I had a great discount Ralph Lauren's. I got the dress Alex for his Wall Street part. You know, right?
How often were you guys talking about the contours of what your company would be like? Like how, when as early as I don't know, a year or two years after graduating or even before, like take me into those like conversations you guys were having. I think the first thing for me was like, when like seeing Mike in the Ralph Lauren world, like you would have me come by the showroom sometimes and kind of like we would go to mansion. You know, I was going from this like, you know, Stodgy Wall Street office, you know, it's barren to just like this amazing world that Mike was living in.
And when Mike would get up in the morning, he would dress a costume, you know, some, they looked like a 1980s preppy guy to a 1940s lumberjack. Like they just the costumes that he wore. It was cool. Like it was just fun to experience.
He was living in this creative world, you know, and I'm living in this like spreadsheet world. And I wanted a little bit of what he had. I started feeling that, you know, by four or five years in and we started, he was like once a month, we would sort of get together on like a Sunday for a couple hours and we would start talking about it. What do we want to do?
Where do we want to go? What products do we want to make? What's the brand going to be? What's the brand slogan going to be?
What's the name of the brand? We spent years, two years probably trying to think about what the name of the brand is going to be, being anywhere with that. So settled on our last name. What was the point, Mike, where you felt like, okay, I'm ready to leave Ralph Lauren, like, I mean, that's a huge platform, right?
And a huge launching pad. Like I'm sure you could have worked for any number of other fashion brands and had an incredible career, right? Maybe become the fashion director or the creative director of a couture house or something like that. But clearly that was not your in your part, your plan.
So what point did you start to say, okay, I'm ready to kind of do this thing? Yeah. I started feeling that way when I felt so comfortable when I could like take an original design concept and like I know I could see the finished garment. So like if it started with like a fabrics watch that was this big, like if I found an antique piece of fabric from a quilt right from the 1920s, I could take that and visualize a cool shirt with these type of buttons and this type of wash and these type of seams.
And I just knew I could make it. And I'm like, if I can do it here, it's go time. Did you have any fear about leaving Ralph Lauren to start something? Sure.
But again, when you have the identical twin brother, who's like, when you're ready, dog, when you're ready. Well, so all right. So in 2012, you officially quit Ralph Lauren and I will get to that in a sec. But before you do that, in high school already, you had this brand coast to coast to curve.
Yep. Okay. That was not going to be the name. But the concept was basically the same.
It was going to be a surf and meet street where brand. Yeah, more probably more like surf meets New York fashion. And what did that mean? Like if somebody said, okay, Mike, tell me, all right, big shot.
You missed a big shot as a designer Ralph Lauren. What do you think you're going to do that's going to be so interesting? You know, you're like, you're like 27, 28 or 30, maybe. And so some of them can come on kid.
What are you going to do that's going to be better than all these things out there? I would have said, remember how big the surf brands were in the 90s? Like Pac-Sone and everyone was in every mall, right? These were billion dollar companies.
Quick soldering. Yeah. Huge. I think that was like a $3 billion company one point.
Bullcom. Yeah, you name it, Rusty. Like they're these huge brands. Yeah.
And they sold to a subset at a quality and a price point, but there was fervor around that world. And like, yeah, what if I took all of my experience in like luxury, American fashion and implemented that into like the surf coastal style that I grew up with? People love vacation. People love the beach.
People love that outdoor lifestyle. And what if it went toe to toe with premium fashion? Got it. So how could I like take board shorts, for example?
I was like the first product I designed for Fairety. And how could I take board shorts and instead of being like really long, kind of like monochromatic, you know, Prince sort of not that interesting. Board shorts for surfing. Exactly.
Exactly. For sure. For sure. For sure.
They were traditionally long and you wouldn't wear them on the street because you would look like a weirdo. Yeah. And on the church, but if you were in like, you know, I don't know, Chicago in a bar or a bit, but you would want to make it so people could wear it like walking around the street of a city. Exactly.
And at the same time, do you remember the line, Villebequen? Villebequen? Yes, of course. It's from France.
Yeah. Like explode. It like exploded. Yeah.
It started. So it was huge. And all of a sudden people are like, ah, 250 bucks for a bathing suit. Sure.
Bathing suit. Yeah. And then before it was like 69 bucks, quicksilver, right? So like, right.
So all of a sudden I was like, oh, there's somewhere in the middle for me. There's a playing ground of like taking surf and starting to put a luxury element to it. Meantime, Alex, it sounds like you were just waiting for your brother to make this move because you were waiting to jump ship as well and help him. But here's my question.
I mean, you're pulling in a hundred thousand dollars. You're a young guy making a ton of money in New York City because that's what they pay you. Did anybody, I don't know, parents, friends say, making like a hundred thousand dollars. Like, what are you doing?
You want to quit this and start this fashion brand? Like what? Yeah. People I worked with.
I remember I went to my mentor mine and I was like, I'm going to start a company with my brother. I'm thinking about leaving and he looked at me in straight face and said that is the dumbest thing I've ever heard. Like you're joking, right? And I remember like that was the first time I really said it to someone besides like a friend of mine and I was like, oh wait, I definitely had a moment before I was leaving where I was like, do maybe I just finance Mike, you know, I can keep my job because you had the cash.
You had the money that you were saving. I had to cash. So I was bank rolling kind of like the early developments. You know, Mike was once he left for I've only done a job.
So I'm sort of bank rolling it moving along and I remember like one day came from from like business trip overseas and I was exhausted. Karen, I were she was home and I was like, should I do this? Like, you've known me for so long. I should I do this?
And she was like, you got to do this. Alex, I read that your dad who I know he's not he's no longer around. He was not super psyched that you were leading finance. Yeah, he before he passed, you know, it was like 2008 to us nine.
I would, you know, we'd get together and I would tell him that, you know, we're starting to work on this and get his advice and he kind of took the stance of, you know, just keep doing what you're doing, build your career. You know, you can finance Mike. You guys can do it together on the side. And I think he had an experience in his career.
We had some ups and downs and I think he saw what that did to his relationship with my mom and the family when you have money and then you don't. And I think he's like, he kind of looked back and was like, I would have just kept that first job I had in that one firm and moved my way up. You know, life would have maybe been easier. And so I think that was his experience.
So I definitely always had that in the back of my mind, which is understandable. We care about you. Right. I mean, I mean, wouldn't you agree?
I would totally agree. Yeah. Maybe even advice to my own kid, but I think I've learned that you can get two forms of advice and they're both right. Totally.
And so you got to pick what's best for you. Yeah. But I honestly, when I made the decision that I was going to do this, I just was convinced it was going to work. Mike, did you have that confidence when you left Ralph Lauren?
Were you absolutely sure this was going to work? I was just thinking about the fabric I was going to design first. You know, I'm such like a methodical engineer like that. You're like step by step.
Yeah. I was like, all right. First, like what's the product? Okay.
I took a trip around the world and I went and sat with my favorite factory owners and I said, here's what you think. And yeah, but and you could do that because you already knew them, right? From your time at Ralph Lauren. That's what I'm saying.
It was such a gift. Yeah. You know, you go when you do these business trips, like especially in other cultures, like every night is dinner and you meet the families and you're just like, you're so interconnected. So like I was very close friends.
I mean, I'm still to this day one of one of the owners of the factory is I call a very close friend. He was one of the first guys to give us money when we started the brand. So building product is so hard. They just knew I wasn't the typical employer just came and clocked it.
I thought I was always there too late. I was always telling one engineer like, what if we change this? Like what if we did that? You know, and so like they saw the opportunity in me, right?
Because you have to sell yourself and a lot of it was, you know, we started from scratch from like the yarn, right? Because a lot of the synergy of ferrite was like, we were going to do it. We were going to do like one idea Ralph Lauren from a quality craftsmanship, but we were going to do it from a Patagonia material perspective. It started with like, what was the recycled fiber to make the board shorts with?
What did you need it to do? What was going to make the board shorts are probably like the traditional surf shorts are probably made from polyester nylon. Yeah, exactly. So I'll get that with you a little bit.
So you need the synthetic to keep it so it's hydrophobic, right? So it doesn't absorb all the water. Right. So we knew cotton wouldn't work cotton wouldn't work a little cotton.
I found out could work fine. And what was what I did was it was like, right? First, you got to find what's the best version of the recycled filament yarn? And that's from a company in South Carolina called Unify.
They're like, they just make the best version of the recycled polyester from plastic bottles and stuff. So it's like, all right, no one's really doing this mix of like, I still like the way cotton feels. There's like a feel to it that feels like softer, a little less sticky, let's just say on your body. So I kind of just kept working and working and working.
It was like trial number six, right? If I only had 17% cotton with the recycled polyester, it didn't change the quick drive mentality of it. But when you touched it, you thought it was a regular fabric. You didn't think it was a board short.
And Alex, how much money did you make available to do this? Like you had some saved cash, probably living as you know, frugally as possible. But how much money did you were able to put in? Yeah, the first inventory, I mean, when we did our first inventory buy of the board shorts that Mike developed, the initial deposit was like $150,000.
And for the year that Mike was after Left Left Lorn, he rented a little studio and he set up shop there. And he set up his concept wall, some of the branding, the fabrics that he was working on, he was there seven days a week all the time. And I would go over there on the weekends to catch up with him brainstorming about the business. And so that kind of went on and on for months and months and months.
And I loved it. I freaking loved it. And I was just feeling like I wasn't really enjoying my job that much anymore. I felt like my dad was in my head still, but I had to make the decision.
It was getting closer. And I just had a couple sleepless nights and just like woke up in the middle of the night, turned up caring and was like, I gotta do this. When we come back after a quick break, have a cross-country road trip, an old-fashioned catalog and a boutique clothing store in Japan. All help the Fairety brand get on its feet.
Stay with us. I'm Guy Raz and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz.
So it's February 2013 and Alex Fairety quits his finance job to go all in on a new fashion brand with his twin brother Mike. They're looking to raise some seed money, they order their first run of clothing, and they're planning to launch their website in the spring. And I remember we launched the website. Alex and I were like, if we're going to launch this brand, we have to be on a surf trip.
So we went to Puerto Rico at a friend of a friend's apartment in San Juan that had good Wi-Fi. We were with our buddy who was helping us with the final backend of the website, making sure everything was linking, et cetera. And at one minute, it was like, the website was live, and there's nothing we can do, and we went surfing. And we got some good press hits out the gate, and then it's like, all right, we're selling stuff.
And just board shorts. That's the only thing available. Men's board shorts. And women's pecanis.
And women's, okay, guys. So it's just when we're, it was the first product that we made. And I had started sort of six months before, you know, we started reaching out to people that we knew, kind of friends and family and people that we had relationships with. And so I started during that time period, trying to raise our first kind of angel round.
How much were you looking to raise? $1 million. And you did it? You got it?
We got it. And so I think that given your backgrounds and your track record, it wasn't, it wasn't easy. But like, yeah, I mean, you guys are smart guys. You had all this experience in finance, your brother, at all this experience in fashion and design.
I guess you get checks ranging from what? $5,000 to, I think our biggest one was $100,000. So I think we had 44 investors in the first round. And pretty much all connections, people you knew were loose ties.
Absolutely. Friends of friends. Yeah, we did a couple smaller add-on rounds to that, because I think what we figured out quickly is that inventory eats up capital really fast. At some point in the first year, we needed to figure out how to make clothes, because we were moving from bathing suits into a full clothing line.
And so we needed to find somewhere to make the line, because we were going to only order 50 units, 75 units, like small quantities. And so this one factory owner, who's one of my close friends, who's an amazing guy, we met with him, talked about the business, and he said he invested and then opened up his factory to us for the first production run. All right. I want to talk business for a sec with you, Alex, because you had experience in working in private equity and investment banks, but not necessarily with inventory management.
You could build a financial projections, you could build a P&L, but this is different. Retail, especially apparel, is a different kind of beast, because one misstep can really put such you back. Too much stuff hanging around that you're at that eventually throw away. You're dealing also with different sizes.
You don't want too much excess. You know you're going to throw stuff away. It's a restaurant. At the end of the day, the restaurant's got to throw away food.
So how hard was that learning curve for you? Was it pretty steep? It was incredibly steep. I'm still 12 years later, still trying to learn it.
And I think that if I look back at what was one thing that I did not anticipate or understand going into this was how we had to communicate in difficult inventory management was going to be. And we learned it right away, because we have to sell this amount of clothes in order to survive. What was the amount that you had to sell to the first year? We had in our mind that we need to sell $1,000 a day.
That's an ambitious goal, right? Especially when an unknown brand. First of all, how did you get people to be aware of the website? Were you doing Facebook ads?
Like what were you doing? We weren't doing Facebook ads. We had an Instagram account. And we got some press right when we launched.
So we had a nice initial launch in April for the first couple of weeks. We had a lot of friends and friends and we were emailing them and we got a couple thousand days, five thousand days. Wow, this is great. And then all of a sudden it's like crickets.
There's nothing. Wow. So clearly sales are slowing down. But I read that by the summer of 2013.
You guys come up with a unusual idea, which is you basically take the clothes on a tour of the country. Like you were a band or something. Like I read that you built a mobile pop-up store. Can you tell me about that?
Yeah. So Alex Orger had this little studio in Union Square 2012. Food trucks. They're everywhere.
And I was like, why don't we just have a food truck store and we can travel and just get a food truck and just have your stuff in on hangers in the store? Absolutely. But you know, I'm not a plug and play kind of guy. So I had to design a custom trailer with hydraulics that looked like, you know, a 1940s cape.
You know, I had my mom who's an interior decorator. I helped me with it. Another friend is an architect. Just go just tell me like a couple things.
And we built this basically trailer that was completely clad in reclaimed wood and you opened it up and it was birchwood on the inside with photography and cool fixtures and racks and the two sides of the trailer completely opened on hydraulics onto a, you know, sort of porch on both sides. And so we could basically pull it on a pickup truck, go anywhere and sort of create a clothing store. And then you would have a plan to drive around the country or? Yeah.
So it first started with, yeah, we basically took the trailer and we started like just plotting out where we would go. We did a mix of like individual clothing retailers who we reached out to and we were like, hey, we could do an event in your parking lot or we reached out to like concerts, like festivals and like, hey, we did this festival in Charleston and we just like plotted it next to like all the food trucks and we're selling bathing suits. Also like the founders are there like every time I've gone to like a craft sphere or because that's the kind of thing you guys might have been doing, right? Like you go there and you're like, oh, this is the guy who's making the leather pouches.
Yeah. And you're like, wow, these are really cool. Exactly. Like, okay, it's a cool expensive 90 bucks.
But you know what, the guys here and I don't buy this. It's not mean like, you know, some giant factory and buy some faceless person like this is the guy's making it. And especially when you're outside of big cities, people like events, they like something different. You know, there's not a lot going as much going on in Charlotte, North Carolina as there as it's going on in New York City or LA.
So it was a cross country trip through the Southeast. Yeah, we did a U of the country. How long did that take? 35 days.
Wow. I mean, how long were you guys driving per day? Like eight, 10 hours? Yeah.
So you guys are doing like days in and like fast food and whatever you had to do. Yeah, a couple of flat tire and tree port lost the keys in the trailer somewhere in LA. The funniest story is like when we're on the PCH in Big Sur and we just park on the water and like a dozen people pull up and buy stuff from us. You open up the store on the side of the road.
Yep. Right when there's a curve and there's a big like and 12 people showed up and never seen this other kind of good. How about something from it? We sold $59 on the side of the Pacific one by Big Sur.
I'll never forget it. It's a great idea because it's like a great way to at least get your brand in front of people. But meantime, like you're running the business, right? So you guys are driving this truck and then like you had to deal with the suppliers and they were probably like calls you to be on and you were like you had to be working on it.
You were in CAD to design clothing. Yeah, you were in CAD. I just a lot of back and forth with your partners at the factory. You know, your partner and your partners on the garment side of things.
So this was May. Okay. All of the trade shows for spring 14 start in July. Okay.
So I needed all my samples July 1st. Let's just say then once we got back and we started the trade show circuit where it was like Faraday's launching a collection. The trailer became our trade show booth and it was like, oh my goodness, this is amazing. You took the trailer to the trade shows.
Yeah. So we floor the trade show. Yeah. So the New York trade show, they let us park out front the front door.
So we're actually on Mercer Street and Soho and we're out front. Granted, it was 100 degrees that week. Still every buyer who walked in saw this cool thing and then we went to Vegas and I think that helped just like as buyers come through. And we were like, oh, this is something different.
This is something that feels bigger than maybe it is. How much did you go with 400 grand that first year? What did you do that first year? So what ended up happening that first year was we ended up doing like 365, 350 indirect consumer sales.
And you know, this sort of experience on the road showed me the power of these small specialty retailers across the country because we didn't have to spend any money on marketing. We just had to get the beach house there. And so when we when Mike designed that first line, there's momentum. There's like these stores are interested in this brand.
Online, no one was interested in us. In person, people were interested in us. And then now I found these buyers from these sort of clothing stores that were interested in what we're doing. And I'm like, this is going to be what gets us going.
At what point did you start to offer other items besides board shorts and bikinis? Yeah. So that was the collection, that first collection spring that we showed in 13. In that fashion show.
Yeah. In that trade show. And that included just give me roughly like T's T shirts and polos, short sleeve printed button downs, long sleeve flannels, you know, wash sweatshirts, you know, shorts, board shorts, couple jackets. It was like a full, you know, full collection.
What was it that like, how were you able to differentiate in your mind? I mean, it's sort of a laid kind of like laid back, coastal vibe. Like what made it in your view different from any competitors? The type of stores we were going at were more of a luxury fashion retailers.
So we were going after Barney's. We were going after Japanese retailers. We were going after Stag in Austin, this awesome store there. And so these stores kind of had this, let's talk about the American market, right?
They had this whole of like, all right, we either have suiting, dressy, haberdashery suiting, or we have Ralph Lauren, or we have like golf brands. They sort of were like, we're kind of missing a rugged casual take on American, you know, that's got some coastal vibes. You know, at that point, Tommy Bahama was kind of out of fashion in that world. They just came in there like, we've just been missing this.
The price point was higher end. The quality was higher end, but the vibe was just like so chill. Yeah. And then you had in the landscape at the time, you know, you had a store in LA called Fred Segal, which was like famous.
And they, you know, a lot of it's like who takes a run at this brand and gives it a chance early. And so the buyer at Fred Segal really identified with the brand, I think, my coming from double R L, which is a very well regarded mind in clothing, saw the potential. And so he gave us some real space at Fred Segal in LA in Santa Monica. And one of the other things was all of a sudden we get this random email in Japanese from a store called Journal Standard, which is a very well known kind of cool specialty boutique in Japan.
Oh my God, Journal Standard, Japan. Like, this is amazing. And then the woman who was with Journal Standard is sort of like an agent. She helps other Japanese brands.
And then all of a sudden it was like Journal Standard. And then there's another store called United Arrows. And then there's another store called Isitan. They all wanted to come see the line.
And that was really when the business went from, you know, $350,000 ecom mobile feature business to in one year once we shipped this product, you know, we're going to be in some of the best stores in the world. Was the idea, because, you know, we've done so many direct to consumer brands, Warby Parker and Harry's Razors and, you know, all these brands that really kind of blew up in this time period. Was the idea to be a direct to consumer brand, like to be a web based business where the vast majority of your stuff was being sold online or were you already thinking, no, we want to be a wholesaler. We want to be in Nordstrom's and Bloomingdale's and we want to do both or we want to, because the margins on direct to consumer are higher, the better.
So what was the idea that you had? When I was working on the business plan, I was studying 10 K's annual reports of Ralph Lauren, coach, Louis Vuitton, you know, whatever brands I could get my hands on that were public that I felt were like the best, most valuable brands. That's why that's really interesting. You were looking at their annual reports of these companies who you aspire to be one day.
Exactly. And when you read about these brands, you know, they do segment breakouts, wholesale retail. That time there wasn't really splitting out of ecom and retail yet, but it was always like wholesale was half the business. Retail, ecom was half the business.
So I was like, this is how you build a brand. So we have our initial business plan. I'm like, I'm looking at it before. And in year six in the business plan, it said that retail would be 45% of the business.
Online would be 35% of the business and wholesale would be the rest. And so wholesale was always a part of the plan. But what happened was wholesale got going first. So year two of the business, wholesale 75% of our business, because that's really what took off.
And that was because the trade shows, you went to the trade shows and you got all these orders. Exactly. So we had Nordstrom picked us up the first season. But nationally was Nordstrom national.
No, it was 10 stores, you know, 10 stores, Barney's got four stores. And then Japan was probably 40% of that first year. So sell this. Wow.
I mean, again, it proved to be the right decision. But like already, I'm just curious how you thought about this. Because in 2014, like, you could start to see that people were not going to department stores as much. Like today, and again, even today, it's a mixed bag.
If you go to San Francisco Union Square, nobody's in the department stores. But if you go to like the Westfield shopping center in La Jolla, which is a beautiful outdoor mall, it's packed with people. Or you go to like a suburban shopping center in Palo Alto, or I'm sure there's some on these coasts where you guys are. They're busy.
But there was an argument to be made at the time that like, oh, this is not going to work. Yeah, I think it was also just the function of the capital that we had. And so when you think about the warbies at the time and some of these, they raise a lot of cash. They raise a lot of money.
Because when you do the financial model of spending money on marketing, commerce, first customer acquisition, LTV, like, it's not dollar one profitable in a meaningful way. And so when I'm like, I only have this amount of runway, I only have this little amount of money. The wholesale business makes sense for me because there's been an industry that's been set up called the factoring business where there's especially finance companies that once you get an order from a retailer like Nordstrom, you can give that order to the specialty finance company. And they will first give you what's called PO financing.
So for some interest rate, they will give you an advance on a high interest rate. It's a high interest rate. It's a high interest rate. It's a high interest rate.
Yeah, it's a high interest rate. But it's capital. And then once you ship the product, you send your invoice and they'll dance you the money. So when I was thinking about the float of this business and how do you make the business to scale without raising a lot of money, wholesale just naturally makes the most sense.
Yeah. I mean, I guess so because you didn't you didn't have your venture back to have hundreds of millions of dollars behind you, you actually were forced to do this. Yeah. So we, you know, we didn't make any money our first month years, but we didn't we were losing like $500,000 a year or $400,000.
We were losing $10 million a year. So we had to. There was no alternative. We couldn't just lose a lot of money.
But the other challenge going wholesale is your stuff has to sell. And if you, if me or anybody walks into a Bloomingdale's and I just need a pair of trousers and I'm like, I've got 15 minutes and this has happened to me by the way. I know that like, I know that like, you're an unknown brand. How are you able to compete in the most?
It must have been harder times to get attention in those places. Yeah. The department stores were tough. It took much longer to get the business moving in the department store world where we saw the initial success was in these sort of smaller specialty stores where, you know, think of the store.
It's an owner who buys the product. He's the number one salesman. He knows all the customers. So he's got to sell what he buys.
And so my job was to try and accumulate as many of these specialty clothing store customers as possible. And they would give us a shot, you know, a couple thousand dollar order, you know, 40 pieces, 30 pieces. But in those type of environments, those buyers are also the same. Sellers, they had it.
They got to sell it. So we found that those stores that could really move the product versus the big department store. So we had very little luck, even though we got some of these small orders from Nordstroms in the first bunch of years, it wasn't much. It was really small.
But I guess it was enough to generate some interest or buzz or knowledge or awareness. Yeah, you just stick around with those department stores. You know, there was like a lot of just being frustrated. Like, I wish the business was bigger.
I wish the business was bigger. And then like, you know, X amount of years in when like Faraday's got more notoriety, it works. And you also, I think there's a product, you sort of got to figure out the product that to your point. You come in, you know, you're right.
I can go pants eyes. Like, what's the product? If you walked into Nordstrom, that would sell itself. And what was that?
Yeah. For us, it was plaid shirts. Plaid shirts. So I think Mike designed shirts around Warren.
And if you go back to this world we were living in in 2014, 1516, it was like very contemporary clothing was like solid black and white or very preppy. Like vineyard mines was kind of a big, big rent at the time. And there just wasn't a classic great sun-fated plaid shirt that you could buy. And so Nordstrom, you know, a lot of West Coast stores, a lot of stores in the Pacific Northwest, they didn't have this sort of like premium high-end plaid flannel shirt.
And that was the first shirt at Nordstrom that we really saw a velocity with. Were you able to do anything to increase visibility at the Nordstroms and Bloomingdale's famous story? And we had this on our show, Sarah Blakely was actually our first guest 10 years ago in the launch of the show. And true story that she would go into the Neiman Marcus's and she would like make sure to put the Spanx by the register when no one was looking.
And she would like front face them and make sure that she positioned them better. Cause she goes to a few Neiman Marcus stores. But now you're like shipping your stuff to these department stores and are you just kind of crossing your fingers and hoping that people notice it? Well, that first year when we shipped to Nordstrom, I visited every single one.
It was 10 different Nordstroms across the country. And I did a version of what Sarah did. Moving someone else to another rack, moving our stuff. Without asking permission.
Oh, yeah, you don't ask permission. You just do it. We still do it. We still do it.
Like I went to Bloomingdale yesterday and I moved our stuff and like moved something out. But, you know, the biggest thing I found successful was like it was me walking into the store, telling a salesperson, Hey, this is my brand. Here's my story. Here's why the products good.
I just found that those interactions to the sales people were like pay dividends and dividends and dividends because they're the ones who sell it every day. And that human connection and you can't do that at scale in a department store. I can't talk to everyone like that walks in and looking for a pair of pants because I got home. I got a family.
But what I can do is I can get the sales people to be on our side. Yeah. How did you guys open your first store? You actually started with a pop up right in Greenwich Village on Thompson Street between Prince and Spring and then became a permanent store.
It was sort of a pop up for about three years. Yep. And that was kind of the first time my mom designed a little store is about a 200 square foot little store for an on Thompson Street. One of the things I think is really interesting that you did in the first maybe year and a half was you sent out a print catalog, which you think is counterintuitive.
Like, wait, print catalog because I get print catalogs. I don't look at them, but I'm not necessarily the target. Like, I do think that probably a lot more people look at them than I would assume because it was work. Like people were literally dialing a 1-800 number to order.
Yeah. I remember there was an article and there was some news in the industry in 2000 early 2015 that J. Crew stopped doing their catalog. And it was like a big thing.
You know, J. Crew, every catalog for J. Crew for so many years. And then one day they just decided to stop doing their catalog.
And I was like, that's interesting. I remember as kids, we'd always got catalogs. I'm like, they're just not catalogs coming. And I don't know.
I was, I think we were like, we got to do some type of marketing. And I was like, why don't we just try a catalog? And so that was our first paid media that we ever did in the holiday 2015. It's just interesting how you chose to spend your money because again, it's counterintuitive.
It's like, like, some brands take radio ads, you know, like it's counterintuitive. But those things still do work. The American classics, like we're almost started by catalogs, right? Like old pennies catalogs in the 40s and Sears catalogs.
Like, so I think just the idea of we were just selling product that needed to be shown in a way that was interesting. So I think there was like, when a customer picks this up, no different than the person who walked into the specialty store. And I was like, this clothing looks kind of interesting. Fair, fair, fair.
I don't even know how to say it, but this stuff's interesting. I'm going to just keep, I'm going to take a look. Meantime, you are, you did raise a little bit more money from your existing investors, right? Like, because you had cash coming in.
But this is an expensive proposition. You've got to order stuff. You've got to pay probably pretty quickly. And then you're not getting the money in for 30, 45, sometimes 60 days, maybe longer.
Yeah, we were constantly running out of money. And that's because of the inventory cycle of the business. And it's just a constant playing your payables, trying to get as much extent on the payables, trying to make the cash flow of this business work. But it was really, really stressful for me because, you know, I felt like the whole business, the financial, it was just kind of on my shoulders to make this business work and be successful.
So it was like, I just got obsessed with how we sell the product as much as possible. Nothing, you know, the whole stuff isn't sort of hit the first year and a half. And then it kind of stopped. And the e-commerce business, just until we did that catalog, I didn't really see any customers coming in in droves because we had spent the money on the marketing.
And the retail store was doing $250,000 a year or $300,000 a year. It's not a million millions of dollars for sure. And so we're like, what's the next thing we need to do to keep scaling in? When we come back after the break, just as the money starts to run out, an angel who also happens to be an investor appears from then tuck it with an offer.
Stay with us, I'm Guy Razz, and you're listening to How I Built This. Hey, welcome back to How I Built This, I'm Guy Razz. So around 2015, Alex and Mike are two years into building their fashion brand. They're selling across multiple channels, the Faireity website, wholesale, and one retail store in New York.
But managing cash flow is a constant challenge, and they're still not making a profit. And so I actually went back to my investment firm for two months as a consultant because I ran out of money. So everything was stressed. Everything was stressed.
And one of the guys I used to work with was like, I got coffee with them just to catch up and I was like, I needed money. I had no money left. Well, the whole time we're telling all of our factories, give us another month to pay, we're basically like 60 days becomes 90 days becomes 120 days. So half of our email traffic was just deflecting payment.
And you know, we had a couple employees at that point, but you gotta be so positive. And just like everything's awesome. The brand's so cool and amazing. So in many ways, I'm sort of end up being the energy a lot around the positivity of the brand, as Alex sort of burdens a lot of the stress of the brand.
But kind of in that year, we sort of started playing with what would become like probably our first hero product, which is the Legend Sweater shirt, which is sort of like our take on a flannel shirt meets kind of a sweater. And that was in like about 2015, I started working on it, and then we launched it in 2016. And it was the first product where we put it in the store and it evaporated. Everyone who touched it bought it.
And that product really helped us be like, all right, this is how we have to be a direct-to-consumer brand. You guys had a basically like the story I read is that around 2016, you kind of like get cold, contacted from a guy in the Antucket or who saw the shirt in Antucket and he wanted to invest. And he became, I guess the stage or soul outside non-family member, friend's investor. And this person is like, private.