Faherty Brand: Alex and Mike Faherty. How Jersey Shore + Manhattan Chic grew to 80 stores.

0:01 Did you have any fear about leaving Ralph Florent to to start something? Sure. But I felt so comfortable when I could like

0:18 Take an original design concept. And I know I could see the finished garment. So like if I found an antique Right from the nineteen twenties.

0:28 I could take that and vizualiz. 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.

0:46 Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. They built. Guy Raz and on the show today, how a college admissions essay grew into Faerty, 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.

1:21 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.

1:34 When Mike and Alex Fayerty 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 Fairdy 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 A strategy most people thought was outdated, maybe even doomed.

2:00 And yet, that contrarian move helped turn Fayerty into a$250 million brand. Now if you're not familiar with it, Faerty 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 Fayerty 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 in college and then worked at Ralph Loren,

2:37 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 get paid off. And for Mike and Alex, it was the culmination of a childhood dream of working together.

2:54 The twins are the youngest of seven children. They grew up in a small town on the Jersey shore where they both learned to 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 cloth his dad wore. to work.

3:15 My dad had a pretty good style, so he, you know, I always looked up to him. Like he was 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 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.

3:43 And My dad took me to Bergdorf Goodman. And I remember feeling A cashmere sweater. For the first time.

3:52 And being like what Is that And I was like, there's something I I'm in into this. I'm I'm into walking into Bloomingdales by myself after school and going to the Ralph Lawrence store. And then you get to high school and you're like trying to create my own style.

4:08 And The surf stuff didn't feel like where I wanted to go anymore. So I started like started buying some other pieces to play with the surf stuff. And so Junior year, right, you gotta start thinking about going to college.

4:24 You gotta 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 to Curb.

4:38 And it was My life. Came to the city, the quality of the things I saw in the city, the vibe of the things I saw on the coast, and This line of clothing that I could create.

4:52 I I'm wondering, Mike, in high school, um Uh, did you ever I don't know, feel like you kinda had to hide you know, your interest in fashion and and design, like uh because, you know, high school people can be weird about that stuff. W was that something that you didn't r really talk about much? No. No, because Some of the gift of moving to New York City was like

5:14 Art's cool. Yeah, that's true. 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 mentor like teachers that I was like, this guy's really cool and he's like, you know, a professional ceramicist.

5:29 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

5:41 I'm actually gonna 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

5:52 Whatever, who cares what people say, just go do it. Yeah, I a I should also mention that both of you guys Both of you were really good at sports. I think Alex you played football in high school and then in college. Yes. Uh and Mike, you played basketball at at wash you in in St Louis. And I also read that you majored in fashion design there.

6:11 Correct? And you took a sewing class in college. I had multiple years of showing as a curriculum. Okay. But on the team

6:20 Like I'm just trying to imagine these guys like dude you're doing what? You're s 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,'cause he's like this old midwestern guy. Congruous. Absolutely. And You know, let alone to have an art school kid on the basketball team, like to have a fashion designer.

6:42 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 sew seams backwards and then like stay up another two hours to seam rip it and start again and

7:02 You know, I was the only male student in 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 there was I had that Just stick with it. Learn crack, keep going. Step one on your journey.

7:20 Alex W 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 a clothing business. When he started to talk about that. Did you already at that point see your

7:38 You having a role in 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 the dots that we connect is uh I met my wife She tells the story of when when we kind of first met and started hanging out that I told her I was gonna start a clothing company with my brother.

7:56 When you first met her in college, you said Yeah, when freshman I'm when I graduate I'm gonna start a clothing company with my brother. Yep. And so I think that our friends our world like it was just we kept we said it, so we put it out in the world. I think we were always like we gotta 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?

8:18 I just I'm curious and you may not have the answer to this because uh maybe I'd 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, uh like my sisters are best friends. Absolutely best friends. And my children are really close. My boys are and and I hope they will be forever. But like you guys are grown men with families and you're so tight

8:41 What do they do? to cultivate that and help you guys become Not only brothers, but like best friends. I think some of it is We were the a you know, we were the last two.

8:52 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 just like I don't it's even hard to describe. It just was like a natural thing that we experienced from

9:05 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 guys 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.

9:28 Mike, you knew you wanted to start a business. And fashion of a fashion. Alex, you knew you wanted to work with your brother and so It I mean it sounds like it and just correct me if I'm wrong, that you both went into college Studying these things so then 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, bingo. Yeah, that's true. And I even in uh starting my sophomore year in college

9:54 Ebay was just coming up. Yeah. And uh I used to f in free time I used to go to like the local Marshall's and T J Max's in like the New Haven area and I would buy things and resell them on eBay. Like I got into You know. Whatever merchandising or whatever you want to call it. And so I think for me

10:11 a lot of it was I gotta learn, I gotta figure out what am I gonna bring to the business. Alright, 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 a helicopter there one day on the weekends.

10:27 But but just to make enough money so you could leave and start your This fashion business? Like from the time you got to the Your first job after college? Yeah. It was uh Make as much money as I can.

10:39 and learn as much as I can. And you know, I found myself always wanting to work on the consumer s projects that investments that we were looking at where I could Learn about specific things within consumer or apparel. So I always gravitated towards okay. If I'm gonna do this.

10:55 What can I work on? How do I work on this team? To um To get me a little bit more exposure. And Carrie, who was your girlfriend in college, who factors in'cause she would go on marry each other and she would join the b the company that you guys have started as a co founder, she went to law school at this time, right? She went to California. Yep. Alright, Mike, you graduate from Wash U.

11:15 In two thousand five. And again, like you and your brother are just you you've got this vision. But the vision is I'm gonna start a clothing company, but I'm twenty two, twenty three. 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.

11:33 Wow. So I worked in About a year in kids. And then I got Picked.

11:38 to move into men's design. Ralph Lauren And that was just, you know. That was incredible. Alright, so you you would spend I think

11:45 Seven or eight years at Ralph Lauren. Yeah. Um yeah, a a It and change. And most of the time I read that you were working on their like their double R L line, which is their like outdoor western

11:56 Yeah, it's kinda like super premium but rugged and and very vintage inspired. It's sort of like focused on denim and American workwear and and sort of the heritage of American clothing and trying to sort of replicate that style. Mm-hmm. And then What really clicked for me Was when I started going overseas.

12:17 to the factories and fabric mills. And that just was like That was just they sent you to they sent you to Asia to like Hong Kong. I was twenty three years old and I was in Hong Kong four times a year, going from Hong Kong to Chennai, India, to Taipei. to Japan, to Tokyo, and you know, working on that line double RL was it was a gift because You know, it the dream for Ralph was like to replicate a garment from the nineteen thirties.

12:44 So like and how do you do that in twenty fifteen or twenty sixteen? Like you gotta dissect Every element of that fabric from the yar 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.

13:09 Really. You become a a garment engineer at that point. And and that was like took my passion to another level. Did you guys see I mean, did did you see each other a lot in New York City when you were both 'Cause you were based both of you were based in New York City, right? So we lived together until Carrie and I moved in together in two thousand ten. Okay. So for like the first five years we lived together. You so you guys are roommates in the city.

13:30 Yep. And Alex, you would be going to your finance job and Mike you'd go to Ralph Lauren every day. Okay. Yep. And I you know, I had a great discount at Ralph Lawrence, I got to dress Alex for his Wall Street part, you know. Right. w how often were you guys talking about the contours of what your your company would would be like? Like how when as early as I don't know A year or two years after graduating or or even before like take me into those like conversations you guys were having. I think the first thing for me was like when it's like seeing Mike in the Ralph Lauren world, like he would have me come by the s the showroom sometimes and kinda like we would go to the mansion. You know, I was going from this like, you know, stodgy Wall Street office, you know, 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 un like a costume, you know, some

14:18 They looked like a nineteen eighties Preppy guide to a nineteen forties 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.

14:36 I started feeling that, you know, probably four or five years in. And we started. Like it was like once a month. We would sort of get together. On like a Sunday.

14:45 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? Uh, what's the brand gonna be? What's the brand slogan gonna be? What's the name of the brand? We spent years, two years probably trying to think about what the name of the brand's gonna be. We can get anywhere with that. So Settled on our n our last name.

15:03 What was the point, Mike, where you felt like okay I'm ready to leave Ralph Lorin. 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 and had an incredible career. Right, maybe become the fashion director or the creative director of a co tour house or something like that. But clearly that was not your in your

15:30 So what point did you start to say, Okay, I'm ready to to kinda Do this thing. Um I Started

15:39 feeling that way when I felt so comfortable when I could like Take an original design concept. And

15:47 Like I know I could see the finished garment. So like if it started with like a fabric swatch that was this big, like if I found an antique right from the nineteen twenties, I could take that and 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.

16:08 And I'm like, if I can do it here. It's go time. Did you have any fear about leaving Ralph Lauren to to start something? Sure, but again. When you

16:18 Have the Identical twin brother. Who's like When you're ready, dog. When you're ready. Well.

16:25 So all right, so in twenty twelve you officially quit Ralph Lorin. And I we'll get to that in in a sec, but before you do that, In high school already you had this brand Coast Curb. Yep. Okay, that was not gonna be the name, but the concept was basically the same. It was gonna be a surf and meet streetwear brand. Uh yeah, f more probably more like Surf meats.

16:48 New York fashion. And what did that mean? Like if somebody said, Okay, Mike, tell me, you all right, Big Shot, you Mr. Big Shot is a designer Ralph Lauren What do you think you're gonna do that's gonna be so interesting? You know, you're like you're like twenty seven, twenty eight, or uh th thirty, maybe. And so some c come on, kid, what are you gonna do that's gonna be better than than all these things out there? I would have said.

17:10 Um Remember how big the surf brands were in the nineties? Like Pax Sun and mall ev was in every mall, right? These were billion dollar companies. Quicksilver, yeah, huge. So I think that was like a three billion billion dollar company at 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 what if I took

17:38 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

17:53 Went toe to toe with Premium fashion. Got it. So how could I like take board shorts, for example? That was like the first product I designed for Farity. And how can I take board shorts and instead of them being like really long?

18:07 Kind of like monochromatic. You know. Prints sort of not that interesting. Board shorts for surfing. Exactly. For surfing. Board shorts were they were traditionally they were long and you wouldn't wear them on the street because you would look like a weirdo. Yeah. I mean not a weir unless you were in in on the Jersey shore. Surely. But if you were in like, you know, I don't know Chicago in a in a bar or in sh but but you would want to make it so people could wear it like walking around the street of a city. Exactly. And and at the same time, uh do you remember the line Vilbequin? Yes, of course. Yeah, it like exploded.

18:42 Starting so it was huge and and all of a sudden people are like, Ah, two hundred and fifty bucks for a bathing suit. Sure. Bathing suit, yeah. And then before it was like uh sixty nine 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

19:10 Yeah. But he here's my the question I have for you. I mean You're pulling in h hundreds of thousands of dollars. So you're a young guy making a ton of money in New York City,'cause that's what they pay you. D did anybody I don't know, parents, friends say, uh you're making like hundreds of thousands of dollars? Like, what are you doing? You wanna quit this and Start this fashion brand? Like what Yeah, people I worked with. I remember I had one one mentor of mine

19:36 And I was like, Um I'm gonna start a clothing company with my brother. I'm thinking about leaving and he 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.

19:54 Um, 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. 'Cause you had the cash. You had the money that you were saving. I had the cash. So I was bankrolling kind of like the early developments. you know, Mike was Mike was once he left for Afflor and he was out of a job. So I'm I'm sort of bankrolling it.

20:14 Moving it along. And I remember like one day came from from like business trip overseas and I was exhausted. Carrie and I were um She was home and I was like Uh should I do this like

20:26 You've known me for so long, I should I do this? And she was like, You gotta do this. Um Alex, I read that your dad, who I know he's not he's he's no longer around, he he was not Super psych that you were leaving finance. You know, it was like two thousand eight, two thousand nine, I would you know, we would get together and I would tell'em that

20:46 You know, we're starting to work on this and Get his advice and and he He kinda took the the stance of, you know, just keep doing what you're doing, build your career. You know, you can finance Mike. Um you guys can do it together on the side. And I think he had an experience in his career where he 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 kinda looked back and was like if I would have just kept that first job I had

21:12 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 w wouldn't you agree?

21:27 I would totally agree. Yeah. Maybe even advice. I would give to my own kid. But I think I've learned that

21:34 You can get Two forms of advice and they're both right. Totally. And so you gotta pick What's best for you?

21:42 Yeah. But I honestly when I made the decision that I was gonna do this. I just was convinced it was gonna work. Mike, did you

21:51 have that confidence when you left Ralph Lauren were you Absolutely sure this was gonna work. Um I I was just thinking about the fabric I was gonna design first. You know, I'm such like a methodical

22:03 engineer like that. It was like step. Step by step. Yeah, it was like all right, first it's 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 I'm doing.

22:16 What do you think? And Yeah, but ha and 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. I 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 I'm still to this day one of one of the owners of the factory Indians. I would call a very close friend and he was one of the f 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 employee who just came and clocked in and clocked out. 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 and a lot of it was you know, we started from scratch from like the yarn right'cause

23:04 A lot of the synergy of Farity, right, was like we were gonna do it we were gonna do like what I did at Ralph Lauren from a quality craftsmanship, but we were gonna 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 gonna make the board shorts are probably Like the traditional surf shorts are probably made from polyester or nylon, right? Yep, exactly. So um I'll geek out with you a little bit. So You need the synthetic.

23:32 Um to keep it so it's hydrophobic, right? So it doesn't absorb all the water. Right. So we knew we needed to cotton wouldn't work. Uh cotton wouldn't work. A little cotton I found out could work fine. And what so what I did was it was like all right, first you gotta find what's the best version of the recycled filament yarn. Um, and that's from a company in South Carolina called Unify. They they're like to just make the best version of the recycled polyester from, you know, 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.

24:04 Let's just say on your body, so I kinda just kept working and working, working it was like Trial number six, right? If I only had seventeen percent cotton with the recycled polyester, it didn't change the quick dry mentality of it, but when you touched it, you thought it was a regular fabric. You didn't think it was a board short.

24:24 And m and uh ex how much money Did you have to or did you were you did you make available to to do this? Like you had s some saved cash, probably living as you know Frugly as possible. But how much money did you were you able to put in? Yeah, the first inventory I remember when we did our first inventory buy of the

24:43 of the board shorts that Mike developed. The initial deposit was like a hundred and fifty thousand dollars. And For the year that Mike was after he left Ralph Lauren, he rented a little studio and he set up shop there.

24:56 And he could set up his concept wall. you know, some of the branding, the fabrics that he was working on. He was there seven days a week all the time. Mm-hmm. And I would go over there on the weekends to catch up with him. Brainstorming about the business.

25:08 And so that kinda went on and on. For months and months and months. And I loved it. I freaking loved it. And I was just feeling like

25:19 I wasn't really enjoying my job. That much anymore. I felt like My dad was in my head still. But um I had to make the decision, it was getting closer.

25:29 And I just had a couple of sleepless nights and just like woke up in the middle of the night. Turn to Carrie and was like. I gotta do this. When we come back after a quick break. how a cross-country road trip, an old-fashioned catalog, and a boutique clothing store in Japan all helped the Fardy brand get on its feet.

25:50 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 Fardy 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.

26:24 And I remember we launched the website. Alex and I were like, if we're gonna launch this brand, we have to be on a surf trip. So we went to Puerto Rico. at a friends 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, like making sure everything was linking, et cetera.

26:44 And At one minute was like The website was live. And There's nothing we can do and we went surfing.

26:51 And like, you know, we got some good press hits out the gate and then, you know, it's like All right. We're selling stuff. And just board short, that's the only thing available. Men's board shorts. And women's bikinis. And we made okay, guys. So it's just swimwire was the first product that we made. Mm. And

27:06 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, you know, trying to f trying to raise our first kind of angel round. How much were you looking to raise?

27:22 Uh one million dollars. And and you did it, you got it. We got it. I mean I'm assuming that given your backgrounds and your track record, it wasn't it probably wasn't easy, but like, yeah, I mean you guys are smart guys. all this experience in finance, your brother had all this experience in fashion and design.

27:39 I guess you get checks ranging from what? Five thousand to uh I think our biggest one was a hundred thousand. So I think we had forty four investors in the first round. And pretty much all connections, people you knew or loose ties. Absolutely. People friends are friends. Yeah, we did a couple smaller add on rounds to that. Because I think what we've figured out quickly is that inventory eats up capital really fast. Um, at some point in the first year. Uh 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

28:14 the line. Because we're gonna only order fifty units, seventy five units, a hundred un like small quantities. And so This one factory owner. Um, who's one of Mike's close friends, who's an amazing guy.

28:25 Uh we met with him. Talked him about the business and he said he invested and then opened up his factory to us for that first production run. All right, I want to talk just talk business for a sec with you, Alex, because you had experience in working in in private equity and investment banks, but not necessarily with like inventory management, right? Like you could build a financial projections, you could build a PL, but like This is different. Retail especially c apparel is a different kind of beast because one missed step can really put set you back. Too much stuff hanging around that you gotta then eventually throw away. You're dealing also with like different sizes. You don't want too much excess. You know you're gonna throw stuff away, like it's a restaurant.

29:07 Right at the end of the restaurants gotta throw away food. So how hard was that learning curve for you? Like was it pretty steep? Uh, it was uh incredibly steep. I'm still twelve years later still trying to learn 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 complicated and difficult inventory management was gonna 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 in order to survive that first year?

29:41 We had in our mind. That we need to sell a thousand dollars a day. That's an ambitious goal, right? Especially when you're 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, you know, we had an Instagram account.

29:59 And we got some press right when we launch. Um So we had like a nice initial launch in April for the first couple of weeks, you know, friends or telling about friends, we're emailing everyone we know. And so we're we're got got, you know, couple thousand dollar days, five thousand dollar day, like wow, this is great. And then all of a sudden it's like Cricket. There's nothing. Wow. So so clearly sales are slowing down, but I read that by the summer of twenty thirteen, um, you guys come up with a kind of an unusual idea, which is Um you basically take the clothes on a tour of the country, like all you were a band or something. Uh like a red that you

30:35 built kinda like a a mob up store. Can you can you tell me about that? Yeah, so um So I Alex told you I had this little studio in Union Square. Two thousand twelve. Right.

30:46 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.

30:57 Absolutely. But you know, I'm not a plug and play kinda guy, so I had to design A custom trailer with hydraulics that looked like You know, a nineteen forties cape.

31:09 You know, and I had my mom who's an interior decorator help me with it. Another friend who's an architect in San Francisco just tell me like a couple of things and We built this basically Trailer. that was completely clad in reclaim wood and you opened it up and it was birch wood on the inside with photography and cool fixtures and racks and the two sides of the trailer completely opened on hydraulics. Onto a sort of porch on both sides.

31:35 And so we could basically Pull it on a pickup truck, go anywhere and sort of Create a clothing store. And then what? You would you would have a plan to drive around the country or Yeah, so it first started with Yeah, we basically Took the trailer.

31:50 And we started like Just plotting out where we would go. Mm-hmm. Individual clothing retailers who we like reached out to and we were like, Hey, we could do an event in your parking lot.

32:02 Or we reached out to like Concerts, like festivals. And we're like, hey, like we did this festival in Charleston where we just like plotted it next to like all the food trucks, and we're like, We're selling Bathing suits. Also, like the founders are there. Like every time I've gone to like a crafts fair or'cause 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 and you meet the guy who's making the leather pouches.

32:26 Yeah. And you're like, wow, these are really cool. Exactly. And you're like, Okay, it's a little expensive, ninety bucks, but you know what? The guy's here and they I I I'm gonna buy this. It's not mean like you know, some giant factory and by some faceless person like this is the guy that'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 on as much going on in Charlotte, North Carolina as there is it's going on in New York City or LA. So it was a it was a cross country trip through the south east. Yep, we did a U.

32:53 Are you of the country? Oh my god, how long did that take? Uh about five days. Yeah. Wow. I mean, how long were you guys driving per day? Like Eight, ten hours? Yeah. So you guys are doing like days in and like fast food and whatever you had to do. Yeah, a couple f yeah, flat tire and shreveport, lost the keys in the trailer somewhere in LA.

33:13 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 and twelve people. Showed up had never seen this kinda good, I'll buy it. I'll buy something from it.

33:42 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 a D Vion and and you Mike, you still were like had to be d working uh did you work in CAD to design clothing I like? You work in Cad uh just a lot of back and forth with your partners at at the factory, you know, your partner engineer partner is on the Garmin side of things, so

34:09 This was May. Okay. All of the trade shows for spring fourteen start in July. Okay. So I needed all my samples. July first, let's just say. Then Once we got back

34:25 And we started the trade show circuit where it was like Fardy'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 explore the trade shows? Yeah, so the New York trade show, they let us park out front the front door. So we're actually on Mercer Street in Soho. And we're out front.

34:47 Granted it was a hundred degrees that week. Still every 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, like, oh, this is something different. This is something that feels bigger than maybe it is. How much did you your goal was four hundred grand that first year. Would you do that first year?

35:08 So what ended up happening that first year was We ended up doing like three hundred and sixty five, three hundred and fifty in direct to consumer sales. And you know, this sort of experience on the road. showed me the power of these small specialty retailers.

35:24 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.

35:33 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 gonna be what gets us going. At what point did you start to offer other

35:51 Items besides board shorts and bikinis. Yeah, so that was the collection, that first collection spring That we showed. In thirteen. In that fashion show. Yeah, in that trade show. And that included T'es T shirts and polos.

36:07 short sleeve printed button downs, you know, long sleeve flannels. You know, wash sweatshirts, Chino shorts board shorts. You know, full collection. What was it that like, how were you able to

36:22 To differentiate it in your mind. I mean it's a c sort of a lay kind of like laid back coastal five, like what made it In your view. Different from any competitors. Um the the type of stores we were going at

36:38 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

36:54 So these stores kinda had this let's just talk about the American market, right? They had this whole of like all right, we either have suiting Dressy habadasy suiting. Or we have Ralph Lauren. Or we have like golf brands.

37:08 They sort of are 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 kinda out of fashion in that world. We've just been missing this.

37:23 The price point was a l 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.

37:34 You know, you had a store in LA called Fred Seagull. Which was sort of like 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, um the buyer at Fred Seagull.

37:48 really identify with the brand. I think Mike coming from double R L, which is a very well regarded Mine. in clothing. uh saw the potential. And so he gave us some real space at Fred Siegel in LA in Santa Monica.

38:02 And One of the other things was all of a sudden we get this random email. in Japanese. From a store. Uh called Journal Standard.

38:12 Which is a very well known kinda cool specialty boutique in in Japan. And we're like oh my God, Journal Standard, Japan, like this is amazing. And then um 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, um, 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

38:38 you know, three hundred fifty thousand dollar e com mobile beach house business to In one year once we ship this product. You know. we're gonna be in some of the best stores in the world. Was the idea'cause you know, we've done so many direct to consumer brands, Warby Parker and

38:53 Harry's Razors and you know, all these brands that really kind of blew up in in in this time period. Um Was the idea to be a direct to consumer brand, like to be an e uh a web based business where the vast majority of your stuff was was being sold online, or w or were you already thinking, No, we wanna be at wholesale or we wanna be in Nordstrom's and Bloomingdales and Uh we want to do both or we want to you know, because

39:17 The margins on direct to consumer are higher. They're better. So what was the idea that you had? When I was working on the business plan. I was studying ten K's annual reports of

39:30 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

39:39 Most valuable brands. Mm-hmm. That's by the way it'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. At that time there wasn't really splitting up Ecom. and retail yet, but it was always like wholesale was half the business.

40:00 Retail e com was half the business. So I was like, this is how you build a brand. So We have our initial business plan, Mike and I were looking at it before. And in year six in the business plan.

40:12 It said that retail would be forty five percent of the business. Online would be thirty five percent of the business. And Jose would be the rest. And so Hosa was always a part.

40:22 of the plan. But what happened was wholesale. Got going first. So

40:30 year two of the business wholesale seventy five percent of our business because that's really what Took off. And that was'cause of the trade shows. You went to the trade shows and you got all these orders. Exactly. And so we had a c you know, Nordstrom picked us up the first season, Barney's picked up. No, it was ten ten store you know, ten stores. Um and then Japan was probably forty percent of that first year's wholesale business.

40:55 I mean, again, it proved to be the right decision, but like already I'm just curious how you thought about this'cause in twenty fourteen, like you could start to see that people were not going to department stores as much. Like today and and it again, even today it's a mixed bag. If you go to San Francisco to Union Square Nobody's in the department stores. But if you go to like the Westfield m 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, you know, on the east coast around where you guys are They're busy. But there was an argument to be made at the time that like, oh, this is this is not gonna work. Yeah, I think it it was also just a function of the capital that we had. And so when you think about the Warby's at the time and some of these they raised a bunch of money. Because when you think like when you do the the financial model of spending money on marketing on e commerce, first customer acquisition

41:49 LTV, like it's not$1 profitable in a meaningful way. Yeah. And so when I'm like I only have this amount of runway, I only have this little amount of money, the wholesale business made sense for me because There's been an industry that's been set up called the factoring business. Where there's these specialty finance companies that once you get an order. From uh

42:10 retailer like a 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 the 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

42:38 to scale without raising a lot of money. wholesale just naturally makes the most sense. Yeah, I mean I I ca so because you didn't you didn't have you weren't venture backed and you didn't have hundreds of millions of dollars behind you Yeah, so we you know uh we didn't make uh any money our first bunch years, but we didn't we were losing like five hundred thousand dollars a year or four hundred thousand dollars yeah. We weren't losing ten million dollars or twenty million dollars a year.

43:02 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 it if me uh if or anybody walks into a Bloomingdale's and I just need a pair of trousers. And I'm like, I've got t fifteen minutes. And this has happened to me, by the way. It's a true story.

43:23 I'll go into a Bloomingdale's like in some city'cause I've got to do a live show or some appearance and I'm I'm like my I spilled something on my trousers and there's like an oil stain on it. And I know that like Rag and Bone size thirty-two fits me perfectly. I don't even have time to try it on. I'm going in, I'm just grabbing it and leaving the store. So how when a and it's you're in an unknown brand. How are you able to compete in those it must it must have been hard at times to get attention in those places. were tough. It took much longer

43:55 moving in the h in the department store world. Where we saw the initial success was in these sort of smaller specialty stores where, you know, think of this store. It's an owner who buys the product. He's the number one salesman.

44:09 He knows all the customers. So he's gotta 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 sellers. They had it, they got to sell it. So we found that those were the stores that could really move the product versus the big department stores. So we had very little luck, even though we got some of these small orders from Nordstroms in the first bunch of years.

44:39 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.

44:59 X amount of years in when like Faradis got more notoriety. It works. And you also I think there's a product You sort of gotta figure out the product. That to your point. You come in

45:10 You know your Rag and Bone Pant size. Like what's the product if you walked into Nordstrom that would Sell itself. And what was that yeah, I think it's a plaid shirts. Clad shirts. So I think Mike designed shirts at Ralph Lauren. And if you go back to this world we were living in in two thousand fourteen, fifteen, sixteen, it was like very contemporary.

45:30 Clothing was like solid black and white. Or very preppy, like Vineyard Mines was kind of a big a big brand at the time. And there just wasn't a classic great sun faded 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.

45:52 And that was the first shirt at Nordstrom. that we really saw velocity with. Were you able to do anything to increase visibility at the Nordstroms and Bloomingdales is a famous story and we we had this on our show. Sarah Blakely was actually our first guest ten years ago when we launched the show. And true story that she would go into the Neiman Marcus's And she would like um

46:14 make sure to put the spanks by the register when no one was looking and she would like front face them and make sure that she positioned them better, like'cause she'cause there was just a few Neiman market stores. But now you're like shipping your stuff to these Department stores and are you just kinda 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 ten different Nordstroms across the country. And I did a version of what Sarah did. Um Moving someone else to another rack, moving our stuff.

46:44 Uh but the most without asking permission. Oh yeah, you don't ask permission, you just do it. We still do it. But the we still do it. Like I went to Bloomingdale's yesterday and I I moved our stuff and like moved something out. But um You know, the biggest thing I found successful was like it was me Walking into the store. Telling a salesperson, hey, you know, this is my brand.

47:04 Here's my story. Here's why the product's good. I just found that those interactions to the salespeople. Where sh were like paid dividends and dividends and dividends because they're the ones who sell it every day. And that human connection in in you can't I can't do that at scale in a department store. I just I can't talk to everyone. like that walks in and looking for a pair of pants'cause I I gotta go home, I gotta you know, I'm about to have a family.

47:26 But what I can do is I can get the salespeople to be on our side. Yeah. How did you you guys open your first store? You actually started with a pop up, right, in Greenwich Village. Yep, on Thompson Street between Prince and Spring. And then that became a permanent store? Uh it was sort of a pop up for about three three years. Yeah. And that was kind of the first time Mike and my mom designed a little store. It is about a two hundred square foot little storefront on on Thompson Street.

47:50 One of the things that 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, a 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 than I would assume. 'Cause it was it worked. Like people were literally dialing a one eight hundred number to order. Yeah, I remember there was a article and there was some news in the industry in two thousand early thousand fifteen that J Crew stopped doing their catalog. Mm-hmm. And online. It was like a big thing. You know, J Crew everyone got catalog for J Crew for so many years and then one day they just decided to stop doing their catalogue.

48:29 And I was like, That's interesting. Remember as kids we'd always got catalogs. I'm like, there's just not catalogs coming. And I don't know, I was I think we were like, we gotta do some type of marketing. And I was like, why don't we just try a catalogue?

48:42 And so that was our first paid media. That we ever did. in uh holiday twenty fifteen. It's just interesting how you chose to spend your money because again, it's counterintuitive. It's like Like uh like some brands take out radio ads, you know, like it's counterintuitive, but those things still do work.

49:01 The American classics, like, were almost started by catalogs, right? Like old Penny's catalogs from the forties 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

49:20 When a customer picks this up, no different than the person who walked into the specialty store and was like, This clothing looks kinda interesting. Fer fairy fairity. I don't even know how to say it, but the stuff's interesting. I'm I'm gonna just keep I'm gonna take a look. Meantime, you are you you did raise a little bit more money from your existing investors, right? Like'cause you had cash coming in. But this is an expensive proposition. You've got to o you gotta order stuff, you gotta pay probably pretty quickly and then you're not getting the money in for thirty, forty five, sometimes sixty days, maybe longer. Yeah, we we were constantly running out of money.

49:52 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 they was really, really stressful for me.

50:06 Because You know, I felt like The whole business, the financial like it was just kinda on my shoulders to make this business. to make this business work and be successful. So it was like, as I said, I just got obsessed with how do we sell sell the product as much as possible.

50:22 Um, nothing, you know, the wholesale business sort of hit. The first year and a half. And then it kinda stopped. Yeah. And the e commerce business just until we did that catalog, I didn't really see any customers coming in in in droves because we had spent the money on the marketing. And the retail store was doing, you know,$250,000 a year or three hundred thousand dollars a year. It's not a you know a million millions of dollar store. And so we're like what's the next thing we need to do to like

50:47 Keep scaling it. 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 Nantucket.

50:59 with an offer. Stay with us, I'm Guy Roz, and you're listening to how I built this. Hey, welcome back to How I Built This. I'm Guy Roz. So, around 2015, Alex and Mike are two years into building their fashion brand. They're selling across multiple channels, the Farity website, wholesale, and one retail store in New York. But managing cash flow is a constant challenge.

51:32 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 I ran out of money.

51:44 So everything. Everything was stressed and one of the guys I used to work with was like, you know, I got coffee with him just to catch up and he's and I was like I needed money. I had no Money left. Wow.

51:56 Yeah, the whole time, right, guy, we're We're telling all of our factories like give us another month to pay Work basically like, you know, sixty days becomes ninety days becomes one hundred and twenty days. So half of our email traffic was just deflecting payment. And you know, you always you know, we had a couple of employees at that point, but you gotta be like Just so positive, right? Like and just like everything's awesome, like the brand's so cool and amazing and like

52:20 So, you know, in many ways like I'm sort of like end up being the 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.

52:38 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 s fifteen I started working on it and then we launched it in twenty sixteen. And it was the first product where

52:53 We put it in the store and it like 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 basic like the story I've read is that around twenty sixteen you kind of like get cold c contacted from a a guy in Nantucket or who saw the shirt of Nantucket and he wanted to invest and he became, I guess to this day is your sole outside

53:20 non family member, friends, investor. Is this and this person is like un private. They don't want to be known. They're not public names. Yeah, just an individual And Uh and a significant investment. Made a significant investment. Made a significant investment. He sent me an email to hello at varitybrand.com.

53:39 Like to our customer service email. Yeah. And it said, Hey Alex, I bought some shirts in Nantucket. Their great shirts. If you're ever looking for money. Let's talk and You know, we're a couple of million dollar fashion brand two years in, three years, you know.

53:54 We're not getting many we're not getting many emails like this. Yeah, we're looking for some money. Yeah. I definitely told him, you know, we're not a high flyer Warby Parker raising money and venture capital, you know, we're selling the wholesale. Who wants to invest in the business that that And we spent some time with him and I think he really saw us and and the vision of what we were doing and and he became our first, you know, meaningful outside investor and he gave us the capital that we sort of needed to kind of like take this next step. You know, we've had brands on that are just like

54:24 rocket ships, you know, year one, two million, year two, ten million, year three, fifty million. you're four hundred million, you're just like, What? How does you know? And uh some of times it's luck, sometimes just a lot of c cash that's come in. There's a a bunch of different reasons. Sometimes it's really just you know you just hit the zeitgeist like crumble cookies, right? Just crumble cookies just went crazy. This, it took you guys m you know, a a bunch of years before you were gonna hit twenty, twenty-five million, which is still super impressive. I think you five, six years in you're you're at twenty five million dollars. I'm curious. You're in New York.

55:00 You're there's a lot of hype and and w some of these brands run how I built this and I I'm happy. They're great brands. Warby Parkers of the world and the You know, the Tom's shoes and uh the cast for mattresses and Were you guys ever like looking at some of these brands, including competitors, and just thinking like

55:19 What's going on? Like why aren't we there? Absolutely, but at the same time. There was always this thing where Alex and I love the fact. That our brand was always one of those things where if you know you know. And like

55:36 I don't know, we just were like, Yeah, I wish it would have gone faster, it would've been easier. But When you kinda know there's no out. If you know what I mean, like the end is maybe never. Hm. Uh it changes how you think of the world around you.

55:52 And I and I think I I had I had known no I came from private equity. And so I knew that sort of like going the venture capital private equity route was something we wouldn't do. because of what we wanted to do with the brand, how we wanted to do this forever. We didn't really want to sell it.

56:08 You know, this is like this was Mike and I's thing. And I knew some of the founders. I went on a ski trip in in two thousand sixteen with a a bunch of these founders of some of the brands you mentioned. And They liked our clothes and I think they had given me feedback that they were like, it's so cool that you don't have

56:26 to do what we have to do and how fast we have to grow and and how big the companies need to be, like that you get to kind of just do this with your brother. And there was perspective that if I didn't meet these guys and have this ski trip with them, that I may have looked from afar, but they were very excited about how we were building it. And jealous of us in a way. Meantime, you guys are expanding, right? I think by twenty eighteen you had seven stores stores in Boston, and Tucket, you had a store in New York, and then you had Malibu.

56:57 Here's my question about those stores. Were you at all nervous about signing a 10-year lease in Malibu or in Boston? You know, in even in New York City, like That's a lot of pressure. You've gotta perform to make sure that the you know, those don't drain the resources. Yeah. Some of it was was timing and in

57:17 The Malibu store, Mike and I knew as these two kids that grew up on the beach in New Jersey. Malibu, California was like we gotta like for Mecca for surfing. If we're gonna have this flagship story we've always talked about, it's gotta be at this amazing shopping center called the Malibu Country Mart. And that was I think we signed a five year lease to start.

57:37 That was the first time where we now had a release. We were gonna put some real money into the store. And there's so much anticipation when you open up that first real store. You know, is it gonna work? Oh my God, like this is our f one of our one of our big moves we've ever made.

57:52 And I'll never forget when we went out there for opening weekend. We had a little party that Saturday and the location was just amazing. It's like right where all the traffic is and the music was great in the store. It just was amazing energy and people walked in and it was busy and we sold clothes and it was like this is gonna work. And it did. All right, so I wanna get I wanna fast forward a little bit to Covid because Covid I mean it was a scary time, but for a lot of retail brands and especially e commerce focused brands, it turned out to be an incredible You know, opportunity because people are stuck in front of their computers. Now some apparel brands it was a disaster, right? Especially if you're if you're selling stuff for the office. But for more casual brands and things like that, it was actually a great year. Tell me what happened to you guys during that COVID year. So we had a couple of really

58:50 great things that were going into that year of two thousand twenty. Our Nordstrom business was finally starting to work. So stores were you know, between wholesale and stores there was about seventy percent of our business and only about thirty percent of our business is e commerce. So when when it first shut down, seventy percent of our business is basically dead. And it was really tough. And you know, we had to do furloughs for a bunch of the team. And we have to figure out how to survive.

59:23 And then at some point in May You know, we're like, all right, e commerce is better than we thought. We had comfortable product. It was great for stay at home. Like it's performing better. Like let's start spending more on marketing. Yeah. And We started seeing our e commerce business in May, just started

59:40 Multiplying. And then year over year we started seeing like a hundred percent growth year over year. And what was the best thing that happened to us, which we thought was the worst thing, was we had all this inventory. that we bought for our Uh wholesale.

59:55 And our Retail channels. That all of a sudden we could actually hit the demand. for our e commerce business. And

1:00:03 uh you know, if we were to sold that that product at wholesale. we know we would have made a significantly less gross margin. Sure. But we had the e commerce business now at a much higher gross margin. So all of a sudden the business starts making money. Uh you know, we became you know, meaningfully profitable. uh starting in the summer of two thousand

1:00:22 And twenty. And the other thing that happened Was What's gonna happen with our stores? You know, at that time we had twelve stores, six of the twelve were in kind of resort beach destinations. Um Nantucket, Martha's Vineyard.

1:00:34 The uh Sag Harbor, which is in Hampton. Exactly. And they're closed, so we're like What's gonna happen. And then when the things got lifted. you know, somewhere in some places in June, some places July fourth weekend.

1:00:48 Business was insane. in these places. So not in the cities, but in the resort towns. No yeah, no business in New York, but in the resort towns, same thing. Business was up like sixty percent, a hundred percent year over year. And so when we got to Q three Businesses making money. And I had a bunch of people who are who are smart. who are like, I think, you know, you only got eleven stores. Like, why don't you close all your non beach stores?

1:01:11 You know, close all your New York City stores, all your Boston stores and just like walk away. And I had um listened to your podcast. I'd heard the episode on the guy who started Panera Bread. Ron Shake. Ron. Great episode. It's a great episode. And I'll never forget he has this uh part where he talks about during the Great Recession where

1:01:31 he said, you know, could be an amazing opportunity because in in recessions, you know, real estate's cheaper, construction's cheaper, landlords want you. And I was like, what do we do? We got this eleven store retail fleet. It's small, it's not at scale. Maybe this is an amazing time for us to really scale our retail business. Listen to Ron Shake's story and just to uh up to he had Panera bread and in two thousand nine during the financial crisis, he was like, Well, let's just expand because we can get good terms for leases, we can get good locations. People are shutting down. Let's let's go in, let's go big. That's what we should do. I was like, this is gonna be the best time ever for a up and coming clothing brand to get an amazing retail fleet.

1:02:14 So we went So how did you Yeah, keep going, yeah, sorry. So we went, um I have this amazing real estate advisor who was working with me before Covid, and we started going out to landlords. And saying, you know, here's all the places we wanna be. And I've made the decision with my real estate advisor like the one thing we need to make sure we do is get as much term. You know, make the leases as long as possible. Because This is gonna be the cheapest we can ever get rent, ever.

1:02:40 Uh and that's what we did. And we signed over the course of 2020 and 21. Forty leases over the next for the for stores that would open over the next three years. Wow. That's crazy. How were you gonna finance that? Um Little bit of it's my my mentality of You know, it you'll figure it out. And at the time too with Covid.

1:03:02 which helped a lot was you know landlords were giving a lot of tenant allowance. So it actually wasn't, you know the amount of capital we had to put in in a lot of these locations was relatively minimal. Also, You know. clothing brands that have dressing rooms

1:03:18 and really nice spaces were just walking out of stores. So you didn't have to come in and do a ton of construction. These stores were sort of ready for move in. We just had to build the fixtures. Well And we at the time, uh you know, we only had eleven stores, but my mom who had been working with us since the beginning. She at this point was running our um our store design and construction part of the business. She was an interior decorator. And so Uh we had this warehouse in New Jersey where we actually had two people on staff who were building fixtures for us. And we were able to build kind of our fixtures and all the interiors for good prices. So all of a sudden in this very short period of time you go from thirteen stores to forty stores. Yes.

1:03:55 So by the end of two thousand twenty two, we had Uh we had approximately forty stores. Wow. And I think today you've got seventy retail stores, is that right? We have eighty eighty one retail stores today. So again, like uh somebody might have said to you, like f very wanting to give you good advice, hey Mike, you know

1:04:12 uh uh Alex, this is not the way to go. Like you're gonna you're gonna expand too quickly, you're gonna get over you're gonna get over your skis and you're gonna see that all of a sudden you're you're saddled to all these costs overhead employees. Um You did have to do some layoffs. I mean there were there have and this is normal in any business cyclical, but you have was that do you think that was connected to this expansion? Uh absolutely. If I go back to You know, we got through Covid. We saw this huge increase in business.

1:04:41 And I definitely became more More focus on revenue growth than Profit. Margin?

1:04:50 And You know, my my survival mode went from how am I gonna sell enough things To survive. to you know, how am I gonna grow This business

1:05:02 Uh you know. Even faster. because we got this great momentum finally. And you know, I gotta build an executive team, I gotta build an organization so it can really stand the test of time because we've now gotten the business to this level of sales that is

1:05:18 you know, bigger. Um, and then all of a sudden, you know, in two thousand twenty two when The Covid. Slow down. You get a ton of people.

1:05:29 We had a ton of people. And so in two thousand twenty three we really had to Rejeag. and retweak and really figure out What we want out of this business. So so you had to let people go, obviously. Yep.

1:05:43 And that's hard, especially hard as a as a family business. You've Real close relationships with people. Um So yeah, we had the Fifty people, I think was our was the layoff that we had to do. Well.

1:05:54 So that was at least ten percent. Uh more than ten percent, yeah. It was really hard. Yeah. The hardest hardest definitely the hardest thing we ever had to do. This is a I think it's fair to say a tough time for retail and apparel in general. Uh from everyone I'm hearing. Big brands have been on the show. It's it's a tough time. Obviously tariffs to make it even more complex.

1:06:13 'Cause a lot of these products are manufacturing in Asia. How are you guys navigating this economic moment? I mean it's I I think probably you're you're doing much more direct to consumer sales now, given that you've got eighty stores. And probably a lot less wholesale than you used to. But on the other hand, you know, um I have to assume like for everyone it's been things have slowed down.

1:06:36 Yeah, I mean I mean it We've just been dealing with different versions of economic issues in some way, shape, or form. So I think to Mike and I like We pay attention to it, obviously. But shit's gonna happen, bad things are gonna happen, good things are gonna happen, so as long as we keep doing our thing.

1:06:51 We'll be okay. But um we've had to create a profitability model that gives us that margin of safety. Yeah. And the other thing that it's really done

1:07:01 You mentioned the tariffs. Is and I'm thinking From a supply chain perspective, it's been wild, right, to sort of watch. Yeah. Ar supply chain now is so global.

1:07:13 Because it has to be. So I have an amazing partner on the supply chain and so we're we're like able to with tariffs like just be ready to move. Hm. We own the fabric recipe. Right, we own the yarn materialization of it, the customization of our product. So the makers become less important for us because we own like the true recipe of all the garments. So we can have that flexibility.

1:07:37 You mentioned a few times that this was started as a family business and that, you know, you don't have the same pressures that you know, the other e commerce or D T C brands that start around the same time do because you don't have really have many outside investors. But I have to imagine that at some point there is Some exit or something. I mean

1:07:59 Is there a world where you would want to be acquired by You know a W H P or one of these these conglomerates? There's not a world. If we had it. in our own control that we would sell the business.

1:08:13 So Mike and I want to do this until we can't work anymore. I think we've both made that decision. We feel really confident about that decision. We've already sold some of the business, um I know a minority of the business, to to some different investors. So you know, we'll have to figure out ways to you know be good partners to them. But Mike and I, you know, no different than Ralph Lawrence, still owns a meaningful stake. in his business. Like I think there's people who've done this before us.

1:08:40 create you know, kept the integrity, kept running it until they were older. You know, and whether the family joins the business or not, I don't think we're thinking about you know, that far. Um But there's people who've been able to do it. And so why can't we?

1:08:54 I didn't we didn't get too much into this, but I think it's worth just noting like Your wife. is part of this business. And Alex and then you Alex and Mike, your mom is a big part of this business.

1:09:07 And I mean there have to be moments where that dynamic does create some I'm not trying to like create conflict. I'm just curious, like'cause I'm I'm more interested in how th these conflicts are resolved, not not like how the conflicts happen, but how but there must be conflict. at times that have to be resolved. Um Certainly. Um

1:09:28 But I think I goes back to the beginning of our talk, which is like Two twin brothers. You know, I'm getting emotional about like that type of feeling of like

1:09:41 Yeah. We have each other, so like Even though there's important people around us. Who matters. It still is like

1:09:49 We have to always be here. Um because this is like still You know, a couple of twelve year old's dream. Race car beds was real. You guys really did have twin race car beds in your bedroom. Yeah.

1:10:02 So how do you Alex, how do you guys I mean, when you have conflicts, the four of you Because your family. Mm. This is a family business. That's a good question. I think we Probably like a lot of families, we're not as good as communicating as we should be.

1:10:18 But that's you know if That's a a wrinkle that we added to an already hard thing to do, which is start a brand, you know, adding adding a family dynamic into all of it. But at the same time you know, when you're just getting started out and you don't have many people and you got, you know, four people that whole livelihood.

1:10:37 depends on making this thing successful. You know, that goes a long way and each one of us Bring something else to the business. And it Adds a lot of value.

1:10:47 Mike, um when when you think about the journey that you guys took and how long it took and I mean, how much of that journey do you attribute and and where you are now to to Hard work and the grind and how much do you think ha had to do with luck where you are now? It's the grind, guy. It's it's the grind. And we've as you talked about it, like we We've done it the hard way.

1:11:07 And fashion's like a hamster wheel. It's like Groundhog Day. I mean, in a way it's like you live groundhog day every year because it's like, All right, we got fall coming up, all right, then we got winter, then we got spring, then we got summer, all right, let's do it again. And you just sort of keep going and going and every season Something gets a little bit better. And people are like, wow, I want more of that.

1:11:29 Alex, what do you think? I mean I attribute it For the most part. to the grind. Um

1:11:36 I think it's it's an attitude that we have that no matter what happens, we're gonna figure it out. Yeah. Um the power of positivity. And so I think in a business like ours, that so many things can go wrong and starting up, if you're just positive every day and you're like, we're gonna figure this out, we're gonna get on the other end of it, we're gonna motivate our people to be like this. Good vibes, positive energy, we can figure this out, we can do it. goes a really, really, really, really long way.

1:12:00 That's Alex and Mike Fairti. Founders of Fairy Brand Clothing. By the way, remember their Beach House on Wheels, the mobile pop-up store that they drove across the country in the early days? Well, they continue to take it to events and concerts over the years, but sadly, this past summer, it was destroyed. Nobody was hurt, thankfully, and a replacement beach house on wheels is now in the works.

1:12:28 Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter on Substack or at guyRaz.com. This episode was produced by Casey Herman with music composed by Ramteen Arabui. It was edited by Neva Grant with research help from Nor Gill. Our engineers were Patrick Murray and Jimmy Keeley.

1:12:57 Our production staff also includes Alex Chung, Chris Massini, Sam Paulson, Carrie Thompson, Catherine Seifer, Ramel Wood. Andrea Bruce and Elaine Coates. I'm Guy Raz and you've been listening.

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