Monday, July 4, 2016

The real story behind the Detroit-made watch Obama just gave to David Cameron



President Barack Obama shows off his Shinola watch to the United Auto Workers-General Motors Center for Human Resources during a trip in January 2016.
AP/Paul Sancya
During a recent visit to the UK, President Barack Obama gave British Prime Minister David Cameron a gift: a custom-made Shinola watch with the presidential seal engraved on the back.
It's no surprise that Obama would give Cameron a Shinola - after all, he's a known fan of the company, and has declared it a symbol of American manufacturing bringing jobs back to the US.
And it's true: Shinola makes a high-quality, handsome watch, and it's one of only a few companies currently assembling watches in the US.
The Detroit-based brand has cultivated a cachet among consumers who are looking for a nice watch, but who aren't willing or able to shell out the coin required for a high-end Swiss brand like Rolex.

Shinola CMO Bridget Russo told NewCo that the company generated $100 million in revenue in 2015, up from $20 million in 2013 and $60 million in 2014.
Despite the fact that the brand has built a large following across the country, there's a little more to that story.

A Detroit-raised company

Shinola
A Shinola store in Portland, Oregon.
Facebook/Shinola
Launched in 2011 by Tom Kartsotis of Bedrock Brands (who also own Fossil, Filson, and Swiss watch brands Ronda and Skagen, in addition to minority stakes in several other brands), the name was purchased from an early 1900s shoe polish brand called Shinola. The shoe polish brand is where the famous 20th-century phrase "You don't know s--- from Shinola" came from, according to Adweek.
Though the company is not as old as its name and marketing might suggest, that's not necessarily a bad thing - plenty of companies revive old trademarks in the hopes of cashing in on nostalgic cachet.
Shinola moved into a former General Motors design lab in Detroit to build its watches. It proudly stamps "Detroit" - the city in which Shinola's headquarters and main factory lies - on all of its products, even a shoeshine that the company makes in Chicago, according to The Washington Post.
Kartsotis and the other early members of Shinola had no previous ties to Detroit prior to starting the company there, but the company says it is committed to the city, providing well-paying manufacturing jobs to its citizens and investing in its infrastructure. It sponsored the creation of a dog park in Midtown Detroit in 2014.
"Shinola is, and always has been, a job creation vehicle and our intention is to create jobs in this city we now call home," Shinola President Jacques Panis told Business Insider.
Shinola hired more than 300 people for its Detroit factory and headquarters, and it employs about 200 more worldwide. Shinola trumpets the fact that they are providing jobs to an economically depressed city in desperate need of them. This lends a philanthropic air to the company that customers and employees can buy into, similar to the Toms Shoes' giveback and Warby Parker's "buy a pair, give a pair" program.
Detroit is also associated with quality American manufacturing in many people's minds, and customers respond strongly to it when used in marketing materials.
An unnamed employee told Crain's about a focus group Kartsotis had commissioned before choosing the brand's home base. The focus group was given a choice between a $5 Chinese-made pen, a $10 US-made pen, and a $15 Detroit-made men. People consistently chose the Detroit-made pen over the other options, which suggested others might be more inclined to pay a premium for products stamped with the authentic Detroit name.
"There's really nothing else like Shinola. It's a brilliant thing they did, this association with Detroit, a very authentic look and this authentic story," Northwestern University marketing professor Timothy Calkins told the Washington Post. "This is a very carefully constructed brand done by very savvy brand builders."

Quartz watches

Shinola
The Shinola Rambler watch.
Facebook/Shinola
The watches made in Shinola's factory are hand-assembled using techniques from Swiss sister brand Ronda, which came to Detroit in the early days to train the workers in the new workshop.
Some criticize Shinola for the fact that they emphasize craftsmanship and engineering in their products, but they still use quartz movements and charge a premium for it. Quartz movements are relatively cheap and easy to produce compared with mechanical watches, since they have far fewer moving parts and require less watchmaking expertise.
Shinola watches retail between $475 and $1,125, while quartz watches made by Skagen and Fossil (Bedrock's other watch brands) hover around $100. It's likely that some of the higher costs of manufacturing in America are baked into that premium, as well as the high-quality materials Shinola uses, but "compared to some of the other products out there, they're definitely charging a premium," Ariel Adams, founder of undefined, told the Detroit Free Press.
A Shinola spokesperson told Business Insider that, in order to produce watches at scale and be the job creation vehicle it hopes to be, its watches must be made with quartz movements, as they require much less detailed work. Shinola does hope to one day create a mechanical watch, however.
Some have also questioned Shinola's stated commitment to Detroit, since the product's prices are out of the range of many people who live there.
"The thought of a company selling such luxuriously priced goods in a city that, according to the 2010 Census, has a per capita income of $14,000 is downright laughable," writes Jon Moy at Complex.
Indeed, the company's first retail store outside of Detroit was built in the trendy, wealthy Manhattan neighborhood of Tribeca, inside a townhouse Shinola purchased for $14.5 million, according to The New York Times. Shinola has since opened stores everywhere from London to Miami and Los Angeles, and the watches are stocked in almost 1,000 stores worldwide, according to the company's website.

"Made" vs. "Built"

Shinola
A watchmaker assembles a watch in a Shinola's Detroit factory.
Reuters/Rebecca Cook
Shinola's tagline is "Built in Detroit." The company builds all of their watches and bicycles in the 30,000-square-foot Detroit factory. However, the company has received some flak for assembling these watches and bicycles using imported parts, like Ronda quartz movements that are made in Switzerland and Thailand. (The bicycle frames are made in Wisconsin.)
Recently, the Federal Trade Commission has taken issue with a Kansas City-based watchmaker, Niall Luxury Goods, for making a "made in US" claim. The FTC requires products labeled "Made in USA" to be composed of "all or virtually all" US-origin parts, but their watches used Swiss-made movements, which the FTC found violated that requirement.
Shinola does not make the same "Made in USA" claim as Niall, but that may not matter to the FTC.
"It seems likely - without consumer perception evidence showing otherwise - that consumers would interpret a 'Built in' claim as equivalent to a 'Made in' claim, and a 'Built in [city]' as equivalent to a 'Made in USA' claim," FTC spokeswoman Elizabeth Lorden told The Detroit Free Press, while not speaking specifically about Shinola. "Therefore, the same 'all or virtually all' standard ... would apply."
Shinola disagrees with this characterization, and claims that "Built in Detroit" is accurate and not duping the customer.
"We have been transparent as to the origin of the parts of our watches and do not claim to be qualified to say 'Made in the USA' on our watches," Panis told Business Insider. "For watches to be considered 'Made in the USA,' virtually all parts would have to be manufactured in the US and unfortunately the supply chain does not exist, at scale, in the USA today."

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